talk about the u.s.- pakistan relationship. and your e-mails from calls -- and phone calls and tweets. "washington journal" on c-span. massachusetts congressman barney frank said today he will not run for reelection. his announcement is next. one of the members of the joint deficit reduction committee talking about the federal debt. and later, a discussion on u.s. security with the former director of national intelligence, admiral dennis blair. >> within 90 days of my inauguration, every american soldier and every american prisoner will be out of this jungle and out of their cells and back home in america where

they belong. >> george mcgovern's pledge of the 1972 democratic convention came a decade after the one of the first senators to speak out publicly against the vietnam war. the senator from south dakota suffered a landslide defeat to president nixon but his ground- breaking campaign changed american politics in the democratic party. george mcgovern is featured on c-span's "the contenders." live friday 8:00 p.m. eastern. >> barney frank of massachusetts announced his retirement effective at the end of this congressional term. his career spanned more than three decades and included the passage of legislation which imposed nouri tippah -- regulations on wall street what he was chair of the house financial services committee. this is 40 minutes. [applause]

>> i am grateful to a promising addition to elected office in massachusetts. i am appreciative of the efficiency, i called them this morning because i was driving in. the mayor's office was opened before 9 so i was impressed, i thought i would get an answer machine and asked if i could use this wonderful place that has been a site for a number of important meetings in my career. i was grateful to them for getting it done so quickly. i am going to give you my statement, you have a written copy. i will be sticking closely to it in substance although not word for word. it is as i said, i will begin

where the statement added. when you are in massachusetts politician, it is the custom to -- quote former presidents from massachusetts. it did not choose to run in -- i do not choose to run for congress in 2012. i have gone through some changes. last year, particularly around the time of the signing of the financial reform bill, i had decided i was going to make this my last term. i spent a very busy and somewhat stressful for years with the financial crisis, dealing with the crisis and then dealing with the legislation to make it less likely we will have another one.

i had as is appropriate and dispirited campaign for reelection. my view was i could do my job best fighting for the public policies i care about by making this my last term. and then a funny thing happened on the way to retirement. a very conservative power -- republican majority took over. it seemed some of the things i had fought hardest for could be in jeopardy. financial reform which i anticipated the conservative republicans who are running the house to undermine, and additionally, i was afraid that given the need to do deficit reduction, this conservative majority would seek to block any increase in taxation on the wealthiest people and would seek to protect the military from any spending cut so that deficit

reduction would fall on such as care become a medicare, and other programs that enhance the quality of our lives. if i were to announce in december i was a lame duck because that would weaken my chances of having influence. ordinarily i would not have announced as early as i did but we are doing redistricting. the legislature and my colleague said it is important for you to tell all bus with you plan to run or not. and so i gave my it and -- my initial view and i was planning to run again. the congressional redistricting came. this is -- decision was precipitated by redistricting. i have been ambivalent about running. not because i do not continue to think the job is important but there are other things i would like to do in my life before my career is over. i was a fledgling academic, i

have the longest uncompleted ph.d. thesis in harvard history haunting me and there are things i would like to do. some people are able to write and pursue an active life. i am easily distracted, i started writing this statement of the black page but i wanted to be all current -- i want to write about serious issues. i was torn. the new district came out and there were two aspects of the district that makes this the decision the way did. the district is substantially changed. there are 326,000 new people, many of whom have never represented, some of whom i have represented for 20 years, which is an eternity. first, i decided to run again

because i wanted to have maximum influence on two issues, projecting financial reform and making sure military spending was part of the mix of deficit reduction. the need to campaign in a district that is almost half new conflicts with that. if i were to run again, i would be engaged full-fledged in a campaign which is appropriate. nobody ought to expect to get elected without a contest but the fact that it is so nail makes it harder in terms of learning about new areas, introducing myself to new people. and i have three obligations. one is to continue to serve the people i can serve. i am wearing a of new bedford wellington museum tie. none of the fishing industry areas will be in the district would be running in. i cannot walk away from the fishing industry and people i

have grown close to genser i am sorry, i have to worry about them, i do not have time to do you. i have worked where my constituents have strong ties. one of them stays the same, that is israel. the azores, i have done a lot at the request of hundreds of thousands of my constituents now. who live there. most would be out of the new district. there are issues are worked on that would become politically irrelevant or irrelevant. i do not want to be torn between a full-fledged campaign in a district with the people and my obligation to the existing constituents and that is reinforced for the fact would have hard time going to 325,000 people, some in areas i am not familiar with and say, i would like to be your congressman for two years. it was clear i would be retiring after the next term. i would be a couple of months

short of my 75th birthday. i have always said i would not be serving an elected office. some people can do it. i know my capacity and energy level and it would have been a mistake. i would have had this difficult situation in which would be going to people in bellingham and other areas and say, please, let me be your congressmen and let me work on your problems because that is an important part of the job i have taken seriously. i am proud of the work i've done as an advocate for local and regional problems but the most important ones are never resolved within a year to. to go into a new district, 325,000 people knew and ask them to trust me with being their advocate on their problems and that expires in two years and if you call me in for a 2014 i will have 11 months to work on your issue. i worked on economic and

environmental issues, none of those are done in 18 months or two years. i would have a hard time frankly telling people that and i would have a hard time justifying to myself to do it. that led me to decide that i should not run. i am, however, and this is the final factor, i'm not retiring from advocacy of public policy and in some ways to be honest, i think i will have more impact in some areas if not in office. it is not a secret that holding elected office is not these days considered to be one of the great virtues. there is a cynical screen through which comments of elected officials are put. i expect to be saying the same things as a private citizen the year and a half from now or months from now the have been saying as that an elected official. i think i will find my motives

less impugned. i think candidly, there is an old saying that truth is the first casualty of war. modesty is the first casualty of a political campaign and in some cases it was in -- on shaky legs to begin with. i will indulge in modesty. i think there was pretty good at being a legislator. i think that have been good at working inside the framework of government. but to my disappointment, the leverage you have within the government has diminished. the anger in the country, the currents of opinion, the kind of inside work i felt best that is not going to be as productive for the foreseeable future and not until we make some changes. i believe my ability to be an advocate on the kinds of issues

i most care about would be as great outside as inside. if i never served in congress that might not have been the case but i look forward to being able to help change to this system. i think there are too many constraints against doing what i would like to do and i expect to join the debate to change that. with that, i will open this up to any questions or comments. >> [inaudible] >> i would have had to work hard. when you are a candidate you are supposed to get all macho and say, i could win. perhaps will not be surprised if i do not feel the need to be as much as others. i've run for office 20 times. i have 120 elections. for your to the state house and 16 here. i counted up anticipating your

question. five of those cases, and i entered uncertain about the outcome. in a couple of cases that was the underdog. when i moved from boston, i want to narrow races. it was a terrible year in 1980. in 1982, people thought i could not win. i was one of them. in 1990 i entered with people i could -- saying i could not win. i think i would have won. i do know this and this is what is most relevant. it would have been a tough campaign. people are skeptical of incumbents and if you are an incumbent who is representing people you have not represented, you get the worst of both worlds. you have not have a chance to show those people what you're incumbency can mean in terms of being their advocate. so there was this. i do not like raising money. i had to raise several million

dollars last year and i have been rising at this year, close to 600,000 in the bank. i will continue to have in this district, you will have enough of the southeastern province market. i would have to start now raising another couple of million dollars. i think i would win. what is relevant to me is i could not put the requisite effort into that. it is exacerbated. part of my strength is i have been affected -- and effective as an advocate. once acknowledged, it is going to be after tears, that since then, what i do know is that running a full-fledged campaign in a district, the new district or the new -- is 75% of the size of the district, it is sizeable.

that is a factor. let me be clear. i will neither be a lobbyist nor historian. i promise you on both. there is no way i would be a lobbyist. i will miss this job. i get new twinges of regret when a new congress has signed up but maybe you will laugh. one of the advantages to me of not running for office, i do not have to pretend to be nice to people i do not like. [laughter] some of you may not think i have been good at it but i have been trying. the notion of having to go and try to be nice to people i do not like would be ridiculous. i will not in any way be a lobbyist, i do not intend to practice law. i might show up sunday for a gay-rights case. my intention would be a

combination of writing, teaching, and lecturing. i'm not looking for any institutional affiliation. i made this decision, about a week ago. one of the great advantages is, when the phone rings, i do not tense up and say, who has caused me a problem now? who screwed up and i have to do with that? i do not plan to be responsible for anybody's actions other than my own and jim's. >> [inaudible] >> i did not think i lifted enough life by be rewarded by newt gingrich being the nominee. it was unlikely. let me say for example, i continue to be an advocate of public policy, i look forward to debating to take one important example the defense of marriage act with mr. gingrich.

i think he is an of -- an ideal opponent for us when we talk about who it is is threatening the sanctity of marriage. i think -- but clearly, repudiation of mitt romney, it is extraordinary the extent to which mitt romney -- i have been struck again by people talking about the degree of flip- floping, of changing, the lack of accord. it has been my experience that when people say they do not like you if you flip flop, they do not mind if you flip to them. most are people who've looked away. it has been so constant and i think there was a question about the -- it is striking that so many republicans and given the nature of the republican primary electorate which is conservative, i think it is possible that you obviously

think so. his comment about immigration will be looking to the final election. he would be the best thing that happened to the democratic party since barry goldwater. i will acknowledge one error. i voted against president bush, the first request to go into iraq. i was afraid he would do with his son did which is to mess up badly. i now believe the very limited engagement in iraq that had the purpose of expelling saddam

hussein from kuwait and not pursuing him, that worked well and i would have -- if we were back again i would have voted for that. i voted at 1.4 legislation, there was one or two dissenting votes to put restrictions on the internal revenue service that i think were appropriate. we suffer more from any effective tax enforcement than from oppressive enforcement. i do not have any regrets. here's the story of the financial crisis. i was in the minority in the house from 1995 till 2006. i along with many others did not see a crisis coming. until 2003, i thought fannie mae and freddie mac were doing well. i had virtually no impact on

that. tom delay was running the house of reserves at that point. i did become in two dozen for concern about subprime loans being given out for -- pimmit -- promiscuously. george bush ordered the percentage of loans they bought. about 50%. i said and with it -- was quoted. clegg's for the recipients. in 2005, i was the senior democrat. put your bill to reform fannie and freddie. at -- i voted against because of an unrelated provision. the bill passed the house, i was in the minority so my boat had no real impact. it was defeated in the senate. i urge bush had given him the

one figure salida so the bill died. at that point, i did try to get legislation passed to stop loans going to be below could not afford them. he sent orders, we're not going to do that. in two dozen 6, you can read this in the hank paulson book. he approached me because it looks like we might win back congress and he said, he asked me if i would work on serious reform about fannie and freddie. i was worried i said i would. as he says in the book, we won and i kept my word. i became chairman with any serious response ability.

until 2007 i have virtually no impact. in 277 and became chairman and was the first things we did was to pass legislation to further regulate fannie mae and freddie mac given -- frame back. there was a group there. they announced they would dissolve it as a result of our bill passing. in divens 7 we passed a bill to block subprime loans. the white -- subprime loans were good things to help people when that did not pass in the senate. and hank paulson took over the regulation and when things, when it turned out it was too late he put them into conservatorship and said he was going to put

them into conservatorship and was afraid he would get attack. he called me and i said that as we should do. fannie mae and freddie mac to and -- have been in conservatorship run by the federal government. the administration -- testified when i asked him that since polls and use the powers in the bill that i initiated, there have been no losses. the losses to about our payments for things that happened before that. since 2008 they have done a good job and have not caused any losses. i was late in recognizing the problem. i had the versed impact on legislation came in 2007. that is telling you if points i mentioned it, michael steele

said the democrats took over and held it until 2002. that is delusional. when the senate went into a subprime bill, we did it for read that into the building has the prime loans that made problems are illegal. [unintelligible] there were two issues i wanted to focus on. there are the ones that made me decide to run again. if i was a lame duck would not have as much impact. one is defending financial reform. the republicans have held down funding with on these futures trading to the same amount as it

has this year. they got a major idea. swaps. the things that got a iag in trouble. they're trying to -- block that. they could say to people if you lend money and sell along, you have to hold on to 5%. you cannot make loans and sell them and not care they get repaid. i am the senior democrat. there were three responsibilities i looked out. running for reelection this -- servicing the current district, people who are not born to be in the ambien the ranking member and try to plant -- protect financial reform. to the mccarren transfer. one is transferable. i cannot pass off being the ranking member and i cannot

leave the people i am not representing. i will watch getting ready for a kimmie boad hopefully you will support -- i believe we are substantially over committed worldwide in the military and that includes the present trade where we're sending 25 million marines in austria, have more to do a home baffles me. we're at is interesting situation. san putin -- there will make reductions in military. to protect the military have to

do one of three things. reduce the amount by which you reduce the deficit, or, the social security and medicare, [unintelligible] i got a call from my office with other members. i requested a caucus to push for deficit reduction including military spending. those are the issues on which i will spend most of my time and that will keep me busy. >> [unintelligible] [inaudible] >> what station are you with? oh. the answer is, absolutely not.

my investments are veryd clear- cut. -- clear-cut. i have for some time put almost all my investments into massachusetts municipal bonds. there are double tax-free and they pay 4%. i actively push public policies that go against our interest because i believe the rating agencies overvalue the risk. it means having to pay more interest than is justified. all my investments are in there. i am sorry to disappoint you. i made no such investments. all my investments are in massachusetts municipal bonds and no one would accuse me of a conflict of interest in pushing for the fiscal stability of my

state. what work>> [inaudible] >> i will acknowledge my judgment is not always perfect but i am smart enough not to answer that question. people should leave their legacies to other people to describe. that is even worse than saying what you think of it. >> [inaudible] >> they have been successful in two areas where a veto power has worked. the absolute refusal of a sufficient number to block confirmation to confirm the head of the consumer bureau.

the consumer bureau has the power and exist in the consumer area but people talk about the non-bank. the community banks have a right to complain. if all entities known as banks had made more luggage -- mortgage loans, we would not be in this trouble. we extended the powers of the consumer bureau to the non- banks. to the czech catchers. -- check cashers. they have retarded our >> this refusal to actually regulate derivatives. on the other hand, they have not been successful because they understand it is quite popular. they have done frontal assaults on health care. one of the great muggings in

american history politically just took place. an extraordinary leader in the medical profession and as an administrator who is a cliveden guy, he just had to retire as head of the cms because of right wing obstructionism. we lost a great man and a very able guy. he has been treated very unfairly. the door after the environment had gone. they want to go after financial they understand the slogan, "but the regulate derivatives" will not take them anywhere. outgoing subprime loans, which happened -- some prime loans were a lot in the legislation that i tried to pass in 2007 and that became law in 2010.

no republican during that time ever did anything to retard subprime loans being given to people who should not get them. they are aware that ahead on assault will not work. if they win the next presidential election they can do that because you have a president to appoint people to use those powers. by underfunding the cftc and by blocking, they have already had some impact. they are trying to go at this from the side and i find it hard to block it from happening. [inaudible] if i were sure we're going to win and i would be chairman again, that was the hardest four years of my life. the things about the better for

the democrats. is newt gingrich's the nominees then... wow. beyond that, it is a very open question. i served in the house for 32 years, 18 in the majority, 14 in the minority. it is different when you are in the minority. that is not a factor for me. you think i'm going to answer that? [laughter] [inaudible] let me make one correction. my late colleague was the first openly gay -- i was the first to volunteer it.

i volunteered that information on memorial day. i'm very moved when the speaker of the new york city council and a serious candidate tells audiences that my example was helpful to her. the best antidote to prejudice is reality. prejudice is, by definition, based on the ignorance of people. i am proud that by my finally coming out -- was 47. when i volunteered finally in 1987, i do think it was helpful in that regard and i am proud. one of the things that we were able to do is to blame dock

congress was the repeal of don't ask, don't tell. -- in the lame-duck congress. then speaker pelosi really put me in charge of that. i have the gavel that was used when don't ask, don't tell was repealed hanging up. [inaudible] it is substantially deteriorated and newt gingrich brings that to mind. when i got a congress in 1980, there was a good deal of cooperation. there were differences, but they were not personal. he has specifically said that he did not believe the republicans would never be able to take over as long as it was seen as a debate between peoples of good will. he had to demonize the opposition and say they were corrupt, traitorous, etc. it was somewhat successful and to provoke a reaction.

it has gotten worse. i was ranking member of the committee 2003-2007 and oxley ran in a bipartisan way. there was some impact of the margins. today, that is not the case. republican party in the house today is dominated by -- i will say this. it consists half of people who think like michele bachmann and half of people who are afraid of losing the primary to people who are like michele bachmann that leaves you very little ability to work things out. personally, i get along with a team members and there are some people like and still work with. congress is not some autonomous entity that parachuted through the dome. we were elected by people. there is no member that did not get more votes than anyone else for that job.

the public cannot be absolved of its responsibility. they picked us. in particular, what you have is this and have to do with primaries. people on the left and people on the right live in parallel universes. no longer do people get most of their information from a current media source and then diverge in how they interpret it. the left with msnbc. the right is on fox and talk radio. what happens is people no different facts. what happens again is that these are echo chambers. people here agreement with themselves so you have the most active people on both sides of the spectrum convinced of their view is the majority view. it is those of us who are their allies to try to make a compromise and we are told there is no reason. i had people that did not believe we have the votes for single payer health care.

works for me. people did not believe it. that is another obstacle to cooperation. there are people who object to cooperation in principle because they do not see the need for it. they blew their side is absolutely on the majority. which one? not at all. it did not affected at all. several people have written my obituary. 2010 was the worst year for democrats that anyone can remember. the 63 incumbents lost. it is one of these things work, having gotten through that, it is unlikely will face anything remotely like that again. there was one aspect of it that is clear to me now. for reasons that are not

entirely clear to me, there are people not so fond of me. some of them have a lot of money. some of them think i want them to have less money. in the last election, i raised a lot of money. i actually raise the most prized as much money as i spent because people gave to him because they do not like me. that is the way it is. with the supreme court decision the way it is, i would anticipate a lot of money being spent. with that said, would have to spend a lot of time raising money. raising $2 million again, that this time i would rather be using to fight to cut the military. is that what? [inaudible] yes. it is the people who do not vote in primaries voting in primaries.

politicians are not all economists. -- not autonomous. the number of people who vote in party primaries is a small number. party primaries have a major impact. what we need are for people to go and participate in primaries. sometimes i get a little irritated when people who have not voted in primaries -- and i do not want to make this personal, but when people who do not vote in primaries complained to me, i do not take it will. literally, it begins with the electorate. the half to stop rewarding excess of the militancy. until the electorate does not, it will not change. yes? [inaudible] yes. i will divide my time. i will continue to live in new england. my partner has a great house in maine. i will be spending time there as well. i will be giving up my place in washington.

i will not have a washington apartment, but i will keep the new residents as well as spending time in maine. thank you wall. -- thank you all. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> let me be very clear. i will neither be a lobbyist for a historian. i promise you on both. there is no way i would be a lobbyist. . will miss this job-creatin

i will tell you this. you may laugh, but one of the advantages of not running for offices, and don't even have to pretend to try to be nice to people i don't like. [laughter] some of you may not think i have been good at it, but i have been trying. the notion of being a lobbyist and trying to be nice to people i did not like, it would be ridiculous. i do not intend to practice law, although i might show up pro bono sunday for gay-rights. >> after 16 terms in the house of representatives, massachusetts congressman barney frank will step down at the end of next year. watch his retirement announcement as well as more than 1000 other appearances on the c-span networks, online at the c-span video library, archives and searchable. it is washington, your way.

up next, we will hear from senator rob portman, one of the members of the joint deficit reduction committee, on the condition thuringia congressional budget process and the federal debt. after that, discussion on u.s. security with the former director of national security, dennis blair. tomorrow on "washington journal," a discussion on social security and medicare. biggert freedom works appointed a 12 member tea party debt commission to put together of federal budget plan for reducing the debt. we will talk to matt kibbe about the plan. then, daniel markey. "washington journal," each morning at 7 eastern here on c- span. an update from the british house of commons on the british economy. we will hear from the chancellor of the exchequer, george osborn,

live from london at 7:30 a.m. eastern on c-span2. >> next, senator rob portman who served on the deficit reduction committee, on the work of the committee which fell to come to agreement on the deficit reduction package by last week's deadline. calling his remarks, a panel and debates reducing the nation's debt. the american enterprise institute hosted this forum, which is an hour and 45 minutes. >> good afternoon. welcome to the american car enterprise institute. today i have the pleasure of kicking off a two-sport event, consisting of a keynote it reviewed address, falling by a panel discussion -- consisting of a keynote address. let me just make a brief remark and set the stage in the wake of the super committee s

termination. when i think about the super committee, i think on one hand, it was much like any congressional conference committee, a limited number of members appointed by the their leadership from the house and senate to forge a compromise between chambers and report back to both chambers of product that is neither amendable in the house or on the senate for. on the other hand, the super committee was a truly unique structure. unlike simpson-bowles, it was constructed in an even in a bipartisan manner and required only a simple majority to act. the expedited procedures for the floor consideration and the sequestration mechanism further facilitate the process and further encourage the committee to work. from the start, i was both a proponent of the super committee and a believer that it would succeed. my best guess was $600 billion in deficit reductions in the first decade. i believe that i was right to

believe in the mechanism, but clearly i was wrong in my hopes for positive outcome. since the announcement by the cochairs last week that the super committee would not make any recommendations, the air and washington has been filled with the degree of finger-pointing. that is neither an unexpected nor inappropriate, in my view. the super committee had a great opportunity to steer the federal government towards a sustainable fiscal path, and its failure brings consequences. taxpayers deserve an explanation. we also need to look forward, to continue to examine the evidence and the options and debate what political considerations, what does let the mechanisms, and what type of leadership is necessary to address our fiscal challenge. a trust will hear about all this this afternoon. i first met senator portman in january 2002. at the time, i was the newest hire to the house ways and means committee, and he was a six-term

member of congress and a member of the budget committee. at the time, his most recent accomplishment had been a series of critical reforms to the tax code to encourage retirement savings. those provisions were a key component of the 2001 tax cuts, and the only portion of that act that was later made a permanent law. in those 10 years, i have had two jobs, that one in this one. rob portman has bounced around a bit more. after serving in the house, he was the u.s. trade representative in 2005, 2006, director of office of management and budget in 2006 and 2007. now the serbs the citizens ohio in the united states senate. his concerns and interests are for the whole country. i can tell you from personal experience, he constantly seeks out the latest economic research in pursuit of any policy that will reduce our unemployment rate, accelerate our rate of growth, and improve the standard of living for all americans. i have always appreciated the

opportunity to work with senator portman and glad to welcome him here to aei today. he will speak for about 30 minutes and take questions for about 10 minutes after that. then we will immediately transition to a panel discussion that will include biggs,hassett, andrew da and norman ornstein. [applause] >> alex will made the mistake of showing me years ago that he knew his way around, not only on policy but also on politics, which is a dangerous and rare combination. alex, i will tell you today that i expect you to continue to give me guidance and advice. i also want to thank other

friends at aei. kevin, norm, and arthur brooks, i continue to want to seek your help and guidance. mark has provided me a lot of guidance. he has had a lot of late nights over the last several months. alex mentioned by four months on the so-called super committee, which in fact, i found to be not so super much of the time. but it was incredibly important experience to have, because through it, we learned a lot about how we can move forward, even though the super committee was not successful. one positive aspect was i got an avalanche of good ideas. at the start of the process, i set up on my website a forum for zero violins to give us ideas on deficit-reduction. -- a forum for ohioans to give

us ideas on deficit reduction. a lot of good, common sense ideas, including changing unemployment in a bid to incentivize hiring, reforming fannie mae and freddie mac, a tax credit for seniors to continue working and choose to forgo medicare and social security. as you can see, these were good, substantial ideas, some of which we were able to work into the process. my favorite idea may have been from john in cincinnati. his idea was that the united states should merge with canada. it is interesting, because i told john when i responded to him that we better do it quickly, because prime minister harbor is about to cut canada's already low corporate tax rate to 15%. we may be losing some business their unless we do that.

what i would like to do today is talk a little about some of these ideas and enter into a dialogue of what comes next after the super committee. first, i think it is helpful to remind ourselves why the committee was formed in the first place. as alex talked-about, there is a a divide in washington that is reflective of the divide in the country. the super committee was born of a recognition of that divided government and different philosophies, but also by the fact that our fiscal and economic challenges are too urgent not to address. the committee was set up with special expedited procedures where we could provide to the house and senate on a majority vote basis rather than the normal super majority in the senate, a product that was voted on without amendment. i was asked to join the

committee by our leadership, not something that i saw, but when asked, i accepted, and i did so knowing it would be very tough to come to succeeconsensus. thought it would be like having a root canal, but to critical not to try. we just cannot wait for someone else. we cannot wait for the next president or the next congress. we needed act and we need to act now. the urgency is particularly profound because of what has happened over the last few years. policies this administration has followed, it has made the problem even more urgent because they have accelerated the potential for an economic and fiscal train wreck.

our current tax burden cannot generate the revenues needed. only four years ago, back in 2007, we had almost a balanced budget. when i left the office of management and budget in 2007, that fiscal year, the budget deficit was hundred -- 1 under $61 billion, about one eighth of today's deficit, representing about 1.2% of the economy. a major difference was that discretionary spending and non- emergency, aniline corporate spending of congress was 17% lower than it is clear 2007 that it is today. there has been a big spike in terms of spending. the subsequent recession has led to reduced revenue, no question

about it. and president is spending expanded the size and scope of government. in a few short years, this administration has now presided over a 21% increase in the growth of government and has taken some spending to levels we have not seen since world war two. the president seems intent on doubling down on his policies. ignoring the recommendations of is on debt reduction commission, the president proposed $1.60 trillion in new taxes and no serious structural reform to bring saw institute are troubled entitlement programs. instead, he asked the super committee to handle even more spending.

he proposed a four hundred $47 billion new stimulus bill, his so-called jobs plan, and ask the super committee to handle an additional four hundred -- $400 billion reduction. despite the absence of presidential leadership on trying to make our job easier, and counter to what you met her from others, i do believe that my democratic and republican colleagues on the committee worked with seriousness of purpose and in good faith. i think members tried to come up with a sensible solution. in the end, the samples of all differences that have paralyzed congress also prevented the committee of 12 from coming to an agreement. the failure of this process is profoundly disappointing, as i said earlier. it also left the even more

determined to forge ahead on the twin challenges of our time, building the economic and fiscal policies necessary to unleash the job creation potential of the american economy, and to restore our nation's long-term fiscal health. these challenges are not going away. even though the committee is gone, the challenges remain. in my view, only with a growing economy and a larger tax base, are we going to turn back the tide of record deficits and huge cut deficits we face. at the same time, failing to address our national fiscal crisis makes it tough to get that economy moving. it only weakens our economy and erodes our competitiveness in the world. saying we can tackle either our financial crisis, which is borne out by the $15 trillion debt that we had reported just two weeks ago, or we can address the

economic slump will find ourselves in, to me, it is a false choice. we have to do both. the mounting debt is a drag on job creation. one have probably heard about is a 2008 study. they have met with us to talk about their research and how they came up with their conclusions. they have shown that once the country's debt burden reaches 90% of the economy, you have a significant downturn in economic growth. they say is 1%-2% reduction in gdp. as i calculated, and two decades, that would leave one fit that -- our economy one- fifth smaller than it would otherwise be. if we don't get our public debt to gdp ratio, which is now at 100%, we will continue to create

about a million fewer jobs annually. the pressure of the annual deficit condemn it does have an impact that has to be knowledge, as well as the longer-term generational tissues that represents -- that it represents. but let's be clear. we have primarily a long-term spending problem. that is our number one issue. this cannot revenue problem. even if we kept the current tax rates in place, meaning that taxes will not go up a year and a month from now, as they are scheduled to do, revenues are still expected to rebound above the historical average of 18%, based on the nonpartisan congressional budget analysis. even if you assume that all the so-called bush tax cuts which are scheduled to expire at the end of next year continue, we still have revenue as a percent of gdp just above the historical average.

if the tax cuts are allowed to expire as scheduled, then revenues by 2014 would top 20% of gdp. the deficit is rising in large part because of tough economic times, but also because of federal spending. historically, it has jumped to 24% of the economy this year. without changes, based on cbo projections, it will rise to 30, 40, and 50% of the economy over the coming decades. you have heard those pushing for higher taxes appeal to the need for balanced approach. the basic philosophy is 0 give you a dollar in spending cuts if you give me a dollar in new taxes. i think this misses the big picture. it would upset a far more

fundamental balance in our country. that is the balance between the federal government and a free and our economy. more space for government means less space for individual americans to enjoy the rewards of hard work, industry, and innovation. a massive tax increase would lead to less growth, diminished wages, and fewer jobs. even large tax increases just cannot keep up with are dangerous levels of spending. some of you know glenn hubbard. he recently calculated that accommodating the president's spending plan would require across-the-board tax increases of 20% over the next decade and 60% over the next 25 years. that would probably make my most aggressive democratic counterparts in the super committee blush. it does not mean we should leave our tax system along. it is broken.

what sticks, it can help put together our economy and raise more revenue for growth. second, we need to be sure we are modernizing our entitlement programs. we need modernization of these important programs that otherwise are unsustainable. third, we need savings through government-wide spending reforms. on the tax front, as an alternative to proposals from committee democrats for one trillion dollars and more in new revenue over the next 10 years, you could produce a more tax -- efficient tax system while yielding new revenues. this money would be brazed by scaling back exemptions and itemized deductions for the top two brackets, while at the same time lowering marginal tax breaks. the work of prof. marty

feldstein help includes this proposal. the outcome would be to reinvest all of the savings from reducing preferences into broadening the base, lowering rates in order to create jobs and economic analysis on that is clear. we are willing to can see that some static tax revenue for the sake of entitlement savings will avoid the risk of call largest tax increase in american history year from now. .e've saw tax certainty rogers and small business owners are well aware that a year and a month -- on to printers and small-business owners are aware that car. our aim is to provide certainty with regard to -- to lower marginal rates to create jobs. we were not successful in that effort, because most democrats

were not prepared to work in that framework. i believe it provides a way forward. all is not lost all on the pro- growth front to a i am a strong advocate of tax reform, including individual tax reform. there is an accepted consensus that lower rates are critical to our competitiveness. during our deliberations, the new york times quoted an anonymous republican staffer saying portman is the most gung- ho for tax reform. he is the chihuahua in the room, constantly yapping about it. i don't know if that was a compliment. as part of our committee deliberations, my colleagues and i from both sides of the auto collaborated to put together a conceptual corporate tax reform proposal.

cohen pleased to announce today that i will soon introduce pro- growth corporate tax reform that is revenue neutral, that lowers the rate to 25%, and that moves us to a territorial tax system. i hope we will have co-sponsors from both sides of the aisle. as you know, with the exception of japan, the u.s. now has the highest corporate tax rate in the developed world. on average, 39.2% combined a federal and state rate. over the last 20 years, every one of the major foreign competitors we have has moved to cut rates. 20 years ago, the average among the developed countries was 39%. today it is 0.5%. the united states alone has fail to act to make its corporate tax system more competitive, and we are paying for it. paradoxically, despite our higher corporate tax rate, could weaken that -- collect less tax

part of gdp than other countries. we have a hard time attracting new investment. this translates into fewer jobs created. some have criticized our current system as allowing a big u.s. companies to pay little or no taxes. this base broadening reform we are talking about wants to ensure that all guns -- companies pay taxes through more efficient tax code that will create more jobs. american workers are paying the price in more ways than one. economic studies have shown that the burden of high corporate rate falls mostly on labor. cbo has reported that 7% of corporate tax freshen is borne by workers in the form of lower wages. it's no wonder that policy makers across the spectrum, the obama administration, chairman max baucus of the finance committee, the bowles-simpson committee, have also cited the need for us to overhaul our

corporate tax code. chairman camp has begun a series process to do that in the ways and means committee. our proposal brings the rate down from 30% to 25% some, reducing inefficiencies, preferences, and exemptions. we have an estimate from the joint tax committee showing you can do it on a deficit neutral basis. . the current tax code penalizes companies are reinvesting province that earn overseas back here at home. our tax code gives firms a towards between keeping those -- keeping it abroad are paying a steep tax bill if they choose to bring money home. our proposal would fix this by moving to a territorial tax system. this means it would tax income where it is generated, as the vast majority of our competitors

do. we will empower u.s. corporations to compete and win customers in foreign markets across the world. it was incredibly important to get the united states back to breaking down barriers. it is time to eliminate this tax driven, competitive disadvantage of our own making. corporate tax reform a central core of economic growth and job creation. 2005, the joint committee on taxation, which is known to be skeptical of dynamic scoring, reported reductions in corporate marginal rates have the greatest effect on long-term growth. by lowering rates and giving to territorial system, we can do something big and something permanent at a critical time we need to strengthen our economy and create more jobs.

at a time when we also need help to reduce the deficit for growth revenues. entitlement modernization -- you have to address social security, medicare, and medicaid. long-term policy in common, along with interest on the debt, is projected to squeeze out the cost of every other federal program within a couple of decades, leaving little or nothing for other government properties. take medicare. it is projected to spend over six trillion dollars during the next decade. there is a perception that all medicare benefits or refunded for payroll taxes, and therefore should not be reformed. an example of a typical two- income couple retiring today, coupled with income of $50,000 or more. they will have paid about

$119,000 in lifetime medicare taxes, yet will receive $357,000 in medicare benefits. or $3 in benefits for every dollar collected. the of structural reforms and a transition to a consumer driven system, medicare as we know it is simply not sustainable. some democrats including the white house press secretary a couple of days ago, and senator chuck schumer, have noted that i gave democrats within the super committee credit for putting in, reforms on the table. i did. and i think it is good that they put entitlements on the table, because america's future depends on both republicans and democrats coming together to address the issue. what senator schumer and the white house press secretary failed to mention conveniently was that i also said that only did so in the context of huge new tax increases of over a trillion dollars over the next decade.

but it is critical for us to come together to address the entitlement crisis. part of the reason we have a crisis is that congress long ago chose to put these programs on autopilot. in other words, the united states chose, and it is the only country in the world i can find not to have a budget for these entitlement programs. so when you look around the world, other countries, even countries that have very generous programs, have a bucket for health care, for instance. the united states does not. we set eligibility and benefits guidelines and then write a check. social security is budgeted similarly. so we should not be surprised when the autopilot comes through automatically. there is a debate, a spirited discussion as to what our priorities are. at the end of the day, there

are boats, and along with that comes accountability. with regard -- at the end of the day, there are votes. there is no mechanism to budget for the cost to make those trade-offs among competing priorities. a bipartisan coalition has endorsed putting social security, medicare, and medicaid on a long-term budget, and then having congress keep those programs on the budget or to face the consequences, which would be certain reforms built into the system. this would provide much-needed oversight and accountability for these rapidly expanding programs. i intend to introduce legislation along those lines. in an era of trillion dollar deficits, the american people cannot afford more blank check without accountability. the third point of deficit- reduction consists of non entitlement federal spending. i continue to support the cap,

tax, and balance legislation. in my time as omb director, i became more convinced it was necessary for washington have been due to have the discipline of a balanced budget, just as the vast majority of our states. until the balanced budget can be enacted, my view is that congress has to prove its mettle as a responsible steward of taxpayer dollars, including attacking waste, duplication, and obsolete spending on the discretionary budget, to earn the trust of the american people in our to reform those important entitlement programs we talked about. no federal spending should go and examine. clearly, washington is not working. the nation's mounting debt and deficits are holding back on job creation, keeping millions of americans out of work. the economy needs on to brewers to come off the sidelines, to hire and invest. the way to do that is through pro-growth policies, including deficit neutral tax reform that

brings hundreds of billions back to the shores, and budget reform tot forces washington' strengthen the entitlement programs. while final resolution elude us, the super committee's work can benefit the work of deficit reduction. republican and democrats alike gain a better understanding of each other viewpoints and frameworks and reproduced proposals on spending and revenue that can provide a basis for an eventual solutions. we generated serious proposals to reform major entitlement programs and areas like federal pay and benefits, governmentese, agriculture programs. the committee may have disbanded, but the profound physical and -- economic issues we face have not gone away, that

only become more pressing. we have always come together as americans to solve tough problems. we can solve this problem, too. but only if we work together as republicans, democrats, an independents, to meet the challenges of our times. thanks for letting me be with you today, and i looked forward to your questions. [applause] awa>> we live about 10 minutes r questions and answers. -- we will have about 10 minutes for questions and answers. >> thank you very much. >> i would like to ask you think there is any validity in some of the criticisms that have been promoted by the occupy wall street movement with respect to

tax reform. >> i addressed that briefly, because one of the things i have heard not just from the occupy wall street folks but from a lot of critics of our current tax system is that there are big corporations that don't pay any taxes. they have criticized other elements of the individual side. as i said earlier, part of the answer to that is to have fundamental reform of our tax code, broaden the base. the reason some corporations don't pay taxes if they take full advantage of the complexity and our current tax code. in order to lower the rate to 25%, and do it on a revenue neutral basis, you end up getting rid of almost all those complexities. companies that currently pay little or no taxes would be paying a higher effective rate. other companies that don't take advantage of all those

preferences and tax breaks in the code would be paying lower taxes. everybody would be paying taxes. it also leads to more efficient tax code resources are allocated in a way that helps create economic growth and jobs. it is a classic example of what we can do across party lines, addressing some of those concerns. again, the super committee process was frustrating. we did not achieve what i hoped we would, but we did achieve some results. one was coming together as republicans and democrats alike and putting together at least a framework for dealing with this issue of corporate taxes. so i am hopeful that one of the products of the committee is that congress will now have the ability to move forward on this. there has not been a joint tax committee scored revenue neutral proposal at 25% in territorial ever in the history of the u.s. congress.

this is something that i think will be able to help move the discussion for, not just on deficit reduction but on economic growth. >> we are very lucky to have you in the senate and on the super committee. that is what i wanted to ask. i know you were desirous of getting into next opportunities to address these issues. if he could tell us -- and you also said, we cannot wait until elections. what do you see as the possibility of moving some of these issues along into a final package that can pass? >> as i said earlier, it would have been a great opportunity because of the special expedited

procedures, particularly in the united states senate. it is very difficult to have a controversy issue addressed in the senate because it requires 60 both, with some rare exceptions like reconciliation. also being subject to amendments, sometimes it is difficult to move something through the process. this was an opportunity that was missed, in my view. having said that, i still think there is the opportunity over the next year to make significant progress. i think the committee has put forward a lot of good ideas that can be picked up by members on both sides of the aisle and both houses. i mentioned corporate tax reform and entitlement ideas and some of the non entitlement, mandatory spending ideas that we spent an enormous amount of time on, as did the beau biden group before us and the simpson-bowles committee.

a lot of you in this room have been involved in some of this efforts. second, we have to address a lot of tough issues in the next year. immediately, the issue of unemployment insurance extension, the payroll tax extension, and other extenders at year end. there are about 87 of them at my last count. in the next year, at the end of next year, 13 months from now, we will once again be dealing with this issue of the 2001 and 2003 tax issues, and also the alternative minimum tax. without addressing them, we are talking about a three trillion dollar tax increase on the 2001 and 2003 tax rates. this will force a conversation,

and that conversation ought to be about both economic growth and deficit reduction, not just about how you deal with the specific issue that is expiring in has to be addressed. third comic-con although as i said earlier, i think the committee represented a lot of work congress is and where the american people are. i do think that folks are looking for some answers here on the spending side. when i am at home, lot of people talk to me as they always do about the direction our country is headed and what we need to do. people are more and more informed and educated on what the choices are and willing to make some tough choices. the internment is actually conducive to making some of these tough decisions. going bid would be something i would support with the right balance.

i supported two budget proposals that do go big, one being the ryan budget that passed the house but did not pass the senate. it reduces the deficit by about $6 trillion over the next 10 years. the environment is there. there are more proposals now to build a foundation and for some specific legislative action because of the inevitable decisions congress is going to have to make, and because of the environment. over the next year, there is a good possibility for reform. that is what i am going to continue to work on. i am disappointed with what happened with regard to the super committee, but more determined than ever to address these issues. >> good to see you again. senator, on the individual

income tax side, even visionary be any further limitation on the home mortgage -- do you envisioned there would be any further limitation on the home mortgage interest deduction? >> the framework that some of us supported in the committee process has promised. that framework would require big changes in the way the individual tax code treats not just mortgage deduction but also other tax preferences. i mentioned marty feldstein, who gave a speech at the 80 i.t. annual dinner several months ago about this very topic. -- at the aei annual dinner. his view is that much of it should be considered more like spending than tax policy. i think there is some truth to that. there seems to be consensus

building around a broadening the base by either eliminating or limiting some of the tax preferences, tax breaks, tax loopholes, depending what you want to call them. there are a lot of promising ideas out there. the presidential candidates on the republican side each seem to have their own idea. i am not going to get into9-9-9, but all of the current expenditures in the code are going to be subject to close examination. at the end of the day, i do believe lower rates will create more economic growth, and i believe that is part of the solution to not just our economic problems, but also our deficit problems. more growth will lead to more revenues through more economic

activities. >> some in the senate have called for a vote on the simpson-bowles plan. senator durbin has said that in recent days. does not seem like there are any other efforts under way to restart negotiations for this. is that something you would support, or is there another way to have a big shot at a deficit reduction plan? >> i think it is an interesting idea. the issue is that there is a legislative proposal, and as we found out in getting scores from the congressional budget office and the joint committee on taxation on the tax side, the discipline of that sometimes alters the way your proposal looks. i would be supportive of any

proposal like that coming to the floor and having a vote, but i think there is a challenge, honestly, in taking some great ideas and reducing them to legislative language that is vetted and scored. we had a number of ideas that were sent to us as committee members. i listed some of them earlier, some of them serious and some not as serious. many of them are good ideas, but frankly, we cannot get a score on them. one example would be selling federal property. there is excess or underutilized federal property. the congressional budget office has a hard time giving us a score on that we tried to set up various mechanisms to do it, including a sequester of agency budgets unless they sold a certain amount of property, but that is one of the ideas in a gang of six and simpson-bowles, but frankly, it is easier said than done.

part of the challenges coming up with legislative language and literally scoring it to make sure it can meet the congressional budget office in the case of revenue proposals, the joint tax committee absence -- estimates of deficit reduction. it is more complicated than just taking a proposal and putting it on the floor because it has not been scored for the congressional process. it would take awhile. i am not sure what the numbers would look like in the end, but it is an effort worthy of trying. >> elizabeth sinclair, tea party patriot from washington d.c. i was wondering whether you and your republican colleagues would get together on the steps of the capital and have little new gingrich-style press conference, a fiscal contract for america,

since we are in a catastrophe at this point. we don't have another year to wait, as you said. if you could get your words and those of your colleagues out to the american people who are angry, upset, very concerned, and that's wonderful and measured as you are, we feel like we are in serious trouble and we need to get the word out to the masses. thank you. of it is contract to america. could you get out to us, please -- a fiscal contract for america. >> i took the lead on putting together a jobs plan, and the first element of its was fiscal issues. we cannot get the economy moving until there is more certainty as to what is happening on the fiscal side. my only again and to what you are saying is, i think it ought to be about both, the fiscal

issues and how to get the economy moving. i talked a lot about tax reform today because that is something i am now going to be trying to promote. include regulatory relief, lower health-care costs, and there are some sensible proposals to put the consumer more in charge. has to include more energy development, exploration, and use, which would create jobs in states like ohio and elsewhere. as to include greatly expanded trade, access to customers outside the united states. most countries do more of that and we do. it will create enormous potential for more jobs here. we need to do a better drop of communicating on all those issues. i don't believe you can solve one without the other -- we need to do a better job of communicating. we had seven points, which seemed like a lot. it is critical. we have dug ourselves into such a deep fiscal hole, it is not

possible for us, in my view, to get out of that deep fiscal hole without doing both spending reductions and smart, pro-growth policies to grow the economy and to be able to work our way out of it. the overhang is now too heavy. i would hope that we as republicans and for that matter, republicans and democrats alike, should do a better job of explaining those challenges to the american people an understanding the challenges and coming up with smart solutions. it is not easy, as we found out in the process. there are very strong feelings on both sides of the aisle. on our side about revenues, and on the democratic side about entitlements. i give them credit for putting that on the table. and the republicans but revenue on the table in the context of program of reform.

-- in the context of pro-growth reforms. there were some very difficult political challenges we face in the committee, but there were some lines that were crossed. i think that forms the basis for an eventual solution. >> we would like you to stay all afternoon. i know you have a schedule. >> let me take one more, alex. >> i am assuming the democrats you were working with was senator baucus. secondly, why do you think democrats would not agree to a smaller deal of around $600 billion like we heard mentioned earlier? >> i have avoided talking about my colleagues for four months now.

i do not want to start now and talk about what happened behind closed doors. with regard to chairman baucus, he is interested in tax reform. he has made that known. he has done as a lot of work on that area. i had the opportunity to work with both of their staffs over the last months on this issue. i think both of them are interested and i believe in this case there is a common approach to not just laureen the rate and broadening the base, but putting this at a priority because they understand it is important for economic growth and deficit reduction. with regard to my colleagues, could you restate that second question? [unintelligible] i talked about that publicly, so i will again.

it is too bad because at the end of the day there was a proposal to at least make significant progress, not to hit the $1.20 trillion, but to come close. alex said that was where the committee was likely to end up. i was more optimistic. that $600 billion included some changes on the entitlement size, in the area of means testing. there was also a proposal for $550 billion to take that out. without any health care or for that matter, and haven't chases, there was not an opportunity to move forward. that would require new tax revenues. that effort was abandoned. it is too bad because that would

have taken us in the right direction in terms of dealing with mandatory spending and the biggest part of the budget and the fastest-growing part of the budget. it would not have made the changes that needed to be made, but would have taken us down that road as opposed to the sequestered, which focuses on the discretionary side of the budget. you have to ask democrats for more detail on that. thank you , all. thank you very much. [applause] [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute]

>> we will move now quickly to our panel, as our fellow panelists move up. i am kevin hassett, and we assembled this panel to discuss where next for the supercommittee. the failure of that supercommittee has been a frustrating thing for a lot of people in the think tank community in washington in the sense that there was this moment where folks thought there was finally a chance that the right thing would happen, and then the supercommittee failed. it is impossible to discern why the supercommittee failed. alex mentioned there is a lot of finger-pointing. it is like you have a buddy who had a break up and you asked why, and he said we just decided to be friends.

both thinking about the politics of how to construct a committee so it can be successful and the economics of how to construct a plant so everybody who is reasonable is convinced we -- they will vote for, we decided to follow up with a discussion of our own. i will go to norm ornstein. >> i must say i am tempted to use -- to start with the story i have used in this room before, but that it's even more where we are now, which is the story that takes place in the first year and that of the class in medical school, the professor using the socratic method says, the question of the day is what human organ when appropriately stimulated grows to eight times its normal size? he says, miss simpson?

she says, i will not ask that question. mr. bowles says the human eye. to anyone who deals with these kinds of issues, we are doomed to live lifetimes of unfulfilled expectations. i was not where alex was, but i was optimistic that we would get somewhere with the supercommittee, and a part of the reason was because rob portman was on it. robb has an unparalleled blend of experiences in his professional lifetime that includes starting working as an n assistant to alan

simpson, but being a member of the house known for his bipartisan efforts to be both budget director and trade representative before moving to the senate. he understands as well as anybody given the shakiness in europe, the troubles in the global economy, that we are not just playing with fire or even playing with live ammunition. we may be playing with atomic weapons in terms of the economic future. there is an urgency to act and a recognition that as much as the supercommittee leaves many of us who believe in the regular order of the legislative process and easy, these extra and unusual actions are not the way you ideally like to go, but having the ability. to take what ever you produced, brought forward for an up or down expedited vote with no

filibusters, no delayed tactics, no amendments was an unparalleled opportunity to get somewhere. why? i would offer a couple reasons. one, which rob alluded to, and i was optimistic because the template is there. we know what the bipartisan template is. i was not looking at $1.20 trillion. i was looking at the $4 trillion, which i believe is much easier to do than a smaller number. you put everything on the table and we know from simpson-bowles and from the gang of six that it basically is due $4 trillion in debt reduction with somewhere between $1 trillion and $1.50 trillion tied to revenues, and then a substantial slice of what is left from reducing the growth of where the real budget increases will be, which is in

the big entitlement programs. the template was there, but one reason it did not happen is they are templates. for all the enormous amount of work that the commissioners and staff of citizen-bowles did and that six senators and their staff did come all those are the templates. they offer ideas. they're not concrete. it turned out in the four months turning that into something concrete was really a heavier lift than it might have been. i am disappointed because i do not think they start looking at that before moving beyond it for the second reason, which is that we do have a deeper level of dysfunction, a sharper division into trouble politics, than i have seen in my 42 years in washington. that played out in sight, much more than it did in these efforts outside.

it is baffling in some ways that we could not move beyond it. when i looked at the dueling n.v. "the washington post" yesterday, what it said to me, and from what i know of the deliberations inside, you had democrats willing to go an extra mile or more on the entitlement front, and when you look objectively at the proposals they were somewhere to the right of simpson-bowles. you could not get there on the tax front of the republican side. there is an imbalance there. what the op-ed said, the republicans said we could not do anything because the democrats would not get off the tax increase front. it is $1 trillion on the tax increase front for a $4

trillion overall package, that is just where all the other committees were less than they were to be. not get very far. if you start to move from the $4 trillion, which requires significant movement, especially on medicare, but you have to include social security and medicaid into the package, and he takes the tax issue off the table and then you start to look at what you can do on the $1.20 trillion front, which means most of that will come from discretionary spending, which is already taking hits over and over again, including the $900 billion deal that led to the creation of the supercommittee. you will not be able to do so. if you move lower, which is going to be seen by the public ratings agencies and others as not much better than complete

failure, because you're taking another tiny baby step, but you are taking off the table now some of the things you could agree on, eliminating or reducing staff gently possibility down the road of coming to that grand bargain, i think i would have been resistant to going in that direction as well. once they moved past the notion of going for gold, of going for the grand bargain, which in this case was not $4 trillion in what they would do, but $3 trillion, because we already had $900 billion bond, and which could have been made easier by using -- by consensus, and assumption of some of the savings from troop withdrawals from attack afghanistan and iraq, seem to me it was doable. it is trouble politics that are keeping us from getting their. while we will see the movement

for, and there is possibility here. i am uneasy about the notion that you will move forward with corporate tax reform. if you do this in individual pieces, you take away from the table pieces that make it possible to fit all the pieces together. it is harder politically than to do an overall deal. but you'd have the possibility of a broader tax reform and broadening the base and reducing rates if you can make adding revenues a part of that package. and you do have the ability then to reach into the entitlement areas. let me make one last comment. portman also alluded to get a little bit. we have a different dynamic as we move toward 2012. the next month is going to be an affirmation of how awful our politics are, because we have not just all of these tax issues on the table right now, that have to be dealt with one way or the other without creating more

deleterious consequences from the payroll tax cut on four. lhasa have the -- you also have the doc fix. doctors will drop by a substantial percentage which will wreak havoc. doing that will require offsets which will be difficult in this environment. next year we get to sequesters which are going to be very uncomfortable for everybody, and the expiration of the tax cuts. to some degree, the dynamic of that shifts and if obama holds to his firm commitment to keep the sequesters in place unless they reach a deal and to eliminate at least a sizable portion of those tax cuts, if you're talking about getting

$800 billion in tax increases in 2013, coming from the over to under $50,000 group with nothing in return, as compared to reaching a bank -- grand bargain where you get tax reform and the time of changes, i think you will see a recalculation on the part of the participants here about whether they want to come to the table and do something. >> thank you. suppose the next president or the current president, the start of the next administration, the president calls you up and said, i believe my economists have that i have to move on fiscal consolidation. what are the lessons from the supercommittee? should i have another supercommittee? should i not? am i political fool to try? >> if i were to answer that

question, the first thing i would want to do, and i would want to get underway right now is in fact to move much closer to operational lysing and legislative language the best of all, of simpson-bowles, gang of six, and beyond that, tom coburn has his own set of ideas on how to reduce spending in to visit areas. some parts of which could reach are part of it could -- could reach a bipartisan agreement. i would want something ready to go and i would propose a process something like the super committees to make it happen. we actually had that when the president created the sense and- bolts commission, he did not do get -- the simpson-bowles commission, it was done because he had a fast track commission process that they put out there. it came up for a vote in the

senate and reflecting trouble politics, 7 original code- sponsors of the congressionally created committee voted against their own plan because did not want to give the president what looked like a political victory. that would have been much more effective, and then a plan like since and-bolts would have been brought up for a vote on the floor. i would want a package and operational terms like those three ready to go, and then a process to make it happen. >> thinking about advice for the current administration if it repeats or the next, isn't it true that the president can take a leadership position on this because he has a large staff, all these guys, treasury, that know how to score things and can do it in a way that is consistent. how does the administrative staff -- is it out of the game

the last couple years, and is that part of the problem? >> the area i fault obama the most is a failure, especially in the state of the union message, to embrace since end-bowles -- simpson-bowles in concept. part of the reason i had optimism was yet the joint tax staff ready to roll their. i think he can do tax reform quickly if what you are doing is adopting some version of marty feldstein's putting a cap instead of doing peace deal -- piecemeal efforts. you look at combinations of rates and were you put the cap. you could do that. the congressional budget office

was ready to go if they have been able to come up with something quickly. we have operated not a whole hand behind our backs, at least several figures in terms of pushing and a lot of this forward. a lot of that represents what we have now in a toxic political environment. i do not think the lead next election is going to somehow cause of that to go away. it becomes harder. i would much rather see something done in 2012 because it becomes harder to do in 2013. >> thanks. >> i share the disappointment in terms of how the supercommittee turned out, because i thought it was a structure and i thought for a long time it was a structure that was most likely to lead to success. the failure of it and other efforts over the past year have

made me reassessed some of the things and the way i am thinking about this. one context i have is if you look over the past several decades, you have liberals and conservatives have a means of living together because they could deficit spend. liberals could have big government and conservatives could pretend they did not by the fact that they were not paying for it. the ability to borrow the smooth over the ideological differences between the two parties. now we are coming to a day of reckoning when you cannot do that anymore, the money is running out, so they have to face each other and say, where are we? the reality is the parties ahave different views about the proper role of the federal government and the size and scope and activity of the federal government in terms of the economy, in terms of people's lives.

there is the perception that this is a failure to communicate and people need to get in the room together. in part people just disagree. into the someone, there was an effort to reach out to aarp. you do know they disagree with you on this. they view things differently than you do, and that is gonna be a difficult thing to get around. there is no right or wrong to wit. -- to it. there are a lot of people around the world who feel that way. republicans look at the history of the united states and the science of government and say they want something that is more consistent. it explains the failure of the difficulty to come to agree on

that. the conventional wisdom is split the difference. who believesebody in the entitlement programs, who think they make important contributions, splitting it down the middle means significant reining back of the vision you have of the proper role of government. if a republican, you think government is already spending too much. one the size of government below 18% of gdp. if you agree to a 50%-50% reform, you are accepting a larger government. there is a readjusting of baselines that is tricky to do. one of the reasons i worry

about the conventional splitting the difference approach is i am not sure it would work that well. kevin and i did work over the past year, so we look at different countries to run the world and their efforts to balance their budgets, and we said, which countries succeed and which fail? was the difference? what we found is the typical successful attempt to get on top of budget problems was not 50% spending cuts, 50% tax increase, it was 85% spending cuts and 15 % tax increases. the question that raises in terms of -- if you say you favor what is good policy, is there a conceivable approach on the supercommittee that would fit into what we think is the

policies come into something where they would say this is likely to seek and lead to good outcomes that would be likely to get support from a majority of the committee. i am not sure that existed. if you want your government to be able to walk and chew gum at the same time, to do good politics, but also did a good policy in the sense that something is actually going to be successful in addressing the problems we face in terms of the budget, and seven that is not going to be -- not going to have a deleterious effect on the economy. i'm not sure your venn digram at an intersection in this place. where do you go from here? the other weston answers, we need an election to decide this. if an election would decide if, that would be great. as long as it decides in the way i like.

way our political structures work is even if president obama is defeated and republicans retake the senate, then you shift the democrats in the senate are now in the mischief- making role that republicans have been in. they will enjoy that because they can stymie any progress so we are back where we started. i think we have a bigger problem, and we have a structural problem in terms of our our politics allows us to get on tops of these things. it is easy to say that tone in congress is bad. people react to structures and incentives. it is very hard to get anything done. i took a quick look on data of other countries at the size of their fiscal gaps, and i looked at other anglo countries, similar political cultures, but

different political structures. with the exception of the u.k., the other countries, canada, australia, new zealand, have much smaller fiscal gaps than we do. is that because they are better people? probably not. it is because they have structures that enable them to get on top of things. part of the problem we have is the increased division in congress between the parties, which comes from congressional districts being set up, increased use of the filibuster's make it harder to pass things. those things make it hard to get on top of these problems. an example i would give is i started working over 10 years ago on social security. 20 years ago people knew it was a problem that needs to be fixed. it was a rather straightforward problem. here we are today, 20 years

later, back to the same point that we were before, except we have lost 20 years. there is something uniquely dysfunctional about how the process is working and makes it hard to get on top of. lacking shortchanges that make it easier for a majority to get policies through, we will meander along on things. part of what we need to do is to focus ideas. yet big choices to make going forward. it is not a question of doing everything we were doing up until today, entitlement programs, but do less of that. or tax the same way, but raise rates. we need to make bigger, more fundamental questions about the sorts of things government is going to do, but if it is going to give, who is gone to give them to come out is what to

collect revenue and from whom, and focus on the bigger questions forward. the downside is politicians do not focus on a task into the night before it is due. it would be nice to think your elected officials or more responsible in getting on top of these problems than a bunch of high schoolers. eventually they will have to focus on these things, and that is when the decisions will have to be made. the job for people, be it elected officials, people in think tanks, is to talk to the public and say these are the choices he faced and have to think about where we are not just today, but what kind of government and what role of government you want going forward. over the next year or so that is the challenge that people face, but it may extend longer than that. thank you. >> putting on my next president at agai -- hat again,

president obama tried to do it and it cannot work out. the one thing he tried to pass was the health care bill and that was a disaster. we have a $1.50 chilean debts of -- $1.50 trillion deficit. why should i bother to try? three years from now i will start running for reelection and i think i can put off for three years. why should i do it now? >> that is the rational consideration. there's always going to be some president or congress where you cannot put off. the reason why these things do not get addressed is you can. if you want to get on top of it -- i was not a big fan of the health care reform, but it gives the congressional democrats who backed it the credit that you have people who are willing to go on a kamikaze mission and say we're going to pass the road

map, whatever you think it's going to be sustained over the long run and recognize you would take a political hit for it. i give the democrats some credit on the health care reform. a lot of them are willing to bite the bullet and just do it. lacking people who have that political death wish, it is hard to get people to focus on what needs to get done today rather than putting it off until tomorrow. >>a p -- >> but the democrats presumably had something that they could put in their minds that they thought it would be worth the risk. you want to convince the president to do it. what would you tell him that he gets. what is the thing he can make his career on? >> the senate republicans have

largely on record saying they support the reihan roadmap to fixing taxes and social security and medicaid. my guess is, if that were passed, and i do not know the mechanics of congress to say how easily it would be to do it -- to reconciliation or whatever -- but my guess is that you would have stumbled back. -- have some blow back. some tebow would lose their seats, but the majority would remain in place for the long term. you would make some changes that needed to be done, but were politically difficult to do. the incentive is, do you want to have a lasting political legacy over the next 10 years or 20 years instead of four years, then just go for it. and then four years later, so be it.

>> thank you very much for having me. it is a pleasure to follow norman andrew. but for some reason, this whole conversation reminds me of a description between an optimist and a pessimist. and optimus believes we live in the best of all worlds and it has to miss -- and a pessimist fears that as the case. i find myself going back and forth between the two. i seem to be the only person in the room that is surprised that the super committee did not reach an agreement. i thought it was general consensus when it was formed that they had an uphill effort, and i was not surprised at all that they did not reach an agreement. for several reasons -- first, they do not have to.

teen-agers do not start their homework until the night before it is due. there with nothing to do. they did not have to reach an agreement. second, there were cuts that were already supposed to happen, even in the absence of an agreement. i never understood why we agreed to $1.2 trillion in specific cuts that we would have to take each for when there was already $1.2 trillion in sequestered cuts that they could take credit for and say, oh, we are sorry, but we did not specifically vote for that. and third, though $1.2 trillion in sequesters were not enough to get republicans to the table. i said this in august when the debt deal was struck, if the triggers had tax increases in them, you would have gotten republicans to the table. and it should have looked like a

cave on the overall package in august -- caved on the sequesters just like it caved on the overall package in august. having said that, my second comment -- having said that it is not surprising, my second comment is -- is that it is nonetheless remarkable that they did not reach agreement. they had a direct line to end up or down vote with no point of order, no amendments, no funny business. i would have expected them to retain that option somehow, even if they could not agree on something right now. and the fact that they just let that go down the drain is remarkable. and the other thing is -- and this has not yet been commented on. yes, they needed to cut $1.2 trillion, but they could choose

their baseline. you could cut from any base-. they could do anything they wanted to in terms of a base line. they could have chosen a base line that had no tax revenues in it, or 50% of gdp in tax revenues, start, and then cut back by $1.2 trillion and then they would have "succeeded." the fact that they chose a baseline was remarkable. the differences between current policy and current law, for example, are about $5 trillion. $1 trillion on defense drawdown and $4 trillion on tax cuts. i kind of felt like, well, if you let me choose the baseline, i will give you $1.2 trillion in cuts from that base line. but even been able to choose their own base line, $5 trillion, they could not come up with $1.2 trillion in cuts. i do not want to spend time on whose fault is. i will just skip that comment.

>> we do not blame you, bill. >> i will take my share of the blame. >> the fourth comment is a lot of questions about what happened. i am an economist, not a political scientist, but there is a lot i do not understand. at first, why did they set the committee up if they were not going to work hard to reach a solution? second, why did they let pass the extremely rare opportunity to have this up or down vote with no amendments and no points of order? and third, why did they give up so publicly and so quickly and easily? even in the nba -- you know, they dissolve the union had filed a lawsuit and came back to the table when more time to reach an agreement. there was no dog and pony show about how they are working really hard and trying to reach an agreement. they just shut down. that is a little baffling to me. the fourth comment is, how can

you hope to have a serious discussion of fiscal policy going big with the white house not involved? fifth, what does this mean for the gang of six? are they back in a leadership position now? if not, who is? lastly, on the optimistic side, maybe this is what progress looks like. it was only a year ago, were less than a year ago, that the report was released and another one almost exactly a year ago, and in some ways, discussion has come a long way. they did not reach an agreement, but this is a hard issue. maybe this is what to get -- success looks like. it is just ugly and messi for a long time, but maybe it is all necessary to eventually reach a solution. and the economics of all of this, how does this change the economics of the fact that they

did not reach an agreement? basically, as far as i can tell, not at all. we had an economist headline this week that said, "with the reduction -- the deficit committee's failure, fiscal policy is drifting in a direction -- a dangerous direction." i thought that headline was 10 years too late. we have been doing that in an explicit 10 cents in terms of cutting taxes and the implicit liabilities we have -- in the explicit sense in terms of cutting taxes and the implicit liabilities we have been setting up as well. the real issue, as the senator portman mentioned earlier, right now has to do with getting the economy going. as long as the economy is sticking around 9% unemployment, or $1 trillion output gap, it

will be very difficult to balance the budget, or even come close. what do we do going forward? if we do another committee, other people have suggested this -- i had this idea in august, but other people beat me to it. maybe we should let the other party. all or some of the delegates of the other party to the committee rather than each picking their own. that might get more people in the middle on both sides. i particularly liked the idea of letting each party veto particular members of the other party. some people are more difficult to work with than others. the second thing, though, is the deficit issue is not like buying a new pc or and ipad. if you are not sure you want to, you just wait six months or year and it becomes technically better and less expensive.

and then you say, ok, now it is worth buying. the quality of the solutions out there are not going to get any better over time. all of the real, big ideas are out there. they have been involved since then, the minute you rivlin, and they have been -- they have been in the simpson-bowles, the domenici-rivlin. and the longer we wait, the heart of the options become because we have a larger issue to solve in a shorter time frame. ultimately, what is going to happen is not that solutions change, but that people's feelings about them change. we will have to reach some agreement. i have lots more to say, but being the last because, i will

stop. >> the first question to follow 's,on that suggestion of norm do you think that in some sense the leadership of the think tank has failed because it could have done a better job to put stuff in legislative language? they have really hard scores for what is going on over there and is easy to know what is going to happen, do you think? do you think maybe that is something think tanks should invest in, going from the idea to actually handing people off the shelf the legislative language that the jcp would produce? >> i do not think the lack of think tanks writing legislative language is holding back the

process on the hill. if we have unlimited resources, sure, we could the board -- to devote some stuff to that. i find it difficult to read the special to language. you have to be a lawyer to understand a lot of legislative language, or a longtime staffer. i do not know that is the think tank's comparative advantage. i think the thing takes have been out there a lot putting out ideas -- think tanks have been ,ut there lot putting out ideas suggesting reforms. >> but it did seem that the parole this time around was that they could not get everything scored in time and written up in time to act. maybe that is just a problem with the design of the super committee. they need a year to do this. >> it is not a problem with the legislative language exactly. the problem with each of these reports is that their ideas have

not been operational lies down to a specific level that you could turn into -- operationalized down to a level where you could turn them into specific language and then flush them out. if you could, then the council could turn them into legislative language and in the cbo could score them. in absence of that, let's just bring simpson-bowles to the floor and debate about it. you cannot do that because there is the paragraph idea or guidelines that someone is going to turn into something else. and year-and-a-half later we have normally move in that direction. >> let me follow up on what you are saying. samson vols does not really have a tax plan -- sinton vols

does not really have a tax plan. it says, if you eliminate tax expenditures you could put back a couple of rates, but does not actually propose any of those. it has other things like government productivity rises at 2.5% per year. i do not know how you legislate that. it is not in legislative language. nonetheless, it was an accomplishment that they got that far then. and i do not know what the saying is, the amazing thing is that the dog could walk, something like that? >> [unintelligible] >> yes. but there is a long way to go. at some point, legislators have to take responsibility for the fact that we do not have legislative action. >> but there is an issue with the 501-c3 and you are not allowed to weigh in on legislative action.

i have been involved with the social security wherein you have to turn over scores very quickly. even with taxes it is still very labor-intensive to do. you can get generalities of a variety of of things, but nailing it down is pretty tough. >> thanks. we have a few minutes left for questions from the floor. you can identify yourself. try to make a statement in the form of a question, if you can. >> rick. i think this whole debt deal was ridiculous, and most people agree. the ratings on the rasmussen were something like 25%. his main talking point was 1-1. at $1 of debt increase, $1 of spending cuts. he said a few times and it

sounded like a good compromise. over a few days we learned that the $1 of cuts was over 10 years. what he really meant -- maybe he realized it. i'm sure it was intentional. i'm sure it was not an intentional lie, but he turned $1 and to 10 cents of spending cuts. -- in to 10 cents of spending cuts. any of us who were watching this new that it was going to go way -- way off the rails. and it did. they should have just started with -- if you had one trillion dollar deficit for 2012, you should have had a poll on it. the american people would have supported $250 million -- $250 billion in cuts. you have a $750 billion deficit,

but at least you get $250 billion in cuts rather than $25 billion. the other thing is, on effective tax rates, the top two% -- the conservative messaging on tv is to need the fed. a fox news is not doing its job. >> could we move to a question? >> yes. effective rates are combined 48%. they are about 12% for state and local. that is never mentioned on tv. the tax foundation has 9.8%. in addition, you have indirect costs for the regulatory access and the real system. that is another 22% according to the cost of government data.

and the top 2% aggressively incurring those costs as well because they deal with the regulatory tax system more so. their exit paying more like 27%. what you have is like a 67% cost out of income for the top 2%. >> what is the question? >> what do you guys think of the conservative messaging on tv? do you think the need information gets to the voters -- the main information gets to the voters so they can go to the voting booth and make an intelligent decision? >> i think both sides have to come to terms a little bit with what their ideologies implied. republicans have gone through it

a little bit sooner and a bit more healthy process, something like the ryan plan, which still leaves some significant things out, but at least it says, if you want to go forward and address the fiscal gap and without raising taxes, here are the sorts of things that you have to do. medicare and medicaid will not look in the future the way they do today. you get a little bit beyond your own talking points and you say, this is what it looks like, and it is not particularly pretty. folks on the left have to get to that stage as well. i think a lot of us still think we can have a european-size the welfare state financed by an american progressive tax system. there is the reason why very few european countries do that. you can have all of those generous programs for not just your top 1%, but the average guy

on the street, and he will have to pay more. president obama says we need to raise taxes on millionaires and billionaires. in reality, he wants to raise taxes on households making more than $250,000. and you have all of the democrats saying, we should let all of the bush tax cut go. that is several they have got to get over. both sides need to come to reality in terms of what their views imply. >> i cannot get past fox news is not doing its job. my question would be, what is fox news his job? -- what is fox news' job? i almost asked a question, but decided not to, on cutting cap and balance.

at 18% of the previous year's gdp, it is capped. that is actually 16.7% of gdp. if you put that level down there and then look at where we are heading in terms of demographics -- and what portman was saying, which is that we should have taxes at the historical level of 18% -- the fundamental reality is, whatever we do with ryan's budget or not, we will not have spending at 18% of gdp. it is going up as a share of gdp. conservatives and liberals agree we do not want it going to 35% or 40%. maybe we should try to stabilize it at 23% or 24% of gdp, but that is probably the best we will be able to do in the

absence of some massive change in immigration that president gingrich would be able to enforce. and that is not likely to happen. and if that is where we are, we need a very different kind of conversation, not one that focuses on the end reality of balanced budget amendment or artificial caps that will not work. we need to come to a better match that reduces the rate of growth and where the real spending is. what robb said also is in reference to the explosion in size and discretionary spending since he was budget director, almost all of which is the consequence of an economic collapse. and if you look at the path of domestic discretionary spending over the past 10 or 15 years, it is not rising any significant degree. we better start worrying about fundamental elements of public safety, for example, things like food safety, c.c., and the like.

much less of homeland security -- centers for disease control and the like, much less homeland security. we are not in a realm where we are having an honest conversation about where government is realistically going to go and how you will develop a mesh that works. a match of revenues that will ideally blend with a much better tax system, and fundamental changes in the rate of growth of entitlement programs that take into account changes in demographics, but that also understand you have to change the growth path. >> thanks. i write the mitchell report. andrew, i want to come back to two things you said, i think. the first is, that there is this

fundamental philosophical difference between republicans and democrats on what the role of government ought to be. i am struck by the fact that it seems to me that if there is anything that recent history tells us, the real issue is not between republicans and democrats, but between incumblicvans and clemicrats. the first gave us two unfunded wars. the second thing that you talked about is, i think you said we need new structures in order to be able to get on top of these key strategic issues.

i am wondering if you could articulate a little bit what kind of structures you are talking about that might allow that to happen. >> on the first, you've got a point. there is a self selection problem where anybody who runs for congress or grows into government implicitly thinks there is good things -- there are good things government can do. you get a lot of that going on, and then self-interest as well. i am not a political scientist, so i get myself in trouble here. i personally think the filibuster in the senate should be gotten rid of. that is just my personal view, which is informed by very little other than what i have said here. i tend to think that at the state level, the districting down four members of congress -- the joke is, in a democracy, the voters choose the

representatives and did the u.s., the representatives choose their voters. i just not think it is a healthy thing. it tends to make the members of congress push to either side. it pushes up the center. i tend to think in parliament. governments, the party in the majority has a lot of power for a certain time frame. at the end of that time frame, they have done what they want to do or what they think they can do and they are responsible for it. the way it works here is the division between the different branches of government and within those branches, people have veto power. it is hard to accomplish something. when you do not accomplish something, you can always blame someone else for it. the voter is not always clear what people are going to do and who is responsible for what happened. it leads to difficulties. icet -- i feel like i'm saying things badly about the founding

fathers. they've set this thing out through postal roads. it generally just tends to make things difficult for congress to get done what it needs to do. the fact that we have this congress at all is tacit admission that congress cannot handle these things. if congress cannot do what congress does -- because these entitlement programs are the majority of what the government and they are passing it on to someone else. you have a lot of members involved where you have the ability to get an up or down vote on the floor. if you have an agreement, you have some sort of ticking clocks. it gives them some incentive to do something, and still it did not work. that is the sort of thing that i in my infinite wisdom would have proposed and was proposed

and did not work. >> discretionary spending dropped pretty sharply in the first couple of years of the reagan administration, 15% to 20%. but after that, it started to grow from the. i just did a perspective on the bush legacy for a national review event. bush's first three budget years were pretty much the biggest spending increases in u.s. history. the other two were in world war and ii. -- world war ii. and if you look back at a social security spending and then medicare pardee after that, if you look at the first part of the bush administration, he was accused of -- steve forbes in the new hampshire primary said he talked like a republican,

but government like a democrat. his evidence was texas government spending of all places. part of the problem that we have, and this gets back to the first question, is that there is almost like a denial about how much spending has gone up. if we had stuck to a clinton baseline and then basted off of that, we would be in surplus right now. -- base to get off of that, we would be in surplus right now. are there any other questions? >> i want to recognize bill frontal. -- bill frenzel, a great american hero. he walked the walk and talk to the top. >> thank you, bill, for your service. thank you all for coming. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]

>> according to the group for -- americans for tax reform, 238 members of the house of representatives and 38 senators have pledged to not increase taxes. garver nor cates -- grover norquist will debate a new york economist about whether it will lead to political gridlock. that is live tomorrow at 5:30 p.m. on c-span3. >> up next, a conversation with dennis blair. after that, barney frank talks about his decision not to run for reelection. >> do you believe the future can be different from the present and do you believe you can

control your future? these are not universal. some places they happen and some places they do not. in the u.s., we have an exaggerated sense of how much control we have, but it is good for us to have that. >> the senate, your questions for author and op-ed columnist, david brooks. he will take your calls and tweet on a variety of topics. his best selling books include "on paradise drive" and his latest, "on social animals." >> next, former national intelligence director dennis blair talks about homeland security and cyber security, pakistan and iran. he spoke with david singer. the aspen institute hosted this event. it is an hour and 20 minutes.

the admiral and david will go for about one hour, in conversation between them. when we are ready for questions, if you could turn on this microphone and turn it off when you are done. the round table series is made possible by the generous support of the smith family foundation. david singer is the chief correspondent of "the new york times" for washington. he has reported from new york,

tokyo, and washington, on a broad range of issues. surrounding foreign policy, globalization, nuclear proliferation, and asian affairs. previously, he served as the chief washington economic correspondent and as the tokyo bureau chief for the times. twice in his career at the time, had been a member of teams that won the pulitzer prize. his documentary won the 2007 dupont award for the workings of the nuclear power for rationed but mark. his first book was a best seller. "the inheritance." with that, david. >> thank you. let me just briefly introduce an admiral blair, who i first met when we were in tokyo. admiral blair, of course, was most recently the director of

national intelligence until may 2010. he led in that 16 national intelligence agencies, some of whom played better with others. he was president and chief executive of the institute for defense analysis, served as the commander in chief for the u.s. pacific command and director of the joint staff and held a number of policy positions in the national security council and maybe staff. -- the navy staff. we are here to talk about u.s. readiness in perilous times. i thought i would talk a little bit about homeland security issues and how things have changed in the 10 years since 9/11, but most importantly, during the obama administration. then we thought we would turn to some of the foreign sources of these threats, explore what

is going on in pakistan. particularly after the events of the weekend. we wanted to talk about iran. we wanted to talk about the arab spring and how it will remake the region, and as a result, threats to the u.s.. so let's dive right in. you have often heard people ask the question, are you safer today than we were 10 years ago? let me turn that and ask the question, if somebody had said to you the morning after 9/11, that we would go more than a decade without any major terrorist attack, but have done several close calls, would you have thought that was possible, and had the reform that you saw take place post 9/11, in your mind, primarily responsible for that, or does it have more to

do with the terrorists? >> i would say the way the situation has changed over the 10 years, i would characterize like this. 2002, 2003, we had to be lucky to stop it terrorist attack. in 2011, the terrorists had to be very lucky to carry one out. it is a set of percentages -- you could think of them as tumblers in a lot, but a number -- tumblers in a lock, but a number of things have to go completely right for a terrorist attack to successfully take place. each of those has different degrees of risk. you have to make the plan, surveillance, record your friends, so on the and so forth

-- so on and so forth. -- we crude your friends, so on and so forth. along the way, there are risks. as we know from the 9/11 report, there was almost no risk to the united states and other countries. they were oblivious to the possibility of what might be occurring. in 2010, 2011, due to some meat and potatoes work of checking databases, setting up offices, sending people to other countries, putting people in different places, we have made it difficult for terrorists to get all those things right. there are points along the way where actions that have been taken can interrupt the pot. one of these that we know is an aroused citizenry, which

famously last year in times square -- a watchful guard saw a car in a place where it should not have been. i would say, the odds have shifted strongly in favor of the united states and others who are the targets of these attacks. as you have implied in your question, the system is not 100%. in fact, never will be, but i think we have just about knocked back the threat to levels that other forms of terrorist attacks on the u.s. have been for longer than we would like to remember, whether unabomber's or federal buildings, kansas city bombers, other disenchanted groups that

think it is a good idea to kill a lot of people with a bomb. >> most of those were individuals, which takes into the next question. if you asked leon panetta, who you work for, he says he believes allocated -- al qaeda is now at the brink of strategic defeat. he said this in testimony a few months ago. first of all, how would you define that, and would you agree with it? i would take it from your comments, about the unabomber, oklahoma city, that if you cut down to that level, you were close to strategic defeat. >> i would say that is true, but i do not think al qaeda is there yet. their core, under various leaders, its various groups in

iraq, somalia, maybe north africa, they are still able to put out inspirational literature, which puts ideas into the hands of twisted people. they still have a certain amount of organizational ability, connection with these other groups who share their goals. as we learned from abdul mutallab, just about two years ago, one person had a visa, another would get him into the u.s. with a twisted idea of doing something against this country, if you thousand -- a few thousand dollars, you can get pretty close to killing a lot of americans.

i would say we are down at a level where the organized big a tax of 9/11 and are very low probability. we and our allies around the world are able to stop those in ways we were not able to before. but to take it down to complete strategic defeat, which is complete disorganization of the movement, so it is truly individuals who do their own work and take their own action, as we have discussed, i do not think that will come until the idea of this zealot innocent killing is identified within the muslim world. -- is disaccredited within the

muslim world. al qaeda's approval ratings have gone down very low among muslims. it is not completely gone, but still something that can cause problems. but i think we are, if we do it right, should be in a different phase of this campaign. >> we mentioned the arab world, the ideological element of this. one of the arguments that the obama administration has been making throughout the year has been, because al qaeda had nothing to do with the arab spring -- and in fact, all of those movements did not seem to replicate any of the al qaeda ideology -- that that indicates they have lost their momentum in the arab world, and someone purposely. -- somewhat permanently. we are in act one of a multi- packed play with the arab -- of a multi act play within the

arab spring, but if you look at the political movements going on across the regions, do you believe it would be extraordinarily difficult for an al qaeda-like organization to come back and have an appeal on the street, the way they did 10 years ago? >> i think it will be. ifthe trend of events that we call the arab spring, if it is ultimately successful, and the success of autocratic regimes -- i don't mean perfect success -- with more forms of government that encouraged people to work to change the system instead of feel compelled to tread off to the hills of pakistan, or before that, the desert of sudan and joined a group trying to

overcome these governments and attack their western protectors with -- western supporters bombs and mayhem, then yes, i do think that is the enormous promise. i would say, the dissatisfaction of the people in egypt, tunisia, yemen, elsewhere is taking a much healthier form, which is, there are more of less than them. -- more of us than there are of them. let's take over the government and run it our way, as opposed to those who were seduced by osama bin laden's call, to go against the west, to take to the hills, cause as much mayhem as you could.

the promise is there, but it is not inevitable. it takes primarily the efforts of those who are dissatisfied. it takes a very wise and smart wisdom and intelligence. i would say, it takes a wise policy with resources put into them by the rest of us, in order to make that come true. >> let me take you back to some homeland security issues here. the department of homeland security had a rough start when it began. there is a sense now, though,

that they have found their place. still a fair bit of tension. tell me what you think has changed, but has made that experiment worked better than many had predicted, and some of us wrote five years ago? >> i cannot remember if the articles were putting these organizations into another organization and putting someone on top, whether they could be more focused by specialization and reach out and corporate with each other, rather than putting children into an orphanage. i think the wisdom of that reorganization was that it took all of these disparate organizations -- each of which had a piece in homeland security -- and put homeland

security as a unifying idea for them. the coast guard does more than protect the united states from threats coming in by sea. yes, customs and border patrol does more to keep those who are in danger to this country out. however, that idea of stopping physical threats to the country ought to be at the top of the list. putting them together in the group provided a unified effect, which gave reality to these connections between directors. over time, it has done that. the other jobs they have to do are still being done but it put a unifying mission to it.

and it is a mission that appeals. if you joined ice, customs, you want to defend your country. i think it was a good idea, but primarily, the hard work of the people overcoming those initial problems at all these organizations go through have been well done. i the organization is begin to fulfill its promise. >> when i asked people in the government, what is the one area where they do not believe coordination has worked as well as it should, almost universally the come back to me and say cyber. the defense mission, a lot of

it is in homeland security. some is located in other places. the defense department has stood up its cyber command. you only have about 30 milliseconds to figure out if your threat is coming domestically or abroad, because one of your former colleagues, as they said to me, you cannot have an argument of whose department should handle it. how you assess how the obama administration has handled this morass of dealing with cyber? >> as far as cyber defense goes, what we have done so far has been steps in the right direction, but those steps are pretty small in relation to the potential consequences of not doing it, not doing it well. i have said openly, my understanding of cyber is you simply have to centralize in

order to be effective, because of that talent available to deal with it. the government only has a limited number of people we can lurk away from -- lure away from .coms, the people that are really good at this stuff. the difference between creating a network and creating a threat against it, defending their own -- penetrating the network to understand the threat against it, defending their own networks, deceiving those who come in to make them think they are getting something where they are not, those are such intertwined skills, that to break them up into separate pieces is almost impossible. what is really impossible is trying to separate the border of the u.s. from the rest of the world in cyberspace.

that is what all of our current approaches are founded on. jurisdiction, protections for americans. all of that is built upon the idea that you treat americans in one way, as laid out in the constitution, and you treat foreigners another way. if you are friends, you work with them, while checking to make sure they are still your friends. applying those rules to the cyber rig that is just -- cyber arena is just impossible. what i saw as director of national intelligence was the game of twister being played continually by people and lawyers to try to, frankly, get around these are under pressure -- artificial restrictions and do what we knew was right. we were constantly running back to the justice department as technology changes, saying we

have to do things differently. there was one problem that we went to the justice department to achieve a decision on the legality of. after six months, they said, you ought to do what makes sense for you and we will tell you if it is legal or not. >> six months of billable hours, and that was your answer? [laughter] >> i do not fault them. they are in rowboats. they look to see if the direction you are going is the direction that the wake said it was. there is no precedent in this area. technology and concepts are exploding. there was some incredibly old legal precedents that they were tried to use to apply to the 20th-century and finally they --

21st century and finally they said, this is silly, you have to find a new way. i do think there are some timeless rules that apply, proportionality, you do not try to hurt people who are innocent, you have to know what you're doing. you ought to have layers of review, division between -- of responsibilities between congress, the executive branch, and the courts. i think those are violated by the bush administration, in the heat of 2001, in a way that were unnecessary and set us back. there are some timeless principles that apply. but we have got to adapt to the new world. i think this artificial system in which the homeland security department is responsible for

cybersecurity within the country, maybe part of the .com domain, where the department of defense is in charge of production, when their overseas -- protection when they are overseas is getting in the way of doing something smart. you are right. at one has not gone very well. -- that one has not gone very well. >> when you were in office, it was just the beginning of the obama administration's coming to grips with the fact that the u.s. has significant offensive capability. they do not talk about it very much, but if you read defense department and other official government reports, now they cannot help to begin to discuss the billions they are spending on offensive technology. tell us where you think we are in that? some people use in a clear analogy, where we might have

been in the period of time after the u.s. dropped the bomb but before the soviets got their first nuclear weapon. others say that the chinese are well into offensive technology. are we getting to the point where we need to have rules of the road, the way we develop them, ultimately, for nuclear weapons in the cyber realm? >> i think we should try to develop those rules on the government to government basis, and i have talked about it with counterparts in china -- well, with china in particular and many of our allies. i get a lot of resonancemeeting with friends and allies to

degree the dependence on cyber, the harm that can be done if you put the resources of a nation state behind what we see in small pieces with hackers and others, the chinese, in general, think that they can take advantage of the internet to try to steal information from others that they can use for their own purposes. although they complain about people who hack them, they think they are giving up more aware than there are getting. -- they think they are getting more than they are giving away. i think we will soon approach that point. where we do see some cooperation among nations states is in the criminal enforcement area. there have been good operations involving russia, china, other countries in which law enforcement have broken up

rings of thieves. i think the next up would be to develop an agreement on espionage. -- on industrial and espionage. i was at a conference in china where i told them we do not do industrial as the knowledge, you -- industrial espionage, you do. eventually, this is going to hurt you, so let's agree not to do it and find ways to enforce that. eventually, china will come along. that leaves the remaining area of national security -- whether you call it intelligence gathering or preparation for the battlefield -- national

governments try to get into the networks of other tournaments, -- other national governments, and if it comes to conflict or crisis between those countries, they will look at ways to use that access to their advantage. i think that will be the final frontier. it may be possible to reach agreements, such as confiding -- ing that action to military or security matters, for instance, grids in other countries or interrupt the emergency service, some of the other things that would cost what collateral -- wide collateral damage. i think that is the area that we can go eventually. in the meantime, frankly, it is hard to tell how vulnerable we are.

i saw both classified and aunts classified -- on classified instances where do it -- on classified -- unclassified instances where it was pretty bad. they peel your eyes back. in other instances, we were dealing with other things going wrong in our networks all the time, some were intentionally malicious insiders, employees who just want to cause trouble. some of them are inadvertent parts of the algorithms that were not understood and cost problems. -- caused problems. overall, i tend to think we are not quite as vulnerable as the doomsday people say, but nonetheless, a great deal of damage can be cost across and -- because it across itcaused acr

oss networks, and the sooner we can find that by agreement among nation states, the better. >> living at the crowd that has assembled, let me move on for a moment to pakistan, the place where many of the threats you discussed earlier came out. if queen elizabeth were here, she would say that this was -- all in the mind with pakistan. this began with the cia this began with the cia agent, officer who got into a firefight in lahore. it moved on to the bin laden raid, something that did enormous damage to the relationship. several efforts to write that relationship, and then this weekend, this incident that none of us seemed to understand in which at least 24 pakistani border soldiers, provincial

birds, were killed by nato forces. the pakistanis have resulted in their usual tit-for-tat way, cutting off two supply lines into afghanistan. is there anything we can do to break this cycle? how does it affect our ability to do with the terrorism issues we discussed? >> when i was operating within it and thinking about it, i had a sense of how before and the -- deformed was the american relationship was with pakistan, how much official deception was involved on both sides in terms of the knowledge in that things were going on, how much each

side would discard -- disregard strong instances on the other side and look for interests. when you take a step back and you say this is a relationship that is this form -- misformed, probably not much success. short-term for pretty specific things. if you believe, as i do, that pakistan requires a fundamental change, if it is to be a member of the international community, that is not a danger to its neighbors, then i think you have to think of trying to establish a more normal relationship between us and pakistan, and we have to give up the short-term goal that we had

with pakistan, which was that it would take actions on the side of the border, which would give us victory in afghanistan a quicker and easier and require less resources. that was sort of our idea in the fall of 2009. pakistan seemed to be moving in the right direction, moved into the valley, south waziristan. they seemed to move into north waziristan, accepting u.s. technical assistance, providing boots on the ground. it seemed we could meet our goal of extending government over the northwest territories to both of our advantages. that sort of fell apart last year and the consequences in afghanistan have been major. it makes the job much more difficult.

if that relationship is not being achieved, we need to look longer-term and go back to a relationship with afghanistan that makes sense over the long term. we cannot deal with the army and isi directly for our purposes, thereby reinforcing their positions within pakistan to the ultimate detriment of the pakistani people. we have to help the government put the army and isi back where they belong. we have to work on long-term things, like trying to change pakistani education, so it is not the the process who are reform renewed -- madrassas who are performing those who cannot get education elsewhere.

we need a careful set of penalties as well as inducements to pakistan, in order to reach a long-term goals. i think we have to accept that pakistan will not be a great deal of help to us in the near term with our goals in afghanistan, and tried to build a long-term relationship that will eventually make pakistan and more responsible member of the international community. >> when you get that aspin -- out at the aspen security forum this summer, you made headlines by suggesting we needed to end our predator strikes into pakistan, that there was no way that we could continue that and continue this relationship. at the same time, you point out we cannot rely on the pakistanis to do their side of the border. you ask people in the obama administration about predators.

they say it is the only way to get inside the border. tell us whether or not your thinking on this has a vault? y? has evolved an >> the question i was grappling with what i made the proposal remains -- and i think this relationship we have with pakistan, in which it does not officially a knowledge it has given permission to the united states to conduct attacks within its own country -- and the reality is part of this to form -- this disformed a relationship, which is a cop-out from the pakistani point of view, from our point of view, and gives the pakistani people reason for anger against their own government, and against us, which will hurt in the long term. what i was getting at with my

proposal -- and it is not to stop the drone attacks. it was to consult with the pakistanis about whom they should be directed against. pakistan has enemies in the northwest territory that it is trying to root out, the gtp, who have killed a lot of pakistan's -- pakistanis. i was looking for ways in which both our and the pakistan interest could be acknowledged, openly, and would be supported by people of both countries. i still think binding this is what we need to do to get this relationship back. >> but to do that, the u.s. would have to the knowledge -- have to acknowledge predator

attacks exist. the world's worst secret. pakistanis would have to acknowledge under some circumstances and targets, they are welcome. >> bingo. >> what are the chances you could get washington or islamabad to agree to that bargain? >> it depends on how bad the alternative is. i think the alternative is looking pretty ugly, at this point. my mind says, when what you are doing is not looking very good, heading towards a waterfall that you can see, you ought to try something else. >> let me turn briefly to iran, a subject that you and i have talked about over the years. you saw the iaea report that came out. not a huge amount new, but it did it knowledge in public what had been circulating in the intelligence channels of many

countries for a long time, what has been circulating in the back rooms of the iaea. it tells you there was a program through 2003 that was very active to build a nuclear weapon. then it puts together a fair bit of evidence but not conclusive, that those programs resumed, but probably not at the level and funding that they had been prior to 2003. when you look at all the things the obama administration has done over the past three years to slow the program, has -- is there any way we can declare this effort to be a success, at this point? >> if you think slowing is success, then what has been going on for the past dozen years is a success. if you go back to the projections of 10 years ago, five years ago as to how much nuclear material and bomb- making capabilities the iranians

could have, you find they have not done as much as they could have. but, i guess what worries me about it, by becoming fixated on just how close they are, a few kilograms here and there, we are losing track of the big picture and we are setting ourselves up for the crisis that we have not prepared for. i am really worried the iranians to overestimate their capability to finely tune this dance to go right up to the limit of american tolerance and be able to stop and hold it right there. i am worried, on the american side, we overestimate the position of our intelligence or skill, access to the iaea to know everything. i think the basic question that

we need to decide is, are we going to tolerate a nuclear-arms iran or not? once we make that decision, life becomes a lot easier. if we do not make that decision but insist on knowing it when we see it, i think we are setting up the dramatic discovery of something that iran is doing that we did not know about, that they thought they could keep from us and were free to do, on the one hand. thinking about making decisions in haste under conditions of excitement and the trail -- the trail, which are usually not good decisions, compared to thinking through consequences. >> when you think about what

president obama has said publicly, he says we will not tolerate -- a nuclear-arms iran is not a tolerable situation. he has said that appoints a nuclear taliban is not responsible. -- a nuclear-capable taliban is not tolerable. something presumably short of having a weapon. based on your experience in the administration, it is that the consensus view, or is this up for debate? >> everyone in the administration would agree with what the president said, not surprisingly. by reducing it to definitions, but you undercut the real questions, which are, at what point is a near-nuclear power an actual nuclear power. -- nuclear power? when the warheads are maitre not assembled? -- are made but not assembled? you get into this -- we are

along this line. i think setting clearer lines, which are a lot less ambiguous and have actions behind them, that make rhetoric by it, as opposed to where you will turn to, is what we need to do. concepts like iran is not acting like a country that is fully carrying out the obligations -- the npr obligations commitment, things like putting the onus on iran to prove that what it says is true come more into play than this game of saying something. the iaea listing a report, national intelligence estimates

leaking interpretations of capability versus armed, or as we are going to boil to death like the frog, one degree at a time. >> you spend a lot of time exploring iran as a sponsor of terrorism. when you look at their potential nuclear capability, how big is your concern that they would be more tempted than most to slip a weapon to a terror group? and what would the saudi plot, if you believe the allegation that the u.s. have put forth, make us rethink how we can control the program, how that could be? if you could have some freelancers out there to higher -- to kill the saudi ambassador, how realistic would

that be? >> i think a plot involving nuclear weapons of any kind, plots involving assassination and so on, for any government association with nuclear weapons inevitably means identification, retaliation peering is inconceivable to me that the united states, if a nuclear weapon were used against it, and a hand in that weapon was traced back to iran, north korea, and near the country, that we would not retaliate, i think everybody knows it. assassination plots and bonds -- bombs are a different category. iran killed a bunch of our

servicemen and number of years ago. i can perfectly believe that some members of the iranian intelligence service have decided that killing a saudi ambassador would be a good idea. i think they felt that they could pursue that as far as they could, from the indication of the command atmosphere in iran. anybody that has a plot against an ally in the country had better be clear at a high level, and we are going to make that decision. anybody have an idea on how to hurt the great state? -- great satan? there are a couple of agents here that have some contacts in mexico, let's give it a shot. i think that is their attitude toward the use of these weapons. their attitude towards nuclear

weapons is, we can get to that line without the u.s. knowing about it for crossing it be read i think the united states has to decide how far it will be pushed, and then to lower the hammer. >> in a significant way, you have heard the israelis break out in a public debate about this. is that more noise in the system, or is that for real? >> i think the israelis have thought what they have to do at which the point at which iran beginning nuclear-weapons have

shown in the past actions that they take when they fear their enemies are acquiring those capabilities. i have no doubt they are making that calculation every day. , as far as what they say publicly about it, that is probably a separate calculation. is it designed to make iran go further underground and the lead? -- and therefore delay it? is it designed to prepare their own people? is it designed for the united states to take certain actions? that is something you decide in the military and intelligence rooms. what would you do if you've had to set back iran? >> let's open this up to general questions. when you were called upon, just

give us your name. please make sure that your question is actually a question. who would like to go first? kimberly? >> we haven't touched on yemen. do you think that the model that is going on there given all the political unrest on the ground, is that a successful model that should be followed for c cooperationt is that a way ahead -- for ct cooperation? is that a way ahead despite the political unrest on the ground? >> i think it is a great aspect of the american policy. countries that cannot enforce laws that are torn by civil or ethnic or tribal strife turn out to be the most difficult countries to help make better

because of the nature of these divisions they are dealing with and they are ideal places for terrorist groups to go because they can set up shop and to -- do their planning and logistics and training and propaganda and so on. these kind of spots around the world whether they be in the southern philippines or distant islands in indonesia or part of the malay peninsula across the part of the world into yemen and somalia, that makes us face this dilemma of how do we handle them in order to keep them from becoming bases from which the united states and other countries can be attacked. i think too often we have treated them simply as battlegrounds for this war against terrorism and return the pentagon and intelligence

agencies loose on them to knock back at terrorists and we have not given enough consideration as to how we can make some places which are not going to be refuges for a terrorist organization for years to come. i think that is true for the southern philippines. i think it is true in yemen. i think it is true in somalia. i don't think there's a magic wand which can weigh in any of these countries that will make them into a perfectly-governed economically prosperous places but i am distressed if you look at -- if you take a look at the number of minutes we have meetings around this town in government and discussing yemen in terms of its military and intelligence operations versus the number of minutes we spend in this in town trying to

understand yemen and sell some -- in terms of helping it solves some of its endemic problems, the ratio could be 1000 to 1. and the resources are probably similar. i think we need to impose the discipline of long-term solutions for these countries as we're dealing with the immediate threat. that being said, in the case of yemen, it is a particularly difficult set of problems. secession is moving in the south. the tribal divisions are in the north and the eastern part is relatively lawless but there have been some successes there in the past. there was an agreement between the south and the central government that actually was

implemented for a while and it fell apart. we have powerful allies in the region. it seems there could be a more comprehensive approach to yemen. of which operating against al qaeda in the arabian peninsula can be a part of it. i would like to see their emphasis added to it. as far as the military intelligence operations in those countries, i think they are doing pretty well they seem to -- doing pretty well. and they seem to be doing it in a way that the yemeni authorities are involved, such as they are, and supportive which was not the case in pakistan. >> other hands around here? yes? >> i am from the voice of america. there are numerous reports

saying that north korea is helping iran to develop nuclear weapons. what is your assessment of the s -- of the relationship between north korea and iran and also how do you think we can break the nexus of preparation? -- a proliferation? >> i'm sorry, i understood the part about the connection between north korea and iran but what was the rest of the question? >> that was correct. >> even though i have been out of government for 80 months, i -- for 18 months, i'd still get confused about what i read in one sanger's columns. >> which one was wrong? [laughter] >> one of the responsibilities i felt i had was to ensure the public discussion of importance

intelligence questions was not that much different at the highly classified level than what it was at the un classified personal level. we have more detail within government. there were some things that we obviously could not make public but on key questions like how close is iran to a nuclear weapon and what is the situation in somalia and what are the russian intentions -- in a democracy, you need to have the public understanding roughly the same as your official understanding with details. any careful reader of a reputable publications that there can get a good idea of what is going out there -- what is going on out there with key issues. in the public discussions of the cooperation between north korea and iran, the main area

of cooperation was missiles, not nuclear weapons. the north koreans sold missiles to iran. their engineers consulted with iranian engineers. some iranian missiles started off as north korean missiles which in turn or often versions of other people's muscles. -- missiles. when you have engineers who are involved in weapons programs whether they be delivery vehicles for what goes on the end of the missiles, the chances to discuss the full range "what you would like on your weapons and how they are built are pretty broad. i have no doubt that the iranian/north korean channel was a pretty broad one that

could include discussion of both warheads and missiles which it obviously did i don't think i -- obviously did. i do not think i will go to much further than that. the primary spreader of nuclear weapons technology around the world including to iran was pakistan. whether you get your missiles from north korea and nuclear technology from pakistan, you are part of this witch's brew of the grey market of weapons and nuclear materials which countries who want to build nuclear programs that can be delivered by missiles have been taken full advantage of. >> let me follow that up -- i have always thought that for the iranians, it must be a little annoying, to say the least, that the finest graduates of kim jong il high-school has

managed to put together two weapons they have tested and sent to have a -- seem to have nuclear program that can produce a device if not an actual weapon. in the case of iran, it has taken much longer one was going by plutonium and one was going by uranium. what is it that the north koreans have figured out about how to get there quickly that the iranians have not? is it the sabotages? did they get the centrifuges? do they have the right talent? obviously iran has a deep scientific base. >> one thing i would point to is it doesn't make much difference to the north koreans whether this stuff works or not. [laughter] the nuclear weapons that you referred to, both tests were not full yield tests.

they were advertising on the international market was for sale and they have never flown. >> so they are not perfectionists. [laughter] >> but horseshoes and nuclear weapons are relatively similar in that regard. and the case of iran, they have higher engineering standards and they do and do it with more engineering skill. i think the pace of their development has been determined more by political considerations than it has been by lack of technical skill. had they taken the wraps off back in 2000 of some of their -- you are right -- nuclear

physicists want to build nuclear weapons but they were not given permission to do so and have not, as nearly as we can tell, been given full permission yet. i don't think it is a case of technical shortcomings in the case of iran. i think it is political decisions. >> mr. lawrence? >> thank you. don warren - thank you for joining us today. thank you for your service to the nation over many years. the talent commission report states that there is a high likelihood that terrorists will use a weapon of mass destruction by the year 2013. let's just did say during the next decade. it says there is a high probability that it will be a biological weapon. whatever weapon comes to mind.

do you agree with that statement and you think we are doing enough to protect against the biological threats regardless of whether it is weapon on a store not? -- weaponized ort not? >> your never doing enough especially in retrospect. statements like the one you just described are probably good warnings that we need to look hard at those threats and make sure that we are doing everything that makes sense. i would say that -- when i was director of national intelligence, we looked at the intelligence and biological programs to determine if there were untapped forms of

collection or new ways of thinking about it that we could or should pursue as the intelligence contribution to a total the fans -- to a total defense against those kind of weapons and was convinced that we were giving a lot of attention to the areas that were at any likelihood of achieving results. it is just a very hard problem between a pathogen and a benign or even a beneficial organism. one is formed by what has happened in the past although iceland lawyers earlier. -- although i slammed lawyers earlier. it is not irrelevant.

biological warfare has not been one that is produced clear victorias results for anyone who tried to use it whether there were a nation state or others that have tried to do it. it is not as if there are hundreds of nihilistic organizations out there working away on chemicals -- on biological threats. there is a good degree of international consensus against it. unlike some terrorist groups which have sympathizers or supporters among permissive national governments, that is not true for those trying to develop biological weapons. i think the level of average -- effort against biological weapons is about what a balanced

person would have met at this point. i do not feel bad about it. >> there was a lot of concern at the end of the bush administration that the detection technology on biological was still pretty poor. you get a warning about 36 hours before. by the time you have any doubt that filters and figured those out. -- you had emptied out the filters and figured that out. has that improved at all? >> it is not quite 36 hours but it is certainly not simultaneous. that is one of the big problems with it. one of the problems in dealing with biological warfare scenarios, most of the work that has to be done is based on trying to set up contamination zones and keeping people from spreading it by traveling around. if you want a good primer on what a good biological threat

is, read about the influence of of 1918 and the sorts of actions that were taken there. a vaccine was never developed for it -- for those parts of the countries or the world devastated by law or in some -- that escaped it either by law or uck or inredict by l some cases cases by strong policies or kept isolated and kept it from coming in. >> mr. london? >> american security challenge -- speaking of technology, cents -- since technology is an anchor in our national security, do you think incutel was an ally in that? do you think it was successful in accomplishing its objectives? if not, why not and what might you suggest? if so, why don't replicate that to accelerate valuable technology deployed in other enterprises?

>> you might teller bills what -- tell everybody else what incutel is. >> it is a prototyping and investment group for the cia and other members of the intelligence agency. >> and the idea is to throw ideas out particularly to the information technology community to see if we can get help in ways that do not come through our normal acquisition process. i don't think there is one model of which is going to be the be all and end all of trying to tap the innovative solution for things. darpa has been as successful as any and it has been replicated in the intelligence version and

the honen security program. that has had some success. those agencies always put a high technical challenge and give a fixed time line and fund high-risk projects and see a banking comes out of it. -- see if anything comes out of it? . incutel is an attempt to go further upstream and put in ideas and funding at an earlier stage and see if silicon valley and other groups could come up with technical solutions to some of the problems we face. i think we have to keep working it and take a different techniques. some things come from inspired individuals who just push it and other things tend to come notther tocomeincutel, i'm

sure what they're batting average was but i am sure it was 50% or less. but there were some good things, so that is good. your basic concern is correct and i think i worry in the budget keeping an amount of federal funding that can address that. those are programs that are generally on the chopping block first. i would second your idea that we need to keep doing things like that and doing more of them. >> we has been -- we have spent nine minutes so can we have shorter questions and shorter answers? >> our topic today was readiness. i am concerned that the cuts are coming and the budget. what is that going to mean for readiness? will we have to think about reviewing our strategy?

if we are going to cut the budget that much? >> yes, yes, you can't take a 20% budget cut and do the same chores you do now. what bothers me about this phenomena that we have now is cutting defense and intel spending and maybe they will do a little bit of what they are doing now. we should have a strategic conversation first. what is it you want your defense forces and intelligence forces to do? they should then come back and ask if last to what to do and this is what it costs. and that is too expensive, so we will do little less of this and a little more of that. bad as they mature decision, not -- that is the mature

decision, not some damn arbitrary $500 billion number. i am waiting for the conversation to begin. what should be our military posture with regard to china, north korea, iran? what capability to we need? do we want to have this strong tactical emphasis on terrorism or do we want more emphasis of looking at long-range threats? i am waiting for that discussion. we should have that discussion and then we can decide what it will cost us. >> when have you seen that conversation take place [laughter] particularly in the congress? >> there are key times where it did happen like in the 1950's. projects solarium. president eisenhower locked his chief of staff up and said come back when you have a strategy that we can do for $17 billion. those were the good old days. i would say in the 1990's, there was a more recent experience when we took large reductions after the end of the cold war, general powell put out

the idea of a base force, this set of missions and this is what you need to do. i don't see any of that going on now. i think that is a conversation we need to have them a question right there. >> back on pakistan, one of the many recent presidential debates, there were many mentions of pakistan. the republican candidates said we need to be more aggressive and kinetic and go across the border and do whatever we need to get into pakistani territory. the other side said to cut them off until we see improvements in their behavior. what is your assessment? has that kind of approach been discussed within this administration when you were

there and what is your assessment of how that would go down? you set a new direction was probably needed in that relationship. >> yes, elements of a more transactional relationship are called for. in early 2010 under the energetic leadership of richard holbrooke, the united states put together a very large and comprehensive assistance program for pakistan. there was a big military component but also a very large economic component, education component, also fought society, which turned out to beat -- also a civil society which turned out to be too much, that pakistan choked on it and did not believe the rest. i think we have shown the limits of what carrots only can do. i think there needs to be some

penalties, sticks, limits to our relationship with pakistan. in my experience, most successful policies have a combination of those tools. they don't lean on one or all the way on the other. the facts are true that the united states and pakistan have a great deal in common. there are things they can cooperate on but there are also point for those things diverge in which the united states should be quite plain and did make it clear there are limits to what we will have a pakistani veto over and we will act. i know what those candidates are saying. i think it is more sophisticated than that. >> gentleman in the corner?

>> thank you, sir. i was recently with the department of defense. considering the elections in egypt, what with that kind of -- an unexpected leap even greater victory for muslim brotherhood-related parties, what would that backlash portend for our interests in the region? >> i have not heard the results either. i understand the elections have been going on for awhile. the early returns are probably just early returns. the larger question of whether the arab brothers return in a legitimate government-elected system and the consequences for

egypt and the rest of the world are very important. we have in our minds the nightmare of 1979 when at the last minute, the united states pulled its support from shah and shifted to the ayatollah and that did not work real well. i think it is probably not your father's egypt in many ways. as we discussed earlier, the impetus for the downfall of mubarak - i would argue that president mubarak had far more powerful portion tools than with any new government in egypt. and yet he felt quite quickly. i would think any government coming into force in egypt would have to deal with the

aspirations of the people in expressing themselves which are not to go back to the seventh century but rather to preserve some of the characteristics of a moslem state but to have jobs, freedom of expression, ability to choose their government. i have faith that the egyptian people are going to have ways to get the kind of government that they perhaps finally want and deserve. i am not as worried about it and i would much rather be on the side of helping the opposition against a repressive fundamentalist government than on the side of supporting a mubarak-type government.

>> i have two questions and they are short. the first question is -- what you make of the fact that anwar al-awlaki's message fired up after his death and given that the drone campaign is here to stay and it would seem that we want to build public support for the campaign, would you encourage the administration to release the legal memos that issued the killings? we may face more americans on that list in the future. >> it is hard to tell just how powerful lockley's message is in context. i suspect there are more fringe groups that follow other blogs then read magazines.

i don't get the sense that -- we have done studies as to what will push a person over that line from being angry about the status quo and being sympathetic with those trying to change it and then taking the next step to thinking that that justifies strapping weapons on your body and killing a bunch of people at a wedding. it is our research but what we found is that the people willing to take that extra step had some sort of psychological defects in their character that made them go into the suicidal/homicidal category from being generally angry. ofon't sense there are many the latter category. knock wood but one thing we have not seen so far within the united states is a suicide

attack. they seem to leave the bon and go away. -- leave the bomb and go away. i cannot comment on particular drum campaigns we're doing today or give official word on them. however, i will say that covert action that goes on for years does not generally stayed covert and you need a way to make it something that is part of your overt policy. i think the way we know to do that is to make it a military operation and therefore when you are going to be using jones over -- using drones over a long period time, i would say you have to give strong

consideration to running it as a military operation. within the armed forces, we have a set of procedures which are known for how you make decisions about when to use deadly force or not. there are levels of approval and degrees approve, and there are things that should be openly put out there. that is another problem of conducting long standing, covert operations which is a secrecy you do for other purposes but puts you in a situation. i argue strongly that covert action should be retained for relatively short duration operations which should not be talked about and should not be publicized. if something has been going on for a long time, somebody else should do it, not intelligence agencies. >> i'm afraid our time is up but i thank you very much. this has been a terrific conversation and we have

covered a huge amount of ground as always. it has been great to hear your views and thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> barney frank said today that he will not run for reelection. his announcement is next on c- span. then one of the members of the joint deficit reduction committee, senator robb portman, talks about the federal debt. tomorrow on "washington journal," a discussion on social

security and medicare. max richtman national committee to preserve social security & medicare of the joins us. we will talk freedomworks to president matt kibbe about the plan. "washington journal" each morning at 7:00 a.m. eastern here on c-span. on c-span2, an update from the british house of commons on the state of the economy. we will hear from george osborne lighted 7:30 a.m. eastern. >> within 90 days of my inauguration, every american soldier prisoner will be how and back home in america where they belong. >> george mcgovern's pledge of

the 1972 democratic convention came after a decade of being one of the senators to speak up publicly against the vietnam war. he suffered no landslide defeat to president nixon, but his ground-breaking campaign changed american politics and the democratic party. he is featured this week on "contenders." from mitchell, s.d., live friday at 8:00 p.m. eastern. >> democratic congressman barney frank of massachusetts announced his retirement effective at the end of this congressional term. his career spans more than three decades. he was chairman of the house financial services committee. from newton, massachusetts this is 40 minutes. [applause]

>> i am grateful for this promising addition very recently to the office in massachusetts. i'm also appreciative of the efficiency. i called them this morning and called city hall and the mayor's office was opened well before 9:00. and so i was impressed. i thought i would get an answering machine. i asked if i could use this wonderful place for a number of important meetings. i was very grateful that it get it done so quickly. you have a written copy of my statement. all the sticking closely to it in substance, although not word for word. although i did write it. as i said, i will begin with a

statement and did. in your massachusetts politician, it is the custom to quote presidents from massachusetts. he is probably the least often quoted by people on my side. i do not choose to run for congress in 2012. i have gone through some changes. last year, particularly around the time of the signing of the financial reform bill, i have tentatively decided that i would make this my last term. i spent a very busy and somewhat stressful four years with the financial crisis, first dealing with a crisis, and then dealing with the legislation to make get less likely to have another one.

i'd been had, as is appropriate, a very spirited campaign for reelection. my view was that i could do my job best in fighting for public policies that i care about by making this my last term. and then a funny thing happened on the way to retirement. a very conservative republican majority took over the house. at that point, it seemed that some of the things i had fought hardest for could be in jeopardy. financial reform, which i anticipated the concerted -- the conservatives running the house will try to undermine, and additionally, i was afraid that given the need to do deficit reduction, this very conservative majority would seek to block any increase in taxation on the wealthiest people and would seek to protect the military from any spending cuts so that the necessary deficit reduction would fall

disproportionately on social security, medicare, and other programs that enhance the quality of our life here at home. if i announced in december that i was a lame duck, it would weaken my chance of having influence. ordinarily i would not have announced as early as i did, but we're doing this -- redistricting. the legislative leadership and my colleagues all said, it is important for you to tell all of us whether you plan to run our not. and so i gave my initial view. and i was planning to run again, and then the congressional redistricting came. this decision was precipitated by this, not entirely caused by it. i have been ambivalent about running, not that i do not continue to think that that job is important, but there are other things i want to do in my life before my career is over. i was a fledgling academic and had along as uncompleted phd

thesis at harvard history and there are many things i would like to do. some people want to write and also pursue an active life. i am easily distracted by the blank page. i will take almost any excuse not to write. i do want to write and write about some serious issues. so i was torn. but then the redistricting came out and there were two aspects that makes this the decision that i did. the district is very substantially changing. there were 26,000 new people, many of whom i have never represented, some i have done so for 20 years, which is an eternity in politics today. first, i decided to run again because i wanted have maximum

influence on protecting representative -- protecting the natural form and make sure that taxation was part of deficit reduction. then need to campaign in a district that is almost half new conflicts with that. if i were to run again, i would be engaged in a campaign which is entirely appropriate. no one should be expecting to get elected without a campaign. but the fact that it is so new makes it harder in terms of learning about new areas, introducing myself to new people. and i have three obligations -- one is to continue to serve the people like currently serve. i am wearing a new bedford tide. none of the fish -- not the fishing industry areas will be in the district that i would be running in. i cannot walk away from people i have grown person like close to. i have to worry about the

ballot. i worked hard on relations between two countries where my constituents have strong ties. well, there 3. one stays the same -- israel. portugal, hundred thousands of them would be in there. there are other issues i don't want to be torn between a full-fledged campaign in a district with 325,000 new people and my obligation to the existing constituents. i would have a hard time going to 325,000 new people in areas i am not familiar with and say by the way, i would like to be your congressman for two years. it was always clear that i would be retiring after the next term. i will be a couple of months short of my 75th birthday, and i

have always said, not be serving in elected office at that age. i know my own capacities and energy level, and it would have been a mistake. i would have had this very difficult situation where i would be going to people and saying please, let me be your congressman and let me work on your problems, because that is an important part of the job i have always taken very seriously. i am -- i am proud of my work that i have done for people as an advocate. the most important ones were never resolved in a year or two. to go into a new district and asked them to trust me with being their advocate on their problems, and then say by the way, that expires in two years. call me in february 2014, and i will have 11 months to work on your problem. none of those are done in 18

months or two years. i would have a hard time, frankly, telling people that, and justifying to myself to do it. that led me to decide that i should not run. i am not retiring from advocacy of private problems. i think i will have more impact. it is not a secret that holding an elected office is considered to be a great virtue. there is a cynical screen through which the comments of elected officials are put. i expect to be saying things as the private citizen and have been saying as an elected official but, i think i will find my motives less impugned. i think, candidly -- there is an old saying that truth is the

first casualty of war. modesty is the first casualty of a political campaign. it was on shaky legs to begin with. i will not have to be modest, so indulge me in modesty now. i think i was pretty good at being a legislator. i have been pretty good at working within that framework of government. to my disappointment, the leverage you have within the government has substantially diminished. the anchor, the current opinion is such that the inside work i have felt best that is not going to be as productive for the foreseeable future until we make changes. i finally believe that my ability to be an advocate on the kinds of issues i most care about will be as great outside as inside.

if i had never served in congress, that may be the case, but i look forward to help change the system. i think there are now too many constraints against doing what we need to do, and i expect to join the debate to change that. with that, i will open it up to any questions or comments to have. [inaudible] i would have had to work very hard. when your candid it, you're supposed to get all macho, say you can win. perhaps you'll be surprised that i do not feel surprised that i do not need to be macho. i have 120 elections, four to the state house from 16 here. in five of those cases, i entered in uncertain about the outcome.

in a couple of them, i was the underdog. in 1980, when i moved from boston, i one two narrow races. it was a terrible year for a democrat to run. in large people thought it could not win, and i was one of them. in 1990, i entered when people said i could not win. the same was true last year. i think i would win, but it would have been a tough campaign. people are skeptical of incumbents everywhere. if you are an incumbent representing people you have not represented before coming you get the worst of both worlds. you are an incumbent, but you do not get to show the people what it can mean in terms of being their advocate. i do not like raising money. i had to raise several million dollars last year. i have probably close to

$600,000 in the bank and i will continue to have two media markets whoever runs, but you have two jurisdictions and i would have to start now raising a couple more millions of dollars. i think i would win, but what is relevant to me is that i could not but the requisite effort into that. it is exacerbated. part of my strength is that i have been effective as an advocate, but one side knowledge or would only be for two years, that gets under cut. people say and should not say that. running a full-fledged campaign in a district -- by the way, the new district is about 75% of the size to which was first elected, resizable. [inaudible]

let me be very clear. i will not be a lobbyist for a historian. i promise you got on both. there's no way i would be a lobbyist. look. i will miss this job but. i will tell you this. one of the advantages, to me, of not running for office, as i do not have to pretend to be nice to people i do not like. [laughter] some of you may not think i am good at it, but i have been trying. the notion of being a lobbyist and try to be nice to people i do not like would be ridiculous. i will not in any way be a lobbyist. i will not practice law, but i may show up pro bono one day for a gay-rights case. i want to do some combination of writing, teaching, and lecturing. i am not looking for any

institutional affiliation. i made this decision about one week ago. one of the great advantages is that when the phone rings now i do not tense up and said, "oh, god. who's screwed up now?" i was not responsible for anyone else's actions. [inaudible] yes. i did not think i had lived a good enough life to be rewarded by newt gingrich being the republican nominee. it is still unlikely, but i have hopes. for example, i intend to continue to be an advocate of public policy. i look forward to debating, as one in portent example, the defense of marriage act with newt gingrich. he is an ideal opponent for us when we talk about just who is

threatening the sanctity of marriage. it is a repudiation of mitt romney. it is extraordinary the extent to which mitt romney, and i have been struck again by people talking about the degree of flip-floping and changing. i have been surprised. it has been my experience that when people say they do not like you if you flip flop, they usually do not mind if you flipped to them. hasitt romney's case, it been so constant. i think there's a real question that is fundamental. it is striking that given the nature of the republican primary, and the electorate is very conservative, it is likely that he will win. he thinks so, to, because his comment about the immigration is clearly looking to the final

election. he would be the best thing to happen to the democratic party since barry goldwater >> my biggest regret -- but i cannot think of it. people often ask you what that is, but none of us think that way. we have several things. i will let knowledge one area of that is very relevant. i voted against president bush's first request to go on to iraq. i was afraid he was going to do what his son did, which would be to mess it up badly. a very limited engagement in erakat the sole purpose of expelling saddam hussein from kuwait and not pursuing a marked well, and i would go back

again and i would have voted for that. i voted at one. for legislation that passed with only one or two dissenting vote to put more restrictions on the irs that i now think were appropriate. we suffer more from ineffective tax enforcement's than oppressive enforcement. i do not have any regrets. here is the story on the financial crisis. i was in the minority in the house from 1995-2006. i, along with many others, did not see the crisis coming. until 2003, i thought fannie mae and freddie mac were doing well. i had virtually no impact on that.

i did become, in 2004, concerned about sub-prime loans given now promiscuously. when he ordered fannie mae and freddie mac to increase the percentage of loans from below the median income, i was quoted in bloomberg that it was a mistake. in 2005, oxley was the conservative chairman and i was the senior democrat. i put through a bill to reform fannie and freddie. it passed of the house and i voted for it in committee, against it in the four -- in the floor. i was in the minority so i had no real impact. the republican senate disagreed with the republican house. mr. oxley said he had been given the one. salute. that was the end of 2006.

at that point in 2005, i did try to get legislation passed to stop loans going to people who could not afford them. that was blocked by tom delay. he said we would not do that. that brings us to 2006. in 2006, and you can read this in hank paulson's book. he approached me because it looked like we may when the congress back. the asked with me if i would work with him on serious reform of fannie and freddie. i was worried enough that i said yes. usc said, we won, i kept my word, and a first became chairman with any serious responsibility in 2007. tom delay ran the house. the majority -- the minority did not have much to say. until 2007, i have virtually no impact.

then i became chairman and one of the first things we did was pass legislation to further regulate fannie mae and freddie mac, giving the secretary of the treasury the power he wanted. there was one group that monitored fannie mae and freddie mac to regulate and they announced they were dissolving as a result of our bill passing. we passed a bill to block subprime loans and they said it was the sarbanes oxley of housing and was not a free market but it was a very good thing. it did not pass the senate. the senate did pass the fanny- freddie regulation we wanted. when it turned out to be too late, he put them into conservatorship. he was afraid that he would get attacked by fannie and freddie.

the first thing he did was to call me and i told him that is what he should do. fannie mae and freddie mac have been in conservatorship run by the government. the agency that runs them was no great friend to the democrats because obama can try to fire them. he testified that since paulson use the powers and put them into conservatorship that there have been no losses. the losses you read about our payments that happened before that. they have done a pretty good job and have not caused any losses. we were late in recognizing the problem, but i was in the minority in the first impact i had came in 2007. by the way, that is telling the air recently mentioned, michael steele, the former chair of the rnc said we took over in 1996

and house in 2002. he has since of knowledge to was wrong. with regards to the financial crisis -- oh, by the way. we did incorporate the subprime bill into the financial reform bill. the kind of loans that were made a problem for people are now legal. there were two issues i wanted to focus on in my statement. i thought if i was a lame duck would not have that much impact. one is the pending financial reform. incredibly, the republicans have held down funding of the

commodities futures trading commission to the same amount in the next fiscal year as they do it this year. they got the major new powers because they are now regulating derivatives, swaps, the things that got aig in trouble. they have refused to fund the agency we give the power to. they're trying to block the independent consumer bureau. there try to cut back on one of the most import reforms which is to say to people a few lend money, you have to hold on to 5% of that. you cannot make loans and not care about getting them repaid. look. there are three potential responsibilities that i looked out a couple of years -- a couple of weeks ago, running for reelection in the reconfigured district, servicing the current district, and being the ranking member and try to protect financial reform. all three are important. two i cannot transfer. one of them is transferable. i cannot pass up being a ranking member in the middle of a term and leave of the people i am now representing. i will continue to push hard for financial reform.

but we will get ready for a committee vote on wednesday to protect financial reform. you may have seen yesterday's "the new york times." secondly, we're going to do deficit reduction, as we should. i believe that we are substantially over committed worldwide in the military and that includes, by the way, why we are sending 2500 marines to australia at a time when we did not have enough at home. we are in an interesting situation now. sequestration has been triggered. that will need substantial reductions in the military, even more than some of the other programs that i care about. there will be a right wing effort to undo that sequestration and protect the military from further cuts. to protect the military you need to do one of three things,

reduce the amount by which to reduce the deficit, or cut social security and medicare, or cut other domestic programs. i do not think we should do many of those. i intend to spend half my time on protecting financial reform and half my time on this. i just got a call from my office with other members and i have requested a house democratic caucus to push for deficit reduction that includes military spending. those are the two issues on which i will spend most of my time that will keep me pretty busy. what? [inaudible] would stationer u.s.? -- what station are you with? oh. quel suprise,. on the first place, if you were

interested, you look at my financial reporting and see this. i have come up for some time, but almost all of my investments into massachusetts municipal bonds. there are double tax-free and they paid a steady four% -- 4%. i believe that the rating agencies overvalue the risk and we have to pay more interest than is justified. municipal bond, full faith and credit general bonds. all my investments are in. i'm sorry to have to disappoint you on your "gotcha." all my investments are public and are in massachusetts municipal bonds. no one would accuse me in a conflict of interest in the persian for the stability of my state. [inaudible]

i will knowledge that my judgment is not always perfect in these situations, but i think i'm smart enough to not answer that. people should leave their legacies for other people to describe. that is even worse than saying what i think of me. [inaudible] there have been successes in two areas where a veto power has worked. first, the absolute refusal to block confirmation to a filibuster to confirm the head of the consumer finance bureau. the way the bill is written, the consumer bureau as the powers now that existed but people talk about the non-banks.

the community banks cover right to complain. if only entities known and the banks made mortgage loans, they would not be in trouble. it was the non-bank lenders. we extended the powers of the consumer bureau to the payday lenders, check captures. they do not become effective until it director is confirmed. they have unfortunately it retarded our ability to extend consumer protection. most outrageously, the have endangered the system by refusing to fund the cftc to actively regulate derivatives. those two are hurting. the have not been successful because they understand the financial reform is quite popular. they have done a frontal assault on health care -- and can i say at this point that one of the great muggings in american history politically just took place.

an extraordinary leader in the medical profession and as an administrator who is a cliveden guy, he just had to retire as head of the cms because of right wing obstructionism. we lost a great man and a very able guy. he has been treated very unfairly. the door after the environment had gone. they want to go after financialthey understand the slogan, "but the regulate derivatives" will not take them anywhere. outgoing subprime loans, which happened -- some prime loans were a lot in the legislation that i tried to pass in 2007 and that became law in 2010. no republican during that time ever did anything to retard subprime loans being given to people who should not get them.

they are aware that ahead on assault will not work. if they win the next presidential election they can do that because you have a president to appoint people to use those powers. by underfunding the cftc and by blocking, they have already had some impact. they are trying to go at this from the side and i find it hard to block it from happening. [inaudible] if i were sure we're going to win and i would be chairman again, that was the hardest four years of my life. the things about the better for the democrats. is newt gingrich's the nominees

then... wow. beyond that, it is a very open question. i served in the house for 32 years, 18 in the majority, 14 in the minority. it is different when you are in the minority. that is not a factor for me. you think i'm going to answer that? [laughter] [inaudible] let me make one correction. my late colleague was the first openly gay -- i was the first to volunteer it.

i volunteered that information on memorial day. i'm very moved when the speaker of the new york city council and a serious candidate tells audiences that my example was helpful to her. the best antidote to prejudice is reality. prejudice is, by definition, based on the ignorance of people. i am proud that by my finally coming out -- was 47. when i volunteered finally in 1987, i do think it was helpful in that regard and i am proud. one of the things that we were able to do is to blame dock congress was the repeal of don't ask, don't tell. -- in the lame-duck congress.

then speaker pelosi really put me in charge of that. i have the gavel that was used when don't ask, don't tell was repealed hanging up. [inaudible] it is substantially deteriorated and newt gingrich brings that to mind. when i got a congress in 1980, there was a good deal of cooperation. there were differences, but they were not personal. he has specifically said that he did not believe the republicans would never be able to take over as long as it was seen as a debate between peoples of good will. he had to demonize the opposition and say they were corrupt, traitorous, etc.

it was somewhat successful and to provoke a reaction. it has gotten worse. i was ranking member of the committee 2003-2007 and oxley ran in a bipartisan way. there was some impact of the margins. today, that is not the case. republican party in the house today is dominated by -- i will say this. it consists half of people who think like michele bachmann and half of people who are afraid of losing the primary to people who are like michele bachmann that leaves you very little ability to work things out. personally, i get along with a team members and there are some people like and still work with. congress is not some autonomous entity that parachuted through the dome. we were elected by people. there is no member that did not get more votes than anyone else for that job. the public cannot be absolved of its responsibility.

they picked us. in particular, what you have is this and have to do with primaries. people on the left and people on the right live in parallel universes. no longer do people get most of their information from a current media source and then diverge in how they interpret it. the left with msnbc. the right is on fox and talk radio. what happens is people no different facts. what happens again is that these are echo chambers. people here agreement with themselves so you have the most active people on both sides of the spectrum convinced of their view is the majority view. it is those of us who are their allies to try to make a compromise and we are told there is no reason. i had people that did not believe we have the votes for single payer health care. works for me. people did not believe it.

that is another obstacle to cooperation. there are people who object to cooperation in principle because they do not see the need for it. they blew their side is absolutely on the majority. [inaudible] which one? not at all. it did not affected at all. several people have written my obituary. 2010 was the worst year for democrats that anyone can remember. the 63 incumbents lost. it is one of these things work, having gotten through that, it is unlikely will face anything remotely like that again. there was one aspect of it that is clear to me now. for reasons that are not entirely clear to me, there are people not so fond of me.

some of them have a lot of money. some of them think i want them to have less money. in the last election, i raised a lot of money. i actually raise the most prized as much money as i spent because people gave to him because they do not like me. that is the way it is. with the supreme court decision the way it is, i would anticipate a lot of money being spent. with that said, would have to spend a lot of time raising money. raising $2 million again, that this time i would rather be using to fight to cut the military. is that what? [inaudible] yes. it is the people who do not vote in primaries voting in primaries. politicians are not all economists. -- not autonomous. the number of people who vote

in party primaries is a small number. party primaries have a major impact. what we need are for people to go and participate in primaries. sometimes i get a little irritated when people who have not voted in primaries -- and i do not want to make this personal, but when people who do not vote in primaries complained to me, i do not take it will. literally, it begins with the electorate. the half to stop rewarding excess of the militancy. until the electorate does not, it will not change. yes? [inaudible] yes. i will divide my time. i will continue to live in new england. my partner has a great house in maine. i will be spending time there as well. i will be giving up my place in washington. i will not have a washington apartment, but i will keep the

new residents as well as spending time in maine. thank you wall. -- thank you all. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> let me be very clear. i will neither be a lobbyist for a historian. i promise you on both. there is no way i would be a lobbyist. i will miss this job. i will tell you this. you may laugh, but one of the advantages of not running for

offices, and don't even have to pretend to try to be nice to people i don't like. [laughter] some of you may not think i have been good at it, but i have been trying. the notion of being a lobbyist and trying to be nice to people i did not like, it would be ridiculous. i do not intend to practice law, although i might show up pro bono sunday for gay-rights. >> after 16 terms in the house of representatives, massachusetts congressman barney frank will step down at the end of next year. watch his retirement announcement as well as more than 1000 other appearances on the c-span networks, online at the c-span video library, archives and searchable. it is washington, your way.

>> next, senator rob portman who served on the deficit reduction committee, on the work of the committee which failed to come to agreement on the deficit reduction package by last week's deadline. following ing his remarks, a panel debates reducing the nation's debt. the american enterprise institute hosted this forum, which is an hour and 45 minutes. >> good afternoon. welcome to the american enterprise institute. today i have the pleasure of kicking off a two-part event, consisting of a keynote address, followed by a panel discussion. let me just make a brief remark and set the stage in the wake of the super committee's termination. when i think about the super committee, i think on one hand, it was much like any congressional conference committee, a limited number of members appointed by the their

leadership from the house and senate to forge a compromise between chambers and report back to both chambers of product that is neither amendable in the house or on the senate for. on the other hand, the super committee was a truly unique structure. unlike simpson-bowles, it was constructed in an even in a bipartisan manner and required only a simple majority to act. the expedited procedures for the floor consideration and the sequestration mechanism further facilitate the process and further encourage the committee to work. from the start, i was both a proponent of the super committee and a believer that it would succeed. my best guess was $600 billion in deficit reductions in the first decade. i believe that i was right to believe in the mechanism, but clearly i was wrong in my hopes for positive outcome. since the announcement by the cochairs last week that the super committee would not make

any recommendations, the air and washington has been filled with the degree of finger- pointing. that is neither an unexpected nor inappropriate, in my view. the super committee had a great opportunity to steer the federal government towards a sustainable fiscal path, and its failure brings consequences. taxpayers deserve an explanation. we also need to look forward, to continue to examine the evidence and the options and debate what political considerations, what does let the mechanisms, and what type of leadership is necessary to address our fiscal challenge. a trust will hear about all this this afternoon. i first met senator portman in january 2002. at the time, i was the newest hire to the house ways and means committee, and he was a six-term member of congress and a member of the budget committee. at the time, his most recent accomplishment had been a series of critical reforms to the tax code to encourage retirement savings. those provisions were a key

component of the 2001 tax cuts, and the only portion of that act that was later made a permanent law. in those 10 years, i have had two jobs, that one in this one. rob portman has bounced around a bit more. after serving in the house, he was the u.s. trade representative in 2005, 2006, director of office of management and budget in 2006 and 2007. now the serbs the citizens ohio in the united states senate. his concerns and interests are for the whole country. i can tell you from personal experience, he constantly seeks out the latest economic research in pursuit of any policy that will reduce our unemployment rate, accelerate our rate of growth, and improve the standard of living for all americans. i have always appreciated the opportunity to work with senator portman and glad to welcome him here to aei today. he will speak for about 30 minutes and take questions for about 10 minutes after that. then we will immediately

transition to a panel discussion that will include kevin hassett, andrew biggs, and norman ornstein. [applause] >> alex will made the mistake of showing me years ago that he knew his way around, not only on policy but also on politics, which is a dangerous and rare combination. alex, i will tell you today that i expect you to continue to give me guidance and advice. i also want to thank other friends at aei. kevin, norm, and arthur brooks, i continue to want to seek your help and guidance. mark has provided me a lot of

guidance. he has had a lot of late nights over the last several months. alex mentioned by four months on the so-called super committee, which in fact, i found to be not so super much of the time. but it was incredibly important experience to have, because through it, we learned a lot about how we can move forward, even though the super committee was not successful. one positive aspect was i got an avalanche of good ideas. at the start of the process, i set up on my website a forum for zero violins to give us ideas on deficit-reduction. -- a forum for ohioans to give us ideas on deficit reduction. a lot of good, common sense ideas, including changing

unemployment in a bid to incentivize hiring, reforming fannie mae and freddie mac, a tax credit for seniors to continue working and choose to forgo medicare and social security. as you can see, these were good, substantial ideas, some of which we were able to work into the process. my favorite idea may have been from john in cincinnati. his idea was that the united states should merge with canada. it is interesting, because i told john when i responded to him that we better do it quickly, because prime minister harbor is about to cut canada's already low corporate tax rate to 15%. we may be losing some business their unless we do that. what i would like to do today is talk a little about some of these ideas and enter into a dialogue of what comes next after the super committee. first, i think it is helpful to remind ourselves why the

committee was formed in the first place. as alex talked-about, there is a a divide in washington that is reflective of the divide in the country. the super committee was born of a recognition of that divided government and different philosophies, but also by the fact that our fiscal and economic challenges are too urgent not to address. the committee was set up with special expedited procedures where we could provide to the house and senate on a majority vote basis rather than the normal super majority in the senate, a product that was voted on without amendment. i was asked to join the committee by our leadership, not something that i saw, but when asked, i accepted, and i did so knowing it would be very tough to come to consensus.

thought it would be like having a root canal, but to critical not to try. we just cannot wait for someone else. we cannot wait for the next president or the next congress. we needed act and we need to act now. the urgency is particularly profound because of what has happened over the last few years. policies this administration has followed, it has made the problem even more urgent because they have accelerated the potential for an economic and fiscal train wreck. our current tax burden cannot generate the revenues needed. only four years ago, back in

2007, we had almost a balanced budget. when i left the office of management and budget in 2007, that fiscal year, the budget deficit was hundred -- 1 under $61 billion, about one eighth of today's deficit, representing about 1.2% of the economy. a major difference was that discretionary spending and non- emergency, aniline corporate spending of congress was 17% lower than it is clear 2007 that it is today. there has been a big spike in terms of spending. the subsequent recession has led to reduced revenue, no question about it. and president is spending expanded the size and scope of government. in a few short years, this

administration has now presided over a 21% increase in the growth of government and has taken some spending to levels we have not seen since world war two. the president seems intent on doubling down on his policies. ignoring the recommendations of is on debt reduction commission, the president proposed $1.60 trillion in new taxes and no serious structural reform to bring saw institute are troubled entitlement programs. instead, he asked the super committee to handle even more spending. he proposed a four hundred $47 billion new stimulus bill, his so-called jobs plan, and ask the super committee to handle an additional four hundred -- $400 billion reduction.

despite the absence of presidential leadership on trying to make our job easier, and counter to what you met her from others, i do believe that my democratic and republican colleagues on the committee worked with seriousness of purpose and in good faith. i think members tried to come up with a sensible solution. in the end, the samples of all differences that have paralyzed congress also prevented the committee of 12 from coming to an agreement. the failure of this process is profoundly disappointing, as i said earlier. it also left the even more determined to forge ahead on the twin challenges of our time, building the economic and fiscal policies necessary to unleash the job creation potential of the american economy, and to restore our nation's long-term fiscal health.

these challenges are not going away. even though the committee is gone, the challenges remain. in my view, only with a growing economy and a larger tax base, are we going to turn back the tide of record deficits and huge cut deficits we face. at the same time, failing to address our national fiscal crisis makes it tough to get that economy moving. it only weakens our economy and erodes our competitiveness in the world. saying we can tackle either our financial crisis, which is borne out by the $15 trillion debt that we had reported just two weeks ago, or we can address the economic slump will find ourselves in, to me, it is a false choice. we have to do both. the mounting debt is a drag on job creation.

one have probably heard about is a 2008 study. they have met with us to talk about their research and how they came up with their conclusions. they have shown that once the country's debt burden reaches 90% of the economy, you have a significant downturn in economic growth. they say is 1%-2% reduction in gdp. as i calculated, and two decades, that would leave one fit that -- our economy one- fifth smaller than it would otherwise be. if we don't get our public debt to gdp ratio, which is now at 100%, we will continue to create about a million fewer jobs annually. the pressure of the annual deficit condemn it does have an

impact that has to be knowledge, as well as the longer-term generational tissues that represents -- that it represents. but let's be clear. we have primarily a long-term spending problem. that is our number one issue. this cannot revenue problem. even if we kept the current tax rates in place, meaning that taxes will not go up a year and a month from now, as they are scheduled to do, revenues are still expected to rebound above the historical average of 18%, based on the nonpartisan congressional budget analysis. even if you assume that all the so-called bush tax cuts which are scheduled to expire at the end of next year continue, we still have revenue as a percent of gdp just above the historical average. if the tax cuts are allowed to expire as scheduled, then

revenues by 2014 would top 20% of gdp. the deficit is rising in large part because of tough economic times, but also because of federal spending. historically, it has jumped to 24% of the economy this year. without changes, based on cbo projections, it will rise to 30, 40, and 50% of the economy over the coming decades. you have heard those pushing for higher taxes appeal to the need for balanced approach. the basic philosophy is 0 give you a dollar in spending cuts if you give me a dollar in new taxes. i think this misses the big picture. it would upset a far more fundamental balance in our country. that is the balance between the federal government and a free and our economy. more space for government means less space for individual

americans to enjoy the rewards of hard work, industry, and innovation. a massive tax increase would lead to less growth, diminished wages, and fewer jobs. even large tax increases just cannot keep up with are dangerous levels of spending. some of you know glenn hubbard. he recently calculated that accommodating the president's spending plan would require across-the-board tax increases of 20% over the next decade and 60% over the next 25 years. that would probably make my most aggressive democratic counterparts in the super committee blush. it does not mean we should leave our tax system along. it is broken. what sticks, it can help put together our economy and raise more revenue for growth. second, we need to be sure we are modernizing our entitlement

programs. we need modernization of these important programs that otherwise are unsustainable. third, we need savings through government-wide spending reforms. on the tax front, as an alternative to proposals from committee democrats for one trillion dollars and more in new revenue over the next 10 years, you could produce a more tax -- efficient tax system while yielding new revenues. this money would be brazed by scaling back exemptions and itemized deductions for the top two brackets, while at the same time lowering marginal tax breaks. the work of prof. marty feldstein help includes this proposal. the outcome would be to reinvest all of the savings from reducing preferences into broadening the base, lowering

rates in order to create jobs and economic analysis on that is clear. we are willing to can see that some static tax revenue for the sake of entitlement savings will avoid the risk of call largest tax increase in american history year from now. we've saw tax certainty. thuringia and we salt tax certainty. sought tax certainty. rogers and small business owners are well aware that a year and a month -- on to printers and small-business owners are aware that car. our aim is to provide certainty with regard to -- to lower marginal rates to create jobs. we were not successful in that effort, because most democrats were not prepared to work in that framework. i believe it provides a way forward. all is not lost all on the pro- growth front to a i am a strong advocate of tax reform,

including individual tax reform. there is an accepted consensus that lower rates are critical to our competitiveness. during our deliberations, the new york times quoted an anonymous republican staffer saying portman is the most gung-ho for tax reform. he is the chihuahua in the room, constantly yapping about it. i don't know if that was a compliment. as part of our committee deliberations, my colleagues and i from both sides of the auto collaborated to put together a conceptual corporate tax reform proposal. cohen pleased to announce today that i will soon introduce pro- growth corporate tax reform that is revenue neutral, that lowers the rate to 25%, and that moves us to a territorial tax

system. i hope we will have co-sponsors from both sides of the aisle. as you know, with the exception of japan, the u.s. now has the highest corporate tax rate in the developed world. on average, 39.2% combined a federal and state rate. over the last 20 years, every one of the major foreign competitors we have has moved to cut rates. 20 years ago, the average among the developed countries was 39%. today it is 0.5%. -- 25%. the united states alone has fail to act to make its corporate tax system more competitive, and we are paying for it. paradoxically, despite our higher corporate tax rate, could weaken that -- collect less tax part of gdp than other countries. we have a hard time attracting new investment. this translates into fewer jobs created. some have criticized our current system as allowing a big

u.s. companies to pay little or no taxes. this base broadening reform we are talking about wants to ensure that all guns -- companies pay taxes through more efficient tax code that will create more jobs. american workers are paying the price in more ways than one. economic studies have shown that the burden of high corporate rate falls mostly on labor. cbo has reported that 7% of corporate tax freshen is borne by workers in the form of lower wages. it's no wonder that policy makers across the spectrum, the obama administration, chairman max baucus of the finance committee, the bowles-simpson committee, have also cited the need for us to overhaul our corporate tax code. chairman camp has begun a series process to do that in the ways and means committee. our proposal brings the rate down from 30% to 25% some, reducing inefficiencies,

preferences, and exemptions. we have an estimate from the joint tax committee showing you can do it on a deficit neutral basis. . the current tax code penalizes companies are reinvesting province that earn overseas back here at home. our tax code gives firms a towards between keeping those -- keeping it abroad are paying a steep tax bill if they choose to bring money home. our proposal would fix this by moving to a territorial tax system. this means it would tax income where it is generated, as the vast majority of our competitors do. we will empower u.s. corporations to compete and win customers in foreign markets across the world.

it was incredibly important to get the united states back to breaking down barriers. it is time to eliminate this tax driven, competitive disadvantage of our own making. corporate tax reform a central core of economic growth and job creation. 2005, the joint committee on taxation, which is known to be skeptical of dynamic scoring, reported reductions in corporate marginal rates have the greatest effect on long-term growth. by lowering rates and giving to territorial system, we can do something big and something permanent at a critical time we need to strengthen our economy and create more jobs. at a time when we also need help to reduce the deficit for growth revenues. entitlement modernization -- you have to address social

security, medicare, and medicaid. long-term policy in common, along with interest on the debt, is projected to squeeze out the cost of every other federal program within a couple of decades, leaving little or nothing for other government properties. take medicare. it is projected to spend over six trillion dollars during the next decade. there is a perception that all medicare benefits or refunded for payroll taxes, and therefore should not be reformed. an example of a typical two- income couple retiring today, coupled with income of $50,000 or more. they will have paid about $119,000 in lifetime medicare taxes, yet will receive $357,000 in medicare benefits. or $3 in benefits for every dollar collected. dollar collected.