graduates who are relatively friendly to the democrats and white working class and relative to national standards. obama lost the white working- class voters by 18 points. so these are all slow-growth states, where there are some ships. we should still have another percentage point of minorities and college graduation and three points less of the white working class, which is the general pattern that you see everywhere. you see what obama will need to do. a lot of people appointed out, and this is true, they do not want this margin to collapse. the deficit may not look good, when you think about it, but this is good compared to national average, and if it goes really far south, he will,

indeed, be in a great deal of trouble. but let's not forget about the college graduate. he went to keep that close to something split, and believe me, the candidate, whoever he is, will be working hard to bring that down. he still has to give the minority base out. we reckon about 18% of the vote. this is primarily the black vote. where is it likely to happen? these three metro areas are the most important, cleveland and cincinnati. the fastest-growing part of ohio is here in the columbus metro area, particularly the columbus suburbs, and they have made progress, and i believe that obama did 31 points better in the columbus metro area.

that is quite a swing, and that is the kind of thing they're going to need to come up with. there is also the relatively favorite college graduates. look at the southwest states. these are very fast growing. they have a relatively high percentage among minority voters. i believe the average for these three states is 36%, which i think is exactly the level we project for minority voters,

2012, the selection. so this is a kind of state where the minority vote is going to be critical. look at how much more minority voters there are. instead of being four percentage points more, minorities. there will be five points less of the white working class, so we really have a collision between demographics and economics. the democrats made huge strides in the last two decades in this state, largely due to the demographics, his changes are ongoing. obviously, the economic situation in nevada is just atrocious. but in the unemployment rate is over 13%, and that includes the all-important las vegas metro, where it is basically about 72% of the vote in nevada that is

an las vegas. most of the rest of it is in reno, and very little of it is in between. that is the nature of the kind of struggle in a lot of these southwestern states. you want to keep these relatively friendly white college graduates. you want to make sure the minority vote is high and high in the supportive of the democratic candidates, and you want to prevent the bottom from going out of the white working- class votes, which is the weakest part of the obama call -- coalition there, and this is something that the republican candidate will probably try to do everything in reverse, as it were. now, this is really critical for the republicans, these new south states. if they can get 57 electoral votes, that will be three new south states. all they have to do is add that to ohio. this is their most probable

state, and they are basically almost there. i think new hampshire would put them over the line. conversely, if obama can carry one of the new south states, this would be a stronger position. so let's take a look at this example of a new south state. these new south states are just like the southwest states. fast-growing, a high percentage of minority voters in 2012. we estimate i think a 31% share of the overall electorate in 2012. i believe that is exactly what -- if it is. look at these demographic changes. they are just huge, in a state light virginia, an increase of two percentage points of minority voice -- votes. white working class is down five points, so this is really shifting the whole political demography of virginia in a direction that is very good for

the democrats and relatively bad for the republicans. northern virginia year has been the locus of republican weakness in the past presidential election. about one-third of the vote. in fact, if you take these three a mattress, northern virginia, richmond, and virginia beach, it is over 70% of the vote, and the rest is elsewhere. you see what college graduates moving in this direction. when they were thinking about because we have heard about the alleged competition between a virginia strategy and no high a strategy for the democrats, because all i know is so blue- collar, it is about the blue- collar worker, in virginia, it is all about the white collar, sort of more upscale. we have got 31% minority here in virginia. this is a huge part of the challenge for obama.

look at this. there was an even split among white college graduates in ohio. this is a key part of a successful obama coalition in 2012, so it is not clear, looking at this kind of data, and radically different way of running in virginia as you would in ohio. in fact, i would argue that what obama is currently doing makes a fair amount of sense. he is emphasizing the jobs issue, trying to improve the economy in any way he can. improving the economy, trying to put more of the onus on the republicans for the bad economy, and this is the classic incumbent strategy. we are going to be punished for the bad economy, but the question is how much? how much of the blame will you

get? he is also trying to raise popular issues, like social security and medicare, increasing tax rates on the rich, some of the things that american meat, and a variety of other things. there are things with the environment that will come into play. it is highlighting relatively extreme positions of the other side that are massively unpopular. that is the strategy. that is what he is doing. i think it will work pretty well with minorities and with white collar graduates, and i think it will help to lessen the pain among the white working class. this is as the look towards 2012. conversely, this will not be that much different from state to state. they clearly want to drive down the white collar graduate vote and increase the white working- class margin in their favor, and what do they want to do? they want to talk relentlessly about the economy.

that is issue one, two, three, four the economy is bad and obama is the president. did i mention obama is president? and that the economy was bad? they try to project at least an image of moderation. they want to avoid some of the more hard-line tea party positions that have become associated with the republican party. that, i think, is the basic landscape. i do not think it is going to look that different. i do not think it is massively different. i could go on forever about this. i can talk about every state, but why do it? we have a great panel. we will have a conversation about all of this stuff, and of course, we will hear from you guys eventually. it is open seasons.

we do have an excellent panel. we have a superb panel. we have a world-class panel, but, alas, i have to tell you that the editor of the agenda blog for national review, it really dynamic conservative commentator, cannot make it. he missed his train in new york, and he just cannot be with us, though i know he is with us in spirit. but we do have a great panel. we have the white house correspondent for the new york times, jackie calmes, paul taylor with the pew center, and ronald brownstein with the national journal. i know this will be so critical.

putting this into play in a way that will help him? >> the debt limit fight. he is doing that, as you are hearing and seeing, he is being more partisan. he is talking more about jobs, as you said. initially yesterday, in the wake of the collapse of the super committee, he did not in his first remarks even mentioned deficit reduction. the only mention it, let's get out and get to work. and then he talked about the jobs plan. no word on deficit-reduction. this is with entitlements, and

really aggravating the base. the problem is what we have to watch for going forward is how much does this undercut the brand to the extent that he looks like just another partisan and that he is implicitly saying all that i said about being a post-partisan figure and making washington." , forget about that. >> ok. obviously, there is a lot in the report about the hispanic voters and how critical they will be, especially in certain states. i know you study this issue every day. do you have something you want to add? >> i have got a lot of numbers for you, and they are not about 270. two or three minutes of hispanic 101, starting with the economics and in the demographics and then back to politics. abouttalk a little bit

wealth and poverty among hispanics. i am not talking about the 1% that we have been talking about. median household wealth. we have very smart folks who can dig into census data. everything you own-the house and car, your mortgage, your car loan, your student debts, whatever. we were able to look at what happened to households in 2005 to 2009, covering several years of this horrible economy, and it has affected virtually everybody, and, indeed, it has. but white house holds an four- year period went down by 16%. median black household went down by 52%, and median hispanic households went down by 52%.

a snapshot of 2009, whites now have a 20 to 1 household advantage over blacks and 18 to 1 advantage over hispanics. this is about double the rate that has prevailed for the last 25 years. if you think about the hispanic, and a lot of it is driven by the value of your home, and if you think about hispanics and what they are in this country, they are the most recent immigrant group and the most geographically mobile group. the economy has brought them here. where are they likely located in the 1980's? like lee las vegas or phoenix or orlando. there were likely to build those houses that went up, quite frankly. many of them bought as the bubble was inflating, so when the bobblehead, they have suffered disproportionately, where as the white, typically

older homeowners, they have taken a hit, but not as much. poverty, which is not a subject that is easy for the american people to get its mind around. in my former life, i did spend a lot of time worrying about getting to to wonder 70, because i used to worry about political campaigns. i would hear it say, talking about poverty, he sort of understood that a lot of people thought this was somebody else's problem, and if an african- american person was talking about it, it was another problem, so he would make you search again and again in the 1980's. most of the people in this country were white. the numbers were such that back then, over 80% of the country was white.

well, that is no more the truth today. most in this country are no longer white. they are hispanic. this has to do with the population, and it has to do with the economic marginality of this population. that is true if you count by the old method or the new method. indeed, if you take the new way of measuring poverty, all of the hispanics now have a higher poverty rate than blacks. one thing to understand about the latino community is it is economically at the margin of this country. a very, very difficult time. and how that plays out remains to be seen. hispanics voted 66%, 67% for obama. there were hillary clinton supporters.

they have felt the brunt of this very tough economy. a kid, very quickly on demographics. 50% of the population today, hispanics. we project, as part of what you saw here, they will be 29%. that was projected from 2008. that is a big, big number. we are going to redo our population figures next year. in the last four years, there was a political debate going on in this country. there has not been a major, major decline. recently in 2006, there were about 1 million mexican- americans, and when we are talking about the hispanic population, 63%, that gets a little bit lost, but it is far and away there are more mexican immigrants. more immigrants from mexico them any other country in the world.

it is an enormous movement of people from one country to another. it was at about 1 million per year in 2006. it is down. probably a combination of our bad economy and increased enforcement. but nonetheless, the hispanic population in mexico, they continue to grow at a very rapid rate. it is the birthrates of the immigrants who are already here. if those who get up and leave have something familiar and go to something new, they are strivers, they believe in something better for themselves and their kids, and they have a lot of kids. the birthrate of mexican women leaving in -- living in mexico, 7 children per woman, and now it is about 2.5 children per woman. the birth rates are higher among mexican-american women. we are continuing to have this

major population boom that has now driven -- driven more by immigration. now we are back to the tool hundred 70. all right, here is this population that is currently 16% of our population. politically speaking, to use a boxing analogy, it punches below the plate. it is 60% of the population, but it is only 9.5% of the eligible electorate, and three years ago, it was 7.5%. so why the gap? this is all about the fact that they skew young, so a lot of them are not 18 yet, and they also skew citizen and nonlegal. a 9% share of the electorate.

all of these gaps have been closing, and that this will close even more. it is coming in every year, and this18-year-old's, is where the situation is. i think it will be the case again in 2012, a strategically located constituency of the small number of swing states better over represented. certainly in some western states and in florida.

this is really a battle for the decades and for the next generation or more, so the stakes are very high. maybe i would just leave it there. >> just like me, trying to look at the population, white, college-educated voters, your thoughts based on the report? >> the report, which i think nails the correct trend that we are kind of looking at, i just want to pull the lens back a little bit and put this in the context about each party's coalition has been evolving and the power between them has been evolving. republicans won five of six elections for the white house in one time period. the average over 50% of the vote. they averaged 417 electra

college votes. in the three elections of the 1980's, democrats got the smallest share of the elektra college that they had in any three elections since the change in the system. the republican lock on the electra college. since 1992, -- on the electoral college. they also will have won the popular vote in five out of six elections, just as they have done in and other period. the question becomes, what changed? what took us from that to this world, and i argue to you, there are two things that will continue to affect us in 2012. one, as you know, is the growth of the minority population and the minority share of the vote.

minorities, non-whites, past 12% of the vote. it was not like there was a sudden surge in the african- american vote. they share the vote cast by the most, if the change from our politics. their share has gone down from 53% to 39% now, so while republicans remain dominant with that, the obama problems were not unique to him. no democrat has done better than 44% since 1976, and in the last election for obama, the variation was only up to 44%. he is in the range. so the first thing if the minority share of the vote has increased -- the other big

change, democrats are now running better among upper- class, college-educated. they were running about 40% of the vote. this went up to -- in 2004. obama got all the way to 47%. outside of the south, they got an absolute majority. we can talk later about why this has happened. it used to be better, but we have had this class of version in which they have changed roles. these are longstanding trends that really have changed the political landscape and have allowed them to move states like illinois the combination of more college and minority. the most committed thing was that the suburbs in north

carolina in denver and northern virginia went the same kind transition we saw is the 1990's in new jersey, suburban philadelphia, cleveland. that is why the democratic map expanded. there are states that in many ways embody what obama himself represents, diversity and education. the future of the democratic party by the ones primarily through states like that. the coalition. of the descendants. -- ascendants. the gender gap among whites is primarily a function of well educated voters. the only portion of the white

electorate was the college white women. the net effect of all of these changes is to reduce the share of the white boat that democrats need to win every four years. as was pointed out, if the minority share of the vote goes up, which is possible, demographically possible, and democrats hold three-quarters of that, which is another reasonable estimates, again. if he can do that, he only has to win 40% of the whites in order to have a majority of the popular vote, but there is no guarantee can do that. democrats did not do that. in 2010, republicans got the highest share of the white vote in the history of modern politics, because not only did this go down, but the college whites fell back a 39%. so if you look to 2012, it is unlikely that obama will match his share of the vote in any of the three blocs. 1984 when we had the three big superpowers.

the college whites, and on college whites, and the minorities, and the question is, can manage the decline enough? i think it does, it is much more likely that they will do this. there was what michael bennett had, which david axelrod talked about, where he was obliterated with working-class whites who lost two-thirds of men with a college education and still won. that does not work in a hive. if he does not get college white men in ohio, he will lose. virginia, colorado, nevada. the tough question i think is not answered for democrats. it is whether there is, in fact

a treadmill, and that is as a minority share of the vote increases and becomes more identified, over 40 percent of the obama vote, that phenomenon itself, does that suppress the vote among whites? it is interesting to note that in the pew and others, we did a similar exercise and asked how they felt about the ongoing racial change in the country, whether it was too fast, too many newcomers. the whites were split about 50/50. 50% said too much change, too fast. 50% said it is good, nourishing the country. looking at whites, divided about how they feel about the racial change, of the to% who said that change was happening to a fast,

obama approval had 70% disapproval. among those comfortable, it was different. among those comfortable with change, obama was winning against mitt romney, 52 to 44. among whites uncomfortable with the change, mitt romney led 3 to 1. this is not to say that obama is primarily driven by race. it does mean that attitudes about racial change are intertwined with a broader role in particular. going back to the 1980's, reagan-style perception. even at the bar gets lowered, -- >> lets you on this a little bit, this issue of how do we reach this -- let's chew on this. also accessible from the other side. if you, jacki, we're going to

give advice to either side, how would they deal with that? in a broad sense, to be more sympathetic, that they feel a little bit simpatico. what do you say to them? what can get them on your side either way? >> for these groups, i think in terms -- if obama is not reelected, there may not be any -- a lot of groups would be an employment rate is stuck at 9%. just the feet of getting reelected next year is arguably as great as getting elected it as the first american african- american president.

if he does, indeed does get defeated, all of the things you're talking about, not just the democrats but the issues that each party is speaking to is reinforcing that. when you talk about the college- educated whites, the fact that you have a national party even debating the idea of evolution, denying climate change, these other kinds of issues that are going to hurt them in the long run if they do not come off of them, just as on immigration, if you know? in each of these comet they are reinforcing, the republicans are, each of these demographic movements by the positions they are taking. i could name right off of the top of my head some former republican congressman, who i knew quite well because our children were the same age,

though our children are now college age, our children, and both of them have said that their kids will not call themselves republicans or democrats, but the single reason they will not call themselves republicans is because of abortion and gay rights. the combination of those two issues, so when you take all of this issue is that the republicans are on the wrong side of the demographic shift in the country, that they cannot take it they are to defeat obama at next year, they cannot take a lot of comfort in that for the long term. you see a president traveled with him. there is hardly a trip where he is not appearing on a college campus. we were just at the university of denver recently. it is just -- and he draws huge crowds.

students, and you see a lot of older people in the audience, faculty, i am assuming. it is interesting, because i read a story recently about i forget which republican, and he made a point that he drew a large clout -- crowd. president obama versus the others. it is just as true with hillary clinton, as well. i think he is doing the right thing. i think he is speaking on the right campuses, but he is having to do a lot of implicit defensiveness. "here is what i have accomplished." because a lot of people really do not seem to know when i talk to voters or you look at a poll, the reader emails that i get,

they are all in the spirit of "live voted for him in 2008, but what has he done?" or "the has not done what he said." -- "i voted for him in 2008, but what has he done it?" or "he has not done what he said." of the passage in increase of the fuel efficiency standards, this would have been one of the most important ornamental laws ever signed into law, but because it was done through the regulatory process and with the agreement of the automotive industry, the new generation automotive industry, most people do not even notice, so these are the kinds of things that he is having to say when he goes to college campuses, because they are not clear to people in the midst of the fighting and the

setbacks that really do make the news. >> that is the problem. >> as we think about what you just said, jackie, this approach of trying to essentially typecast the republicans as extreme and out of step, it is like a better way of seeing some of these more of fill constituencies. then what was the previous model, which was we are going to convince people we are bipartisan, and, you know, we are going to deal with this terrible long-term debt problem and deal with the deficit. we are the responsible people here. we are responsible. it totally did not pay off, it looks like, with those constituencies. is this kind of part of what it is about? >> i think you have to go back and try to think about what he can do to maintain that vote, go

back to basics, thinking about how it works in the fourth place. looking back, from franklin roosevelt to jimmy carter, the democrats -- white voters with a college education or without a college education and people who worked with their hands. why did that flip? i think this is largely because of economic issues were supplanted by other concerns. social issues, like gay rights and abortion. it is the flip side of what is the matter with kansas. why are all of these people voted against the interests for candidates who want to raise their taxes? the answer is a lot of them share the values that are important, and particularly, if you're thinking about it, it is not just the issues like abortion and the issue with the days. -- gays.

they are more in than any other part of the electorate. this is something that i think resonate well with some of the voters. there is a big question for them. it will be how the shopper -- the sharper is perceived. do they say, "ok, the people at the top are screwing me, too." they are going to be in that meant. in the end, i think it will be hard for them, even with the most populist message to really make inroads. they have been resisted to him from day one. the upper-middle-class that it is a swing part of the electorate. mitt romney is a formidable competitor. they do not see him as an ideologue.

they probably do not think he believes a lot of the things he is saying on social issues. the evangelicals. >> it is interesting to note, you look at the break of the college educated whites, not quite as adamantly against it s working-class voters. that is a pretty populace issue. you look at the hispanic job approval for obama, it is only about 50. you look at how they are going to vote, by a far wider margin, and you can chew on that. >> if you think about the challenge before obama, this message in 2008 was washington -- it will have to be the republicans are broke.

"i will rescue you from what they are presenting. obviously, a much more partisan edge to it. i think the most interesting challenge is probably among the young. he had the biggest gap, young to old, and the polls allow us to look at this by age. they did not turn out 18 months ago or one year ago. old. they sort of drank the kool-aid of this is somebody new. he embodies the kind of diversity that is second nature to us. he is very diverse and very appealing. his message about change in politics, very appealing, and one has to assume three years

later, there is a good bit of disillusionment, as there is across the board. ron talked about the coalition of the ascendant. we have not seen this young to old age gap. young voters voted more republican than on older voters. they have completely turned that around. older voters were still part of the fdr coalition, and they were part of a group of the white working class. most of those have gone along to their greater rewards. the current generation really has been more conservative throughout, and very, very angry about economic circumstances, and probably uncomfortable and uneasy with the changes they see around them. the other voters, i wonder how they will react.

they do not like being considered democrats or republicans. the last and when to say about younger voters, this system end. we looked at wealth by race and ethnicity, and if you look at wealth or poverty or income or an indicator that sort of makes sense for how well people are doing in this country over the past 30 to 40 years, what you find is that today's old are doing better than yesterday's old, by almost any measure once you adjust for inflation and other things. the young are doing worse than yesterday's in young. the young are not going to college are having a hard time. record high unemployment rates, especially among those who did not go to college. the silver lining is a record share of young are going to college. some of that is probably that

they cannot find a job anyway, so there are flooding into community colleges that they can afford. the other side is they're coming out of these colleges with record amounts of student loan debts, very hard to get started, and they cannot find the job, still living with mom and dad. this is the story played out throughout america, and i think it makes it a much more contested sort of group, how you get the message to them will be an interesting challenge for both parties. >> i want to ask requested as a think it goes right to the heart. what is true about the millennials is true about the others. these other groups that have been hammered the worse by the recession. demographically, having a potential to grow. but what do you think the impact of economic discontent will be, both on turnout and share for obama in the groups that are

part of this coalition of the ascendants, other than the college-educated white women, who are having a difficult time. >> there will be some compression of margin among these groups. there will be some compression of margins among young voters and among hispanics, for example. maybe some among blacks. they can live with that. the question is, these groups are very sympathetic to obama, and more broadly, sort of where the democrats are coming from this point versus the republicans. there is this juncture between approval ratings and support. if you look at hispanic job approval for obama, it is great. and yet, you run obama against mitt romney, who is the strongest candidate at this point, his margins are not that

far off the margins of 2008. they are a little bit compressed but not drastically so. i think this shows the loyalty. it will be very good to great for some of these states. young voters, they are the best of any age group, but definitely running below. but then if you run obama against mitt romney, you have the strongest candidates, and the margins are still quite high. i think that economic is like the weight on obama among these groups, but i think in a weekend partially keep this off of his chest. >> you asked about his approval ratings. the conversation going on now among the republican nominee is,

for their nomination, and the same conversation that went on in 2007 and 2008. we have a republican nomination process which has been driven, i think, both times by a very hard line. we really have to get tough and cracked down. this came after eight years of the george w. bush presidency, coming out of texas, understood the demographics of the political power of the latino vote. he did very well. i think he won close to the majority. but he ran for reelection as governor of texas. he was close to 50, and whether or not he got 44 -- but the republicans clearly feeling the "we are not going to be locked in." this is not like the committee where we will be knocked out 85

to 15. the nature of their primary conversation. if you look back years ago, they wound up nominating the one canada and that they felt was the most open to comprehensive immigration reform and kind of a centrist on that issue, and as a result, immigration disappeared as an election issue. we were on two different things. something similar may happen this time. it is hard to know where the republican process is going. but if this has not been very receptive. the republicans have not done a good job of reaching out to this constituency and is likely to old obama in good stead. >> when you mention mitt romney, i have to say i was surprised recently over the past couple of months how he has ratcheted up

the anti-immigration reform rhetoric, and he did so initialling because rick perry had just entered the fray, and rick perry had, like two republicans from border states, george w. bush and john mccain, had a record of being in favor of comprehensive reform, the path to citizenship for the millions already here, and romney really -- he has arguably, except for the colorful sort of herman cain " let's dig a moat and put alligators in in," -- in it," it will stand him in very bedstead. -- bad stead. >> as i said, they are drawn so much support from the portions that are uncomfortable -- in

2006, 23 senate republicans voted to legalize illegal emigrants. last year, with charles schumer, they did not find a sponsor. in 2008, john mccain said he would no longer vote for his own bill. obama was intimidated by the fear of losing many of these blue dog, rural, white districts. i think the broader part is that if obama does win, the bottom may just kind of sad everywhere, but if he does win, it will only be by accelerating the transformation to this new coalition, a coalition of minority voters and college educated, with support among the working class, and that does require you to rethink some issues where you are kind of

stock. you're driving with your eyes on the rearview mirror. there is more sentiment in the republican party than in the democratic party, and maybe even on gun control, and they are being intimidated by the fear of losing people they have already lost and not serving the interest of the coalition. democrats now are like lying in front of the train tracks to benefit white seniors who are voting over 60% republican, and in the process, they are creating a long-term squeeze on discretionary spending that will be needed for the population to move into the middle class, voting 80% democratic. they are each governing with a memory. >> what i think i would say to

that is that i would disagree with the metaphor that democrats, and i think if they are going to get an obama deal, i am confident he would have got the votes in congress to pass that regardless of the changes made. still, hope springs eternal that they can reverse these numbers. but they do understand that the squeeze is on. from colleges, anti-poverty programs, and education, and democrats are much more willing. >> health care also reflected that.

they explicitly transferred in come down the generational ladder. it went to the uninsured, and this conflict between the emerging, heavily non-white millennial and other generation, and the older whites are getting more conservative, i think that is basically going to be the structure of the political debate for decades. there is a brown versus great construct. >> an immediate sense. and mr. obama has put his foot on the accelerator for the coalition of transformation. for the other side, did i mention the economy was so great? we have yakked for awhile, but let's not hear from the audience.

>> hi, i am not affiliated with anybody. a big the presentation has been a great. some of the things are making the playing field, not all things being equal. one of those is the growth of the super pacs, misinformation, redistricting, driven by republican governors. other factors are going on right now that seemed to not want a playing field that is equal, and i wonder if you can talk about the impact of those elements of this discussion. >> ok. does anybody want to offer a comment? >> well, that is a big topic.

this has paralyzed congress and is a reflection of the way the districts are drawn, and that is a long and unhappy story at the moment. in a way, i think it has created parties that are more ideologically coherent than they have been in our lifetimes. you would like to think that that is a good thing, in clarifying thing, but we just do not have people here who can find the middle. as for money in politics, actually, i spent a chunk of my life working on that issue. and there is a lot that has not gone well on that front either. i would, however, hold up for everybody who is with me from the 2008 presidential election campaign, where someone named barack obama, who had been in the senate for two years and was a complete new, but had a

message and a set of skills that enable him to get three process that was very tough. the primary process. raising record sums of money, and here we are today. this is not to say that i do not agree that the money in politics was different from what it is. that is a personal view, but i do not believe at the end of the day, it is not determined at the presidential level. 90% incumbent reelection rates when people cannot stand congress, you have got to scratch your head and say, "what is going on their?" and i suspect that money has a piece of that action. >> good afternoon. this summer, in the fall, puerto rico will vote to determine the political future, and one likely outcome of that is a request to become a state. how will that movement impact

the almost half of 1 million porter riggans -- puerto ricans living in a key battleground states. moving forward, what would happen to adding hispanic senators and maybe half a dozen congressmen to the legislature? >> i never really thought of it. as you were going forward, you would assume that republicans would resist creating a new state that would vote democratic. but if they were willing to move back to puerto rico, they might accept that. democrats of got back into the game to the extent they have in florida. we are so polarized that we have

a hard time seeing eye consensus emerges to do that, but, you know, as was shown before, there is no question in any of these states what has brought them within reach for democrats is a combination of a growing minority population, a somewhat boring population that is growing more receptive, so anything that kind of interrupts that, i do not know. republicans may want to see those from pr move back, at least electorally. >> hi. does this work? >> yes, it does. >> curtis. the issue of turnout has not been discussed very much. i cannot conceive going on campuses -- hispanics are 50/50.

they may divide. but the turnout will be considerably lower. i think that impacts on the scenario. i also think conversely, because of the republican positions on entitlements, there may be a break at the top end of the scale. the second thing is, the analysis does not include some americans, which i think may turn out to be a significant force because the conditions for it are right. and the third thing is, there really is a major change that has happened in virginia since 2008. the republicans control the whole state. in my county in northern virginia, the republicans swept the board of supervisors. the democrats are not exactly as presented, because the political

factor now is more important. the latino turnout. anything else that someone may want to comment on, the changes in the states. >> first of all, the political climate i think is absolutely right. as i said in my remarks, and ruy did, as well, you have to accept that the obama share will be lower, with perhaps the exception of african-americans, and the issue is that he had caught some ground to give. the question is, can he manage that decline and not to survive? i think it could be a lot less in the working-class white community, which is not only resistant to him but getting hammered economically. holding down the losses in places like northern virginia to the point where he can still

win. in contrast with the republican. that will be a key to that. on turnout, one issue i was trying to allude to in my response to ruy is that demographically, the response is there. 4 million more millennials being eligible to vote to ban in 2008. -- to vote than in 2008. an awful lot of white, blue- collar of voters -- blue-collar voters came out to vote against obama. it is conceivable their share of the vote will not increase by as much as you would expect. the denominator get bigger.

certainly, i believe in 2010, seniors were a larger share of the vote than they have ever been in a midterm election, and i have got to think a lot of those voters are waiting for the chance to come out again and vote against the socialists in the white house, so there is that issue, as well. >> the question is what is going to be the mobilization differential? in 2010, it was heavily skewed toward conservative constituencies. i very much doubt in this incredibly hotly contested presidential election where they will go all out and the obama machine will have the resources to go all out but of all the things we can talk about to mobilize people, a lot -- there may be some immobilization

differential but it's not going to be on the level of 2010. the most reasonable expectation is it will sort of balance out. obama will see an electorate with 28% minority vote and the rest will be on trend. people exaggerate the extent to which the obama administration -- the obama election was turnout. it's hard to change turnout patterns drastically from election to election. given demobilized each side is going to be, i see these efforts as canceling each other out. >> if you go back to 2008, the white turnout, the share of the white eligible electorate who voted late 2008 was 66%. african-americans, 65%. that hase smallest gap

-- that was there and it was a breakthrough and a milestone. 50% hispanic. that was an increase but not a surge. the question now is -- the other thing with a huge turnout and closing of the gap among younger voters. he had a better message for younger voters than he does today and i would not hedge it again on that though except to say the fed demographic change will push the base because that is worthy population bulge is. many of them are hispanic and many of them are born in this country. you've got a big bulge of older hispanics who are either not

citizens are not here legally. almost all of their kids are born here. >> looking at age and looking at generation, if we believe in a generational analysis, it could be 26% of eligible voters will be from the millennial generation because they are now bleating upward into the 30 year olds. the entire 18 to 34 age group will be millennial. that depends on what you define as the birth year. that will produce more voters, assuming turnout rates don't collapse completely because it is a bigger age group now. have that gentleman in the back.

>> i am a business consultant. i think the panel for having this. my questions are don't you guys think if the minority strategic turnout -- obama will win by a landslide. african-americans are the key and the presidential election. what about the african and asian other than just the hispanics? >> the minority vote and

differentiation among the minorities. >> in 2008, about 01 2/3 of hispanics. the other is an interesting category. you think not only be hispanics are moving beyond the kind of states where they have been influential. 10% of the vote was neither white nor black. in north carolina, it was a sum on the scale for obama to get over the top. strong minority turnout is necessary but not a sufficient condition for obama in 2012. up figures are similar to what we projected. that means you have to get 40%

of whites, which they could not do. the democratic vote in 2010 was below the 75% level among minorities. you have a lot of people who are hurting at one thing i wonder is you noted how much ahead of his approval rating he is running head-to-head. as a cosmic phenomenon, it's unlikely he is going to run ahead of his approval rating. some say you can't pick the number before the election. if you were below 50%, you were unlikely to win. when i talk to people in the obama campaign, they count 47 as a threshold. >> this is a good moment to add another statistic to the work we do. a lot of this conversation and

the way we have been thought to think about politics is through the prism of race and ethnicity. of all new marriages in that united states in 2009, 15% are between partners of a different race or ethnicity. either a hispanic marrying a white, etc. -- we had a famous marriage and we have the offspring of that marriage and the white house today. when barack obama's parents were married, the best we could gather -- it was illegal in 16 states for that to happen and it was an enormous social taboo. one in 1000 marriages were between a white person and a black person. this is part of the change. i wonder if a decade or two from now it will be as easy to slice

the electorate because it's very much a part of the change going on. i suspect for young folks it's the only world they know. older folks a where did this come from and they are having more trouble adapting. that is part of the demographic change going on. we're going to take a few more brief questions and then we will have the panel comments. >> what do you make of the -- whoever carries pennsylvania, ohio and florida will be the next president? >> in this presentation, he broke it down by white working- class, white college-educated minorities. looking at the education gap among whites, i'm wondering how

that persists among minorities and millennial and what that might say about the future? >> that will have to be the last one. >> the question is about colorado and how the economic situation and hispanic population growth fits in colorado. >> three good questions. on these last three questions and throw in anything else you want. >> i would say it is a three state theory. i don't think you have to get too of the three if you get this combination -- it would be difficult for obama but what is essentially a could be argued as a single state, north carolina and virginia. unfortunately for obama it's not

so -- if you were to get north carolina, virginia and colorado, he would only have to get one of the three states you mentioned. >> i would put money and whoever gets those states. in terms of educational attainment breaks and other breaks, if you have an african- american community voting 9 and 10 for about, there are now a lot of breaks of any kind there. there are important differences in that african american community around educational attainment. women are doing much better than men and how that plays out in terms of public policy is a more interesting question in the rest of our lives than politics. ad -- in politics is a locked in constituency. >> if obama can hold pennsylvania and the other 17

states have voted democratic, he could win with the three southwest 8 + virginia. but more likely, if someone wants to of those three states they are more likely to win. hispanics boat -- hispanics vote by and large the way white people dead. the class and version has not affected hispanic voting at and, i think colorado has gone from a reach to a necessity. it has moved inside the line. hard to imagine obama getting to 270 without it unless he went florida or ohio and i think both of those are harder states. colorado embodies what is the modern democratic coalition are you have a significant minority population and a college educated population in 2010,

despite a real movement to the right among working-class whites, there were enough of those people and that's what makes the difference at over say wisconsin. in the midwest, working-class whites are more willing to vote democratic. you cannot make up the margins anywhere else. >> that will have to wrap up. i hope we have highlighted the basic backs and trends behind the struggles in these different states. it gives you a lot to conjure with. i know they will be thinking about it all locked. thank you for coming and hope you check out the report. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> beginning tonight at 8:00 eastern, see comments from two republican presidential candidates -- first, mitt romney making his second campaign stop in iowa. we will show you his speech. then, ron paul is answering questions from the editorial board of the "register." that is tonight at 8:00 on c- span. >> see more videos of the candidates from recent offense to the earliest parts of their campaigns and read the latest comments from social media sites

and a wink to the media partners in the early primary and caucus states. all at c-span.org. >> friday on c-span, the nuclear regulatory commission chairman discusses the lessons learned from the fishermen nuclear disaster in japan. that is 5:50 on friday on c- span. >> at james murdoch today resigned from board of directors at two british newspapers. a special committee appointed by the british prime minister is investigating phone hacking. the committee heard from the parents of a murdered english school girl. after she went missing, her british newspaper hack into her voice mail and deleted message, giving her parents false hope she was still alive and had deleted the messages herself. >>

>> we do think is important that those who are here and those who will watch the proceedings clearly understand the procedure which the inquiry has laid down as being appropriate for this evidence under the inquiries act. we have seen the witness statements of those who will be called this week and next week and it is right to say that in some of them there is varying degrees of criticism of sections of the press and on occasions of individual journalists and that is why they are here to give evidence to you. what i am about to say briefly, i am not including in this the

dowler family. but we do believe where criticism is made, and it is our belief that criticism is incorrect or for whatever reason false, common fairness requires wheat or any other participants who are affected ought to be able to put questions to that witness in order to put the record straight or a least to the other side so that everyone understands the inquiry is falling and so far as these witnesses are concerned, this is the procedure it the inquiry has required. we should put questions to the council who will put those questions if he thinks they are

appropriate to the witness on our behalf. i have no doubt he will do a better job than i would. i do not want to hide what is an important concern -- that is reputation all criticism can be made by these witnesses in what is a televised situation without any opportunity for the opportunity -- for them to respond directly to the lawyers representing the corporate as been affected. can i just say two things. i understand your reluctance. if it becomes necessary to correct the matter, i'm sure he will cover all that we require. if it becomes necessary, i hope you would entertain an application under rule 10 said

paragraph 4, providing we would notify you of the questions we wish to put to witness. i understand that is a position of last resort. we will file where necessary to obviate the need for that evidence with the inquiry to correct any matter we perceive to be important and which needs to be corrected. as one illustration of that, we will file evidence and we will hear this one mr grant gives evidence concerning the way in which journalists covered the announcement of the birth of his daughter, we will file evidence showing what the daily mail journalists did and explain what happened. that is not out of a lack of respect for mr. grant, but we wish to assist the inquiry to

explain what happened and we hope it will be of assistance to you. >> the position of the inquiry is comparatively clear. it is abundantly clear based upon the approach adopted in northern ireland that it is unusual to commit cross- examination outside of the inquiry team. the challenge to that decision, lot failed in northern ireland -- there is an overriding duty of fairness. though rules to permit an application. >> i understand that. the other important feature is to know although you'll -- your

absolute liberty to file whatever evidence you feel is appropriate, and i will want to be balanced and fair, what is under investigation this morning and throughout the inquiry is the concept and practice of the press, not the conduct and practice of the witnesses giving evidence. >> i understand that. i'm sure we hope the evidence will be limited as possible to deal with the general issues. >> i understand this is called a right of reply, which is one of the topics about which some of those who criticize the press complain.

that is unfair at this stage in the morning but but see if we can find the right balance. >> thank you. >> our first witnesses -- [inaudible] >> i swear by almighty god dead evidence i give shall be the truth, the whole truth and nothing but the truth. >> i swear by almighty god the evidence i shall give will be the truth, the whole truth and nothing but the truth. >> please sit down. if at any stage, you need a

break, don't hesitate to say so. before we start, can i thank you both for being prepared to come to the inquiry. you have done so voluntarily and i am conscious that it is a strain. i can only sympathize for the appalling losses you have suffered. i'm very appreciative to both for being prepared to expose yourself further to assist me in the work i've got to do. so thank you very much. >> [inaudible] i would ask you to confirm the

witness' statement. do you confirm the truth of that statement? >> yes. >> one or two questions for you -- >> a few introductory questions. >> good morning. i appreciate -- i know your experience last time was a difficult one. i'm not going to ask detailed questions about your statement, but can i begin by asking, we all know it was the revelation publicly in july of this year that the phone was hacked into by people acting on behalf of " news of the world "-- "news of the world" which led to this inquiry. can i ask how you feel about that? >> the gravity of what happened needed to be investigated. there is a much bigger picture

obviously but given that we learned about these revelations just before the trial of the murder of our daughter, it was extremely important that we understood and people understand exactly what went on in terms of these practices to uncover this information in that situation. >> prior to you discovering about the phone, did you read stories about other people, including well-known people whose phones had been hacked into? >> yes. we had been aware of the cnn miller situation and gordon taylor. we followed that in the media and were very much aware that from a celebrity awareness you point that would be an issue. but not realizing until we were informed about hacking in our situation that it spread much wider than celebrities.

>> how did you feel about the fact there were other phones that have also been hacked? what impact did that have won your case? >> fundamentally, everyone is entitled to a degree of privacy in their private life. it is a deep concern that our private life became public but also other people who are in the public eye, their private life became public as well. >> can you explain how you came to instruct mr. lewis? >> it was during the trial. just before the trial, we found out at about the phone being hacked. when we were given that information, it was difficult to process. what do you do with that information when it's in your mind. i was aware of what happened

with cnn miller and thought we ought to -- get -- was aware of what happened to cnn miller. i did not quite know how we were going to do that. i left a message and at found it straight back and he said please come see me. >> what was your objective in going to see mr. lewis? >> just to be in a position to respond to what would possibly become a public situation and how we would deal with that. we had been given the information but no advice as to what to do with it. it was dynamite information to be aware of.

suddenly everyone got a very excited. motivated about all situation. >> can i ask about your legal representation? did you have the money to pay for legal advice? >> we did not. >> how were you able to pursue a complaint against these nationals? >> it was a difficult thing to do because it was during the trial. we needed someone to represent us and we dragged ourselves along to that meeting and he said you don't need to worry about the money. i will represent you come what may. then with regard, we were able to use the agreement, otherwise we would not have been able to proceed. >> we know that "the news of the

world of" settled your claim in july of this year. you heard my statements. what would you like to say to news international now? >> given the gravity of what became public, the circumstances in which it took place, one would sincerely hope news international and other media organizations would look very carefully at how they procure and obtain information about stories because the ramifications are far greater than an obvious story in the press. >> we said to mr. murdoch to use this as an opportunity to put things right in the future and have some decent standards and

it here to them. >> thank you very much. >> it is a fitting that you should be the first witnesses. [inaudible] this is the private walk that occurred in may of 2002. can i ask you to tell us about that in your own words. >> what was its purpose? >> it was seven weeks after billy had gone missing and a lot of the initial media hype had died down and lit the. did was a thursday, the day she had gone missing and it was a sunny afternoon. she would have come home at

about 4:00. he had gone to london that day and i said why don't you come back and there and we will do the walked back so many questions are buzzing around in your head. why didn't anyone see her, etc.. it was maybe an hour or two before that i said i want to do this and we will walk back together. previously there had been pressing issues at the station but when we got there, there was no one there and it was empty. >> one of the officers i was working with dropped me at the station and we retraced her steps and no one was around.

it was like the day she had gone missing and we put out missing a leaflets with her photograph and a telephone number. the number had been changed and i was checking the number if the right post your was up. we walked back to our house which is maybe three-quarters of a mile. that was on a thursday and on sunday, that photograph appeared in "news of the world. i remember seeing it and i was really cross because we did not see anyone. they had bought -- they had taken the picture. how on earth did they know we were doing that walk on that day? it felt like such an intrusion into a private moment. >> it goes without saying that

you were completely aware at that time that people were watching you. >> did you know significant to your witness statements -- we can draw our own inferences [inaudible] >> i don't know where he would have been to take those pictures. maybe in a parked car somewhere. i don't know. >> you see from that picture -- [inaudible]

>> we see on the second day, for what it's worth -- do you make any complaints beyond telephoning the police? >> i asked how did they get the picture. in the scheme of things at the time, more importantly was the fact that billy was missing. was more mind consuming. >> >> we agreed we would do all of our press communications

[inaudible] >> you referred to situations when your doorstep by journalists. can you tell us more about that? >> it became quite a regular event for people to knock on the door. we established we would not be doing interviews. we would do everything that through the police press office for the simple reason of not wanting to create any media war between any particular publication certainly, it was polite and at the end of the day, our response was the same.

the thing that was quite difficult was on our own property, i was out on the front drive putting at a bit of recycling and suddenly this person popped from beyond the hedge and approached and i remember specifically the head of the investigation police chief was changed and immediately said to me what do you think at the investigation been changed? it was -- what possibly am i going to say. i had the foresight to say i have no comment. [inaudible] for the simple reason that as we said to try and avoid to get specifics of once you engage in

one question and you are engaged in a discussion and that becomes an interview. >> every time we went out the front door, we had to be on guard because someone might be there and they would come up to you when you are least expected it. as you are lifting a stuffed in and out of the car, they will fire a question at you without introducing themselves. you have to train yourselves not to answer. >> maybe you feel pressure to that tactic altogether, is that way you feel? >> however polite people are, you are afraid to open your front door because you are faced with a question. however you respond to that question might lead to one line

were two. we have always tried to be polite and courteous and leave it at that. >> i have to ask you next about boehner. you deal with that [inaudible] in trying to fix this in to -- you think this must be in april or may of 2002? >> it was quite soon after she had gone missing. where she was abducted was opposite a building down by wharton station. there were closed-circuit cameras on the building and

everything focused around these cameras. we were asked to go up and have a look at some of the cctv to see if someone on it was smelly. do you want me -- if someone on it was millie. >> the want -- you were phoning in to the voice mail frequently to see if there was anything else? >> of course, all the time. at first we were able to leave messages and then her voice mail became fall. then you rang and just got the record we are unable to leave messages at the moment. i was so used to hearing that and we had gone up to the building to look at the cctv and i rang her fund. it clicked through on to her

voice mail and i heard her voice. i thought she had picked up her voice mail and she was alive. it was then, really. when we were told about the hacking, that was the first thing i thought. >> your immediate reaction was to phone gemma. >> it sort of died down after word. >> can you tell us anything about the police reaction? >> all i can remember is they put some credit on her phone.

she had no credit on her phone. i can only remember telling day put some credit on the phone. >> did that incite any particular reaction? >> i cannot remember that. >> it is nine years ago for us to remember. >> [inaudible] >> months later, this was shortly before the criminal trial, you learned from the police that the voice mail had

been hacked into by "news of the world." >> that is what we were told. >> what was your immediate reaction? >> we got calls from [inaudible] to tell us what it was about. as soon as i was told about a phone hacking, i did not sleep for three nights because you will replay everything in your mind, just thinking that makes sense. then we went to the meeting and i said to them about this instance that something untoward

was going on. >> he made the connection with dialing into the voice mail and possible connection with the private what you told us about? >> [inaudible] >> for obvious reasons, namely the fact of the criminal trial, this was information you could not share more widely until the trial was completed. [inaudible]

you refer to the press being a double-edged sword. i suppose you have to engage to some extent to assist the police in their inquiries. on the other hand, it was a very important domain which was private. is there anything else you would like to assist about the double edged nature of what he might have had to do it that time? >> in essence in our situation, you have to remember we were really desperate for some information. the press were in a position to help and they did. they got the message out that

she was missing and lots of information came in to police headquarters. on the other hand, being asked questions and everything else associated with that, all of the requests for interviews -- >> i follow the media over the years and certainly recognize that it is very important we tried to be as consistent and not give anyone party any particular position for the very reason she's not wanting to create another set of issues to deal with.

in the early days, we were in a very desperate situation and it is unprecedented in your normal life for most people, how do you deal with that? we tried as best as we could but recognizing things are outside of your own control. >> you had to rely on your own judgment and your unique situation. did you get any help from the police liaison officers? >> very much so. they were brilliant. they really helped us. fifth they took the majority of the burden off of us. we chose the route as well.

>> i'm not going to ask about the settlement of your civil claim. you refer to a meeting with rupert murdoch which i think was the 12th or 13th of july. presumably that was a difficult meeting for both of you. >> it was a very tense meeting. >> heat made it clear that what happened was unacceptable. >> he did. he was very sincere. >> you refer to a letter from the ceo -- can i ask about the

section of your statement which deals with the future and you touched on this alone bet. [inaudible] it's also here to make some recommendations, this is your chance. is there anything you would like to suggest to think about at this stage? >> when we went to see the party leaders and prime minister, we have no experience in such a public life situation and certainly no experience from a media situation treated has

always been on our own best judgment as how we dealt with these matters. >> it was more how we wanted the extent exposed and the inquiry into the decision. >> your judgment has been extremely well emphasized throughout. we understand and appreciate that. if you have anything more general -- if there is no problem, we will be thinking -- >> how very generous of you. >> i have no further questions. i appreciate the way that you frankly answered my questions. thank you very much. >> thank you very much.

i think your title of the applications -- >> i have no further questions. >> thank you very much for coming. >> may we break for five minutes? >> yes, of course. >> some news out of london today -- james murdoch, an executive of news corp. and the son of robert murdoch has stepped down as director with the company bought british newspapers -- a son of rupert murdoch. but he is still with the parent company and remains the head of

bskyb. >> friday on c-span, the nuclear regulatory commission chairman discusses the lessons learned from official nuclear disaster in japan. that is at 5:50 eastern on friday on c-span. >> there was a flood in fort wayne, people were down there filling sandbags, desperately trying to keep the river. air force one stop, reagan had a motorcade down to the flooded area, took off his jacket. my memory is he filled a three sandbags, said hello and hi to everyone, got back in the car and got back on the plane. but that night, what to fill the airwaves was not three sandbags was reagan filling sandbags with his shirt off. >> sam donaldson, andrea mitchell, and chris dodd talk about the legacy of ronald reagan. new york city mayor michael bloomberg and mariana huffington

discuss their dreams and opportunities in the u.s.. astronauts john glenn, neil armstrong, buzz aldrin and michael collins are awarded the congressional gold medal. go to c-span.org for the schedule. >> presidential candidate mitt romney makes his second campaign stop in iowa this month. you can see his speech tonight at 8:00 eastern here on c-span. on c-span2 at 8:00, a discussion about a camp in iraq housing thousands of supporters of the iranian opposition group. it's scheduled to be closed at the end of the year. we will hear from a number of speakers, including tom ridge and howard dean. on c-span3 at 8:00 by house hearing on u.s. development assistance to china. >> the pentagon is facing hundreds of billions of dollars in automatic spending cuts in

2013. those cuts were triggered by the joint deficit reduction committee's failure to come up with a plan this week. the center for strategic and budgetary assessments today look at what would be cut and what it means for the military. this is just under one hour. >> we will talk about what this means for the current budget as well as for budget as we look at and for some of the key defense programs. with that, let me turn it over to todd.

>> thank you for coming out. the purpose of this briefing is to talk about the post-super committee budget environment. defense in the age of of their -- defense in the age of austerity. we got tired of using the phrase age of austerity so try to come up with other examples of alliteration to express the same thing. my favorite is. of persistent penny pinching and purse money. i have a few slides here and then we will open up for questions. the budget control act of 2011 passed in august set off a change of events that began with the super committee and did a number of things. in addition to creating the

super committee charged with finding $1.2 trillion in additional deficit reduction, it set immediate caps on fiscal year 12 budget. the fiscal year 12 budget we should note is still pending in congress. we are on a continuing resolution for the fiscal year that lasts through december 16th. i think it's highly likely the continuing resolution will be continued at least until january to give congress more time to put together of bill. the super committee -- today was the deadline. on monday, they announced they were not going to meet the deadline. what that means is without congress having time to consider a proposal or having a proposal to consider, it triggers the sequestered mechanism in the bill. what sequestration means is budget caps on various parts of

the budget and medicare are lowered, lower than what they were initially sap for fiscal year 12 and will remain at a lower level for the rest of the decade unless congress does something to undo it. there is a one-year delay before the enforcement of sequestration actually goes into effect. that means a cloud of uncertainty will be hanging over the discretionary budget, including the defense budget, potentially for the next 13 months. january 2nd that sequestration goes into enforcement and money is taking out of the budget. that means congress will be able to talk about this, debate it, kick it around and potentially not do anything about it until after the november 2012 elections. i think there's a fair chance that is what actually will

happen. that means not only the department of defense and other parts of the government will have the cloud hanging over them for the next year. i should also note there are several other things going on at the department of defense right now. we of the comprehensive strategic review that has been in the works since april. it's supposed to report out next month on taking a look at our strategy for the next 10 years or so. also at the same time, the fiscal year 13 budget is being worked out. they are already working on it right now. they are working on the 13

budget and the target their working for is about $525 billion. that is the cap set by the budget control act. the department has indicated they are not working on a contingency plan for a budget that would fit within sequestration. contingencyave a plan for sequestration at this point. that could change in the coming months. the budget they're working on now will come out in february. it's scheduled to come out the first monday in february. we know the cuts are lemming and we know what the budget cap would be. they may come out with a budget that does not fit under those caps in 2013. dod is in the early stages of

planning their 2014 budget right now so they don't know whatfy fy12 will be yet and they may not have 13 cleared up the next year and they're already trying to plan for fy14 and beyond. the uncertainty in the defense budget of sequestration could persist for a year or longer. the real question is what are we going to see in the budget request? here are the range of possibilities. i put this up to show you what could happen under sequestration. what it means for the level of defense spending. the initial cuts under the budget control act are shown in the purple bottom-line, the third one down from the top. above that, you see the green dotted line. that was the projection of spending in fy12 budget.

they were projecting real growth and flattening out only growing with inflation for the latter half of the decade. the red line is the cbo baseline. that is what cdo uses when it is scoring things in terms of deficit reduction. that assumes current law continues into the future. that means most items are just allowed to grow with inflation but personnel costs that are linked to a different measure like the employment cost index grow a little faster so you see some real growth there. the purple line is the initial cap. sequestration is the lower line of there. the way the law is written, when sequestrating goes into effect, you take an equal amount, divide up the roughly $500 billion in cuts it mandates of the next nine years.

you divided equally, the cuts are apply equally across the years. that is why the budget drops suddenly and then continues relatively flat over the rest of that decade. that means if sequestration actually goes into effect, in 2013, the defense budget would drop to the level was in 2007. when i look at this, it is not the depths of the cuts, it is the abruptness with which they occur. the way the law as currently written, you are not allowed to move moneymoney between years. you can move money between accounts within the budget cap but not between years. this presents several challenges for dod. the two major challenges are personnel related costs and acquisition costs. certain personnel costs on the left side here.

this shows all the different components of military benefits that were in the fy12 budget request. i want to show you a couple of things. military benefits have been growing. this funds things like try care. these accounts together had grown by 59% of the past decade. the number of people serving has only grown by 4%. it has remained roughly flat. the marine corps has actually decreased in size over the past decade. that means the cost on a per person basin has gone up 46%. congress has enacted higher than requested pay raises year after

year. health care costs have been growing rapidly across the country. additional bonuses and incentive pay has been added over the past decade as we have problems with recruiting and retention. the top of the pie top in red, the defense program, covers things like tricare and military hospitals. this particular item has grown by 85% of the past decade. a tremendous growth. it is due to the inflation we have seen. a fair amount is due to the fact that more and more retirees and their dependents are staying in the military health-care system. the annual premium has not been increased since 1995.

military retirees can play $30 a month and get coverage for them and all of their dependents. that has not increased since 1995. many of these working aid to military retirees, a lot of people get out of the military 20 years of service and are in your early 40's, they have a second career in in private sector. rather than going on the private plan, it is more cost-effective for them to stay in the military health-care system. that is adding rapidly to the military health-care budget. at the bottom, the orange slice is the tricare for life program. did they have to set aside $11 million a year to pay for this program. it was treated in 2011 -- 2001. this equates to $5,580 per

person per year. what is it? it is a medicare supplemental insurance policy that only applies to military retirees and those who serve 20 or more years and only becomes effective once they become 65. it is free. they pay no annual premium. in the private sector, an equivalent plan would cost $2,000 a year. this is a new benefit. it accrues to a small percentage of people. less than 20% of people that served stay for retirement and qualify. we have to set aside $5,580 per person per year for every single person to provide this benefit. the other major challenge i see is in acquisitions.

it is likely that if it is allowed to go into the fact that we will see the majority of the cats, half of them or more, coming out of the acquisition side. the budget is only a third of the total dod based the budget. y? a lot of things you can do to save money takes time to implement. dod has a basis around the country and around the world. he could close the bases but it takes time. it cost money up front. doing things like reforming pay and benefits will take time to grandfather in these changes so they do not affect people who have already retired. as an dod stated they would do. if you look at other options like reducing the number of personnel, both civilians and military personnel, if you want

to avoid actual layoffs and reduced the number of personnel using attrition, that will take time as well. what does that leave you with? instead of making some of these structural changes in short term, a dot will be forced to make quick cut. the quickest way to cut money is an acquisition. we could see programs being terminated outright. the vehicle is one that the appropriators have already targeted in their fy12 bills. there can be others. the late starts of new programs, they could delay the start of those in order to free up money in the near term. or they could slow the pace of procurement of programs. the joint strike fighter stand out. it is the largest program in the dod program. size matters.

when you're going down the list of programs and looking to free up dollars, you will look at the big programs. what i have shown here in tornado chart, at the top 12 acquisition programs as were listed in last year's report to congress about acquisition programs. i would point out there are a number of new start programs that are not listed. and they will be a major acquisition programs. because they are so new, and they are not included yet. the tanker replacement program is not in there yet. replacement for their nuclear ballistic missile submarine is not in there yet. there are a number of programs. as dod looks to free up of the budget, i think they are likely to target a lot of these major acquisition programs. what is the potential impact on

acquisition funding, if it will be hit the hardest? i did some calculations. i ran for different scenarios for reference at the top and the purple line. this is the planned increase in acquisition funding in last year's budget to congress. did they planned to increase acquisition funding in fy12 and beyond. that has been overcome by events. the blue line is the initial cuts. this is implied by the initial cuts on the budget control act. assuming that half will come out of acquisition funding and half out of the rest of the budget. under that scenario, we would see about faye 6% in fy13. this is relative to the fy11 levels of funding. under sequester and, it may be

deeper. it applies equally across all accounts of in defense budget. you will see about a 12% drop. this is not likely to happen if sequestration does go into affect. the law provides for this that the president can exert military personnel. they have indicated that is what they would do in the event this happens. if you take military personnel, and everything else has to be cut by a greater percentage to fit below the cap. we're looking at about an 18% reduction including acquisitions. if you say that the cuts in sequestration get ahead of the curve and a stark targeting the cut and a target about half of them, then we of looking at a potential drop of 21% in

acquisition funding notin fy13. he came out a number of 23%. he is using a different base line. i am using fy11 funding. his baseline is the green line at the top four fy -- for fy13. this is what he uses as his base line when he comes up with the reduction. he is assuming that military personnel accounts would be exempt. database line is not what dod is planning for. their current budget is planning for a level of funding of about five under $25 billion in fy -- $525 billion in fy13.

?ow do you manage this there is an old saying that you either change the way you do business are you change the business you do. under the deepest cuts we're talking about under sequestration, the department may need to change the way it does business and the business it does. the report we put out we outlined three ways that dod can change the way it does business. the first is in paying benefits. we have seen congress enact a lot of additional benefits. they have expanded benefits. it is not that we can single out a specific thing here that they should not have done or should be rolled back. the problem is that these have been added without understanding

what it means for the troops. how did they value these various benefits? the first thing we do is focus on the value for money we are already spending. we need to understand the preferences of service members. they ought to have a voice in this. their preferences ought to way into this. rather than finding things to cut. first is the tricare for life program. given the cost per year per service member, we have to ask ourselves, do they value tricare for life? less than 20% will actually earned this benefit. more than 80% do not stay for retirement and will not qualify. how much do they valued it? would they prefer a cash bonus of some lesser value rather than paying for this benefit? these are the questions we have

to ask. in private sector, this is a preference based benefit compensation. companies do this all the time. they find that how people value aspects of the compensation. if a dental plan cost to fight for dollars a year and you prefer to benefit the dollars and rigidified hundred dollars a year and you prefer to let -- if a dental plan costs $500 a year and cheaper for getting to under $50 in cash, it makes sense. they recommended that we have an independent commission that goes off and steadies' this, collects data from service members, and comes up with reforms and proposes it to congress. the qdr would have the power to

submit something to congress and congress would have to give amendment.or down we have seen a proliferation of the past decade. they have been very effective. there are a lot of cost advantages. they require fewer personnel to operate. you do not have to advise all the platforms. i could go into more detail on this the people have questions. this is an area that dod should attempt to exploit more in the future. there are limits. it limits the applications for permits of environment. that is where there are not air defenses. where we are not subject to

jams. while the planes are undermanned, they are remotely piloted. we have to remain a communication link with them. if we invest smartly in our science and technology budget, we can make advances in automation so we do not have to always maintain a popular controlling and we can work on more resilient communication systems that can withstand jamming. healthy ones are out there. the last item here is talking about changing the way we work with our allies and the role of our allies. a number of our partners around the world have not had to spend nearly as much on defense in in recent years as a% of their economy as we have.

we spend a little over 4%. a lot of our european allies spend much less than 2%. they can pick of a greater share of the burden for common defense. they have a lot of interest in common. our fiscal constraints present an opportunity to encourage them to do this. we can incentivize some of our allies to take a greater responsibility for their own security. to be willing to export more of our advanced systems to other countries can have a dual benefit that can sustain our defense industry during a downturn and helped enable our allies to pick up a greater share of the burden. dick india may be a good candidates. they have shown a willingness to

increase their defense spending. as a result, it means we do not have to shed its commitments. we can reduce our participation to some degree. that is all i have prepared spiri. >> can you return to the 2007 level? >> sequestration, the base defense budget not including the war is $530 billion. it would drop to approximately $472 billion plus or minus a couple of billion. adjust for inflation, the

base defense budget in 2007 was 473 billion. we did take a back to the same level it was in 2007. >> you said things are more expensive now. what to say about this? >> the costs are increasing. pay has gone up faster than ablation. because of health care has gone up. these are things that are hard to roll back. especially if you're trying to roll back five years in 1. the look at the fundamentals, we have the same size military today that we did not could

2007. it is just costing us more. -- -- that we did in 2007. a dishes costing us more. >> he said he would support the president vetoing the sequestration. what do you think about that given the do and gloom he has laid out? >> it does seem like he is trying to play both sides of the argument a bit. in days leading up, he would ratcheted up the rhetoric for what this meant for defense. using his numbers the way he was doing his math, he was showing the worst case of the worst-case scenario. the worst cuts implemented and the worst way possible. the problem is if you want the threat of sequestration to be a real credible threat that forces congress to come up with other

offsetting deficit reduction. it becomes a non credible threat. i think the problem is that they may have said the threat is so high that the credibility has been reduced. members of congress may not take the threat as seriously as they would have otherwise. >> he set the bar so high. >> it doesn't run the risk of undercutting the veto threat. if the administration has said these will be catastrophic, and that is the kind of language he has used. if that is true, how could they ever let them go into affect? >> you said there is some ability to change and switch

around money within the departments. did is there a simple way to where money can be changed to some function to keep up acquisition and allow for bac billing by congress of other stuff to read appropriations? >> the way that the sequester budget works, what ever it is enacted by congress, by the time you hit january 2, whatever budget they enacted, if it is above the cap then sequestration would automatically cut all programs and activities by a uniform percentage to make the budget the below the cap. if you want to allocate it, then you should propose to congress

and in act one below the cap. you can allocate the money however you wish. war funding is not subject to the pleasure capture. more funding gets capped. they can move items from the base defense budget into the war budget. they moved $10 million from the base budget to the war budget. i expect we would see that in the future in terms of how much. the limit is how much congress would tolerate. >> i wanted to go back to the earlier point. even gen the pentagon could

submit a budget in 2013. -- you mentioned the pentagon could submit a budget in 2013. doesn't he have to abide by his own laws? >> he can some it whenever budget oeneus. it seems like it would be much more credible. it shows what the impact would be. you do not have to exaggerate it. you do not have to talk about it. this would send a powerful message. i do not think it is likely to do this. dod has been working on this for a year. there are a had to revise it.

it is unlikely they would go back and try to revise it to fit. here is the budget. they say we will submit a budget amendment. it shows you how we would trim it to fit. >> if you want to preserve americans ability, where do you cut? do you cut on the personnel side or acquisition side? do you have to pay sit? -- pace sit? >> you have to do a bit of both. you a pat on the personnel side probably starting in benefits. that would be unpalatable. there might be long term consequences in terms of recruiting and retention. you can also cut the number of

civilian employees. right now dod employees over 700,000 civilians. we're not talking about contractors but government civilian employees. that cost them about 70 billion a year. a 10% cut would free about $7 billion a year. there are consequences with all of these things. i think you have to take a pretty balanced approach to this. >> to what detail level of this sequestration go down? if that happens in the budget is 5% greater than the sequestration budget, is it the

sort of department top line that has to be reduced? is it the department collectible? >> if you submit a budget five% above the cap, when sequestration kicks in, it cut its every account with in that budget down to the account level by 5%. you can exempt military personnel. and everything else would have to be cut on the order of 7.5%. it would stop it at the zero and m -- 0 and m level. in others it a good to specific line items.

it would be messy, in addition, and terribly disruptive -- inefficient, and it's terribly disruptive. if you are planning on buying two submarines and your budget gets cut by a 20%, you cannot by a fraction of a submarine unless congress can give the special send moneyission to overseas. that is where it gets to be incredibly disruptive. why would you ever go into sequestration with a budget that is beating the cap? you should reduce yourself so you can target the cuts. there are critical things.

>> if you terminate programs, and there is almost always termination penalties. how does that factor in? if sequestration goes into effect in 9 years, what does the dod base budget look like? would it be real percentage cuts or basically flat? >> termination liability is a big on known. the contractor has the ones the government moves. the you can not know in advance what your costs will be. the contractors are not going to

end up losing money on this. they will be protected in terms of money they have already committed, things they have already spent on the program's in terms of buying part in advanced and everything the government has authorized them to do. if the government cancels the program, they get reimbursed. it is a big unknown how much that would actually cost. especially when you consider programs that are ramping up right now, companies are hiring people. they sent them through training. if you kill the program, and they have to let the people go. all that invested money they lost. that is an issue for the department. that is one reason why they may try to trim programs rather than kill them. especially delaying the start of a program.

>> it cost money down the line. >> exactly. we just ramped of it. is more efficient to produce it. if you go back to buying one per year, your unit cost will go back up. in long run, if you buy the same submarines in the end, it will buy them or if you buy them one at a time as opposed to two at a time. >> if sequestration goes into effect nine years down the the budget have been flat throughout? >> i will go back to the charts.

>> the way they have to be divided. it can grow a little bit above inflation. aching for a slightly over time. >> what areas do you see in cost savings versus personnel? how would you counter the arguments that except for unmanned air systems, and many are in the developmental stages and it will cost money to bring them into place. >> this is in the paper we published. i looked in detail at the

example of intelligence, surveillance, and reconnaissance. we ran through the cost equation. it was a revised -- surprising to see that the savings came out of training. for manned aircraft, you have to spend so much time training pilots that you have to buy more aircraft in order to maintain the training schedule. and of buying almost twice as many aircraft to accommodate -- you and up a buying almost twice as many aircraft to accommodate the people. the aircraft for training requirements and fuel and parts and overtime. they require people to be the maintainers over time. it is the training part of the equation where we save a lot of money on uav's. pilots can spend a much greater percentage of the time on

missions. did they did not have to be deployed to do that. they can do that at their home bases. simulator training is much better and much more comparable to the actual flight environment. when you have pilot in the plane, they can only do so much in simulators. that technology is not all there. we are moving in that direction. that is something the department should embrace to save money. >> yesterday, after the announcement, analysts were pointing out that the market has not yet punished if the defense industry. how was wondering what the take is. is that a sign that the market is steady? do you see it as a sign that the industry can absorb these cut?

>> i am not an expert on the market. i think there is a fair amount of doubt out there that sequestration might actually go into effect. i share that doubt. i think that they will find a way at least to delay the implementation of the the cuts. i think that may be reflected on how people are valuing the stocks. i am not a market analyst. >> do you not think the industry can absorb the cut? >> sure they can absorb it. they will find a way. it may be painful and disruptive. we may see some smaller companies decide to get out of the defense business. they may merge with larger companies. some of them may even close their doors. in terms of the major price, we

have five main defense contractors now. at the prime level, we have seen a significant amount of consolidation. we may see further consolidation. we are going on 12 and 13 years of growing defense budgets. just as it is hard for the pentagon to adjust, i think it is the challenge for industry as well. people i have talked to see the writing on the wall. if they know whether sequestration is a lot to go into affect or not. the budget is coming down. it will have an impact. you see them taking steps to prepare for this. >> i am confused by cuts that

are mandated by the budget control act and the sequestration. my impression is that many of the things you are talking about as ways to fill the sequestration are already being discussed as ways of accommodating roughly $450 billion under the bca. can you clarify? >> they are looking at a lot of these things to accomplish the initial cut to the to the purple line on the chart. baking did the things they wanted to avoid. they may have to start cutting people sooner than they had planned.

they may have to start drawing down the sooner than they have planned. there are a talking about burning down the size of the army and marine corps. those cuts would be based in overtime not starting into fy15 or fyy16. i think we will see congress being a willing participant. it can dampen the slope. it is a lot of the same things they were planning to do. they just have to do them sooner. >> the pentagon plans for everything. it plans for a war with iran and invasion of canada. does the pentagon's refusal to

plan for sequestration makes sense? as a budget dweeb, does it make sense? >> a budget dweeb? they plan for all number of contingencies. i've not seen the canada plan yet. this is a contingency. it seems only prudent that dod should be preparing for it. this is a bit disconcerting. perhaps it will change. they should be planning for this. they should be developing budget options that they could roll up

quickly. the last thing they want to have happen is you go into january 2, 2013 and the talks break down. they're not able to undo sequestration and these across the board cuts take effect. you do not want to cut your budget that way. you want to target your cut and lower priority areas. hopefully, they will start working on that. >> my understanding is a number of these services are looking anat a deeper level of pat. it was stopped. they were told to look at the fy13 budget. >> who told them that?

>> i do not know. i assume it came from the top. >> is it possible to implement another strategy they want to do with those cuts? >> one comes to strategy, your budget does contain your strategy or constrain its. did you do not want to try to implement a strategy do not want to afford. you will stretch yourself to them.

is it more are less a tweet on the current strategy? that is something we should be looking for. >> you touched on this a little bit. it all depends on the baseline. can you give us some idea of the differences versus with the caps are and where sequestration would put things? >> this is what really matters. it has five and a 71 billion.

it is the budget control act. there's not a lot of flexibility. 5 and 25 billion is roughly what they're planning for in their budget they're working on now. under sequestration, the budget would drop to about $472 billion. relative to what they're already planning, it is a little over $50 billion in cuts relative to what they were cutting. this is a lot about what the baseline does. they consistently used the

higher baseline level. this makes the cuts look larger. many here the people in congress talk about it, it is relative to the cbo baseline. it is relative to the cbo baseline. it is a big difference depending on what you use. he added that roughly $500 billion. it all depends on what baseline you're using. >> any feeling for which of these services might hit harder

under sequestration? >> you would be wise to probably place your bets on the share of the budget remaining roughly equal. if they really do shift strategy, that is the case. it is likely that ground forces would be cut more. if you look at future threats, it is not going to be as ground heavy. we invested a fair amount in our ground forces over the past decade, much through war funding. we're looking to carry out major

stabilization campaigns at the same time. are we going to need that capability in future? are required to get into another in iraq or afghanistan anytime san? if you are willing to prioritize, you would say that is a low risk. we could scale back some of our capability. we could see dod come out and saying in sitting prepared for two major ground wars will only be prepared for one or 1.5 are we will reduce the amount of overlap between these two complex. that is one conflict that would result in deeper cuts. >> they have some of the largest

and most expensive platforms. there is some expensive aircraft. is very capital intensive. >> they are operating on this. hal is sequestration going to affect the ability to modernize the legacy programs? >> it is true. if you look at the average age of aircraft in inventory, it is getting older. it is the oldest is has been in history of the air force. the oldest planes are the kc135 tankers which are said to be

replaced in next decade. i look to the 2020's and that is where i say problem. we are supposed to be buying the tankers at for rate production. we're supposed to be buying the striker at for re -- full rate production and buying trainer's. iny're all coming on line 2020. there are things you can do to mitigate that. some of the new aircraft where buying now are far more capable. the capabilities are far

greater. the weapons we put on them are getting better and better. uav's are another example. i think we will continue this in the future. we might need to shift this. they're completely vulnerable to attack. he cannot fly them with air defenses. have to shift in the future to buy more higher and once to operate. that will cost more. there is a cost savings their relative to the demands equivalence. i think the air force will have a budget crunch.

this all happen regardless of sequestration. they're going to have to make some tough choices about how they want to replace their bets for the future. >> do you think this means that the new programs will not start? >> there is a real risk that they do not starts immediately. they will get stretched out over a longer period of time. >> have you any projections to show what defense spending would be in 2020 or 2021? do these cuts really make us more vulnerable?

>> in terms of percent of defense of gdp, under sequestration it would decline over the next decade. it would drop below 3% of gdp. as a share, it would be neart the lowest level. i cannot imagine where we'd be. is that sufficient tax is that enough for defense? it depends on what you're asking your department of defense to do. since the end of the cold war, we have had a grand strategy that was one of local privacy. falls into a question on whether we can afford that grand strategy in the future or whether we will have to adapt it. we could start prioritizing more

than we have in past. the obama administration has made clear that asia is rising in priority for the department of defense with the announced deployment. we have been in talks with countries like vietnam. if we're making that a higher priority, what would be a lesser priority? it could be that your becomes a lower strategic priority. there can be a lot of options. if you do not prioritize, if you do not have a strategy that is constrained by resources, you run the risk of breaking the force and accepting a high level of risk. if you adjust your strategy according to your resource constraints, it is conceivable that we could maintain national

security and maintain our core interest around the world including support of our allies and partners. we could do that with the lower budget. it would mean we would have to make other areas of the world's a lower priority and be willing to accept some risk. >> how much has acquisition, do you have an idea on how much acquisition over the last 10 or 15 years has been inflated over plans by under estimates? >> that has been a significant issue over the past decade.

we looked at this and in recent report. cost overruns are nothing new. it has been a regular parts of the dod acquisition since the establishment of an industrial base in 1950's after the korean war. it is nothing new. it has been a big issue of red the past decade. -- over the past decade. many programs were cancelled was still in development. these are things like the new presidential helicopter, the future combat systems for the army. a dozen of these major programs were canceled over the past decade. while we were in development, we never saw a single thing. we clearly cannot afford to keep

doing that. there are good reasons why these are canceled. we did not do a good job of estimating costs. we are a bit too optimistic. as a result, we see some cost overruns that are massive. there is a concerted effort within the office of acquisition technology and logistics to do a better job of cost estimating upfront on these programs so that we go into them with our eyes open knowing what we are getting into. we can scale back requirements accordingly. it will be years before we can tell if these efforts are going to be beneficial or of the oil producer dolts -- or if they

will produce results. well we have seen as part of the 2009 acquisition is that a mandated stricter controls. they did go back in the estimates the cost of a lot of programs. we saw a number of security breaches. i think that is a good sign. we have a little better control of what this cost will be. we are doing a better job now. ask me now could 10 years. that is when we will know if it actually improves. >> we have not been solving this problem for the last 40 years. >> this is a perennial issue. i do not think there is a silver bullet. it will take a lot of hard work for the estimators that do this.

in contention, you have to have better requirements disciplined with in the service. you have got to constrain your requirements to what you can afford. the first step is understanding what it will cost you. you can action make an informed decision. at the end of the day, you have got to be willing to scale back requirement to trade off features of the systems to accept something less in order to keep it affordable. >> what happened with sequestration as the trend in congress continues? >> if they cannot agree on then udget?ut sequester rushing goes into affect three months into the fiscal year of 2013. if they do not agree to a budget

by the time of the start of the fiscal year, which almost never happens, we will be on a continuing resolution. that generally funds everything at the same level it was the previous year. we will be looking at a budget in at that as fy12, which will be roughly $526 billion or sell. -- or so. that is not much different than what they were planning for. >> president obama sent a signal to the budget people on executing turkeys. >> it could be a really strong signal. trim the fat. that is what he should do. >> what is to stop them that's

top them?les -- saw the what is to stop them from putting all the money in that pocket? quite seesawed to get it passed by both houses and signed by the president. -- >> you obviously have to get it passed by both houses and signed by the president. you have to have a realistic understanding of what is taking place. it is a political limit of how much people are willing to tolerate. looking at the chart here, i think the sharp drop is not a smart way to bring down defense spending. you can bring it down in smart ways.

dropping 11% in one year is not a good way to do it. you introduce inefficiencies that cost you more in the long run and can hurt your capabilities. if they cannot override sequestration and they use the loophole and moving things into the war budget and use it to smooth this out, that might not be such a bad thing. both for the long-term budget and for the short-term national security needs. there are options there there are many ways this can play out. we're going to be debating this and discussing this for the next year. we will be here next year. they may get around to acting on that. they may delay it so we can have