where are they now? guest: that's a great question. it is striking to me that after toera -- after this era of the cold war space race, there has been real armthey felt one shoue johnson space center. the ultimate decision was to put one in the kennedy space center, one at the smithsonian here in washington, and they are sending the test shuttle, the enterprise, which had been -- it was one that was flown on the back of a 747 to show it was aerodynamic and it was released and landed but it never had an engine in it, never power to go into space. that was awarded to new york city, the intrepid museum on the hudson river. a museum built around the aircraft carrier that picked up

some of the mercury astronauts back in the 1960's. houston took great umbrage because they thought their connection to nacke so was -- but new york got one, democratic state, california got one, democratic state, florida, swing state, i think politics had a hand in it. host: thank you so much for joining us. we will have live coverage tonight of the results from florida on c-span from both the mitt romney for president and newt gingrich for president campaign headquarters. right now we want to get you to the beginning of the senate select committee for intelligence annual hearing on global threats to the united states. that is getting ready to start right now on c-span. thank you for joining us.

>> the senate select committee on intelligence meets today in open session for our annual worldwide that hearing. this hearing provide the intelligence community with an opportunity to present to the nation its views of the threats and challenges it -- we face. and for the committee to ask questions of our intelligence leaders in public. today is also an opportunity to take stock of what has happened in that last year and what we can expect for 2012. it before looking ahead, i want to congratulate the leaders of the intelligence community before us today and the tens of thousands of civilian and military pro -- intelligence professionals they represent. through their efforts, 2011 was a year of numerous major intelligence successes, including, first and foremost, the operation that located and

killed osama bin laden. this past year also saw the removal of top terrorist leaders, plotters, and recruiters, including anwar al- awlaki in the yemen, al qaeda's linchpin in pakistan, and numerous others, resulting in the disruption of specific terrorist plots and casting into disarray al-qaeda's senior leadership. closer to home, since our hearing last year, there were at least 20 individuals arrested in the united states on terrorism related charges in 17 different investigations. which stopped them from carrying out or assisting in attacks on the homeland. in the interest of time, i will put a list that describes each of these of arrests in the record.

arrests like these are the product of coordination between the fbi, other intelligence agencies, the department of homeland security and state and lawrence gold law enforcement units throughout the country. also, it in 2011, the drug enforcement administration, d e a, the federal bureau of investigation, fbi, and the central intelligence agency, the cia, and others, combined to identify and thwart an iranian plot to kill the saudi ambassador to the united states, a plot so unusual and amateurs -- amateurish that many doubted iran was responsible. let me state for the record, i have no such a doubt. finally, the intelligence community supported countless united states national security and foreign policy actions, including the war in afghanistan, the drawdown in

iraq, the nato-led mission in libya that removed a dictator muammar gaddafi, the implementation of sanctions on iran over its nuclear program, the interdictions of met -- weapons of mass destruction shipments, and many, many others. despite the successes, the threats to our nation remains sirius, and in many ways, more difficult to understand and even to address than in years past. the intelligence community's statement for the record, which is posted on the committee's web site, and will be summarized by director clapper, describes these threats at length. let me address just a few points. it terrorism -- we are all familiar with the continuing threat posed by al-qaeda affiliate's in yemen and somalia. aqap and al shabab, as well as al-qaeda in iraq, aqi, and all

three of which conspired to conduct attacks outside of their borders. i want to mention with special emphasis the threat posed by the al-qaeda affiliate in north africa, which calls itself al- qaeda in the lands of the islamic -- aqim. for the past few years, aqim has been almost an afterthought when discussing the terrorist threat. this may be about to change. a recent public records point out that aqim, which is traditionally operated in parts of algeria and mali, is well positioned to exploit the stability and pockets of extremism in libya and nigeria, and to create new safe havens. the reports also raised concerns about the tens of millions of dollars aqim has received from ransom payments for hostages and

other illicit activities. i believe the intelligence community needs to move now to be prepared to address this possible growing threat. then there is iran in north korea. while the overall terrorist threat may be down, the threat from the proliferation of weapons of mass destruction from iran and north korea is growing. on january 9, iran announced that it started encouraging uranium at one of its plant sites near the city of -- according to iaea report, iran is enriching uranium up to 20% both there and another site. i-80 a inspectors arrived in iran over the weekend -- iaea inspectors arrived in iran over the weekend and i believe they should have access to all the iranian nuclear facilities and i guess they make their findings

public on a regular basis of the world will clearly understand what is happening there. according to most time lines i heard, 2012 will be a critical year for convincing for preventing iran's development of a nuclear weapon. in north korea, there is now a 28-year-old dictator ruling over the country's cache of nuclear weapons and ballistic missiles, which should concern us deeply. recently this committee received an update from the intelligence community on the threat no. 3 opposes, and it was quite sobering. i will not go into details because they are classified. but i strongly believe this will need to be an area where the intelligence community continues to focus its resources and attention. i think we all know the threat from cyber. we all know the need to pass some legislation in that regard.

and we know that of the intrusions could be enormous -- take down a dam, take down our electric grid, and united states companies have cost untold billions of dollars annually. china and russia have both been named as aggressive and persistent cyber thieves. in afghanistan, the surge of u.s. forces that began in to thousand nine has produced meaningful gains. that said, i think we are all very concerned about what will happen in 2014 when we reduce our troop commitments and president karzai's term is up. frankly, i don't see a viable strategy for continuing the level of security and stability that we are building after 2014. and i am also concerned by what appears to be a disparity between the discussion of afghanistan in director

clapper's statement for the record and the bleaker descriptions in the december 2011 nie. the director's statement notes modest improvements in the the challenges that remain. while i am not able to describe the nie, as it remains a classified document, news reports described it as a sobering and dire. those words in quotes. and includes phrases like "mired and stalemate." i would like to ask witnesses how they assess how stable afghanistan will be in 2012 as well as in 2014 and beyond. i also want to know to that last week i met with ahmad osmani, the afghan minister of counter narcotics and i was very impressed. i believe he is making good

progress in afghanistan and we should be supportive of his efforts to replicate the helmand food zone in five other provinces to let farmers grow alternative crops instead of popping. of course, pakistan remains a huge problem. and i would very much appreciate your views on pakistan's willingness to be a partner in our efforts against terrorism and in afghanistan, as well as whether the civilian government can survive in light of other political controversies. there are a couple of things i want to add -- and i am not sure this is a good place, but i am going to do it anyway. in this morning's edition of "

the los angeles times," there was an article asserting that the cia director david petreaus has been inaccessible and guarded in his interactions with congress, and with the intelligence committees in particular, since being sworn in. as far as i am concerned, nothing could be farther from the truth. and i believe the ranking member, the vice-chairman, would agree. i spoke to the reporter last friday and made very clear to him that this has not been my experience, or to the best of my knowledge, the members of this committee. if it had been, i would have heard. director petreaus has put -- appeared before us every month since becoming director and the vice-chairman and i have had several phone calls and other meetings with him. he has upheld his obligation to keep the committee fully and currently informed, and i regret that some people felt the need to engage in an anonymous complaints.

i would also like to say that once again in this committee has been put in a difficult position last five matters when the various parts of the executive branch may be doing somewhat the opposite. i ask members to be careful in their questions and statements and to remember that public discussion of some intelligence programs and assets can leave it to them being compromised. on the particular issue of drone strikes, i will only say that i was cleared to say in our joint hearing with the house intelligence committee last september, and there is no issue does received more attention and oversight from this, it came the and the united states counter-terrorism efforts going on along the afghanistan- pakistan border. these efforts are extremely precise and carefully executed

and are the most effective tools we have. non-combatants casualties are kept to an absolute minimum. so now, if i may, mr. vice- chairman, i want you to know it has been a great pleasure for me to work with you. i also wants the public to know that to gather from your side and our side have been able to pass three intelligence authorization bills by unanimous consent in both houses. and it has just been a great pleasure for me to work with you. and if you have some comments, if you would make them now, and then i will introduce a the speakers. >> thank you, madame chair. let me just echo the same sentiment to you with respect to our work and a relationship. it has been pretty seamless, both at a personal level at the top as well as with our staff. and i thank you for the way that you have integrated meat into the vice-chairman shifts over

this past year. and i look forward to continue to work in a very close with you. and i also like your california wine. [laughter] and i joined the chairwoman in welcoming our guest today. and this is certainly the brain trust of the intelligence community. there is an awful lot of experience here, also an awful lot of talents on the table, but i will comment more on the brave men and women who work for you, the great job they are doing. the committee holds almost all of our meetings in closed sessions of this annual for that hearing is one of the only opportunities we have to discuss and public the threats it is also one of the few opportunities we do get to extend our public thanks to the men and women of the intelligence community. because of the hard work from the fall to work for each of you, 2011 was a great year for the intelligence community, a year when we finally saw the

realization of a decade of work to ensure that osama bin laden and anwar al-awlaki will never again threaten this nation. i am glad to say that we will no longer have an annual threat hearing when someone asks the question, where is osama bin laden? last year's successes were no small achievement. a result of from transformation and improvement in every agency. in particular, i am impressed by the work being done by cia's counterterrorism operators and analysts, working together to take down terrorists and their network. we have heard from these officers in countless briefings that core al qaeda is essentially on the ropes, as long as we continue sustains cct pressure on the group. a director clapper, this exact sentiment is expressed in your written statement for the record for today's hearing. i know i am not alone on this panel and agreeing we must continue whatever pressure it

takes to degrade or al qaeda once and for all. as we are seeing in iraq, gains that took a decade to achieve can erode quickly if we do not do what it takes to protect them. i also hope we are learning some of the lessons from iraq. i was dismayed by the administration that a decision to hand over custody of hezbollah are restive -- are operative to iraq last year. it is too late now to prevent what i believe will result in the altman release of a terrorist who killed five american soldiers in iraq. but it is not too late to make sure the same thing does not happen with the hundreds of terrorists still in detention in afghanistan. i hope all witnesses can discuss the range of likely threats posed by these detainees and the role in the community in providing intelligence and support and planning for any handover of detention facilities to afghans. i understand this is going to be

a challenge because the administration still lacks a long-term detention policy. but we just cannot keep letting dangerous detainees go free. this brings me to my last point -- press reports have outlined the administration's's plans to trade prisoners detained at guantanamo bay to the taliban as a confidence-building measure. it appears from these reports that in exchange for transferring detainees who have been determined to be too dangerous to transfer by the administration's own guantanamo review task force, we get little to nothing in return. apparently the taliban will not have to stop fighting our troops and will not even have to stop bombing them with i e d's. i have also heard nothing from a ic that suggest the assessments of these threat posed by the detainees have changed. i want to state publicly as strong as i can that we should

not transferred these detainees from guantanamo. moreover, i believe the community should be classified intelligence assessments of these detainees so we can have a full and open debate about the wisdom of this transfer before it takes place. let me conclude with the two other comments. first of all, with respect to the "l.a. times" article, madam chair, i did not see it in this morning but i want to again state in an unequivocal fashion that director petreaus has done an outstanding job and service to our country in many capacities as his service in the military would indicate. and during that time he has been the director of the cia -- you are exactly right, he has stayed in constant communication with the two of us, and i know with our colleagues on the house side, has been readily available to come to the committee in both a formal and informal basis, as

well as being available at any time for us to have a conversation with. and i am surprised there would be any question about that. as we all know, we have the utmost confidence in his leadership, along with the leadership of the entire community. and there has been, again, that seamless transition from director panetta to director petreaus. and we are very confident of his leadership. one other issue that i want to mention -- following the event of cents september 11, as a member of the house select committee on -- congresswoman jane harman and i shared a subcommittee on the intel committee that did a review of the facts leading up to the events of september 11.

and we issued the first detailed report on the deficiencies within the intelligence community that led up to september 11. and we were very critical of the community in one respect particularly. and that was the lack of the sharing of information between our various agencies within the community. director mueller, you and i have had extensive conversations as you have been here longer than any of the rest of the members here about this issue, and i just want to say that over the past decade, the stovepipes that we leave it -- alluded to in that report have continued to fall. and i would have to say that today, without question, while we still have improvements to be made, that the sharing of information between all of our agencies is that a superior love all -- level. mr. olson, i had the privilege,

as you know, visiting with your folks at -- recently, and it was impressive not only seeing the improvement from the technology standpoint but just to see every member of the intelligence community in sitting around the table virtually and discussing and real-time the issues that face the community from a ct standpoint is very impressive. and i commend all of you for the great work you have done. it has not been easy. and sometimes i know it is very difficult to put aside some of the previous relationships that might have existed. but, boy, you have ever done a good job breaking down the fire walls and really engaging with every member of the intelligence community to ensure that we disrupt and interrupt terrorist activity around the world.

directed toward america, americans, as well as other countries and allies around the world. i commend you from that respect. thank you for being here today and i look forward to your testimony. >> thank you very much, mr. vice-chairman. now what would like to introduce the distinguished panel. the director of national intelligence, james clapper, who will deliver an opening statement on behalf of the entire intelligence community. director of the central intelligence agency, david petreaus, director of the defense intelligence agency, general ronald burgess, director of the federal bureau of investigation, robert mueller, director of the national counterterrorism center, mattie olsen, assistant secretary of state for intelligence and research, a look goldberg, and undersecretary for intelligence and analysis at the department, and security, caryn wagner. thank you all very much for being here.

we will now take your statement, director chambliss, and then go into a period of questions. what i say? do what did i say? director clapper. and then we will go into time and around based on the early bird rule. director clapper, welcome. >> i take it as a compliment. thank you. >> thank you, chairman of feinstein, vice chairman chambliss, and distinguished members of the committee for inviting me to present the 2012 world wide assessment. these remarks reflect the collective in sides of the extraordinary men and women of the united states intelligence committee, whom it is our privilege and honor to lead. on their behalf, i would thank you both for your acknowledgements and recognition of the great work these men and women do all over the world, day in and out. and in many cases, at some

hazard. i will not attempt to cover the full scope of worldwide threats in these brief remarks. so, i would like to highlight just some of the issues we identified for the coming year. never has there been in my almost 49 your career in intelligence, a more complex and independent a ray of challenges than what we face today. capabilities, technologies, know how, communications, and environmental foresail -- forces are not confined by borders and can trigger transnational disruptions with astonishing speed, as we have seen. never before has the intelligence community has been called upon to amass such complexities of such a resource constrained environment. we are rising to the challenge by continuing to integrate the intelligence communities, taking advantage of new technologies come implementing new efficiencies, and as always, simply working hard. but candidly, maintaining the

world's premier intelligence and the prize in the face of strained budgets will be difficult. we will be accessing a managing risk more the we have had to do in the last decade. we begin as we did last year with the global issues of terrorism and proliferation. the intelligence community sees the next two to three years as a critical transition phase for the terrorist threat, particularly from al-qaeda and like-minded groups. with osama bin laden's death, the global jihad is movement lost its most iconic and inspirational leader. the new al-qaeda commander is less charismatic than the death and capture a prominent al qaeda figures has shrunk the top leadership later. however, even with the degraded capabilities and focus on smaller, simpler plot, al-qaeda remains a threat. as long as we sustained pressure on it, we judge that core al- qaeda will be of largely symbolic importance to the global jihad this movement.

but regional affiliate's, as the ones you mentioned, and to a lesser extent, small cells and individuals, will drive the global jihad agenda. proliferation, that is, efforts to develop, acquire, a spread of weapons of mass destruction, is also a major global strategic threat. among asian states, iran's technical advances, and iranian richmond, friends and -- strengthens our assessment that iran can produce enough -- if the local leaders, specifically if the supreme leader himself, chooses to do so. no. 3 of that export of ballistic missiles and associated materials to several countries, including iran and syria, show the reach of the north's proliferation of attendees. we do not expect. i would note that in this year's statement for the record we elevated our discussion of cyber

threats to follow terrorism and proliferation. the cyber threat is one of the most challenging ones we face, as you alluded. we foresee a cyber environment in which emerging technologies are developed and implemented before secure the responses can be put in place. among state actors we are particularly concerned about entities within china and russia conducting intrusions in the u.s. computer networks and stealing u.s. data. the growing role non-state actors are playing in cyberspace is a great example of the easy access to potentially disruptive and even lethal technology and know-how by such groups. two of our greatest strategic cyber challenges are, first, definitive real-time execution of cyber attacks as knowing who carried out the attacks and where these perpetrators are located. and second, managing the enormous vulnerability is within the supply chain for u.s. networks.

briefly looking geographically around the world and afghanistan during the past year, the taliban lost some ground, but that was mainly in places where the international security assistance forces were concentrated. the taliban senior leaders continue to enjoy safe haven in pakistan. partner withs to afghan national security forces are encouraging but corruption and challenges continue to threaten the force's operational effectiveness. most provinces have established basic government structuresisaf and support of afghanistan's neighbors, notably in the together pakistan, will remain essential to sustain the gains that have been achieved. and although there is broad international political support for the afghan government, there are doubts in many capitals, particularly in europe, on how to fund afghanistan initiatives after 2014. in iraq, violence and sporadic

high-profile attacks continue. prime minister, lee ki's recent aggressive moves against the sunni political leaders have heightened the tensions -- prime aliki's recent aggressive moves against the sunni local leaders have heightened the tensions. those pushing for change for confronting ruling elites, lack of experience with democracy, stalled economic development, military and security force resistance and regional power initiatives. these are fluid political environment that offer openings for extremist to participate in political life. states where authoritarian leaders have been toppled like tunisia, egypt, and libya, have to reconstruct a political system through complex negotiations among competing factions. in syria, regime intransigence

and social division prolonging internal struggles and could potentially turn domestic upheavals and to regional crises. in yemen, although political transition is underway, the security situation continues to be marred by violence and fragmentation of the country is a real possibility. as the ancient roman historian once observed, the best day after a bad emperor is the first. after that, i would add, things get very problematic. the intelligence community is also paying close attention to developments across the african continent, throughout the western hemisphere, europe, and across asia. few issues are self-contained. virtually every region has a bearing on concerns -- terrorism, proliferation, cybersecurity, and instability. throughout the globe, whenever their environmental stresses on water and food and natural resources as well as health threats, economic crises and organized crime, we see ripple

of that -- affects around the world and impact on u.s. interest. it is important to remind this distinguished body and the american people that in all of our work, the intelligence committee strives to exemplify american values. would carry out our missions with respect will lot and protection of civil liberties and privacy. that flood leads me to a crucial recommendation on our highest legislative priority this year and requires the support of this committee and both houses of congress. the faa is set to expire. title 7 allows fisa to collect information on international terrorists and other important targets overseas. the law authorizes surveillance of non-cubans as persons overseas that may have connection to an information about threats such as terrorism and proliferation.

it also provides for cumber hands of oversight by all three branches of government to protect the privacy and civil liberties of u.s. persons. the department of justice and my office conduct extensive oversight reviews of these activities, and we report to congress on implementation and compliance twice a year. intelligence collection produces crucial intelligence that is vital to protect the nation against international terrorism and other threats. considering whether there are changes that could be made to improve the law, but our first priority is reauthorization of these authorities in our current form. we look forward to working with you to ensure the speedy enactment of authorization reauthorized in the act so there is no interruption in our ability to use these authorities to protect the american people. i will end of this brief statement where i began. the fiscal environment we face as a nation and in our intelligence community will prove -- require careful identification and management of the challenges the ic focuses on

and the risk we must mutually assume. with that, i thank you and members of this committee for your dedication to the security of our nation, your support for our men and women for the intelligence community and for your attention today. my colleagues and i look forward to your questions in our discussions. >> thank you very much, director clapper. we will begin with 10 minutes and early bird rule. as a mentioned in my opening statement, i think 2012 is going to be a critical year for convincing or preventing iran from developing a nuclear weapon. times"ay's "the new york magazine and israeli journalist wrote, and i quote -- "after speaking with many senior israeli leaders and chief said the military and intelligence, i have come to believe that israel will indeed strike iran in 2012."

how do you assess that likelihood and the response from iran if that happens that might be forthcoming? >> our hope is that the sanctions, particularly those who have been recently implemented will have the effect of producing the change in iranian policy toward their apparent pursuit of a nuclear capability. obviously this is a very sensitive issue right now. we are doing a lot with the israelis, working a lot with them. of course, for them, as they tear -- characterize it, and existential threat. but this is an area of where -- we are very concerned about and

would be pleased, because of the sensitivities, would be pleased to discuss in greater detail in closed session. >> the vice-chairman and i just met this past week with the director of the mossad, and that was a classified meeting, we do know that. let me ask this of you, director petreaus. i think the world has to know what is happening again one of the reasons i believe the iaea, when they go win, really must make transparent and public what they find their, what they see. so that we know for sure what is happening. i think the world is entitled to that. particularly when we have a situation where one country use this as an existential threat.

they believe it is their survival. they are determined to lot to -- not to let it happen. to really get a correct picture of what is happening i think is important. do you have a view on this? then i do, madam chairman. if i could come up front, let me echo director clapper's remarks about the thinking you and the vice-chairman for your kind words about the members of the intelligence committee on the accomplishments this past year, some of which obviously were of enormous significance, and thank you both of you as well on your comments for the agency's efforts to keep the committee currently and fully brief -- in form. we work very hard to be accessible to you. i have personally, my deputy and staff -- i think the facts reflect that. and we have worked hard also to shorten the time frame from event to notification when it

comes to congressional modifications, and was also increased those over the last five months as well. i met with the head of mossad when he was here. part of an ongoing dialogue, and it also included conversations with prime minister netanyahu administer a who brought -- barak. it is important to note, as the article did in "the new york times" the growing concerns israel has and countries in the region have, and indeed, all of us have come about the continued activities by iran along a path that could come if the decision is made, as director clapper noted in his opening statement, the decision is made to pursue the construction of a nuclear device. israel does see this possibility as an existential threat.

it is important to keep that perspective in mind as indeed analysis is carried out. inspectors are in iran right now. i believe the -- report was a very accurate reflection of reality, the situation on the ground. it is the authoritative document when it comes to informing the public, all the countries in the world, of the situation there. iran is supposedly reportedly trying to be more open, perhaps trying to reassure countries as it feels be reassured -- the bites of the sanctions, the reduction in the purchase of oil from some key customers. i look forward, as do others obviously, seeing what the public report will provide this

time, believing, again, that it will be, again, the authoritative open source documents on the program iran is pursuing -- pursuing in the nuclear field. >> thank you very much, general petraeus. to me, pakistan is a very puzzling country. we know that thousands of pakistanis have been killed by terrorists and we suspect that what pakistan it is doing is trying to essentially, used but the macular, what both sides of the street. i think i and most of us believe that having a positive relationship with pakistan as a nuclear power, a significant nuclear power, is very important. the question i have is how do you assess this relationship, which certainly had its low in

december, and may or may not be approving? how you assess it at this time? >> let me start, and i will ask petreaus to add in. clearly, as you alluded to, chairman feinstein, this is a challenging relationship, but it is an important one for exactly the reason that you mentioned, which is pakistan is a nuclear power. pakistan and our interests are not always congruence. their existential threat continues to beat india. they have also paid a huge price because of the militants they have had in their country and suffered literally thousands of casualties in that context. so, sometimes our interests converge and sometimes they

differ. but as i would characterize the relationship, it is crucial that we have one and have a positive relationship, dimengo we have gone through some trying times. >> relations is very important but the relationship right now is quite strained. the most recent cause of that, of course, is the november 26 border incident between isaf and pakistani forces. the pakistani parliament, there was a committee in that was determining recommendations to make for the government for the way for it in the relationship between the united states and pakistan. i think there is an awareness as well there that this is a critically important relationship, that there are areas of considerable needs will concern, mutual objectives, while there are those, as director clapper noted, ones in which they are -- there are diverging interests.

the activities right now are also complicated, though, because of the difficulties in the domestic context, where there is a bit of tension between the supreme court, between the army chief nd isi -- andy isi director and the president and prime minister. it may be coming in little bit. there have been signs in recent days. i should note the former ambassador to the united states was allowed to leave and he did arrive in the u.k. in -- uae this morning. the situation, as are british colleagues might say, is fraught, and it will take some time and it will take some diplomacy, engagement, and so forth, to move forward in a relationship that is important to both countries. i should note that in a general comment i believe the relationship between the

intelligence services is generally still productive. there is good communication going back and forth, and there have been some imports and, again, pursuit of some important mutual objectives between the two services. >> thank you very much. mr. vice-chairman? >> thank you, madame chair. director clapper, press reports -- and emphasize that -- indicate the united states is prepared to trade five taliban members currently detained at guantanamo as a confidence- building measure in negotiations with the taliban. now, all five detainees named by the press were determined by the administration to be, and i quote, "too dangerous to transfer" and held as enemy combatants. as part of the task force, did the intelligence community concur in the determination is that these five detainees were too dangerous to transfer and should be held as an income that is? -- enemy combatants?

>> i believe the original assessments, which the director and matthew olsen was involved, that was the case. i should say, though, that this proposed so-called trade has actually not been decided yet. there is continued consultation with the congress. in fact, there will be a session this afternoon with the senate leadership on this issue. of course, we are certainly mindful of provisions in the national -- authorization act and requirement for certifications, and i believe in a hurry with that is continued consultation with congress of whether or not this will go forward. that said, i think the history has been in almost every case where we have had hostilities that at some point in time,

there are negotiations. i don't think anyone in the administration harbors any illusions about the potential here. and of course, part and parcel of such a decision, if it were finally made, would be the actual determination of where these detainees might go and the conditions in which they would be controlled or surveillance. >> olson stated he did have the guantanamo review task force that made the determination that these five purported, named individuals, were too dangerous to transfer. has -- have you changed your view with respect to these detainees? >> vice-chairman, i have not been involved in any reviews for recently of these detainees. as you point out, they were subject to the review we conducted in 2009 that determined that, i believe those were among the 48 who were deemed too dangerous to release

and could not be prosecuted. but i have done no further review in my current capacity. but what you are saying is the administration has not asked you for an update of your opinion relative to these individuals? >> that is correct. >> sir, i need to inject here, though, in the interagency deliberations, certainly the ic has been asked and we have provided assessments of the five that are in question. it has been part of the discussion. >> has there been a change by the community of the categorizing of these individuals as too dangerous to transfer? >> no, sir, i did not believe -- the repatriation to their country of origin. this is a little different, this is a different condition,

though, the terms of the potential for negotiating some form of confidence-building measure with the taliban. and this is very, very preliminary, and again, no final decision has been made. >> let me ask you and the director petreaus, who are very familiar with this. are you comfortable with transferring these individuals out of guantanamo? >> for me, the key would be where they would go, the intermediate country where they might be detained and the degree to which they would be surveiled. that would be the key determinant for me. >> director petreaus? >> very similar, vice-chairman. in fact, our analysts did provide assessments of the risks presented by various scenarios by which they could be sent somewhere -- knocked back to afghanistan or pakistan

-- and based on the paris mitigating measures to believe -- so that they cannot be returned to militant activity. >> director clapper, your statement from the record underscores that the taliban remain resilience and capable of challenging u.s. international goals in afghanistan. senior leaders continue to enjoy safe haven in pakistan, providing strategic direction to the insurgency. of the community assess the taliban reconciliation is likely to have a great deal of success, considering the group is resilience and maintains the ability to challenge the united states -- continues to enjoy a sanctuary in pakistan and knows the time lines under which we plan to withdraw u.s. forces from afghanistan.

>> our assessment is pretty much as you stated it, sir. the taliban remains a resilience, determined adversary. that said, again, i repeat that i did not think anybody harbors any illusions about it, but i think the position is to at least explore the potential for negotiating with them as a part of this overall resolution of the situation in afghanistan. then i will be careful how i ask this and hopefully do >> i will be careful about how i ask this -- the safe havens that do exist have been pretty obvious and well-documented publicly.

how is our relationship with pakistan at this point in time allowing us to address these safe-haven and the cross border activities taking place there from the taliban standpoint? >> this is obviously part of the dialogue, the engagement that director petreaus and i have spoken of. it clearly this is a point of discussion with the pakistanis and they are certainly aware of our concerns, but this is a case historically sometimes -- a good example where mutual interest in not always converge. >> director petreaus, anything you want to add? >> the record has been obviously mixed. there has been progress in the extremist elements, in the border regions and reticular. that would include obviously al-

qaeda. when you get the no. 1, 2, 3 removed from the picture in a single year, needless to say it is a pretty significant accomplishment. but it is beyond that. it is important to note back in october of this past year, four out of the top 20 in a single week were either captured or killed. and again, some of this has been undertaken together. there has been progress also by the pakistani partners with the elements that threaten their existence. in little over two and a half years ago, it looked as if the taliban pakistani were going to been to me to watch right out of swat valley and into islamabad. they reversed that. they fought hard and have taken casualties, and in so doing they have gone after some of the other elements in the federally administered tribal areas. in the other -- on the other hand, there has been insufficient pressure on the

network and some of the other elements, the allies of al- qaeda, the imu and some others. the needless to say, the afghan taliban has not been pressured sufficiently in the sanctuaries that it enjoys in the baluchistan and other areas as well. >> director burgess, you have been involved in the issue of cross border activity. anything you want to add? >> no, server and i think, in fact, director petreaus laid the line out very well the way things are progressing. >> director mueller, a month ago the president signed the defense authorization act and issued a signing statement in which he outlined reservations about certain provisions. regarding section 10-22 mandating military detention for a limited type of non-u.s.

citizen servicer, the president said he would use is waiver authority for entire categories of cases and would design implementation procedures to provide maximum flexibility and clarity to are counting -- counterterrorism professionals. are you aware of any categories of terrorists and with the president intends to use his waiver authority, and which ones, and how well -- art intelligence and law enforcement agencies implementing section 10-22? >> let me start by saying at the outset we had reservations in two areas. one, our continued authority to investigate terrorist cases -- and that was resolved by the legislation. the other part was what happens at the time of the arrest in the united states, and the statute provides for the administration to develop a set of procedures that would be applicable to that particular situation. without getting into details,

the justice department and white house, they are in the process of drafting the procedures. it may be premature to talk about some of the specifics because it was -- it is in the drafting stages. but i am hoping as we go through and develop the procedures, the remaining concerns we have about what happens at the time of arrest will be resolved. >> thank you for that. and i would just say that we had extensive conversations between doj, the white house, and congress on this issue, as we went through the drafting, and that would hold you would continue the dialogue with us regarding the regulations and how they are ultimately implemented. >> thank you very much, mr. vice-chairman. senator wyden? >> let me commend you and the vice chair of the way in which you put the focus in this committee on a bipartisan way, and i commend you for it. and all the witnesses in the table, i thank you for your

outstanding service. it has been an extraordinary year. let me start with you, if i might, director clapper, with respect to iran. i have come to believe that iran's leaders are not going to give up their push for nuclear weapons capability unless they believe it is going to cost them their hold on power. do you share that assessment? >> senator wyden, that comports with the intelligence community assessments that if the decision is made to press on with the nuclear weapon and there are certain things they have not done yet to eventuate that, it will be based on cost- benefit analysis, starting with the supreme leader's world view and the extent to which he thinks it would benefit the state of iran and conversely not

benefit. so, that is i think precisely where he is and it will be done on a cost-benefit basis, and we do not believe he has made that decision yet. >> what would convince them, in your view, that their hold on power is being undermined by their nuclear efforts? >> well, i think the rest of the population, because of the extremis the country of iran is a current -- in caring, if you look at the plunging value of the rial and you look at the two indicators that i think are important -- the extremely high and unemployment rate in iran -- this, i think, could give rise to resentment and discontent among the

populace. not to say there has not been other examples where in the region. >> now, on the -- another sector, mr. director, you referenced a recent report that describes how foreign spies, particularly those in china and russia, are stealing our economic secrets. can you give us some sense of what types of secrets these entities in china and russia are most interested in stealing? >> the report referred to is the national counter the report called out russia and china, particularly china, on their wholesale plundering, if you will, of intellectual property. they seem most interested in our

technology. if they can save themselves the time and expense of doing research and development on their own and stealing from us, the works to their benefit. to the extent they can get to unprotected industry networks, which they have done -- >> which industry networks are most vulnerable? >> i think it is across the board and much of it is driven by what they can get access to. the more high tech for them, the better. this is a serious problem. >> let me move to a third topic. in your view, could the peaceful revolution in the arab world have happened if repressive governments in the region had been successful in censoring twitter, facebook, internet

search engines, and electronic the occasions? >> i'm not sure the success of these upheavals were completely dependent on social media. i think the basic problems in this region, particularly repression of economic and political freedoms would have bubbled up anyway. i think a social media helped foment and amplify that resentment when people understood it was a large collective. i think social media facilitated it, but i don't think without it it would not have happened. some of the governments reacted to that by their attempts to repress such communications.

>> i don't know how word would have gotten out. if you look, for example, at the way phones are tapped in the region, i don't think the word would have gotten out and that's why i'm going to ask you -- there is a discussion now in congress about whether or not internet search engines should be involved in a censorship approach in terms of dealing with intellectual property specifically. are you concerned that this could be a precedent that could make it harder for the state department to go forward with secretary clinton's internet freedom initiative. i have come to feel at a minimum it would be cited as a precedent -- if it decided here, we could

have oppressive government run the world says look at what the united states is doing -- they're supposed to be the leader of freedom and we are following that. is this a concern? >> we are concerned with many conflicting strange when policies -- conflicting strains when policies is being discussed about the internet. with the distribution of intent -- information as well as how to protect private property. the secretary of state has made it very clear that internet freedom is a very important principle as we approach all these issues. when we consider whatever precedent is being set, whatever legislation is being considered, that is the primary interest we need to consider. we also need to consider, and

the head ministration has spoken about on -- spoken about online piracy and how to deal with this issue and how this can be done in a way that protects those freedoms but also that not change is the architecture of the internet. >> let me wrapup -- this is a question about the use of force given by the state department lawyer. it's a matter of public record that the intelligence community takes direct action against terrorists and the sometimes involves the use of lethal force. a speech was given aligning our policy with regards to the

attention and use of unmanned drones. he noted under u.s. law the use of force against terrorist groups is permitted, while international law, it is permitted by america's right to self-defense. you know that i share the chair's view, but i have not been able to get an answer to this specific question whether or not that speech contained unstated exceptions for intelligence agencies. >> with respect to counter terrorism, it does not. it come -- it complies to all components of the government, be it military or non-military. >> are there other exceptions

other than counter terrorist activities? >> i believe the speech dealt with counter-terrorism. >> you believe the text of the speech applies to all agencies, the intelligence community, his entire speech applies to all the intelligence committee -- intelligence community? >> yes. >> good morning and thanks to all the important work that you do. let me start by commenting on the topic senator chambliss mentioned which is the detainee provisions. i want to thank you for waiting in for sharing with the arms services committee and their concerns about the detainee

provisions. we had a spirited debate on the floor of the senate for a number of days. senator mccain was very involved and i think was a valuable and worthwhile debate. i did was the set at its best. i'm hopeful the compromise is put into the final product will work and i'm going to continue to monitor what is happening. i think the debate as to whether we ought to be prosecuting justice through the military is an important one. senator feinstein and others have worked to introduce the due process guarantee act and at the heart of our concerns and the center of our missions is to ensure americans will not be indefinitely detained. i want to thank everybody for the engagement and passion they brought to that debate. if i could focus on a particular

topic -- commercial industry. is glad to see your comments last week that you are a big believer in commercial imagery and has the benefit of being unclassified which is great for sharing among war fighters at all levels and coalition partners overseas. in light of those comments, i am concerned about what i'm hearing about the reductions in fiscal year 13 for the enhanced view program. i had and the white house requested a review for commercial industry consistent with a new defense strategy and this review may indicate a need for a shift away from the national technical means given that commercial providers can collect resolutions that meet all the military's needs. do you believe fiscal year 13 enhanced view budget will meet

the war fighters need for unclassified imagery? how will it affect the safety of our war fighters and the capacity to work with our allies? >> i am a huge believer in commercial imagery going back to when i served as director of nema anti the immediate aftermath of 9/11. continues to be of great value for the reasons you cited. it is unclassified and can be used in disaster relief and the like. that said, we are looking at some pretty steep budget cuts across the board in the intelligence community. commercial imagery will be considered in that broader look at where we have to take reductions.

to single out commercial imagery as the only one. not only can we satisfy the military requirements but the non-military requirements as well for commercial imagery that the contemplated level of funding. i think it is incumbent on the industry to come up with some kind of gimmick -- innovations and practices that will help us as we look at a more constrained fiscal environment. >> many participants on the panel depend on this kind of imagery. if you cut too far, you reduce the reach of the commercial sector and may lose the skill sets and experts who played an important role and create downward spiral that might be hard to reverse it goes too far.

>> this is a concern we have across the board, not just in the commercial imagery area but as we make reductions in intelligence, it's going to have an impact on the industrial base across the board. >> let me turn to the middle east and direct this to general petraeus and other members of the panel. syria -- do you predict a fall of the regime is inevitable at this point or is it still in question? if the regime should fall, how do you suggest a post-assad serial what looked? how would hezbollah be affected? >> i believe it's a question of time before he falls. but it could be a long time, given the protracted -- two

factors here -- the protraction of these demonstrations, the opposition continues to be fragmented, but i do not see how he can sustain his rule of syria. post-assad would be the issue. there is a question about who would emerge in a post-assad situation. as far as iran and hezbollah, what has transpired in syria is of great concern to them. it is why they are both expanding great effort in terms of resources and advice to prop up the regime. >> i generally subscribe to that

as well. the opposition is showing a considerable amount of resilience and, indeed, is carrying out an increasing level of violence. the fact is damascus and to previous relatively safe cities are seeing violence in the suburbs. the initiation of offensive operations by the assad regime has met very stiff resistance and i think it has shown how substantial the opposition to the regime is and how it is in fact growing and increasing areas are becoming beyond the reach of the security forces. post-assad, one would assume there would be leadership from the sunni majority of the

country as opposed to the minority that is the curt -- is the core of the assad regime, but that begs the question of what happens to that minorities. clearly, the loss of syria as a logistics' platform, a line of communication into lebanon to support hezbollah would be a substantial setback for iran in its efforts to use hezbollah as a proxy. that is why the revolutionary guards is so is engaged in trying to prop up assad right now. >> let me turn to another country and in that region. you know better than anyone how

much we have invested in iraq. treasure, reputation, and of course the lives of americans from all over our country. if you were to advise the policymakers sitting here in the senate and congress at large, what would you suggest we should be doing as iraq struggles to find a democratic path forward? >> i think essentially continuing what we are in fact doing, which is to engage iraqi counterparts at various levels, all the way from the top through the diplomatic communities, intelligence and to -- intelligence services to work hard to help them to resolve the ongoing political crisis. there is no other word for it, though it has perhaps diminished somewhat and appears in the last

48 hours that the sunni block is going to return to the government, albeit with some hedging of bets. of supporting them as they grapple with security challenges that have emerged over the course of the past two months or so where al qaeda in iraq has been a bit more active than it was for quite some time, helping them to develop further their security forces and intelligence services to combat a mutual enemy. we do not want to see the resurgence or read generation of al qaeda in iraq. in the's very much interest of both countries and the of world to work together to combat. >> thank you, madame chair.

>> thank you, and thank you for your contributions to our country. i want to follow up on a couple of issues with respect to iran. obviously, it's deeply troubling in terms of the direction they're taking. we predicate a lot on the report was issued by the iaea and i note general petraeus indicated an authoritative document. the list on page 8 the number of activities relevant to the number of procuring material for a nuclear device, and declared pathways, nuclear weapon documentation, working on the head out -- development of indigenous design and testing of components. i gather that we agree that iran has not made a decision to weapon is at this point.

do you agree? >> yes, but they're moving on that path. we do not believe they have actually made the decision to go ahead with a nuclear weapon. >> how will we decide they have integrated all of these components in a decision to weapon is it? at which point? what will be the red line? >> a key indicator will be, without going in to sensitive areas, a clear indicator would be the enrichment of uranium to a 90% level. that would be a good indicator of their seriousness. there are some other things they would need to do, which i would rather not go into in our open session. apart from whatever we could

glean from across the community on an actual decision to go forward. >> do you care to answer? >> i fully subscribe to that. the various components, enrichment, wept as asian and delivery -- weapon is asian and delivery -- weaponization and delivery i think would be telltale indicators. there is no commercial use for that. arguably -- factually the amount of 20% enriched uranium exceeds any requirements for the pteron research reactor for the foreseeable future. there are already concerned just with that. >> the iaea report said much of

the work is dispersed among a number of locations. with inspectors being there for how many ever days, would they be able to discern or detect their ability to what a nice? what we hope to glean from that? >> the role of the iaea is extremely important here. we do have to bear in mind there are a signatory to the non- proliferation treaty and the facilities they are operating are safeguarded, meaning they are required to be inspected by the iaea. their presence there and the fact they -- there extended stay there, their intent to hopefully resolve these ambiguities about iran's program and its intent. what they have to say is

crucial and their continued access is crucial. >> there is continuous monitoring by other means that they have as well. >> iran has issued various threats with the fact on the straits of hormuz. can you give us some analysis of the activities there and what we are doing? what capabilities does iran have four dozen have with respect to having potential to close the straits or effective in any way in regard to transit? >> what i have said in open discussions -- it would have to be taken to closed session. the iranians have the capability we assess to temporarily close the straits of hormuz.

the concern becomes defined temporarily and how long that would go, but they clearly have that capability. if we go any further, i would prefer to go to closed session. >> do we have a defined time in that respect? on temporary? >> i prefer to go to closed session. >> thank you. director clapper, getting back to the issue of pakistan, a senior administration official was quoted recently saying they're developing a normal in terms of a relationship with pakistan. so much of what we're doing in afghanistan is predicated on effectively addressing and rooting out the safe havens. that is the predicate and template for the president's policy he indicated in june and obviously we need to have that

strong relationship with pakistan. how does that strategy going forward -- how was affected by what is developing in pakistan -- there is a review of our relationship under way with the pakistan government parliament. second, i issuing threats about imposing taxes on the transit of our materials from their ports and roads to afghanistan. this is deeply troubling and i don't know if it's a normal, but how does that affect our situation in afghanistan and how is it that changes the dynamic in afghanistan? >> this obviously has a profound impact on afghanistan and prospects for successful resolution there. that is why -- it's a way of

emphasizing the importance of a positive relationship with the pakistanis -- this is getting outside of the policy realm of intelligent, but it's inclusive our dialogue to proceed and we find a way of converging on that issue as well, particularly with respect to safe havens. pakistanis are very proud people and they felt their sovereignty was a salted in the raid and the regrettable incident in november with the killing of the pakistani troops on the border. that has heightened that and cause them to collectively reassess their relationship. but in the end, i believe they

realize they need a positive partnership with us and hopefully we will work through these in such a way that we minimize the impact of these safe havens. >> and general petraeus, you are in an interesting position being the architect of that counterinsurgency and being the director of the central intelligence agency. since you have assumed this position, do you think anything differently with afghanistan in regards to our strategy? >> i cannot say that i do. >> even with some of the reports that have been issued regarding the assessment of afghanistan, and it is difficult to make the gains that are essential precisely because of what is happening with the safe havens

in pakistan? these issues are ever thus and nothing has changed in the dynamic. you see in the corruption and the government and now the safe havens, these have been the dynamics that have been there since the beginning. >> there is nothing easy about afghanistan, as we used to say, it is all hard, all the time. but it's also all important all the time. there's a reason we went there after 9/11. we have hugely important national security issues there and it's important to the world we do everything in's -- everything possible to try to get right and make sure afghanistan is never again to launch pad for extremist acts as it was for the 9/11 attacks. you touched on the fact that i had a different viewpoint at various times than that of the intelligence community. i was pretty clear

in my confirmation hearing that resulted from the fact the intelligence community tends to stop the clock and then for six to eight weeks do the analysis and argue with in the community itself on the ultimate position and then provide the district assessment or whatever document is provided to policy makers. typically, at least four times i've differed with the intelligence community on iraq or afghanistan, the reason has been the laggard in a dynamic situation. we continue to make process or didn't because in those four cases, twice i thought the assessment was too negative by the intelligence community. once in iraq and once in afghanistan. i felt the community was too positive the and we should be more guarded our assessments. >> i will recall that and i know there is a difference in the lag

time. >> what i should note is that director clapper and all of us have discussed this. what we want to do is reduce the amount of time we stop the clock for the analyst to start writing or finalize the writing so that there is not such a large gap between the end of the data and the delivery of the product to the policy makers to congress, to the rest of the community. >> that probably did not happen this last time? >> i'm glad you asked that. because i think that is worth clarifying. the most recent nie addressed the post-2014 timeframe. it was not on the past or how things are going in afghanistan. it was assessments by the intelligence community analysis -- analysts about various scenarios.

if you make a certain set of assumptions about level of support and other factors in afghanistan, what will the outcome likely be? there were a series of assumptions about that. there was relatively little on the state of the insurgency. in fact, an open session, it said there has been continued progress. but also that taliban does remain resilient. the military's concern in this case was a view that perhaps there should have been an additional set or even sets of assumptions that could be analyzed. in particular, assumptions that may have implied a greater level of assistance. that was the issue. the accounts of this have not been completely well informed, shall we say. >> i appreciate that. >> thank you very much. senator rockefeller?

>> thank you, madam chairman. i want to make a couple of comments. number one is i am pleased to hear you want to proceed with fisa. newal of i think it created a good piece of legislation. it was not without controversy, but it was the right thing to do. i think it helped some of us who have been here for some years -- i think it helped open up the dialogue between the intelligence community in this committee. this committee went through a long time when the community treated us cavalierly and was not interested in sharing -- as was pat roberts at the time and myself, we would switch one chair and then the other chair

and they would talk with a gang of four, the gang of eight, but never both committees. they would never sure what they told us and there were certain circumstances where they could not share what they told us because there were specific questions for good reasons. but it was not a good relationship. right after 9/11, the first thing congress did was pass a law saying it was ok for the central intelligence agency and the fbi to communicate with each other and perhaps even shake hands and start to work up intelligence on the fbi side. that was a long process. all of this is long and painful. i lead up to this by saying i cannot describe to you my own frustration and sense of wonder and how all of our dni directors

have come to these meetings, and at least in the past, that far and away the most important matter of national security is something called cyber security. the president, in his state of the union, used the word cyber threat, which is i think a better way of talking about it. it is stunning, alarming, less passive. we have made it virtually no process on that subject. on the one hand, the intelligence community is telling us is the number one national security threat, not taking three of the top five out or what is going on here or there, but on a sustained basis, national security, depends on our ability to form a system

where private companies working with dhs and the government can decide how they want to protect themselves and get some help. we do not overregulated, some have said that. we have made changes. olympia snowe and i came up with a bill three years ago, three years ago. it has wandered through melissa hathaway and mr. schmidt and nobody seems to get excited about it or the subject. i am very troubled by this and want to discuss this with you specifically. cyber security is not in your general line of work, general petraeus, but it is very much and director clapper's line of work and all of your line of work. i don't see particularly

movement. there was criticism days that it was to -- criticism made that it was too regulatory. we have hundreds of stakeholders and companies over the years and they are quite satisfied with an almost completed or virtually completed bill. our democratic leader and the president talked about this. president did mention it in his state of the union. that's important, but nothing has happened. if it is a national security threat, if it is the national security threat, i do not understand why we cannot get working together on this and get a bill done. fisa was hard, but this makes it look like a piece of cake. it's far more in the long term

-- it is probably equal in the long term in terms of its importance. it has been a very bad demonstration on the part of congress, the administration, and public, which has no particular interest in cyber security because nobody is explaining it to them because it is abstract and not pushed by any one group with particular emphasis and therefore nobody is very excited about it. we have worked out a way private sector companies basically take responsibility for their own cyber safety and cyber security. dhs helps them and they are held accountable for it. i grew so frustrated on a lack of action on the part of all of us -- the conclusive action -- i went to mary schapiro on the

securities and exchange commission and said i cannot do legislation right now, would you please at least post on the sec website where investors go all the time to figure out if they're going to invest in private companies for not. private companies would have to simply say if they had been hacked into. that is all i had to say. not what subject, it just had they been hacked into. it was a desperate measure, but it was a start and has had some effect. people are talking about that in washington. that doesn't interest me unless it's headed toward the bill. i would like to your take, general clapper, and perhaps director mueller and perhaps anyone else who chooses to speak on the subject, how you can tell us it is the principal national security threat and we have absolutely no bill.

we do have a bill, but we have no pervasive push to get this accomplished. not just a legislative map. >> first of all, i don't think there is any question about the potential here. there are two dimensions to this. there is what goes on day in and day out as far as the intellectual property being stolen from us. that is a real threat. then there is the potential, though i think it less likely, but a massive attack as some have described that would basically paralyzed the country or key segments thereof. most likely, proponents of that

would be a nation state, like china or russia. that is why we pushed hard to have that report published by the national counterintelligence executive, unclassified, that called out that threat. i think that's an important responsibility to advise all and sundry whether it is administration officials, the congress or the public of the nature of that threat. i do think the government has a responsibility to provide support and advice as exemplified in my mind by the defense industrial base pilot program championed by the department of defense which evolved a workable formula whereby threat data is provided

to keep companies, particularly those involved in defense or the intelligence business. the bigger issue here is how do we protect the nation's cyber -- and that is writ large -- it's an open question and i'm not sure that's the responsibility of the intelligence community. i do not view it that way. there needs to be a government- private partnership. they have to participate and be open about that as well. as far as championing a bill -- >> my time is about to run out. it's not your job to champion the bill. at some point, you start asking,

if you and your predecessors have, -- have come up and said this is our number one national security threat and you are in the threat business, to say this is not necessarily what we do, i'm using this forum to scream out who is going to start paying attention to this? >> i think a lot people are paying attention. the president's mention of it, there is a white house coordinator for a orchestrating this across the board and it involves the intelligence community and the department fence and the department of, and security. -- department of homeland security. -- fair to say >> i'm just saying we have made no progress. we have made no progress and

that is embarrassing about what you and your predecessors have said about the nature of this thread. director mueller, do you have any comments? >> i think it's wrong to say someone should be excited about it. we are exceptionally concerned about that threat. i don't think it's the number- one threat today, but it will be tomorrow. terrorist attacks for the fbi is the number-one priority. but down the road, the cyber threat which cuts across all programs will be the number one threat to the country. we look at it in three different perspectives. inside the fbi, we have to change organizational structure. in the same way we changed to address terrorism, we have to change to address cyber crime. we have to hire and bring on the person's capable of doing it and

understand our role is to investigate intrusions and port further intrusions. second, and the same way we have to share intelligence in the wake of september 11, we have to share intelligence between the various entities who addressed this particular threat. at the time of intrusion, you don't know whether it's a state actor like russia or china, you don't know if it's an organized crime and tea or a high-school student on the street. -- organized crime into tea or high school student on the street. that is why we built the cyber investigative tax -- investigative task force. all of those who have a role to address this kind of threat. we have to build up the collective a dressing of that threat, the way we broke down the walls in the wake of september 11. lastly, in terms of legislation,

we have pushed to areas of concern to us. one is a national data breach requirement. there are 47 states that have requirements for reporting data breaches. there has to be a national data breach requirement for reporting and we should be recipients of that reporting and there has to be the ability to share the information is indicative of a crime with the bureau or others to have that responsibility. it is something we're focusing on as the next substantial threat. >> thank you very much, senator rockefeller. i have a date of breach law that has been pending for some time. next is senator conrad. >> thank you, madam chairman, thank you to you and the vice chair of this committee for conducting this committee in such a thoroughly professional way. i have really enjoyed my service

on this committee and it is in no small measure because of the leadership of this committee. it's a very good example for the rest of the senate. i also want to thank all of those who are here testifying on behalf of the intelligence community. let me add my voice with respect to press reports reflecting on director petraeus by these unseen, unnamed sources -- as far as i am concerned, these people who work behind the cloak of anonymity attacking people are cowards. if they have something to say about somebody, if they want to have some credibility, they ought to have the courage to stand up and say it and put their name behind it. i say to the press they ought to quit printing anonymous attacks on people. it does not reflect well on them either.

with a respected director petraeus, he's a patriot and he has demonstrated that not only in his military career but taking this assignment. this is not only an act of patriotism -- he did not need to do this for his reputation or his career. he deserves our praise, not these nameless, faceless attacks that frankly have no basis in fact either. my experience is i have been quite pleasantly surprised at how open the intelligence community has been with this committee. quite to the contrary of this report. director mueller, thank you for agreeing to serve another couple of years. that is also an act of patriotism and is very much appreciated at this time of threat to our country, to agree

to take on additional years of service deserves our public praise. we thank all of you. i cannot neglect mentioning mr. olson because his parents are from my home state and i know them well. we're very fortunate to have people of that quality and character serving. i would like to ask each of you in turn, since this is an annual meeting, what is your assessment of whether or not we have made progress in our ability to handle the terrorist threat in this country? have we made progress? if so, how? what is your assessment of how we have done compared to where we were a year ago? let's start with mr. goldberg and go right down the line. >> as it was said earlier, progress has made in various

parts of the counterterrorism fight, especially against al qaeda senior leadership. but there are many other challenges out there and it remains a very, very dangerous part of our work. >> mrs. wagner? >> i think we have made a lot of progress, particularly in a couple of key areas. it was already mentioned, the extent to which many of the stove pipes have been broken down. i think we have made huge progress in that realm and we operate as a team. i am daily interacting and operating with my colleague that the fbi and ncpc at terrorist abroad and how it projects to the homeland.

i would say we have mail of progress in my own department in the ability to which we have been able to harness the intelligence from the intelligence community to inform our instruments, if you will, to keep people out at our borders, to make sure the wrong people are not getting on airplanes at points of departure and the people are not receiving benefits from the department. we have tightened our ability to take the community is producing and operational is that in homeland's security. >> of the removal of osama bin laden was a huge benefit to the security of the united states. by the same token, there are still leaders in both yemen and afghanistan and pakistan border area that have the capability of launching attacks domestically. most of the arrests we've made

over the last year and half have been long wills, those individuals who have been radicalized and trained -- have been loaned wolves, those individuals who have been radicalized and trained on the internet. we have been successful in addressing these particular plots, nonetheless, the ability of persons to utilize the internet to be individually radicalized and get the information they need to undertake a tax has increased. >> a director clapper? >> to take a longer perspective, this is my third job in the intelligence community in the last 12 years. i started two days after 9/11 that i think we have made tremendous progress. the transformation of the fbi into an intelligence-driven organization is one point. the mitscher urbanization of common security, -- the

maturation of homeland security, these things have demonstrated improvement. that's not to say we should rest on our laurels. we always have more issues to deal with and this is not with respect to counter-terrorism a threat that will go away. >> thank you. >> thank you for your words of support. we have made considerable progress over the last year. anytime the top three leaders of the most significant terrorist organization that faces us are taken out, needless to say, that is quite a banner year. al qaeda in the arabian peninsula another organization have sustained important losses. having said that, the threat of terrorism remains significant and we must sustain the campaign

and maintain the pressure on al qaeda and its affiliates and other violent extremist organizations wherever they may be. beyond that, i concur with director clapper that there has been continued important progress in the organizational aspects of the war on terror, the counter terrorist campaign has benefited enormously from the continued efforts to better integrate intelligence, for the various elements of the community to work together more effectively, and even within individual agencies to further the progress in the integration of efforts between the cia operators as well as analysts in bringing together all of the different components of our organization and the rest of the intelligence community, say in the counter-terrorism center and others we have as well. >> general burgess'? >> the phrase appears like to

identify myself with the remarks of those who have gone before me. as a plank holder in the director of national intelligence, as i look back, i agree with their way director mueller has put it and director clapper. we have made great strides in many areas. having said that, we still have work to do and we still have challenges remain. >> consistent with the other comments, the bottom line is that al qaeda is weaker now than it has been in the past 10 years. that said, we face a more diffuse and to centralize threat from al qaeda's affiliates in yemen and somalia and threats from loan actors in the united states. as director clapper said, from an organizational perspective, and our ability to handle the threat, we are better positioned and the operative word is it is a team of brothers.

we are better positioned to share information, as the vice- chairman commented at the beginning of this hearing, we do a better job of integrating information and analyzing it. we're getting better at providing situational awareness and overall, it is a team effort among all the agencies represented here. >> in terms of something this up, i'm hearing significant progress, serious threats remain to the united states, and the teamwork in the intelligence community itself has dramatically improved. i am hearing that quite consistently. i think that's very important for the people we represent here. they understand that yes, we have made progress. in some ways, very dramatic progress, especially against al qaeda, but a significant threats remain. we have to continue to be vigilant and have to continue to

put resources to these issues. i think the chair. -- i thank the chair. >> good morning, everybody. i would like to thank each and every one of view for the wonderful work you do every day and in every way protecting our country. so much progress has been made since 9/11 in reforming the intelligence community, making it more effective and making it an integrated unit. the fact all of you are here at the table and at the same time, points to our successes and one of our greatest has been will we are doing to dismember and decapitate al qaeda. i'm going to pick up on the issue senator rockefeller raised about cyber. i have been almost a johnny one

note on this issue. i share senator rockefeller's frustration over a lack of urgency. i think it is partly due to the executive branch and also due to the congress itself. my questions are going to get a clapper, mueller, and wagner. first, a comment about urgency. in april, it will be five years since the attack on estonia in which we thought we were going to triple article 5 of nato -- trigger article 5 of native for a cyber war. so five years we're supposed to be on the edge of our chair on this issue. how do we protect that and so on? in recent meetings, because of our involvement to the appropriations committee and ron

noble of enter poll in the interval team, it is the protection of the .com. he spoke about the counterfeit and fake drugs coming into european countries, to canada and to ourselves. it in a meeting with dr. hamburg yesterday at the fda, what we're talking about a new regulatory framework to get drugs to the market fast, yet safe, one of the biggest challenges is protecting the secrets she has of america's pharmaceutical and biomedical device community and the supply of the drug chain. right now, there is a bigger criminal penalty for a knockoff of a designer handbag than four a blood thinner that came into our country and that could kill

thousands of people. big growing issues -- organized crime -- interpol says cyber is a growing crime and it affects state secrets, trade secrets and this other stuff. the corruption -- where there is a weak government, there is a strong organized crime element. we have got to really move on this. senator rockefeller has spoken about his frustration with the executive branch. i'm frustrated with the legislative branch. we have turf battles, we dither and diddle over policies. i hope we move on this. to me, there are three issues -- urgency, foggy policy, particularly on governance, and the need for bipartisan camaraderie among ourselves to

pass the bill. let me get to the governance issue and this goes to director clapper. miss wagner, director mueller. the question is who is in charge? we all biddle and dither over the government's issue. article 10, article 50, homeland's security -- let's take our president. he is at the democratic convention and the lights go out in san diego. you say, oh, my god. he turns to napolitano and says what is this? the lights go out for maybe three hours. the lights go out in boston, etc.. he turns to napolitano and says what are we doing here and what can we do? my question is -- a

>> you can continue to follow this set at coverage live on c- span.org. the house will be battling in four speeches and will come back at 2:00, to do work on appointing members to the federal aviation program. then work begins on a measure that will repeal part of the health care law, known as the class act. now, live coverage, here on c- span. january 31, 2012. i hereby appoint the honorable andy harris to act as speaker pro tempore on this day. signed, john a. boehner, speaker of the house of representatives. the speaker pro tempore: pursuant to the order of the

house of january 17, 2012, the chair will now recognize members from lists submitted by the majority and minority leaders for morning hour debate. the chair will alternate recognition between the parties with each party limited to one hour and each member other than the majority and minority leaders and minority whip limited to five minutes each. but in no event shall debate continue beyond 1:50 p.m. the chair recognizes the gentleman from texas, mr. poe, for five minutes. mr. poe: mr. speaker, request permission to address the house for five minutes to revise and extend my remarks. the speaker pro tempore: without objection. mr. poe: mr. speaker, across the globe, iran continues its saber rattling. the little fellow from the desert, ahmadinejad, threatens to block the straits of hormuz and all the oil shipments going through them. this worries americans who can't afford for the price of gasoline to go up. what if we made middle eastern countries irrelevant to our

energy security? imagine a place where the united states actually controlled its own energy destiny? there are two different paths to that world. the administration and environmental obstructionists will tell you the only way to energy independence is through so-called clean and green energy projects. funded at taxpayer expense. this may sound good in a sound bite but these projects are expensive, unreliable, and many cases they continue to fail. cases in point, three companies, solyndra, interone, and beacon power. in each of these cases the federal government has taken taxpayer money and gambled it on risky projects. with solyndra, half a billion taxpayer dollars were poured into a company that was doomed to fail. the result? solyndra went belly up, 1,000 people lost their jobs, and the american people will never see a refund on their money. clean energy may be a noble goal, but we are just not there

yet. the second path to controlling our energy destiny is an all-of-the-above approach. solar, wind, nukear, clean coal, natural gas, and yes, oil. for now oil is the most reliable and cost-effective sources of energy we have. that's one reason why the keystone x.l. pipeline is a golden opportunity for our country. this project unlike solyndra won't cost the taxpayers any of their money. it would bring 750,000 barrels of oil per day from our stable ally, canada, down to refineries in my district in southeast texas. equally important it would create at least 100,000 jobs in its lifetime, including 20,000 immediate construction and manufacturing jobs. but unfortunately the administration has said no to keystone pipeline. it said no to our national interest. it said no to jobs. it said no to energy security. and it said no to our ally canada. it said no to the will of the

american people because most americans support the pipeline. but it did say yes, yes to china because china will probably be the recipient of that canadian oil and the jobs. now isn't that lovely. keystone would enhance our energy security by bringing almost as much oil as we get from saudi arabia to the united states. it would help enhance our foreign policy by bolstering our relationship with canada instead of depending on unstable middle eastern countries. radical obstructionists got their way when they took to the streets in front of the white house and threatened their support for the president. they seem to conveniently forget that pipelines are the absolute safest way to transport oil. failure to approve the pipeline is putting our national security, energy security, and economic security at risk. that is why i have introduced along with my friend, dan boren from oklahoma, the bipartisan keystone for secure tomorrow act.

this bill would allow congress to act immediately and approve the permit for the keystone x.l. pipeline. there is precedent for congressional approval of pipelines. in 1973, the same type of special interest groups were holding back the permit for the transalaska pipeline. after four years of delay, congress finally took direct action and successfully approved that pipeline. i'm pleased that a bipartisan group of 45 senators agreed that congress should approve the keystone pipeline. the holen, lugar bill similar to mine would do that. we simply cannot afford to reject a reliable supply of energy. while the administration continues to say no to americans, congress has the obligation and the legal ability to say yes. let's make keystone pipeline a reality. it's time we create jobs, bring energy to the united states, and make middle eastern policy

and turmoil irrelevant to our national and energy security. it's time to think of the american people because they can't wait. and that's just the way it is. the speaker pro tempore: the chair recognizes the gentleman from texas, mr. flores, for five minutes. mr. flores: request unanimous consent to address the house for five minutes. revise and extend my remarks. the speaker pro tempore: without objection, the gentleman is recognized. mr. flores: mr. speaker, i rise today to remember an american hero from this country's greatest generation. john "jack" francis hannigan was born march 27, 1918, to frank and elsie in new york city. he attended parochial school throughout his life, obtaining a college degree and law degree from st. john's university in new york. through his beloved sister, myrtle, he met the love of his

life, marian josephine roany and fell in love with her large family. they were married on may 2, 1942, at maxwell air force base in montgomery, alabama, thus beginning a union that lasted 67 years. jack was a navigator and a lawyer in the united states army air corps, serving during world war ii and the european theater of operations. as part of the 397th bomb group, also known as the bridge busters, he flew 70 combat missions in a b-26 marauder, including three over normandy beach on d-day. he earned a purple heart during his wartime service. in 1948, his commission as a jag officer was transferred to the newly created united states air force. jack and his wife's military service span 30 years living in alabama, louisiana, south carolina, florida, georgia, new york, new jersey, pennsylvania,

new mexico, arizona, germany, virginia, the philippine islands, massachusetts, maryland, and of course texas. throughout his service he was awarded many medals of commendation, including the silver star, the legion of merit, the meritorious service medal, the air medal, the afse commendation medal, and the army commendation ribbon. upon retirement, he received the distinguished service medal in 1971 at randolph air force base in texas. the hannigans retired to allen, texas, and were active parishioners at st. jude's catholic church. while there he volunteered his legal services and his wife's typing to many church members. jack and marian raised a large irish catholic family with six children. while the family is spread across the country, the love that jack and marian held for them is a bond would forever

unite the clan. jack is survived by his children, john f. jr. united states air force retired colonel of colorado, mary ghetto of arizona, barbara clark of massachusetts, joan johnston of massachusetts, dr. jim hannigan of austin, texas, and kathy hoagele of dallas, texas. 14 grandchildren and 10 great grandchildren. he will also be remembered for his quick wit, practical jokes, skill with cross word puzzles, love of sports, especially golf, and, yes, and his yes, dears, to his wife. this friday on february 3, 2012, a memorial service will be held at arlington national cemetery to honor his and his wife's life of service to our country. mr. speaker, the service of mr. and mrs. hannigan to our country will never be forgotten. they serve as examples for our current generations of

americans to emulate. god bless their service and god bless the united states of america. thank you, i yield back. the speaker pro tempore: the chair recognizes the gentleman from north carolina, mr. jones, for five minutes. mr. jones: mr. speaker, over the weekend i read an article by the associated press that the french have made a decision to fast track its withdrawal from afghanistan and bring troops home by the end of 2013 instead of the end of 2014. if france follows through with this accelerated drawdown, they will join other countries like canada and the netherlands who have also drawn down their forces in recent years. i believe these countries are on the right track. mr. speaker, the department of defense has recently been asked to find over $490 billion in cuts. we are currently spending $10 billion a month which equates

to $120 billion a year in afghanistan. by bringing our troops home now, we would be saving hundreds of billions of dollars that would prevent the department of defense from cutting other military programs. it simply is common sense to bring our troops home now and not wait. mr. speaker, i would like to quote from january 20, 2012 "new york times" article by matthew rosenberg titled, afghanistan's soldiers step up killing of allied forces. let me read that again. affings soldiers step up killings of allied forces. i quote from the article, american and other coalition forces here are being killed in increasing numbers by the very afghan soldiers they fight alongside and train in attacks motivated by deep-seated animosity between the

supposedly allied forces, according to american and afghan officers, and a classified coalition report obtained by "the new york times." mr. rosenberg further states in his art k -- article, and i quote, a decade into the war in afghanistan the report makes clear that these killings have become the most visible symptom of a far deeper ailment plaguing the war effort. the contempt each side holds for the other never mind the taliban, the ill will and mistrust runs deep among civilians and military on both sides raising questions about what future role the u.s. and its allies can expect to play in afghanistan. mr. speaker, more important than the money are the young men and women who are sacrificing their lives, limbs, and families by serving in a corrupt nation led by a corrupt leader. beside me, mr. speaker, is a

poster that i have been bringing to the floor from time to time of a young soldier from fort bragg, north carolina, who is sitting in a wheelchair, mr. speaker, with both limbs gone and an arm gone, with his lovely wife standing beside his wheelchair showing him their new apartment. how many more young men and women have to die? how many more young and women have to lose their legs, their arms and the sad part about it, mr. speaker, is history has shown that no great nation in the history of the world has ever changed afghanistan and we are not going to change it, either. history has proven the fact time and time again. it is time to bring our troops home from afghanistan. before closing, mr. speaker, i want to tell the story of my visit to walter reed, which is now bethesda, maryland, and young marine corps pral from camp lejeune which i have the

privilege to represent. said to me with his mom in the room, why don't we come home, congressman? why don't we come home? it is time that this administration and this congress say to the american people, we are not going to wait until 2014 to bring our troops home, we are going to start bringing them home in 2013. with that, mr. speaker, in closing i ask god to please bless our men and women in uniform, i ask god to please bless the families who have give a loved one dying for freedom in afghanistan and iraq, and i close by asking god three times, god please, god please, god please continue to bless america. i yield back the balance of my time. the speaker pro tempore: pursuant to clause 12-a of rule 1, the chair declares the house in recess until 2:00 p.m. today.

>> more than two million voters, up from the republican primary in 2008, more than -- with the polls beginning to close at 7:00 p.m. eastern, we will have live coverage for you on c-span2.

we'll have coverage results beginning at about 8:00 eastern. also the candidate speeches for you and your reaction by phone and by twitter and facebook as well. mitt romney this evening is in tampa. and also newt gingrich in orlando to make comments this evening on the results of the florida race. we'll have all of that coverage on c-span2. also on c-span radio. and a reminder as well, in case you want to catch up on the speeches you have missed, read some of the candidate's positions, and follow other interviews and such, it's on our website at c-span.org/campaign2012. next we are going to take you to congressional budget office director doug elmen door of. he's finished a news conference for capitol hill, talking about the projected economic output and projected budget deficit in 2012. the agency's projection for fiscal year 2012 shows the deficit falling to 1.08 trillion from a level of $1.3

trillion that was the budget deficit in fiscal 2011. his comments are just over an hour from earlier today. >> good morning. thank you for coming. i a -- i'm the director of the budget office. c.b.o.'s mission is to provide congress with a nonpartisan analysis of budget issues. prt of the way we fulfill that mission is prepare regular budget and economic outlooks, the latest of which we released this morning. i will briefly summarize the report and then my colleagues and i will be happy to take your questions. let me begin by noting that our baseline economic and budgetary projections are conditioned on current law not because we expect that there will be no changes in law, but because this approach provides a benchmark against which potential changes can be measured.

what we are presenting is a benchmark not a forecast. that distinction has a big impact on both the economic and budget projections. what is our assessment of the economic outlook? as you know the pace of the recovery has been slow since the recession ended 2 1/2 years ago. and we project that it will continue to be slow for the next two years. reflecting both the lingering effects of the financial crisis and recession, and the fiscal restraint that will arrive under current law. specifically, current law fiscal policy will reduce the growth of output slightly in 2012 and significantly in 2013. through a combination of large tax increases and large spending cuts. our projections incorporate the upcoming expiration of the payroll tax cut and emergency unemployment benefits. the expiration of the tax cuts enacted in 2001, 2003, and 2009, as well as other expiring

tax provisions. the constraints on spending imposed by last year's budget control act and the winding down of the budgetary effects of the 2009 recovery act. taken together those policies will generate a sharp fiscal contraction. in addition, the number of houses, loss of wealth, run-up in debt, and other legacies of the economic downturn are continuing to weigh on household and business spending. as a result and shown in the slide, c.b.o. expects real g.d.p. will grow by 2% this year and only about 1% next year. we expect the activity to quicken after 2013 but real g.d.p. to remain below the economy's potential through 2017. according to our projections, the economy is only about halfway through the cumulative shortfall and output that will result from the recession and its aftermath.

the costs associated with that persistent output gap are immense. and they are borne disproportionately by people who lose their jobs, who are displaced from their homes, or who own businesses that fail. in particular, the labor market still has a tremendous amount of slack mainly as a consequence of continued weakness and demand for goods and services. in bow's forecast, the unemployment rate remains above 8% both this year and next. as economic growth picks up after 2013, the unemployment rate will gradually decline. but in our projection it remains above 7% until 2015. before dropping to 5 1/4% by the end of the coming decade. while the economy continues to be weak during the next few years, inflation and interest rates will remain low. let me turn now to our budget

projections. under current law, we expect that this year's deficit will be about $1.1 trillion. at 7% of g.d.p. that is nearly 2%age points less than the deficit recorded last year. but still larger than any deficit between 1947 and 2008. over the next few years, projected deficits in c.b.o.'s baseline narrow sharply as you can see in the picture averaging 1.5% of g.d.p. and totaling about $3 trillion between 2013 and 2022. with deficits small relative to the size of the economy, debt held by the public drops a little as a share of the g.d.p. in our baseline projections but remains quite high. much of the projected decline in deficit occurs because under current law revenues will rise considerably. in particular between 2012 and 2014 revenues in our baseline shoot up by more than 30%

because of the recrept or scheduled expiration of various tax provisions and new taxes and other collection that is are scheduled to go into effect. federal spending in the baseline declines modestly relative to g.d.p. in the next few years as the economy expands and statutory caps constrain discretionary appropriations. later in the decade, though, spending turns up again relative to the g.d.p. because of increasing expenses generated by the aging of the population and rising costs for health care and because the accumulation of debt and rising interest rates will cause a surge in the government's interest costs. of course these baseline projections are heavily influenced by the changes in tax and spending policies that are embodied in current law. changes that in some cases represent a significant departure from recent policies. to illustrate the budgetary consequences of maintaining some task and spending policies

that have recently been in effect, c.b.o. developed projections under an alternative fiscal scenario. that scenario incorporates the following assumptions. first, with all expiring tax provisions other than the payroll tax production are extended. second, the alternative minimum tax or a.m.t., is indexed for inflation after 2011. third, medicare's payment rates for physician services are held constant at their current level rather than dropping by 27% in march and more thereafter, as scheduled under current law. and fourth, the automatic spending reductions required by the budget control act in the absevens of legislation reported by the joint select committee on deficit reduction do not take effect, although in the scenario the original caps would remain in place. under that alternative fiscal scenario, deficits over the 2013, 2022 period would be far

higher than in the baseline. averaging 5.5% of g.d.p. rather than 1.5%. and totaling $11 trillion rather than roughly $3 trillion. under this scenario debt held by the public would climb on an unsustainable path, reaching 94% of g.d.p. by 2022. the highest figure since just after the second w0r8d war -- world war. under that scenario, the economy would be noticeably stronger during the next few years than under current law. the midpoint of the ranges for the end of 2013 showed g.n.p. under the scenario that is 2% higher than under current law, and unemployment rate that is

1%age point lower. however -- percentage point lower, over the mid won't range for 2022 shows g.m.p. more than 2% lower because of the crowding out of investment that will be caused by the escalating debt. it bears emphasis that projecting economic outcomes and budgetary outcomes that would result from them is very difficult. many things cause the economy and budget to turn out better or worse than we project. however there is no plausible economic outcome under which the policies of the alternative scenario i outlined would lead to a sustainable outcome. the challenge for this decade and beyond remains the aging of the population and rising costs for health care. the number of people in this country age 65 or older will increase by 1/3 in the coming decade. substantially raising the cost of social security, medicare, and medicaid. in addition, the affordable

care act will significantly increase the number of nonelderly people receiving assistance through federal health care programs. furthermore, c.b.o. projects that the costs per enrollee for social security and the major health care programs will continue to rise. because of these forces, the budget policies that were in effect in the past cannot be maintained in the future. here's one way to think about the problem using c.b.o.'s projections under the alternative fiscal scenario, which, as i said, represents a continuation of many recent and current policies. each pair of bars represents a component of the federal budget as a share of g.d.p. with the left pair -- left bar of the pair showing the average during the past 40 years and right bar projection for 2022. under the scenario outlays for social security and the health care programs, the first set of bars would be much higher in 2022 than in the past. however, outlays for all other

federal programs put together, the second set of bars, are projected to be about 8% of g.d.p. in 2022, below any year in the past 40 years, and well below the 11% of g.d.p. that such outlays had averaged over that period. yet the budget deficit under this scenario, shown on the far right, is projected to be 6.1% of g.d.p. in 2022. to keep debt from rising relative to g.d.p., the deficit would need to be about 3.5% of g.d.p. smaller in 2022 than we project under this alternative fiscal scenario. that's $900 billion of reduction in the deficit relative to the scenario in that year, 2022 alone. therefore, to put the budget on sustainable path, policymakers will need to allow federal revenues to increase between much higher pestage of g.d.p. than the average of the past 40

years. or make very large changes to social security and federal health care programs. or pursue some combination of those approaches. let me close by highlighting the consequential choice policymakers face this year. on one hand the policymakers leave current laws unchanged, the federal debt will probably recede slowly relative to the size of the economy. that would occur because a large increase in revenues and sharp restraint on federal spending, apart from the programs. however, both of those changes from historical patterns will have significant economic and social effects. moreover, the sharp fiscal restraint this year and especially next year will markedly slow the economic recovery. on the other hand, changing current laws to let scurnt policies continue along the lines of the alternative scenario we outlined would poost the economy and allow people to pay less in taxes and

benefit more from government programs in the next few years, but would put the nation on an unsustainable fiscal course. if policymakers want to achieve both a short-term economic boost and medium term and long-term fiscal sustainability, they need to fact policies that leave deficits significantly wider than we project under current law for the next few years but significantly narrower than we project under this alternative fiscal scenario for later in the decade. in conclusion, how much and how quickly the federal budget deficit declines over the coming decade will depend in part on how well the economy does. probably more critical, though, will be the choices made by lawmakers as they face the substantial changes to tax and spending policies they are slated to take effect within the next year. thank you. we are happy to take your questions. please identify yourself and the organization for which you

report. yes. can you give your estimate as to what would happen if the payroll were ex-- extnded through the end of the year? >> we provide this in the report. if the payroll tax cut were extended for the remaining 10 months of 2012, it would add about $675 billion to the fiscal year 2012 deficit. and about $25 billion to the fiscal year 2013 deficit. we have not reported that here. i think the -- part of the restraint, part of what's

holding down g.d.p. in the baseline projection is the expiration of the payroll tax cut. if that were extended for the rest of the year, we think it might add about half a% to the level -- half a percent -- quarter percent to the level of g.d.p. at the end of 2012. unemployment would be around half of that. so maybe a tent or two on the un-- tenth or two on the unemployment rate. on the economic forecast in chapter 2 and the year by year tables in appendix e, if you look on ages 128 and 129, that we show the averaging unemployment rate in each year over the coming decade. we expect that decline slowly principally because of slow growth in the demand for goods

and services and thus slow growth in businesses need for employees to produce the goods and services they are selling. in addition to the limitations on the demand for workers, we think the unemployment rate is also being held up by some structural factors. mismatches between the available workers and available jobs. the effects of the extension of unemployment insurance and other factors. we think those are comparably small part of the current amount of unemployment, but we think that they will persist to some extent through the decade. our unemployment rate we project at the end of the decade is a little higher now than it would have been in the absence of recession and prolonged high unemployment. >> how much do you see potential g.d.p. coming down? how much are you lowering your

outlook for the long-term growth capability -- >> we have a box in chapter two of the report called the lasting effects of the recent recession and potential output. our current estimate is that potential output, actual output in 2022 is about 1/14% below what it would have been without the financial crisis and recession. we think of that as being partly smaller capital stock. they will make up for some but not all of that by the end of the decade. we think that some of that loss in potential output is through lower labor supply. people who have lost jobs, will either leave the labor force or remain and not be able to find work again. and we think part of that is a little hit to productivity growth. the productivity of those labor and capital resources. there's a wide range of possible long-term effects.

i think one of the risks in our forecast is that this prolonged period of high unemployment and prolonged period of high long-term unemployment for individual workers could have a larger effect on output in the long term. we have not had a period of such persistently high unemployment in the country since the depression. we just don't know how workers and firms will respond over time. i think we have made best estimate that we can, but that's a source of significant uncertainty. >> how much does that impact -- >> it raises the deficit. i don't think it's a huge amount. we show in our -- another part of the report rules of thumb for the effects of changes in the economy on changes in the budget. so 1 1/4% on the level of g.d.p. at the end of the decade is a little more than a tenth

of a percentage point of high annual g.d.p. growth. we show in the appendix that it's low economic growth. think about $300 billion to the deficit over the decade. but of course one thing then i'll move on, the slow recovery, the fact that output remains well below potential for all of these years, for this year and next year and the year after and so on, because the amount of production, taxable income is much lower for this long period. >> on economic growth, your projections are considerably lower than blue chip and federal reserve for 2012 and 2013. and you show growth slowing. you talk about the differences in the report including varying assumptions about continuing current policies. can you elaborate on that?

>> yes. there are several reasons why we might have different forecastses. for the -- forecasts for the economy than these outside forecasters. the first and most important is we are not trying to do a pure forecast. we are doing a projection based on particular set of assumptions about fiscal policy. and in particular that current law remains the same. if i were doing a forecast, in a private capacity, i would be trying to predict the changes in fiscal policy that the congress and president will go ahead and support. that's not our roll to do that. i think probably the principle reason -- principal reason our forecast for economic growth is weaker this year and especially next year than a lot of outside forecasters is because we have to assume that the taxes expire at the end of this year as scheduled under current law. that all the restraints in the

budget control act take effect in the beginning of next year as scheduled under current law. and most outside forecasters, including the federal reserve, are making some other guess about what actually will happen. there are other reasons for possible differences as well. forecasting is a very uncertain business, but when we try to back out what our forecast might look like in the absence of a particular set of policy assumptions, we end up with numbers that look similar to those we see for outside forecasters. >> on page 124, 2012-2013, are you assuming that the payroll tax holiday ends on schedule? >> no. be careful here. for those who haven't found

this yet. page 124 is our projection of balances in various trust funds. i think you are referring to the balance in the old age survivors i shurens -- insurance trust fund. a crucial part of the laws that have so far extended and created this payroll tax cut and be considered to extend it is that they make up for the loss in revenue to the trust fund by putting general revenue into the trust funds. so by described is the effect of extending the payroll tax cut on the overall government pugget but the trust fund itself -- of course -- budget but the trust fund itself -- all the way this has been enacted and discussed in the past have made up the difference for the trust fund. >> so the differences for 11, 12, and 13 are not the program itself. it's the program plus whatever the government put in. >> yes. that's right.

aol aol you talk about the current fiscal year. the -- >> you talk about the current fiscal year. the $1 trillion versus below $1 trillion in our august forecast, can you explain what the difference is there? >> those who want to check later, there's a table on 98-99 that decomposes the provisions. for each of the coming 11 years. for 2012 there are a number of factors. part of it is the extension of the payroll tax cut for january and february of this year. that was not built into our august projections. an important part of it is disappointingly low corporate tax receipts. it's a little puzzling, does not seem to be a shortfall in corporate profits as measured in income accounts relative to

what we were expecting. it's a shortfall in the tax receipts that have been collected. a decline we weren't predicting in the average tax rate essentially that ends up in a corporate tax code. not the rates written into law but simply the amount of revenue collected relative to the profits as reported in the accounts. is he corporate profit taxes have been lower than we thought. that's another piece of this. then there is a whole selection of other -- collection of other fairly small changes. the revision for 2012 is about $100 billion from what we expected in august. and that's a lot of money by many standards, but given the size of the flows into and out of the government budget, it's not a particularly striking provision. >> do you have a forecast for when the current increase in the debt limit would be -- >> we don't try to model the

catch flows on a month to month basis. in general terms we think that given our projections for the deficit, for the coming year, we think that treasury would not come up against the limit in this balanced year. but i don't know exactly -- we just don't have a basis for accepting exactly when it might hit the limit. it depends in addition to the accuracy of our projections on the legislation is enacted. and moreover even when a limit is reached, then as you know, the treasury department has a number of steps it takes to continue operating while remaining below the statutory limit. we don't try to track that or predict that sort of thing. >> i want to get back to the unemployment rate.

2012-2013. can you explain that. >> it's our projection unemployment rate rises a little bit from here to 2013. couldn't refer to it as a spike particularly. unemployment rate has been between 8.5% and 9% for much of the past few months. we do expect it though under current law to move up a little in 2013. that's because of the slowdown in particular growth. which owes most importantly to fiscal restraint. if one looks at the effects of this alternative -- differences between this alternative scenario that extends expiring tax provisions and imposed the enforcement procedures from the budget control act, it makes it a very large difference in government inflows and outflows in the next fiscal year. and you can see some of that. and if you go to table we have the back of chapter one, i think the most important tables in the document, the effects

alternative, table 1-6 shows the effect that policymakers talk about. table 1-7 pulls together the pieces that underlies the alternative fiscal scenario. so if you look at table 1-7 for example, one can see the difference in federal -- in the deficit in 2013, this is fiscal year 2013 between the baseline and this alternative scenario, is almost $400 billion. so the amount of higher revenues and lower spending will occur under current law is really quite sharp. we think that will be pushing down the economy as other factors are starting to push up the economy. and that slowdown in growth that we see for 2013 then has an effect on the unemployment rate. >> can you divide that any further by the tax guide --

>> actually table 1-6 has the pieces of that. these numbers and these tables are for fiscal years. so when we do the effects on the economy on a calendar basis we need to do -- we take care in that. this gives you a rough sense of that. so in fiscal year 2013 the effect of extending all the expiring tax provisions, meaning the 2001 and 2003 and 2009 cuts as well as trying to index the alternative minimum tax completion, as well as extending the other expiring tax provisions like the research and experimentation tax credit and other things that have been exped ited, that set of policies together extending them into 2013 adds about $300 billion to the deficit in 2013. at the same time the budget control act, again to make sure we are understanding what i'm saying here, the budget control act last summer imposed caps on discretionary spending, but it

also set up a joint select committee on deficit reduction to try to find additional savings, but the act established a backup plan in case that committee did not report legislation, which in the end it did not. the backup plan is further cuts in discretionary and mandatory spending which are what's described in the document. in table 1-6 we show the effect of lifting those additional reductions, but leaving in place the original caps. that effect on the deficit in 2013 is $66 billion. and then there's also a piece -- another piece of restraint is a smaller piece, medicare's payment rate for physicians. beyond that not on a policy option but source of restraint in the economy is the waning effects of the recovery act. so most of tax cuts and spending increases from that act are now out the door. not all but most. but as the effects of that

wane, that is providing a further -- that helped the economy before but the waning reduces the growth rate we'll see in this coming year. the back. >> the projections for medicare and medicaid spending. you say in there that you are expecting a $29 billion increase outlay for medicare and $24 billion? outlay for medicaid. but then say you are revising down medicaid projections because of utilization changes. what's the net difference in c.b.o.'s view what's going to happen to those programs and their outlays? >> i don't think i have at hand the revisions the medicare numbers or medicaid numbers over the decade. we can certainly -- we can find those for you. it means taking one table here and sub tracting a -- subtracting a table from another report. >> do you expect these programs will spend more than expected

in the august update? >> i don't know if we made large revisions to those projections at this point. i should say that although this is the big -- this outlook is the one that gets the most attention, in fact we get more of the data we use for updating the health projections between now and the march baseline. and moreover we have not updated for this report our projections of the effect of the affordable care act on medicaid and other programs. we'll do that in the march baseline as well. i think we'll actually have a more complete answer to this question in a couple months. i just don't know now what the revision has been. we do know -- we note in here very slow growth in medicare spending per beneficiary in the coming decade relative to what we have seen over the past few decades. and woo attribute that to two fact -- we attribute that to two factors.

one is the restraint in payments to providers, partly from the sustainable growth rate mechanism that remains in place. partly from the additional restraint imposed in the affordable care act. but the second factor that leads to slow growth and spending per beneficiary is that the medicare population is actually getting somewhat younger offer the coming decade. more people are going into medicare but they are going in at the age of 65. so the share of medicare beneficiaries who are in their 60's relative to their 70's and 80's is going up rather subtoongsly over the coming decade and that means those people tend to be less expensive. the number that we cite in the document is real growth, meaning adjusted for inflation, in medicare spending per beneficiary is average about 5% per year between 1985 to 2007 averages about 1% a year over the 10-year projection. yes. >> if i read these things

correctly, the projections for 2012 both under current policy and under current law seem to have been downgraded a little bit and that seems to counter some of this good news and bad the last couple months. could you elaborate on why that is or -- and also on the impact of you guys doing the reestimate own the president's budget given his delay. >> two good questions. the forecast published in august was essentially completed in early july. and a couple of important things happened after that that we alluded to in the august report but couldn't build into the numbers. one was the annual revision to the national income and product accounts that made the recent history look a little worse. than it had at the time we were putting together that forecast. the second thing is there was some pretty bad news late in the summer about the state of the economy. at the time that we were

leasing the -- releasing the forecast there were predictions by serious analysts that the country had a 1/3 chance of going into a recession or some people get higher numbers than that. so you look back at the period of from early july to early december when this forecast was finished, the news was quite -- on balance gimp the way we read those data and give what we saw in this historical vision, the near-term thrust of the economy looked weaker. and i don't think we have regrets at this point about the forecast we had written down. g.d.p. growth in the fourth quarter looked fairly good, but much of that was inventory investment. final sales growth, which ultimately is the -- willpropel forward investment in other parts of the economy, was not particularly strong. we still see lots of problems in the housing market. households have lost wealth.

they have a lot of debt. they have a higher saving right now than a few years ago but not particularly high. if they are trying to fortify their financial positions and deleverage, we expect more restraint from them. so i think we have good reason for expecting continued slow growth. even in the absence of fiscal restraint, and fiscal restraint pushes us down to next year, as i said this is a very uncertain business. if one just looks at the, i think the swinging moods about the near term state of the economy over the past six months, you can see why this sort of exercise is fraught with peril. yes. >> i think you said lawmakers look at this area of harsh fiscal policy. versus better fiscal policy that leads to 96% of the debt

held by the public in the long term. >> 94%, and it's not -- we have not tried to lay out a specific fiscal path. i think the point that i'm trying to make and that we have made on a number of occasions in written documents and testimonies, is that very sharp imposition of fiscal restraint, dramatic increases in taxes or cuts in spending at a point in time under the current economic conditions in particular will tend to hold back the economy. at the same time letting the debt skyrocket the way it does in this alternative scenario will ultimately be very damaging to the economy, unsportable in the end. so one can both provide near-term support and put the economy on a sustainable medium and long-term path.

there is no intrinsic contradiction but to do that requires fiscal restraint take effect slowly. but amount to a very large change from current policies by the end of the decade. this is not as we said a number of times before, there's no substanley advantage to waiting to decide what policy changes we will make. to the contrary, the longer that we wait as a country to make the sort of choices that we have to make, the harder it will be to make them. because more debt will have been accumulated. people will have less time to plan how they will react to these various changes. so there is no substand live advantage to waiting to make decisions. but on the issue of howly those decisions should take effect, how quickly taxes, or spending, that's a more complicated question. doing it very quickly slows the economy now. if you wait too long you end up

with debt that is harder to manage. and so there are a number of ways in which congress could put off the expiration of some of the tax provisions that are scheduled to expire or it could put off some of the spending restraint that will occur under these pleadures under the budget control act -- procedures under the budget control act, but not put them off indefinitely. if one puts those off, then other large changes need to be made in the budget. it's not our place to recommend any specific set of changes. robert? >> in the elected policy alternatives. [inaudible]

>> robert's referring to table 1-6 on age 19. we note that the cost of extending certain income tax and estate and gift tax provisions scheduled to expire at the end of this year and indexing it for inflation would have a direct effect on the deficit of $4.564 trillion. and would then raise debt service by another $790 billion. i believe the sum of those that you are describing as $5.4 trillion. we don't have in this report, i think, an estimate of the effect of extending those provisions for all but the highest income people. i believe in the past when the staff of the joint committee on taxation have done estimates or proposals like that, and they are the ones who do revenue estimates as you know, i believe there are estimates have suggested that the

spending -- the budgetary effect is about 3/4 or 4/5 of this total amount. so that only a quarter or fifth of this $5.4 trillion is attributable to what happened to the expiration of the lower commercials -- versions of the highest tax rate. of the total here, i think about 4/5 is the effect of extending all the tax provisions except the rate, the highest rate, so 1/5, roughly is the effect of extending the high rates. and one needs to be careful about describing that as provisions to heighten people as you know people at the highest incomes pay some tax each of the successive rate up to the highest rate. trying to be careful about the wording, but garbled a key

point. >> do you see any impact of the downgrade last year on the deficit? either debt interest payments -- >> interest rates as we project them in this outlook are lower than the rates we projected in the summer outlook. and that reduction is importantly because market interest rates have actually fallen. since we produced that earlier forecast. in addition, not just current market interest rates, but the implied future rate that one can extract from quotations and financial markets. in addition, other forecasters, when we look have lowered their forecast of interest rates. on balance the set of news, the financial markets have seen since our previous forecast, suggest lower borrowing costs

not higher. now, a number of -- there are a number of pieces of news that probably play a role in that. our part is what's happening in europe. the financial situation in europe has clearly worsened and i think there's much more concern about the possibility of really terrible outcome in europe. part i think in the summer was concern about the weakness of the u.s. economy. and with that said not just about the demand for credit today but the demand for credit over the coming years. part of the news was about u.s. fiscal policy. so we don't know how to separate out the part that was due to news of u.s. fiscal policy. i think an important risk in our forecast is the possibility interest rates will rise more sharply than we have built in here. it's also possible it could be lower. we try to construct forecasts in the middle of the distribution of possible

outcomes. but these rates that we see in financial markets are a good deal lower, again even for the end of the decade, are a good deal lower than we would expect ourselves given the state of the economy that we think will be in place at the end of the decade. given the demand for credit. given the fiscal policy that we see. so in essence we are surprised how low interest rates are. and we take some signal from the financial markets. i think appropriately, but in countries that have had large amounts of debt and growing amounts of debt, financial markets' reactions to that can change very quickly, and if you looked at countries in europe that have experienced particular problems over the last couple years, can you see very quick increases in interest rates when market perceptions turn.