department of defense, which evolved, i think, a very workable formula whereby threat data is provided to key companies, particularly those involved in thethe bigger issueo 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 -- i personally have deferred to the white house. >> 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. it's 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. focusingething we're 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 -- is napolitano in charge? we know the president is in charge, but what is the president in charge of? i need to know who would respond and so on, because i feel that it is the governance issues that are the number one issues that we continue to dither and punt. >> i am just going to jump in here. >> take me on. >> if the lights go off and we are talking and electrical power grid issue, then i would say that my secretary would be the logical person to turn to. >> what is the clear role? >> if i could answer the question i did not get to answer last time, and then i will get to that.

your first question about who is in charge -- there is never a simple answer to that question, especially in this town, because we all have a piecof the pie. but where our responsibilities lie is in securing the .coms, and many parts of .coms related to structural resources, including the power grid. >> have you done this? >> yes, we have. we still have a ways to go in terms of educating and building up this network that we have been working on, and we are trying to bring a sense of urgency to that. we then turn to our partners in the fbi and nsa because as director miller mentioned earlier, you never quite know what the genesis of the attacks

are. it could be a crime. it could be a state actor. it could be an accident. it could be a disgruntled former employee. we work this as a triad. we make sure we are bringing to bear the appropriate technologies to bring things back on line as quickly as possible, and we make sure we have an investigation going to try to determine the source and the attribution. >> first of all, my job, i do not believe this. i mean, director clapper, what do you think here? there you are. is the president going to call you? >> the fact of the matter is it happens a fair amount now. when it comes to identifying the attribution of a particular domestic intrusion, it generally falls to us. what we currently do is we get

ourselves and dhs at the table and we will put a team out as soon as we got the word. there would be a team. generally, we would lead the team. wherever the outages are, wherever the investigation leads us, we would have a team of ourselves, dhs, and if it goes overseas, we would have nsa and others from the community in there. we do this as a matter of course now when we get a substantial intrusion that needs immediate investigation. >> i think what director miller has described kind of captures the essence of what the intelligence community's responsibility as which is the detection and attribution of an attack writ large, whether foreign or domestic. it just so happens that the administration is sending a senior level team to brief the entire senate on cybersecurity tomorrow, on the threat and what needs to be done about it.

secretary napolitano i am told will be there. my deputy, john brunner from the white house. >> there are 11 coming. that means that there are 11. but i will come back -- not only is it great that they're going to come and brief us. it is great that the national security council has come to this issue. but my question is, still, getting back to rockefeller and the sense of urgency, do you feel that the current authorities related to title 10 and title 50, and the issues surrounding homeland security, not talking about the current situation, are the way they ought to be when the composite torrey of knowledge in cyber -- composite knowledge and cyber rests at the national security agency? >> i would say that there probably could be more than to take advantage of that technical

expertise that you recognize that resides in an essay. the department of defense response to that was to establish cyber command as a war fighting headquarters, a smartly, i thought. i think there is a debate, frankly, that maybe perhaps the responsibility of dod is just a bit bigger. this would be a good topic to bring up tomorrow. >> we have substantial expertise in this arena that we have built up over time. we of agents positioned overseas to -- have agents positioned overseas to work closely with our counterparts in a number of countries. we have, over a period of time, built up an expertise -- not to

say that nsa does not have substantial at -- substantial expertise as well. much of it is the same kind. in terms of power, i think nsa has more power in terms of capabilities, but in terms of expertise, i would not sell ourselves short. >> i would not sell you short either. >> i would commit that we -- comment that we are committed to leveraging nsa's expertise and we think we have made a lot of progress in that regard. >> well, my time is up. i think, senator feinstein, this shows that some of the issues are here. we cannot stop the threat. we can only stop ourselves. this is why i think we need to have a robust new legislative framework, and we have to de- conflict these issues. instead, we just remain foggy and keep hunting. -- punting.

>> thank you. you headed our cyber task force. i think senator rockefeller for his interest. you are both correct. i think we need to both get -- i think we need to get cracking on it. the issue is whether the standards mean something or if they're purely voluntary in .com area. i think that needs to get resolved. i thank you both for the work you have done. thank you very, very much. let me move on and let me give you the list as it remains, because it is going to take as close to 1:00. senator rich, senator nelson, senator rubio. it would be my intention, unless there is objection, not to do a second round but to complete this round. senator coats? >> thank you. i would like to pursue an issue

that you brought up in your opening statement relative to the situation that exists with iran and their pursuit of new killer is asian and potential -- nuclearization ew kill and potential is really respond. we hope that sanctions will -- is really response. -- israeli response. we hope the sanctions will present an israeli response. sanctions to this point have not made any kind of difference with

the regime in iran. does anybody disputes that? >> no, sir. that is precisely the intelligence community view an assessment at this point. the sanctions as an's far have not cause them to change their behavior -- sanctions as imposed so far have not cause them to be changing their behavior or policy. >> we judge the rimbaud's though nuclear decision making is guided by a cost that -- iran's nuclear decision making is guided by a cost-benefit approach. is there any indication that sanctions to date have changed their view relative, from a cost

benefit standpoint? >> i think it is fair to say, and we could go into this in more depth in a closed environment, that there is dissension and debate in the political hierarchy of iran. so, there is not unanimity about the is. to the extent that the international community is united on this with the u.s. leadership, i do think they pay attention to international opinion and what others think of them. certainly, if there are impacts on their oriole exports -- oil exports that would affect their financial position, that could have a profound impact on their decision making calculus.

that is what we mean by cost- benefit. >> but that is more of a hope and a wish than a hard reality, from what i understand. >> as i said, at this point, the sanctions have not cost that calculus to change, apparently. but as the pressure ratchets up, there is the prospect that they could change. >> would a dramatic decrease in oil prices have a bearing there? what is the likelihood of that given the world demand for oil and energy sources? >> well, it could, and that is what we will have to see, how it plays out. this is dependent on the willingness of the maine customers of iran to support that position. >> but those customers are not supporting the sanctions. >> i would not say that. again, we can discuss this in closed session as to who is and

who is not. >> ok, we can discuss that in closed session. i do not see any public acknowledgment that china, india, some of the fast-growing nations have joined us in supporting rejecting any kind of export. >> if i could, senator, actually, publicly, it is well known that china reduced its imports of iranian oil in purchases. these are matters of public record. it remains to be seen whether that continues. it appears that saudi arabian production is ramping up and can fill some of the demand that might have been met by iranian exports now that there are the sanctions on iran. >> thank you, director, but are not in a situation where the clock is ticking? certainly, the clock is ticking on the iranian side in pursuit

of nuclear capability and perhaps nuclear weapon is asian -- weaponization, and it has been for some time. it is my view that it is going to be tough to beat the clock that is ticking towards a nuclear iran. we see how difficult it is to ratchet up the sanctions and get world community support. it took us a long time to get european support of the current level of sanctions. we do not have chinese or russian support of it. it is unlikely that we would unless something changes that we are unaware of. when you put that in the context of what israel must be thinking -- everyone acknowledges that it is more than an existential question for them. we have a time factor here.

we just want to be realistic about what's described as the hope of sanctions, that they can bring about the desired result. >> i think you have very accurately captured the gravity of the situation and what is at stake here, what is at stake for israel. >> would a naval blockade, which i guess would be an act of war, would enable blockade achieve the kind of cost-benefit ratio that would cause them a change in attitude? >> i do not know, sir. we would have to take that one under advisement. we could air out the possibilities there in a closed session. it would certainly have an impact on our calculus. whether it would move in the direction of a positive outcome or a negative outcome, it is

hard to say. >> of course, the outcome we want -- the outcome that seems to be trending and taking place is trending negative, but the outcome we want is that their nuclear capabilities diminish. it seems like we have had years to ratchet up sanctions and tighten them to a point where we see a change in the supreme leadership decisions on this. the recent movement to enrichment and the defiance in terms of public statements that come out of iran all indicate that so far -- maybe they are disputing this internally -- but so far, we have not seen positive results from that. viewing it from the standpoint of israel i think clearly reaches the level of perhaps in number one challenge of 2012 as

the chairman has indicated. >> well, the latest round of sanctions, of course, is really just being felt, and it will take a number of months. but as you know, there is a clock ticking during that time, and there is the inexorable progress, if you will, in the refinement of additional uranium to 3%, 20%, and a variety of other activities going on. the iaea has ladies out very effectively. but -- has lead these out very effectively. there has been a drop in the value of iranian currency. inflation is also taking off. there are problems of

unemployment. but the overall situation is one in which the sanctions have been biting much more liberal the -- literally in recent weeks than they have until this time. we have to see how that plays out. what is the level of popular discontent in iran? does that influence the th strategic decision making of the supreme leader and the regime, keeping in mind that the regime's paramount goal in all that they do is there regime's survival. >> i have questions particularly regarding the perception of israel on all of this, but i think that is better left for a closed session. >> senator coats, in response, i

think it is instructive to remember on this what the policy is as stated by the president in the state of the union. he said, "america is determined to prevent iran from getting a nuclear weapon, and i will take no options off the table to achieve that goal." then the secretary of defense interviewed on 60 minutes said the u.s. and the president have made this clear that we do not want iran to develop a nuclear weapon. that is a red line for us and it is a red line, obviously for israel, so if we have to do it, we will do it. the question is, what is it? if we have evidence that they are proceeding with a nuclear weapon, then we will take whatever steps are necessary to stop it.

question, including military steps? answer, there are no options that are off the table. >> with the senator yield for a quick response? >> of course. >> in a previous life, i served here and i heard much the same rhetoric regarding north korea. and now we know that north korea, despite all of our rhetoric, possesses nuclear capability. i hope we do not talk ourselves into a situation where we are not able to back up what we say. we did not do it before, so it raises skepticism on my part, statements made by both republican and democratic leadership relative to what you indicated unquoted, but we have been down this road before. -- and "it, but we have been down this road -- and quoted,

but we have been down this road before. in the case of north korea, our policy was words, not action. >> the senator believes the stakes are so high that the policy will be executed. what i wanted to do was, i wanted to give an example from an earlier discussion of how we are meeting the terrorist threat, and i want to particularly congratulate you, mr. fbi director, because we just had a plot in florida, in tampa, to have several truck bombs go off downtown to kill a lot of people. and the fbi was all over this in coordination with the u.s. attorney, in coordination, bringing in local law

enforcement, the sheriff's office, the tampa police department, but what is also instructive is help with intelligence out of the muslim community to identify the potential perpetrator and to stop him before he did the act. i think it is another example of how all of these different stovepipes that worked -- that were not interacting before are beginning to. so, i congratulate you. >> thank you. it was a team effort of particularly state and local law enforcement and other federal authorities working together over a substantial period of time. i particularly want to signal out the -- single out the muslim community for recognizing a threat and bringing it to our attention.

most of our cases have come from individuals within the muslim community that they have brought to our attention, concerned about the potential threat, which we have run and ultimately resulted in the destruction of a plot. >> madam chairman, thank you. >> thank you, senator nelson, for your patience. senator rubio. >> this is a general question. i do not know who handles it. it has to do with iran's intentions in the western hemisphere. i think it is generally accepted that iran is willing to sponsor and use terrorism as a matter of foreign policy. i have been on this committee for only a year, but i recently went on a trip to latin america. ahmadinejad recent record needed a trip to latin america. i think it is part of an effort to show he is not isolated.

i think some of these leaders, particularly one in venezuela, have some sort of illusion that he is a global figure and is actually irrelevant individual. beyond that, there is something else -- actually a relevant individual. beyond that, a couple of things are concerned. for example, the venezuelan banking system is a significant banking system. billions of dollars flow through there. could it not be used as a place to ebay sanctions, for example? they also -- a place to evade sanctions, for example? they also opened a banking system which we know is used to funnel funds to hezbollah and other groups, so we are concerned about that. and then, any other kind of asymmetrical capabilities

established in the region. kind of looking at that, how serious a threat is it? how focused are we on it? obviously, relatively speaking, it is not what we confront in the middle east, but what is the state of that? there is not a lot of talk about iran intentions in this hemisphere? >> we do follow it, and i think you're quite right in hiding it. in this day and age, iranians are looking anywhere for a friendly hand. ahmadinejad's trip was not all that successful. obviously, we're very concerned about connection with venezuelan. of course, the most obvious manifestation of this outrage, if you call it, is of course the plot uncovered to assassinate the saudi ambassador here in washington, which was uncovered in mexico with the cooperation, by the way, of the mexican authorities.

so, there is more to unfold here. i think they are consistent with their outreach elsewhere. they're trying as well to penetrate and engage in this hemisphere. i would like to research a little bit these financial banking, potential banking connections. i am not current on that, specifically, but i think if this is, that is indicative of their attempts to, again, evade sanctions, which they have worked very assiduously at in the past. >> just a follow-up on that, and i appreciate it. obviously, we are limited in what we can talk about in this setting, but i would just encourage, whether privately or otherwise for the administration and others involved in the security community, to think about -- i hate to use red lines

-- but certainly things we are not going to tolerate in the region. some may think we are so distracted in other parts of the world that there are things they can get away with in terms of capability. i think we should not be out looking for conflict, but there are certainly things that we should not allow and that we should consider that as the policy, expressing that. my last question is about mexico and any assessment we have with regards to drug violence in that country posing a threat to governance, particularly in such a year in which these key elections are going on. >> david petraeus just returned from a very successful trip to mexico so i will ask him to address that. >> i did just visit there. there is no question about the magnitude of the challenges their to the rule of law.

in certain areas, it does not exist. but there is also no question about the determination of the government of mexico, and indeed the progress they have made in a variety of different ways, both in terms of results in taking key leaders of the criminal gangs, the illegal narcotics gangs out of action. very substantial results in that in the last two or three years in particular, but also in their organizing for this effort, and the building of institutions. indeed, i think that the legacy of the current president will be the institutions that he has built during his time in terms of, for example, the national police and coming to grips with some of the judicial challenges. it soon to open more than five

additional corrections institutes. indeed, the comprehensive approach that they are taking to this effort is truly a civil- military law enforcement approach, because that is obviously what it takes to retrieve certain areas that have gotten away from the grip of the government and the writ of law, if you will. that is the impression that it took away from this, and clearly the fact that this is going to continue to be a very tough fight, but my sense that the government knows what needs to be done, has been building, again, these critical institutions that are necessary to carry out this comprehensive campaign that they recognize is necessary. needless to say, all of the different elements of the u.s. government are partnering with their respective elements in the mexican structures. the integration of intelligence

that we have tried to achieve here in the united states is something that they are also trying to achieve in mexico and something with which we are involved in trying to support. >> thank you very much, senator rubio. senator wyden has one last question. >> madam chair, thank you for your courtesy. director clapper, you know, the supreme court ruled last week that it was unconstitutional for federal agents to attach a gps tracking device to an individual car and monitor movements 24/7 without a warrant. because the chair is being very gracious, i just want to do this briefly. can you tell me as of now what you believe this means for the intelligence community, number one, and two, would you be willing to commit this morning to giving me an classified response with respect to what you believe the law ought to be?

this goes to a point you and i have talked about in the past. i strongly feel that laws and their interpretations must be public, and then of course, the important work that all of you are doing, we very often have to keep that classified in order to protect secrets and other well- being of your capable staff. so, to the parts. one, what you think the law means of -- as of now, and would you give me an unclassified answer on the part of what he believed the law actually authorize? >> the judgment rendered was, as you stated, in a law enforcement context. we are now examining, and the lawyers are, what the potential implications are for intelligence, foreign or domestic. so, that reading is of great interest to us. do you want to add anything?

one more point i need to make in all of this, we have, and we will continue to abide by the fourth amendment. >> thank you. >> thank you very much. i would like to end this by thanking all of you. i think it has been a positive year as much as one can say anything is a positive year in this area. i would suggest looking at the list of the 20 plots that have been prevented this past year. it is really consequential, the work that has been done to protect the homeland, as well as the work that has been done abroad. i think we really have of very important intelligence team together, and i think it is really progressing, and i know on behalf of the vice chairman and myself we are very grateful to you. i know that includes the whole committee as well. thank you very much for your dedication, for your talent, and for your extraordinary service. this hearing will be adjourned.

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>> nv is holding its republican caucuses today, and we expect to start hearing results at about 8:00 eastern time. mitt romney and newt gingrich will both be in las vegas and we will bring you their reaction to the caucus is live. we expect to hear from mitt romney at about 10:40 p.m. eastern and newt gingrich about 11:00. you can join the conversation on our facebook page, where we will be getting feedback on whether you think any of the candidates will drop out after the nevada caucuses. you can share your thoughts at facebook.com/cspan. join us tomorrow for more campaign coverage. we will speak about president obama oppose the reelection strategy -- president obama's reelection strategy and the iran

in nuclear program. we will look at campaign fund- raising and supertax tamara starting at 7:00 a.m. here on c- span -- super packs starting tomorrow at 7:00 a.m. here on c- span. >> the house will continue their work on tuesday with a fourth public meeting to discuss extending the payroll tax. all sides agree it should be extended. the talks are focused on how to pay for it. >> i do not hear a fundamental disagreement in the philosophy that if people get a ged that enhances their lives and enhances the ability for them to get a job down the road, i do not hear a disagreement with that. i hear an excuse as to why not to do it rather than the fundamental philosophy to rearm people with an education so that when they go into the work force they have an additional tool. >> to link the social insurance program designed and 470 + years

functioning -- for 70 plus years functioning to provide financial support when you lose your job, to tie it to this requirement for training, contradicts the notion that the more education you have today the better off you will be in this economy. >> watch the rest of this meeting for the two others they have held on line in the c-span library, archives and searchable at c-span.org. >> on wednesday, the senate budget committee held a meeting in europe's budget crisis and possible solutions. witnesses who testified agreed that what is going on in europe could be a wake-up call for the u.s.. you will hear from experts from the american enterprise institute, the peterson institute for economics, and mit.

this is a little over two hours. >> today's meeting will focus on the eurozone and its potential impact on the outlook for the u.s. economy. we have simon johnson, senior fellow at the u.s. institute a professor at the sloan school of management. dr. johnson has testified before this committee on several occasions, and we'd welcome him back this morning. we also have the director of the peterson institute for international economics. he recently announced that after 13 years of ably leading the peterson institute, he will be stepping down as director and focusing more of his time on research and writing.

i want to commend him for his years of leadership at the institute and wish him well in his future endeavors. of course, he has testified many times before the budget committee as well. we also have with us this morning dr. adam lerwick, a visiting scholar at the american enterprise institute, someone who is deeply knowledgeable on european affairs, having spent the last two years there. we look very much forward to your testimony and welcome you to the budget committee this morning as well. i would like to begin by just very briefly reviewing the situation as i see it in europe. to be clear, what is happening in europe has ramifications across the globe, certainly including the united states. here is the front page story from the washington post last

week. imf fears european crisis poses serious risk of recession. yesterday, we saw reports that european leaders had agreed to new measures to a dress the debt concerns in their countries. it was the new york times headline on the agreement, european leaders agree that new measures needed to enforce budget discipline. i would very much like to hear from our witnesses on this agreement and whether it is the right answer for europe at the moment. most economists believe the eurozone is already in recession. economic growth has fallen from an anemic 1.6% in 2011 to a negative 0.4% in 2012.

at the same time, european nations are saddled with large and growing debts. we can see that greece and italy both faced debts well above 100% of gdp. of course, our own circumstance, we now face a gross debt of more than 100% of our gdp. the threat to the u.s. economy is clear. here is how the former vice chairman of the federal reserve described the situation in his testimony before the budget committee last week. "my rough outlook for u.s. gdp growth in calendar year 2012 is about two 0.5%. the biggest threat to the economy is financial contagion from europe. if we get a worst-case scenario, a european financial blow up that looks somewhat like lehman brothers, i think most, if not all of that two 0.5% growth

could evaporate in a worldwide recession. we need to remember that almost one-quarter of u.s. exports go to our european trading partners. what happens to the european economy could have a very real impact on u.s. manufacturers and u.s. workers. we will turn to senator johnson. then we will turn to our witnesses. i want to thank senator johnson for filling in for senator sessions this morning. there are many competing meetings of other committees this morning, including markups which means that colleagues who would like to be here simply cannot be your -- cannot be

here. we understand this is a meeting in which there are many competing priorities for members of this committee. >> thank you, mr. chairman. i am here because this is my top priority. this is the greatest threats that does face our nation. it is tied into our need to really achieve economic growth. that is what the threats of europe poses to the u.s. i want to thank you for your comments at our last budget meeting. you indicated your desire to work towards passing a budget resolution and one that would reduce our deficit by as much as $5.50 trillion. it is a great goal, one that i want to work with you to try to achieve. one of the things we will have to do to achieve that goal, it we have to be mindful of our

obligations under the budget act. be mindful of those dates. the president was -- should be presenting a budget on the first monday in february. we will probably miss that by all week. ok. this committee has an obligation to pass a resolution by april 1st. the senate should be acting on a concurrent budget by april 15. i think we need to hold our feet to the fire to get that done. the minimum amount -- the minimum requirement the american people should expect from this senate is to pass a budget so they understand what the plan is. >> if i could interrupt the center. one unknown -- interrupt the center. one undone we have to deal with is when we will have at cbo cost estimate.

-- one on known we have to deal with is when we will have the cbo cost estimate. thatis the one on unknown is out there. i would like to get this done as soon as possible. we had a schedule -- we have a hearing scheduled. we are hat -- we are hearing from the secretary of defense, secretary of treasury, secretary of transportation. the one thing that is out there that is an unknown is when cbo will provide the estimate. >> we should ask them that question and keep his feet to the fire. you have done such a good job of providing graphs. imitation is the greatest form

of flattery. i want to describe what i think is the problem facing our nation. as i was reviewing the testimony, my concern is that we are trying to address a problem of fiscal mismanagement with monetary solutions. we are seeing that in europe and it is not working that well. one of the charts that i showed to groups in wisconsin is i describe the history of art dead. i like using this one because it shows in 1980 -- of our debts. it took us 200 years to accumulate 2.3 trillion dollars worth of debts. we just entered an agreement to give the president the authority to increase the debt ceiling by $2.10 trillion. we will blow through that lens in less than two years. that is depressing. the next chart will show a total

spending. people use shorthand version that we are cutting spending. we are proposing cuts. nobody is proposing cuts. this is a jaw dropping the charges. when i showed to groups in wisconsin, 10 years ago, our federal government spent $1.90 trillion. last year, we spent $3.60 trillion. we doubled spending in 10 years. the argument moving forward, the house budget -- the graph is pretty visual. we're not talking about cutting the size of government, we're talking about reducing the size of growth. $16he 1990's, we spent trillion over a period of 10 years. the last 10 years, we spent $28

trillion. the argument moving forward to -- he was looking to spend $46 trillion. you heard about that six trillion dollars in draconian cuts. that is what we are talking about. neither 46 or 40 is less than 28. this is the eye-popping charge. it compares the total liabilities to the united states to the total net assets. these are last year's figures. i have not revised the charge. last sure, according to the balance sheet of the united states, the total federal liability of medicare, social security, total debt, and reliability of federal retirees was $99 trillion.

that is an and comprehensible figure. -- and comprehensible figure. i do not think it is rational to believe that health care law is going to lower health-care costs. the other assumptions we are making, cbo just released the latest baseline. they are assuming that we will lead these tax cuts expire, all of them. that is a $5 trillion at bats. i do not think that is going to happen.

i have written some op-ed. we are deluding ourselves to think that this thing is going to be deficit neutral. the other thing we have to worry about is the economic growth assumptions. we have seen a couple of studies. cbo says to the extent we have missed our growth targets by 1%, that adds $3 trillion to our debts and deficits. we need to be concerned about that. the final thing is we are trying to hold the deficit. it is a spending problem. i would caution anybody who wants to increase tax rates. i want to raise more revenue by growing the economy. i want to raise more revenue by significant tax reform. if we just raise rates, we delude ourselves into thinking that we will have revenue increases. you would harm economic growth.

in the end, that is what we will year in the testimony today. the solution in europe, trying to enact governmental policies that will promote economic growth. in the united states, we had the exact same dynamic. we have to make sure that nothing we do in washington it detracts from that economic growth. i have one final charts that speaks to the u.s. government in relation to the european economies. this is incredibly geometric. i am an accountant and i am looking at metrics. the size of our dead in relation to gdp is an important magic. but -- of our debt in relation to gdp is an important metric. when you add in state and local governments, the total government is 39.2%. 39 cents of every dollar that our economy generates filters to some form of government.

government does the number of wonderful things, but it is not effective and efficient at many things. it is a very bad metric when you compare it to european socialist nations. congratulations, america, we have arrived. norway spends 40% of government. greece, we will be hearing about to greece and italy. italy is 49% and france is 53%. we need to start reducing the size of government. i appreciate the indulgence, chairman. i will turn it over to the witnesses. >> there are lots of things you have said i agree with. some that i do not. i think my sharpest area of disagreement would be the new health care law. cbo has told us that it will reduce deficits by more than a trillion dollars in the second 10 years. i believe that is the case.

i know you did not share that view. that is what makes our democracy vibrant. there is much i agree with. what i most strongly agree with this been unsustainable course we are on. it is undeniable that we are on an unsustainable course. we have had the head of the congressional budget office testified before this committee that we are on an unsustainable course. we have had the head of the office of management and budget testified. we've had the chairman of the federal reserve testifiy. we of how the secretary of treasury testify. i think it is undeniable. it is really the central thrust of your argument. i think you are entirely right about that. we have an obligation on this

committee. we have an obligation in the senate. the house has an obligation. the president has an obligation to try to get us on a more sustainable course. you know, it does not take that much to get us to balance. a 6% increase in revenue from what is currently scheduled, a 6% reduction in spending, would save us $6 trillion over 10 years. and balance the budget. i do not think it should be an even split. in everybody that i have served, -- every body that i have served, we have weighed heavily on the spending side. we need additional revenue. but not with an increase in tax rates. that would be counterproductive to our competitive position in

the world. there are places where there is agreement on both sides, sir. my fondest hope is that we find a way this year to actually make substantial progress. i am leaving after this year. i would like nothing better than to leave behind a legacy of getting america back on track. one of the things facing us, obviously, is an external issues. we are discussing, i think, one of the biggest threats to our economy -- the european economic challenges. another is what could happen with respect to military engagements around the world. we will be dealing with that at a later hearing. let's go to our witnesses this

morning. we will start to with simon johnson. dr. johnson, a thank you for being here. we will go right through the witnesses and we will open it up to questions. we will do seven-minute rounds and thank you to all the witnesses. dr. johnson, please proceed. >> thank you. thank you for placing the conversation in the context of the u.s. budget and are unsustainable situation. that is absolutely correct. i would like to frame my remarks very much to respond to that. let me make three points. first of all, the euro zone has already failed. the euro zone was established as a bastion of stability in the world. it was designed to further cement the european union and to build a larger economy.

this has not worked. fiscal mismanagement lies at the heart of their problems. i completely agree they're trying to solve the fiscal problems through monetary innovations. i do not think this is going to end well. for them or for us. with regard your question about the new agreement, the latest round, i think this is a very small step relative to their problems and relative to what they need to do. we should encourage them to do more, but it is not just a fiscal problem. it is a fiscal problem on top of the competitiveness problem. on top of debt levels. portugal, ireland, italy, at

these debt levels are not sustainable under the current arrangements. even my more optimistic colleagues will agree that the outcome in europe is going to be austerity. that is a good scenario. you have high unemployment, low growth, and that is not good news for our situation. the downside scenario is much worse. spillovers from their sovereign debt problems and their financial system and from there mega-banks -- those issues were clear already in 2007 and 2008. they have not addressed those issues and they have not made the system safer. it is a dagger pointed directly at our financial system. in terms of the direct negative

impact on our economy and our budget, this is a huge risk. it is a risk that week he can take steps to mitigate. we cannot solve their problems for them. that would be extreme arrogance on our part. we can build better protections for ourself. the financial-services roundtable has a report out this morning claiming that all is well in our banks and that we had a fortress balance sheets. it is not true. that is not an accurate depiction of the level of capital and equity financing relative to data that we have in our banks. the federal reserve is well aware of it. you should as the remarks of former vice chair. i am sure that ben bernanke's colleagues sure those in private with you. they must take the logical steps of suspending bank dividends. it makes no sense to allow the banks to pay out that capital.

they should keep it on the balance sheet and build up their equity relative to the losses they could face, for example, if the euro stock market were to collapse. that is a real possibility. if that market were to collapse, we need as much of a buffer as possible. the suspension of bank dividends order by the federal reserve would stabilise and help strengthen our financial system. we should be scoring the fiscal impact of financial calamity. the dangers posed by the financial system that is run irresponsibly. they do score you -- for you important contingent liabilities. but do not know exactly what it will cost in 20 or 50 years.

they should do the same for our financial structures. what would happen if there were a serious sovereign debt problem for italy? how would that affect our real economy? assuming that the dodd-frank principle holds, it would still cause a massive recession. it would push up the borrowing at the federal level. we should be scorned that. you should be looking at that. -- scoring that. you should be looking at that. i think you should impress upon him. i am on the cbo panel of econic advisers. i think they will be receptive if congress pushes them hard in that direction. there are serious liabilities. finally, with regard to the imf, the imf should be working to build a fire wall, not within

the euro zone. they should not lend more money into the dangerous and counterproductive situation we see in the euro zone. the euro, they are perfectly capable of sorting out these problems themselves. they have not done it yet. they need a lot of encouragement. they're getting some from the executive branch. more encouragement from congress through all available channels would be helpful. the imf should focus on protecting other countries. build a firewall outside of the euro zone protecting innocent bystanders. help other countries with whom we do a lot of trade. help those countries bought for themselves against calamity that may arise in the european situation. they have issued a paper to their membership. unfortunately, it was a secret

paper. the details have been poorly communicated. i strongly advise you to bring senior imf staff in for a private briefing. they can brief you and private and they can communicate their intent. i would urge you to impress on them, build a firewall outside of the euro zone. not attempt to fix of the european -- the euro zone. the europeans can do that for themselves. >> thank you for your excellent testimony. >> thank you, mr. chairman. thank you for your kind remarks on my stewardship. for 30 years, -- i hope to continue to participate in activities like this. one of the great privileges is -- has been to work with you many times. i thank you for the opportunity

to do so again. i share the view that seidlin has expressed. -- sign and has expressed. europe is in -- simon has expressed. europeans have failed to get ahead of the crisis ended failed to restore market confidence. however, i take the view that none of the apocalyptic forecasts will be realized. i disagree with assignment that the euro get some has failed. i do not think there will be serial default. i do not think the year will break up. it is a possibility that greece might break up. i do not think there will be any widespread defections from the euro zone. i think europe is going to come out of the crisis stronger and will restore its position as a key poll of the world economy. i have watched the evolution of

the european integration project for the last 50 years. they have -- they have overcome every crisis and have come out of their stronger and moved forward and better. if you look at the current crisis, every time it has reached a pivot point, where there was much commentary, every time that has happened, they have done enough to avoid the apocalypse. they have kept going forward. they have built institutions. they have built a fire wall. they have avoided disaster. for a very simple reason it will continue. the overwhelming -- is to hold the european union to gather. that now means holding the euro zone together. that has become the definition of europe. they know the future of europe

is wrapped up in sustaining the euro. i am confident they will do it. the history of europe. remember why they created the european union in the first place, to overcome the previous millennium of slaughter. i happen to visit the holocaust museum again. if you have done that recently, it gives you plenty of memory by the europeans have pulled together to avoid letting europe explode into the kind of holocaust and disaster the experience. they will hold your together. in addition to that, they have an overwhelming economic interest. germany has a nirvana and economic situation in europe. germany is the world's largest trading surplus country. it has based its will on economy

on an export led model. in the old days, when they had their own deutsche mark, is frustrated the germans. the germans have the world's largest trade surplus and a weak currency. for them, it is a perfect outcome. every german knows it and they will continue its at any price. if you went to a new deutsche mark, it it would explode of pork in value and the whole german economic progress -- we would -- it would explode upward in value. both germany and europe as a whole has a huge interest in holding the dressing together. the problem -- my conclusion is that germany will pay whatever

is necessary to keep the euro zone together. the european central bank will put in whatever amount of resources is necessary and will play lender of last resort even though they cannot -- there is one problem with this scenario. they cannot say they're going to do what i am confident they will do. why not? it would be the epitome of moral hazard. if the germans pronounced that they were going to rescue everybody no matter what. that would take the pressure off. mondi is speaking at our institute a week from friday. he wants to keep the pressure on his country. so the domestic politics will support the reform program. the germans and the ecb cannot say they will provide all the resources. secondly, the usual juggling among the creditors.

germany and the other successful northern europeans, the ecb, the private banks, and the international monetary fund. they are trying to -- they are trying to preserve their own negotiating position. none of them wants to say he or she will take care of the whole problem. the result is a situation very unsatisfactory for the markets. the markets want to hear assurances and firm words of rescue. those cannot be given. therefore, the market situation is likely to remain unsettled and volatile, even though i am confident the outcome will be successful in the sense of successful financial engineering to avoid financial break down. that is not getting to the recession and the underlying economic problem.

i want to draw two or three major conclusions for the united states. i would be happy to answer more questions about the european situation. the united states has a huge interest in this situation been resolved. we have to do what ever we can to support a successful resolution of the european problem. i agree with my friend simon that the europeans should provide the bulk of the resources to do that. i disagree with him that