realtors discusses the u.s. housing market and later a usa corresponded talks about his papers analysis of state spending for services, employee compensation, and infrastructure maintenance "washington journal" is next. ♪ >>host: the paper's report the capture of a terrorist. the number of people who have been arrested for plotting terrorist attacks in the united states over the past year has risen to 20 in presidential politics the white house says there looking at wreck santorum as a real political opponent. the maryland house of delegates passed to the same-sex marriage bel pre governor chris christie vetoed the bill.

it has been three years since president obama signs the recovery act into law which produced stimulus money. vice president joe biden called the investment in critical role in turning the economy around. the rnc chairman reince preibus says there have been broken promises and it has created massive desperately want to get your thoughts on what stimulus money has produced over the last three years. if you want, you can weigh in on a couple of runs. you can tell us why it has or has not worked. the fall numbers are on your screen. -- the phone numbers are on your screen. you can send us an e-mail at journal@cspan.org. you can also reach us via tw itter. john merline has this story --

>> more from this story taking a look at the national debt -- that is some analysis done from "investor's daily"when it comes to this to analysts fund. this is from vice president joe biden --

that is an op-ed from the vice president for it and opposing of bed is from reince preibus prius, the head of the republican national committee --

to give you some statistical analysis as far as the money that was spent in the initial recovery act -- this is the way it breaks down -- $840 billion divided into three categories and this is from the congressional budget office -- there are categories for each of those and we will go through that during the course of the morning but again, your thoughts

on the three-year anniversary of stimulus funds and united states, the signing of a recovery act and you give us a call from the numbers on your screen. we ask that if you have called us last 30 days, all of doing so today. you can also send us your thoughts on twitter and e-mail, as well. let's go first to a republican line from the bronx, new york good morning. caller: i don't think the stimulus or because the unemployment rate is now at 9%, not 8.3%. we lost 1.6 million jobs in this country. all the money that was given to these companies are all obama possibilities. i feel the country will sink. it has sunk already but it will sink even more with the health care law. when it goes into effect, it will hurt small business and other companies out of business.

host: the local level, did you see any effect of the stimulus whether it be road projects or any other type of projects? caller: not at all, there are more pot holes in the city and it is unbelievable and seek more new bridge is being put up and announce the new roads being paved. it looks like the money has gone to waste. host: haunts bill, alabama republican line. caller: i believe the stimulus worked. the economy would have been much worse if it they had not. if the government had not put up public funding. [inaudible] i think it has helped.

it would have been much worse. host: when uc figures like $845 billion, when you look at this type of figures and the amount of money that has been put into the economy, you say we have gotten something out of that? caller: on a local level yes you can see new road projects. there are new covers on the bus routes that were not there before. on top of that, a lot of those new projects were created by the stimulus money. to keep the country out of depression, you want to raise the debt limit to keep us from falling. host: you can join us on

twitter -- this is the third anniversary of the stimulus bill and we are asking if it worked. washington monica, hello? caller: to start with, i hear all these figures and i hear the debate going back and forth and nobody has come to a final decision if we were to take and understand because i am ready to go forward with public sizing myself being a victim of this recovery act. i started self-investigating and realizing that it became a case

study of a statistical act of the government and federal government. maybe we add figures to the table and we should stop and think about what it is worth whether it is the dollar amount would put on the table or justice of liberty. when we are not facing justice as a unity for a quality to this whole nation, we're not doing justice. for ourselves or anybody. host: pittsburgh, pennsylvania hello -- caller: i think the stimulus has worked. i think we can thank mr. obama and timothy guyton their and their aides and also their economists for pursuing the exact opposite program to those

that some of the countries in europe are doing. there is a very good example in the fact that england is a sinking further and further into economic doldrums and some of the other countries are also instigating huge cuts in all kinds of government programs. they are not getting out of their recession or depression. host: your area of the country was hit really hard as far as economic issues. how have you seen pittsburg change because of the stimulus? caller: i think pittsburg has largely escaped because of not having industry any longer. it is more computer and technology-centered. we seem to have escaped the worst part. we did not have a housing boom

and so we pretty much have been on an even keel here. i don't think that i see anything related to the stimulus here. host: you said you thought were so what would be an indication that it has worked? caller: the fact that the economy is turning around and somehow, from somewhere, jobs are increasing. although some of the polls have not shown exactly, i think that mr. obama and his cabinet have managed to turn the promise -- turned to the promise that he has passed for and i think another term will show that he will be able to provide anything that is needed in this country

to keep it on an economic course. host: one of the legislators that was on the house floor who has been commented on this is representative cassie mcmorris. she used a gop radio address to talk about the anniversary of the stimulus endeavor thoughts on what it has produced. [video clip] >> friday marked the three-year anniversary of the infamous the stimulus spending bill for the president's team said the unemployment rate would stay below 8% if taxpayers gave his party a blank check to spend and government programs. that promise did not pan out either. in fact, employment has been above 8% for three years running. gas prices have nearly doubled since the president took office and a new health-care laws making it harder for small businesses to hire new workers and provide insurance for their employees. host: on this three-year

anniversary of the stimulus your thoughts. if you want to reach as on the telephone -- the phone numbers are on your screen. you can also send us an e-mail at journal@cspan.org. we go next where independent line from knoxville, tennessee. caller: thank you for taking my call. i want to comment on the stimulus. initially, i was opposed to the bank bailout and the auto bailout and the stimulus. i am still pretty much opposed to the bank bailout. i'm not really sure about the automobile belt out for it as far as the stimulus, i have changed my opposition to it in the sense that after reading about it quite a bit, i

understand it worth it to fund the government projects but also benefits and other entitlement benefits. i wish there had been additional funding but maybe i hope that the stimulus would have had a bigger effect. host: you are saying it should have been larger? caller: yes, i am an independent and voted for george bush both times. i voted for obama this time but i'm not sure who i will vote for this time. i am a defense contractor and i have some large defense contracts and having read about the stimulus, i think they quite a lot of the money went toward tax breaks and backing up entitlement programs and not enough towards putting people to work.

i don't necessarily support the fact that government should fund work in the free market but under this situation because we were headed to a much worse recession, if not a depression i think a much larger sum of money should have been put towards public infrastructure and programs that could have -- especially small businesses -- construction contractors and such were really hurt badly in the recession. host: the caller mentioned how the breakdown of the funds came in. this is the analysis when it comes to tax benefits --

some other news this morning -- papers are reporting of what you may have heard of of revenues or seeing it on television about the man heading to the capital with a vehicle that was loaded with bombs

sebring, florida, republican line, hello. caller: there are 25 million americans out of work in this country and i came through new york to the south on 95 two years ago and there was one american working and the rest of them or mexican. they're not giving any of these jobs to the american people. there giving them to the illegals. they are hiring them as subcontractors and not paying any taxes. the ones that account for unemployment they have millions of them that they have taken off the roles so the unemployment is

probably higher. host: did this stimulus bill work? caller: obama has destroyed this country already, no it did not work. we need to vote him out of office. host: from "the washington post" -- canton ill., democrats line, go ahead caller: i can not believe that anybody would suggest that the stimulus worked. when the president came into office, the unemployment rate was 7.5%, gas was $1.70.

also, an independent study on cnn said each job created by a stimulus cost the taxpayers $277,000. it also stated that over half the jobs created are paying less than ones that were lost or even part-time. it also cited that $4 million was given to a fire department 3.5 years ago to build a new fire department and they are still operating out of date tent. to me, i know for a fact and it has been stated that over half the democrats in the senate and house would not vote for another stimulus because this one failed. host: the guest "the wall street journal" playing out the details of the tax break --

schenectady, new york, republican line -- caller: i was in schenectady which is called of this city that lights the world and ge was born here and i used to employ tens of thousands of people. president obama came here not too long ago and people were excited thinking it would help our city and it has done nothing. the stimulus is a joke. our roads are a mess and there are no jobs. the small businesses that are here are all closing. neighborhoods are falling apart and there is high crime. have not seen any benefit at all. we need a president that will

actually cut $1 trillion and a budget and take a hard look at everything and really get some jobs going. host: there is one response about the president's stimulus plan from the center of american progress -- they put up a web of video. he gives an explanation on why the stimulus worked -- [video clip] in the second quarter of 2009, the first full quarter after the stimulus was passed, gdp still decline but at a much slower pace .7% and begins to grow again in the third quarter of 2009. job losses also begin to slow down immediately. the not to the stimulus, we were losing more and more jobs each month and after the stimulus, fewer and fewer. then we actually start adding jobs again.

take a look at this -- private- sector laos actually peaked in february 2009, the month of the stimulus past and began a dramatic decline. by the 1-year anniversary of the stimulus, a private sector layoffs are back down to pre- recession llate levels. . host: that's when it comes to a breakdown of funding. about $225 billion for contracts and grants and this is how it is broken down into sub-categories. about $90 billion is going for education purposes, about $33.2 billion going for transportation and infrastructure is broadband and federal building and highway construction and waste disposal -- that is about $25.5 billion. these are figures that have been compiled by the white house and

the congressional budget office but you get a sense of how some of the stimulus money broke down for category. three years later, we are asking you out there if it worked and you can give your opinion on that. battle creek, mich., on our democrats line, good morning. caller: thank you for taking my call i would like to respond to the other caller. i think is more relevant to the subject. everyone says the stimulus did not work. that is nonsense. i would agree that the stimulus should have been greater, a lot greater, to help the poor and minority people white people will thrive because they are the majority in the population but you have to think about the poor and minority people that are suffering down the street. republicans want to lead detroit go bankrupt. that is incredible because the tribe is full of minority

people. it used to be white and they moved to the suburbs but the minority people are not thought of and the tea party patriots have all this rhetoric about the deficit. the deficits have been run in america since the creation of america. host: why would you make the case that the stimulus worked? caller: system was worked in the sense that it was a bunch of tax credits for poor people. it should have been greater so we could have bought more gas for our cars because that is constantly going up. we could have bought more food, baby formula, diapers, you name it. host: he spoke about taxes and what the stimulus did for taxes. here is the breakdown --

new york, independent line, hello. caller: i think the stimulus package has been doing some good things. what obama has done in detroit has been extraordinary. host: why do you say it has done good things? caller: the previous epigraphic you put on earlier still my fondest. people look at a chart by dave johnson and an article it is

really fantastic. host: with which publication is that? caller: i don't know per day you can just google yourrightwing brother-in-law. it shows what your previous graphic showed which is how on climate was going down and went back back up under the obama stimulus plan. some people called it the beginning recovered because you can see how jobs are being lost like crazy under george bush and a turnaround almost instantly after the stimulus package under obama. one thing that does not get enough credit is what secretary of the treasury tim geithner did with the ppip program,

public/private investment program that took a lot of these toxic mortgages off the books of the bags and put it into a different system to reconcile it. clearly, not enough has been done for homeowners in this country. there as much a victim of these crazy instruments that wall street was peddling for mortgages. we have privatized profit and we have made public the risk. i think this is a serious tragedy. host: couple of stories involving presidential politics --

when it comes to mr. gingrich -- then there is a story looking at mr. santorum -- this is off the front page of "the washington

post"he is morning -- we have about 15 more minutes and we are asking you out there to tell us about the stimulus bill on its three-year anniversary and whether it has worked. charlotte, n.c., democrats line -- cado you think it has worked? caller: it definitely work. that is indisputable. anybody that says it did not because of where the economy is now -- when people say what the

economy was when president obama took office, it was the seventh 25% or whatever -- -- it was 7.5% or whatever -- under george bush he had a lot of debt. second of all, the stimulus could not do anything but work. the question could be if it was worth it. it did work. it can only help. second of all unemployment would be maybe around 7.5% if local and state government was not cutting so much -- so many government jobs like police and teachers.

it wasn't for that, the unemployment rate would be much lower than it is now. it is just not true what a lot of people say. they need to understand what is going on. host: you have seen benefits of this in charlotte? caller: i see plenty of benefits. i was out of work for a long time and i was able to get me a job and i see how it is picking up a lot in manufacturing. that is where i work and i see the difference. host: "the atlanta journal constitution" talk about newt gingrich and georgia -- this is a story about caterpillar.

dallas texas thank you for waiting on the republican line. caller: this is about the stimulus, right? as a business guy and a republican, i don't see any fan in the stimulus to help business. the only stimulation that he has done for business is to scare the heck out of people. some business may be picking up because they realize how strongly half the country wants to get rid of obama. he is not doing his job.

he is spending his time campaigning for money and he is not working and he is not looking out for the common man. host: when it comes to funds that were allotted, according to the figures from the white house, $35 billion went for tax incentives for businesses when it comes to the work opportunity tax credit and was $10 billion for tax credit energy efficiency and about $10 billion for taxes in bonds to expand its development and that was under the category of manufacturing and economic recovery. caller: you are saying there were some credits given for hiring but there was not a lot of hiring. maybe it is starting to trickle in now. because of an atmosphere of pure uncertainty that he has created and now that election time is coming around and we are seeing what the candidates are saying

and i will say rick santorum is a good candidate now that he is getting to speak and you get to hear what he is saying, people will love him. i think he stands for a lot of good values. i believe he will be the toughest competitor of obama. host: any final thoughts on the stimulus bill? caller: if you want to stimulate the economy you give certainty not uncertainty. if the market gets uncertainty, you notice -- if you give the market certainty you notice the market go up. there is a lack of certainty with your but i would like to see actual leadership and highlight business to know what the future is likely to be and what the economy will be like. host: that is from dallas,

texas. here is another one from twitter -- "the miami herald" takes a look at john glenn --

tallahassee, fla., on our democrats line, hello. good morning. one more time, go ahead. caller: good morning . the stimulus package worked. this president has walked the walk and talk to the talks. he has done everything he said a word. -- he said he would. everything that he said he has done. the republicans have their feet on the break. this economy is going forward if they let it.

they don't want it to work. [unintelligible] host: tell me why specifically you think it has worked to? caller: i am from atlanta georgia. they have 10 miles of just the road work, building four-lane highways. it should have been bigger. if there ever been bigger, it would have been better. host: raleigh, north carolina, republican line -- caller: has the stimulus worked? i have four people that i know that were out of work who are still out of work. look at the gas prices. we have had the warmest summer

in history and gas is still above almost $4. had this stimulus ort go to a grocery store and pay for some groceries and see what your bill comes to. as the stimulus worked? no because some of the people who are still unemployed are not being counted anymore. the north carolina unemployment is still 10%. i think cspan has done a very dubious thing by not also reading all the little budget items the park for squirrels. why don't you read those line items? when you talk about the money that was spent on senators or $700 million for cat farming or

shrimp farming. that money was thrown out the window. yes, transportation -- the only thing that was in the bill that did anything for transportation and roads was having people have to wait in traffic because people were standing around in vetss because we had to do something with the money. if you have to tell the story, i really wish that cspan would go back to the truth and reports that the reason why we are in this place is because housing went down and the reason why it was destroyed was because the government went to the banks and said you guys will get low interest loans to people that they cannot pay these loans and we will back you up and when these houses went into foreclosure and the people who they knew could never pay for a house could not pay for a

house, they turned around and looked at the banks and said you are evil people. it was not the fault of the banks. it was the fault of the government. this is why obama will be out in 2012. host: want to let you know about special programming happening this weekend on president today on our american history tv on c-span 3. this weekend you can take a look at president de but our focus will really be on first ladies. you will see a 30-minute tour of the first lady's exhibit at the national museum of american history. you can see inaugural and evening gowns. you'll get a tour and it will be explained why the gallons were influential and what the

guns have to tell us about the first lady's role in presidential administrations and is about the politics and the culture of the times. that is just part of a lot of programming that deals with present day with a focus on first lady sprayed you can see more on our website, c-span.org. also on book-tv coverage, you can go to cspan to to see our book-tv coverage. one thing you will be able to do is to see coverage live from the savannah book festival on saturday and monday and they will feature authors and books about presidents throughout the day. there will be many authors highlighted. you can see all that on book-tv go to the website when it comes to information. that is book-tv.org.

baker is well, calif., independent line. caller: thank you for taking my call and thank you for "washington journal." it is the only real reality show. the stimulus is like putting up a guard rail and asking whether not saved people's lives. some cable jump over the guardrail or someone will climb under but when you put up that chart that showed where the money went, i think that really was quite interesting. i was sitting here as an independent listening to both the democrats and republicans. the democrats are obligated to say it worked and the republicans are obligated to say it did not work. i am so glad i no longer have those blinders on my eyes. have the money went to tax cuts. i don't care what your political stripes are -- tax cuts do not create jobs.

ask that heritage foundation, asked the brookings institution. a lot of that money went into filling the hole in the loss of revenue in jobs but also from property taxes and things of that nature. it was. too diffused. if the president had focused on infrastructure -- as a republican how do you say that infrastructure is not going to help? our infrastructure across the united states was falling apart. had we focused like a laser on infrastructure and all the money going to that, if you are a small business and you see the roads being repaired and things of that nature, you are more likely to go forward and invest in more people. what really matters now is how the government response to the housing crisis and whether or

not the government decides it is going to get out of the insurance backing of mortgage insurance is. it is distorting the real estate market here in bakersfield. you can get more money by just foreclosing and picking up a mortgage insurance than actually planning to work with someone under water. host: in our second segment today, we will take all looked at the housing market. it controls about 8:30 for that discussion. -- you can join us at about 8:30 for that discussion. we will talk about the number of foreclosures in the united states. we have been showing you the charts all morning. recovery.gov is where we are getting the information.

one of your talk about the various projects. you can check it out for yourself and see specifically where money has gone when it comes to stimulus' funds. let's take one more call from mississippi, republican line. caller: i live deep in the south. the white man and the republican party -- in the republican party want to take us back to the days where they want to rule the world and the plan did work. host: you've heard about housing, and the program by next, we will talk about tax policy specifically tax issues that were laid out with the president's release of his budget for 2013. we'll talk about specific policy and how it affects not only businesses but individuals as well. we will have that discussion when we come right back. >> i have a list of chemicals in

cigarette smoke. >> i will go right down the row and these quite simple question and see with their responses. >> i believe nicotine is not addictive ben and the second one -- >> cigarettes and nicotine to not make the addiction definition. >> i don't believe nicotine is addictive. >> not addictive. >> they had a program in the 1970's were they wanted to remove nicotine from cigarettes and replace it with a drug that was equally addicted but a drug that would and -- would not cause the heart problems. they had these molecules they invented but they had no way to test them. that was my job. my job is to come in and find a molecule where the brain says it likes it and the rats heart would not have cardiovascular problems. >> sunday night on "q &a," a

former philip morris researcher and the film's producer of " addiction inc." at 8:00 sunday evening. >> this president's day, a former navy seal talks about his new book on a mission that resulted in the killing of osama bin laden. >> one thing that got me off the bench to write this book is by augustthese factoids had metastasized into a story like the keystone kops and blowing their way into the building after shooting their way into the building. finally, shooting their way through the building to the third floor where they wounded a man's wife and shot him in cold blood. that did not sound like seal team mission to meet. talking to guys on the scene

this whole thing basically was over in 120 seconds. that is quite a different story. >> see his remarks as part of our prime time lineup and that includes a debate on whether to prosecute wall street banks for mortgage fraud with the former new york governor eliot spitzer and assistant attorney general lanny brewer. that begins monday at 8:00 p.m. eastern on c-span. >> join american history tv on monday for 24 hours of america's first lady's including an interview with eleanor roosevelt at 4: 40 5:00 p.m. eastern. [video clip] >> like everything else, i think we started out expecting that the united nations would solve every difficulty just by being the united nations. >>tour the white house private

quarters with laura bush at 5:00 and lady bird johnson at 8:00 and nancy reagan reminisces about her husband and the only first lady to run for president now secretary of state, hillary clinton at her final campaign rally in 2008. american history tv monday, president's day, on c-span 3. >> "washington journal" continues -- host: kinm dixon is the tax policy expert for reuters. there's a theme of the release of the budget this of the clinic and to tax policy. guest: the message is economic spareness and that is the message the president at the last couple of years. he had that in his rhetoric when he released the budget, looking at raising taxes on the rich and on corporations and trying to draw a distinction between

ordinary americans pay and what the wealthy americans pay. host: what qualifies as rich these days? guest: the president's definition has been households making $250,000 or more for individuals making $200,000 or more. host: if you are in that category what should you expect should this plan passed? ? guest: this is a wish list. nothing is immediate. the trigger at the end of the year is the expiration of the bush-year tax cuts which will force lawmakers and the president to get together and come to a decision. if the president got what he wanted the top 2% of taxpayers would see their rates go up a bit to levels that were in the clinton era. if you are at a 35% tax rate, it

would go to 36% rate. it could top 40% after that. host: what does that mean dollar-wise? guest: i don't have the dollar amounts of hand. collectively it raises of more than $400 billion over a decade. that is another of the president's message that we have a deficit that we should ask the wealthy to pay more and raising taxes on them will raise that money on a macro level. host: does the plan layout differences between those who work and make those kind of figures and those who have investments and debt capital gains? guest: absolutely, for the past couple of years, he has wanted to raise the tax rates and capital gains and dividends from

the current 15% to 20% for high earners and those categories. this time, he put in a surprise on dividends. he wants to raise the rate from the current 15% to the ordinary income rate for top earners and that would be over 40%. host: describe how that works. guest: a company has paid to two investors who hold stock in the company. host: they would be at one tax rate and if he gets what it wanted, it would be a greater tax rate. guest: right now they pay 15% and that would be taxed at 40%. the president is putting out the idea of economic fairness. a vast majority of people that benefit from dividends are in

higher economic income groups. host: for those people, what has been the reaction? guest: the reaction has mostly been from companies. there are certain sectors of the company -- country that pay out dividends. there has not been -- there has been an outcry from republicans who say this is a tax on business and this will slow the economic recovery. i have not heard any warren buffett-type folks and the other side saying this is a bad thing. i am sure they are out there. host: if you'd like to give our guest a call and ask about tax proposals in the 2013 budget, now is your chance to do so. here are your three numbers to call.

you can he malice or use twitter -- what about the average american? how are they affected with taxes? guest: for the most part, they just stay the same perio. in the president's budget was the tax proposals of those folks would get a continuation of the tax cuts and he wants to continue the tax cut for those making under $250,000. that is the vast majority of americans. he keeps the status quo for those in the lower-median income. host: the bush tax cuts would go

away? guest: exactly. host: we have been down this road before what is the reality of those taxes go away in an election year? guest: there is going to be a trigger at the end of the year with all these tax cuts at expiring for the middle class and the lower class and for the wealthy. the tax cuts that were enacted in 2001 and 2003 when george bush was president -- there'll be a frenzy at the end of the year because nobody thinks congress will do anything about this until after the election. they tend to put these decisions off. nobody wants taxes to go up -- no lawmakers -- and president obama does not want taxes to go for everybody, just for the wealthy. it will be decision time in november and december and that is when the fight will take place. this time two years ago the

president wanted to raise taxes on the wealthy. republicans out negotiated him and he did not want to raise the taxes. he was worried that taxes would go up for everyone. they came to a deal to extend all the tax cuts in all categories. this time the president will have either lost or won the election so he will not have that to worry about some folks say he will have more and upper hand this time. host: factor in how this fits into the president's overall plan for the economy? guest: republicans have been criticizing him because there will be a deficit of over $1 trillion. he gets the deficit by his projections, down below $1 trillion next year and slowly

tries to decrease the deficit in part by raising taxes on the wealthy and raising more than $300 billion in new taxes on corporations in various proposals. his economic policy right now -- we are still trying to get out of this recession. we are not technically in a recession but 8.2% unemployment is high and we will do some spending now and he has a plan that by mostly raising taxes. there are defense spending cuts to slowly drove down the deficit over time. host: our guest is with us until 8:30 kim dixon. the first call is from bob on a republican line from florida caller: does the guest believe

that the unemployment rate is actually 8.2%? there is much talk about it being much higher than that. the numbers are not factored against the people who have left the job force. i don't understand how we can justify a 47% of americans not paying any federal taxes. please justify that to us, thank you. guest: you're absolutely correct. 8.2% unemployment rate is just the official rate. the rate is much higher if you account for people who have stopped working. that is not my area of expertise. on the 47% that pay no federal income taxes yes, that number is correct host: who are those people? guest: everyone points out that those people may pay payroll taxes and that hits a lower income.

it is capped at a certain levels of the wealthy have stopped paying after $100,000. they pay other kinds of taxes but those people -- the tax policy center can now that number a year ago and caused a lot of headlines and republicans went with it. a lot of those people are the elderly. they are families that are taking advantage of tax credits like the child tax credit that believe was enacted under president clinton but was doubled under president george w. bush. these are programs we have under place and there is of the tax code that benefit the needy and working families on the wealthy. about half of the 47% are not paying income taxes because they are working families and they don't earn enough money. looking at the other half,

about 3/4 of those are either elderly and getting tax breaks on the social security benefits and more tax credits because they are low income. so you see burger king closing. people can't go out to eat. they don't have enough money. i make about $10,000 a year.

i'm married and have a family. i'm lucky enough to live in subsidized housing. host: tell us about your tax obligations. how much do you pay in taxes or how much do you get back? caller: i feel as though i get back too much. i got back about 4500. and that's too much because i didn't pay anything at all. as low income as i am. host: as far as your income what you put your income tax what led up to you getting 5 money back? caller: married and two dependents, which is my wife and daughter. host: thank you. guest: he's one of those people in the 47% that makes a very low income. so there's a debate whether someone -- how much taxes should someone who makes $10,000 a year pay. many republicans maybe some democrats say he should pay a

little in taxes. but that's the theme of the president's budget and he wants to use tax policy to sort of get at that problem. we talked earlier about the difference between investment taxes and income taxes. that's been a big issue with mitt romney and his tax returns coming out. he makes nearly all of his income from investments and is taxed at a 15% rate where as a similar person working in a law firm would be taxed at the 35% top income rate. host: and one of the things we heard was a term called carried interest. how does that play out? iveragetsdz that is the share of profits that investment managers get when they're managing money for private equity firms like bank capital where mitt romney used to work, also in venture capital firms.

democrats have been trying to change, again the low 15% rate as opposed to the top 35% rate on salary and wage income. democrats got very close in 2010 when they had control of snet and they couldn't get it done. obama called for it in his budget again. there are republicans leading economist whose say it's an unfair tax treatment. the managers will say they're taking risks this is an investment activity and that's why it should be treated as riskier activity like investment income, 15%. host: when it comes to themes taxwise, has there been similar themes this proposal and then it hits previous ones? guest: absolutely. it's almost a blueprint of his past couple of proposals. there are tweaks every time. the dividends tax increase was a big change. he had not proposed hiking the

tax so much. but the theme has been similar. host: go ahead. caller: i would just like everyone in america to step back and take a deep breath. i feel that because of the recession that we all need to just take a deep breath. i would like to see the president and congress work together to keep the middle class tax cuts and raise the taxes on the upper income temporarily to help us get out of this mess we're in. maybe not make it permanent. maybe they can put something in place and then look at the economy three years out. but i do feel that the upper income should help out with the country. they have the money. and i would just like everyone to come together and like i said just temporary. host: let me ask you this.

why temporarily and not permanently? caller: to relook at it further down. because right now nobody can predict what the economy is going to be in the next three or four or five years. so put in something temporary fror three years and then look at the situation again until we can dig ourselves out of this economy. host: she said temporarily versus permanently. guest: if you look at most polls americans do support higher taxes on the rich. that was the case two years ago when obama was trying to do this at the end of 2010 and was not able to do it. one of the interesting things she said is she wants people to work together. and i think they got that message this week when they came together on a payroll tax extension deal much earlier than they usually do these things which is usually at the very last minute late at night the day before it is supposed to expire. host: why do you think?

guest: i think it's 11% approval rating for congress. and that's sort of among both parties. and at the end of december, republicans were blocking an extension of the pay roll tax cut or they had their own way they wanted to do it. they wanted to pay for it with certain things. they were forced into the position, some of them of being opposed to a tax cut which is pretty unusual for them. so politically i think they were bruised a little bit from the battle and they just wanted to get it behind them. host: detroit, michigan. you're on with kim dixon from roiter. caller: good morning. in your opening statement you mentioned that some people would say that the tax changes would screw -- against investment. but i venture to say that over the last 0 years the policy -- 30 years the has skewed it to

manufacturing. why would you 15% tax? we create a lot of stock market jobs but we haven't created real jobs that last for a long time. i say we should raise capital gains tax to ordinary income tax rates. the same rates that obama is considering for the dividends. guest: well, many experts agree with you on this. i think the obama administration agrees with you to some extent focused on finance as opposed to manufacturing. with a few of the things in this president's budget has been extended tax breaks for manufacturing. that's one of the things that he hadn't focused on so much in prior years that was slightly different this year. he's been really hitting manufacturing hard. he wants to double a tax credit for manufacturing for high tech

manufacturing and a bunch of other programs for manufacturing. that's one of the tax proposals so called bonus depreciation that lets businesses deduct the cost of investments quicker rather than do it over time. but so obama is focused on manufacturing. there's a debate about whether these sort of special carve outs in the tax code is the most efficient way to spur u.s. manufacturing. i don't think most economists think that it is. but there's no doubt about it there's been finance jobs have been increasing over the past decade and manufacturing jobs have been leaving the u.s. host: south dakota, jeff, republican line. caller: just a couple quick things. on those taxes now mr. romney, he was already taxed 35 to 38%

on money he already made. he is getting taxed 15% on his investments. you didn't say that. his money was already taxed 35%. and we as americans that are making up to 42,000 right now that are not getting federal tax they have 42,000 because of all the tax things they can put on for children or whatever and they can make up to 42,000. that's a lot of money. and as far as congress, congress is not going to vote on the president's budget because the democrats won't let it go there. they don't want it. ok. thanks. guest: well, i'm not quite sure what he is getting at, romney paying a 35% tax rate. there is an argument about investment taxes and dividends that that money is taxed twice once at the company level and once at the investor level.

so i'm not sure where to go there with that. with the carried interest, the argument revolves around whether investors are managing their own money or whether they are managing someone else's money. and the critics of this lower tax rate say that if an investor at a private equity firm or private venture if i remember, they are providing a service and should be taxed like other service providers like lawyers or journalists. host: staten island, good morning. caller: good morning. i want to state a comment and then ask a question about the gentleman that called earlier. he said that his 4500 in tax credits was too much money and i can understand him being modest like that.

but it's disconnected that he doesn't realize that that allows him to go and do other things that he wouldn't normally do if he didn't have that. my question though is that i make around the same amount. i have a child i'm married and it's about 43,000 a year. but i also owe taxes. so whatever the tax cuts go through, i don't get any tax -- i don't receive any tax moneys to help stimulate the economy. me and my wife are paying taxes for a variety of things, things that maybe we had income in previous years but now i'm thaiing taxes. we should get a tax amnesty and so that we would be able to take some of these tax situations that are happening. and i'll take my answer off line. guest: well, i'm not sure about this gentleman's particular case. it could be that he sort of makes a little too much money

to qualify for a lot of the tax credits and sort of working family tax programs that we talked about earlier that allows substantial number of people not to pay income taxes. host: if i'm a corporation and i have a portion of my business is outside the united states, what am i looking at taxwise under this plan? guest: one of the big things is companies can take a business expense if they close a plant in the u.s. and -- for many reasons and one of the reasons is if they want to move the plant abroad, they're allowed to do that. obama wants to get rid of that deduction. businesses will say we make investment decisions for many reasons. we might be expanding abroad. we might also be expanding in the united states. they contend it's a complementry effect. right now, companies can defer taxes on profits that are

earned abroad and just keep the money abroad. there's a lot of talk about the $2 trillion companies are sitting on and not doing anything with. a lot of that money is abroad that they have not paid taxes on. obama wants to do a couple of things. he wants to tighten rules on deductions taken right now you can take some deductions for income that you've earned but not paid taxes on. he wants to tight b some of those rules. he also has a forth coming plan that he has hinted at. he wants to create an international profit minimum tax. so if you have a profit in a low tax country or tax haven that some might consider the caymen islands with very low business taxes and you're a u.s. company that you should pay a minimum x%. we don't know what the percentage is. he has talked about it. it's sort of on his bucket rules. a minimum for corporations when

they earn profits in these low tax countries. host: he also talked about a possible lowering of the overall corporate tax from 35 down. is that a surprise or at least has he telegraphed this idea before? >> this time last year they were working on a white paper at the treasury department that was going to come out with some specific ideas for yes lowering the top corporate rate. the u.s. has nearly the highest statutory corporate rate in among its peers. i think japan is the only country that has a higher rate. however, we don't collect a lot of money from our corporations because thed to is so convoltluted and there's all these carveouts. most economists agree that our top rate is too high. it makes us less competitive to a certain extent. so yes he wants to cut the rate probably below 30% to somewhere within the average of our trading partners. you can debate what the

averages are depending on which countries you include. and he's coming out with a plan by the end of the month to -- with a goal of lowering the corporate rate and with some ideas for what they call expanding the base getting rid of some of these deductions and special provisions in thed to that favor select ippedstris over one another. host: and i think it's dave camp from michigan who wants to see a higher top rate. you don't think it's going to go that low? impltsdz i don't think the administration is going to propose that no. host: martin, independent line. go ahead. caller: i'm a tax lawyer and accountant and i've been practicing tax for 45 years. let me give you a little tax history. during the kennedy years ordinary income was at 70%, sweat of the brow working

income was at 50 so that you paid more on coupon clipping tax. during the reagan administration everything was a straight 28% whether you worked or whether you clipped coupons. and then it reversed. and i don't know what happened in our policy where that changed where romney pay as lower rate than someone else you know who practices law for example, but that's the way it is. host: thank you, caller. guest: well, yeah. the last time thed to was overhauled was with president reagan. he had a split congress republican senate and democratic house and they were able to bring the rates on investment income and ordinary income closer together. the individual rates were very high at that point.

and since then over the years the investment taxes have been lowered. some of that happened when the economy was doing very well. and now in the situation where there's sort of pretty diergent tax rates between wage and salary income and investment income. host: louisville, kentucky on our republican line. good morning. caller: i was wondering about the social security thatted to coming out with social security money. i was wondering if they will have to put an iou in the box or whatever you want to call it to pay the government has to pay that back. guest: as far as i know, the money is being made up from just direct injections from the treasury department. so there is not an iou. the money is being -- thed to is given to workers for the tax

that helps fund social security. and to make up that tax break money is coming directly from the u.s. treasury. host: silver spring, florida on our democrat's line. lutsdzer. hello. are you there? one more time. let's go next to tallahassee florida. republican line. caller: hello. ok. i have a comment to the person who said he got too much back. number one i'm guessing that maybe he got earned income credit which is money that he got back that he never put in. i feel that refundable credits are grossly unfair. people shouldn't get money back they never put in. he can always send it back to the i.r.s. host: any response?

guest: it's possible that he got the earned income tax credit and i guess you can debate whether that is a good policy or not. i don't have an opinion on that. host: donna independent line. caller: good morning. two things. first of all, because the rich are shipping most of the high-paid jobs to china with their risky investments, and they're getting all these tax breaks and they pay no income tax, they need to say the same percentage of tax on their dividends as warren buffett's secretary and the rest of us. and secondly, obama went along with the republicans re newing the tax cuts for the rich for a short time because he didn't want to let them cut off the unemployment benefits. and it was a compromise. but he had to deal with the devil and he got the best thing he could get. host: the caller mentioned

warren buffett's secretary. there's an e-mail that mentioned her too. guest: well the first thing is that if i am in the % tax bracket i do not pay 28% tax on all my income. i pay 28% tax on my income after a certain amount. so when you say taxes will go up on the top 2%, it doesn't go up on all their income. it goes up above a certain margin. effective tax rates are what people actually pay after all the deductions and i guess statutory tax rates are what sort of what the law currently is. so i don't know if that answer

it is question. host: pennsylvania butch democrat's line. caller: i have one question to say is if they take people's jobs that are still going overseas, they're losing tax dollars there, people are losing their jobs here, the unemployment is still going down. there's no way that anybody can keep up with taxes, especially if they only make like $24,000 a year. i can't see that. have a nice day. guest: well, i guess president obama's awfully concerned with jobs going overseas and that's one of the reasons he's proposing some of these ideas to curb some of the tax provisions in thed to that companies use when they earn income abroad. host: with higher taxes for those who make more is there an estimation by the

administration of how much gross money they can take in by putting new tax rates in effect? guest: the number for just raising the to two rates is $440 billion over 10 years. some people say we should let all the bush tax cuts expire. that would go a long way towards helping our deficit situation. that could raise i think it's close to $4 trillion over 10 years. and that's a point that some economists make, there's a lot more money in the middle class because there's a lot more people there. but then you get to issues of equity and obama -- most republicans. obama does not want to touch those in those lower income categories. host: silver spring maryland. you're on with kim dixon of reuters. caller: good morning. i think a gasoline tax and that would have stimulated the economy more. it would have made up whatever the tax cut on the social security is.

and on your investment, you can be taxed three times. what -- what the corporation pays, your dividend. and then if you sell the stocks you pay on that capital gains. and i guess a lot of us are going to wait and see what the social security trustees' report says because we're digging a big hole in social security. i'll hang up and listen. thank you. guest: he makes the argument that many business make that capital is taxed more than once. it's taxed at the company level, it's taxed at the investor level. and that's the reason for the lower tax rates on investments. on the social security side, as i said earlier i do believe that the trust fund is dollar for dollar made up with this payroll tax cut. but i'm less of an expert on

social security finances. host: michigan, william hello. caller: yes. i was wondering if there's anything in the proposal to recover the taxes hidden outside the country by the wealthy individuals. guest: well, the i.r.s. has been going after wealthy americans who have money in swiss bank accounts on the enforcement side. so i actually haven't looked at the i.r.s. budget specifically but over the past several years obama has asked for increase in enforcement personnel to do that. host: is that illegal? guest: it's not illegal to have money in these countries. it's illegal to not reported it and pay taxes on the interest. so the administration actually it started under the bush administration under the i.r.s. commissioner that was appointed by president bush. they went after ubs the big

swiss bank and they're continuing its efforts. so i think the money that it is asking for, for i think i.r.s. enforcement. is getting at that issue. host: yesterday we had an interview with the chairman of the house nrning and commerce committee. he also talked about what you mentioned at the end of this year when you're talking about the payroll tax cuts and things along that libe and he talks about that might serve as kind of an impetus to talk about the overall issue of tax reform. here's what he had to say. >> maybe these provisions that expire will provide the umph to get to the finish line. if they expire december 31 but for most americans the impact doesn't hit until april 15th of 2014 because the tax hike

kicks in january 13 but you don't pay the tax until the end of the year. so that still allows you time to make or say hey what is it that we have to do? for me i would like to see the rates come down, i would like it to be simplified. host: you can see that full program tomorrow at 10:00 and 6:00 in the evening. guest: well, tax writers in congress, dave camp the top republican on the panel and max baucus have been holding hearings on tax reform, on opening up the tax code like we did in 19r6. they think it can be done in the next year. it's really a complex process. thed to is huge and they're just holding hearings now. it is something that people want to get done in the next couple of years. i don't think the end of the year there will be enough time to do anything.

beyond sort of deal with the code. there could be some agreements to extend them to put some deadlines to maybe force action like they did at the end of last year when they came to a deal on raising the debt ceiling. but i guess we'll have to see. host: economics of the country aside, what was happening in 86 that made it possible to happen? and other administrations have tried. that may not have been able to achieve that as far as reforming thed to. guest: ronald reagan took an interest in it. top individual rates were a lot higher than they are now. there was a real interest in congress. but the groundwork was laid. it started happening in the early 80s where certain congressmen came out with specific proposals. ronald reagan mentioned it in his state but he didn't get it done until second term. but presidential leadership is

something some people say obama could use his bully pull pitt a little more. no one things iths could happen quickly. i think we're probably a year or two out. host: one more call. washington. rhonda on our democrat's line. caller: good morning. thank you for taking my call. i just have a quick comment about the bush tax cuts and personally i believe they should expire. it would not be raising taxes on the rich. it would be restoring the tax base. in my social security administration report every year up until 2002 i was seaving 100% of what i had earned and was allotted to me and yet in the year 2003, all of a sudden i am now receiving

78% of what i had earned. now, it's kind of ironic, 2003 was the year that the bush tax cuts was the second large cuts for the wealthy. so i believe at this time i'm already paying for their tax can you tell us. also, i wanted to say that we should get rid of the subsidies for the oil companies. i do believe mobile got its tax return in the year 2010 of $500 from our country. host: thank you. guest: well, i think many democrats agree with the caller that taxes need to go up to restore help bring the deficits down and bring these programs like social security back into better fiscal shape. host: she talked about oil companies. do they get some type of attention in this budget?

guest: obama takes aim at them definitely. he wants to raise about $40 billion over 10 years by closing a bunch of tax breaks they have in thed to. but again his ideas have been bucket force the past couple of years and most people don't want to touch these individual provisions. they want to put everything on the table. host: when do you see any type of significant activity when it comes to taxes breaking out as far as this year is concerned? guest: well, the first thing will be at the end of the year and there will be a big fight over the bush tax cuts. then next year, depending how the election comes out that's when some serious work can get started on a big tax code revamp. host: kim dixon, the tax policy correspondent with reuters.com. what are you looking at next when it comes to tax?

guest: well we were putting together this calendar and now that the pay roll tax deal is done there's a big empty period because it's an election year and as i said the bush tax cuts are probably not going to get addressed until the end of the year. there will be a continued doe bait in congress overhauling the tax code. the next story is at the end of the month the obama administration is supposed to come out with a plan to cut corporate tax rates and with some more specific proposals on which so called loopholes or special tax deductions for special corporations it thinks should be scrapped. host: thanks for your time. >> up next, the housing industry. the chief economist and senior vice president. we'll talk about housing issues when we come right back.

host: lawrence joins us chief economist and senior vp.

when you look at housing starts, where do we stand in the united states? guest: it's at a very depressed level. but the encouraging sign is that the past three months we have seen some upturns. moderate levels. which is applying that now the builders are beginning to feel more comfortable and also from the lending industry which they had essentially cut down the construction loans are beginning to loosen up. so you see a good early sign that perhaps the housing market is on an early stage of a recovery. host: so when those builders and financers say ok let's start building some more, what conditions have they seen that this is a good time to maybe up those numbers? >> first, if there's mobility it's great for the economy. it creates construction jobs and other serktry spending. and typically in the economic cycle, the housing cycle

recovery this time around it is a little different in the sense that we are getting some economic moderate recovery. but now that the housing has come around this could set a very good stage positive feedback and the reason why the builders are building is job are being created. high affordability conditions. much better time today than before. the record low mortgage rates and we are beginning to see a very important turn around in the consumer confidence. host: now, as far as breakdowns between a single family home and a multifamily home, where are those differences as far as new housing starts? guest: in terms of the percentage games it is the multifamily that is getting greater action. due to the fact that the renter population has arisen. the rents are rising and the commeck incentive is to follow

that and as a result the builders are building more multifamily homes to gain some of the rents increases. host: is renting more popular than owning these days? guest: the hend trend is that home ownership has come down. at its peak it was 70% now it's 65%. hopefully it stops at this point, because right now there are many factors to suggest that it is a great time to be a buyer. it's a buyer's market. sailors are negotiating. the buyers have advantage. the overall inventory level has come down but still the buyers have more choices to choose from. and the mortgage rate. to lock in a 30 year fixed mortgage that means the person will be protected from any inflation. >> at the same time we talk about housing starts there were numbers released from others as

far as foreclosure is concerned. the numbers they have is that one in 624 homes received a foreclosure filing in january up 3% in january. and then the average foreclosure sales price is about $167,000. so we have times where more houses are being sold but a higher number of foreclosures. guest: there could be an upward swing in any data. foreclosure has been trending down from three years ago levels. they're still elevated but what's important for the consumers to keep in mind is that the people who bought their home from 2009, 2000, 2011, they are one of the most successful home owners ever with exceptionally low default rates. so the high foreclosure figure tht aggregate is a legacy impact of the bubble years. people who unfortunately bought during the bubble years and it

is still going through the pipeline but the recent home buyers have been one of the most successful group of home owners. host: are they buying more of these foreclosed homes as they become available on the market? guest: in fact, the buyers are very much attracted to the foreclosed property because of the huge discount that it is offering. so we have seen both the first time buyers taking the advantage of much discounted prices. furthermore, the investors are coming into the market. let me give you one example. miami, one year ago this time it was six years of supply and people were saying that it will take six years to recover. well, today the inventory level is about five months supply. it has greatly changed because of the strong buyer activity regarding foreclosure property. both the investors as well as the first time buyers taking advantage of the deep discounted prices. host: miami still on the list of top foreclosure cities.

why those? what is it about those locales? guest: these are the markets that experienced the great bubble and painful crash. so it depends upon the local economic conditions. if one looks at the very middle of the country north dakota all the way down to the state of texas the foreclosure rates are much more manageable. one is getting price increases one of the rarer phenomena. so all real estate is local. host: our guest with us until 9:15 to talk about issues of housing and the outlook. if you want to join us for the conversation the numbers are on the bottom of your screen.

our first call is from massachusetts. republican line. go ahead. caller: good morning. how are you folks this morning? host: fine thank you. caller: i would like to ask a question sort of you kind of went through some of the numbers and it's one of the things when you call in it's hard to follow the conversation when you're going through. but if you look at the number of homes that are being started, it's at a very, very low level and the reporting opt thing is they come out with a confidence index of 29 as opposed to 26 and 50 is normal is where they think things are good. and i always come back to this whole -- i don't particularly think it's -- i think we're really halfway in the middle of this housing bubble because the

banks have not done the foreclosure on it. just follow the numbers average income of the united states that house hold income is somewhere around 39,000. the typical average sales price would be somewhere around three to four times that for mortgages to go forward. obviously it's gotten way out of whack and different things in the country because they want people to take loans and put the mortgage debt on people very much like they are doing for student loans and things like this. host: what would you like to ask our guest? caller: what do you think, how do you think that -- do you think that housing would be improved if the banks had to renume rate the gses for the money that they put on there? and do you think that these quasi public gses, fannie and

freddie, which were quasi public. i mean even the fed talked about that as early as 2008. do you think that they should -- the banks should be able to push this gse debt off to the public sector? host: we'll leave it there? thanks. guest: regarding fannie and freddie certainly during the housing market bubble one can clearly see that it was a flawed business model where you had a private profit during the good times huge bonus checks for the managers. and then when the housing market goes down somehow that hedge fupped that they had created crashes and the taxpayers are on the hook. this violates any sense of economic fairness. so this return of fannie and freddie in debt mode just cannot happen. but since the government takeover of fannie and freddie

fannie and freddie have play it had traditional behind the scene quiet role which is to say that because of the government backing they are able to borrow money cheaply and they are passing on their low borrowing costs directly to the consumers without all this hedge fund investment portfolio nonsense. so it is playing that role because we have to remember america is one of the very few countries with 30-year fixed rate mortgages and it exists because of the government backing. it served very well for our parents and grandparents and we wanted that to continue for our children and grandchildren. so some level of government support is need bud they need to play that behind the scene quiet role. host: there's a piece in the washington times recently talks about ben bernanke talking at the show. he has floated an idea for fannie mae and freddie mac and the federal housing administration to rent forechloe -- foreclosed properties . host: that would have made

sense a couple of years ago. in the current environment even in the hard hit markets vegas phoenix. when a foreclosed property comes on to the market there are multiple buyers who want to buy already. so the idea that somehow government should intervene and possibly tilt that favor to some wall street company to me doesn't make sense at this time because nearly all markets they are ready investors first time buyers soaking up that property quickly so let the market work through it because it's evidently working right now. host: mark on our independent line. new jersey. caller: good morning. i'm going to be running for congress in nunal's fifth district under the reform party. my question is real simple. when are we going to start to address the problems that were caused by the illegal aliens used by the banks and developers where they devalued the people's wages? they decreased the cost of a

home being built to maximize the profit for the banks and stuff? and so this problem let's address this problem with the housing market it's never going to be soled. host: those who build the houses. guest: people are responding and those people have suffered greatly. once the housing market went down. with any business decision, some people make a right bet other times they make a wrong bet. and many people in the industry suffer the consequences. regarding the broader economy economic support for the housing in terms of the income level, absolutely true what the caller is saying. we need to have a strong economy to have a strong healthy foundation for the how'sings. and what we have seen is that we have the economy recover. it's not an expansion because during a great recession america lost 8 million jobs. now we have gained million from that point. so that is helpful but we still have a long way to go in terms of job creation to provide support for the very sound

fundamental home buying healthy level. host: he talked about illegal aliens building houses. guest: any illegal action needs to be taken care of but i'm not an expert in that field. but regarding any breaking of law should be prosecuted. host: st. petersburg, florida. democrat's line. hello. caller: good morning. i'm a realtor in a very hard hit part of florida the whole tampa bay area. home prices generally and condo prices even more are 60% over the last 5 years. that's about an average. and i would like to ask, you know i pay very heavy dues to the national association of realtors and they are the number one lobbying machine i think in terms of expenditures in d.c. why they didn't do more. i have been through so many horror stories with clients

over the past five years where the big wall street banks did not respond to really bonafide desires for some ameal ration of cutting down on the payments. it's just been a nightmare. and yet, i saw nothing from the association of realtors in congress trying to take the stand of the average homeowner in places like the tampa bay area. guest: well, certainly you are absolutely right in terms of some markets like tampa phoenix, vegas where prices have gone down 50% tremendous stress for people who bought a home during the peak years. many responsible home owners have been making payments on time. but they have been stuck at the high mortgage rates and they cannot refinance because of the underwater status. so as a result -- as a result of the nar realtor association

has been talking with congress about trying to provide a relief for those responsible home owners to refinsance, tap into current prevailing historically low mortgage rates and that will help reduce some of the stress for homeners and we saw some movement in the legislation. the president has come out to say he support it is measure. so we hope that this gets moving because it just makes sense. those responsible home owners who have been making payments at time but stuck at say 7% mortgage rate, today's mortgage rate is 4%. host: we have this tweet. guest: the investors came into the market and they were clearly not healthy because they were adding fuel to the fire and causing excessive speculation excessive price run-up that is completely out of whack.

now, we're in a housing market downturn. the key part of a recovery is to absorb those excess inventory as quickly as possible and part of that absorbing of the inventory are the investors who believe that these are bargain prices. they are speculating one can say but they believe that the speculators are coming in because they believe it is a great bargain opportunity and at this point in housing cycle where housing used to absorb inventory, speculators investors coming into the market it's helpful in terms of soaking up the inventory. unfortunately for some first-time buyers are being pushed out because of the excessive demand that has been caused but this is also a point about the foreclosed property where the discussion of government intervention to somehow that government should determine how the property moves when in fact the market is already absorbing at a very quick pace sfloofment is there

more oversight than back when this started? guest: i would say that during the booming years we had about 40% of all purchasers buy a nonowner occupant. today the figure is about 20%. host: texas thanks for waiting. joe republican line. caller: i'm a first-time caller obc-span. your guest has given a lot of excellent information. i have two quick comments and then a question. you say we need to absorb these foreclosed homes. i would suspect that bernanke didn't help that by guaranteing low interest rates for the next few years. because as a home buyer you get nervous about that interest rate and you think you've got to go buy it because it may go up. he's guaranteing it's going to be down. second is that the people who have lost their homes i would suspect a lot of them were saying that they really had gotten hit hard. i don't know if they got hit

hard. in other words, it takes a long time to gain equity in a home. when they walked away did they really have a lot of equity in that home? i don't think they're nearly as hurt as much as we say. yes, they lose their credit and it takes seven years to build that credit up. it's a valuable lesson. guest: those are excellent questions. on the first part, the federal reserve controls a short-term interest rate which is the fed funds rate which they have kept at zero and are committed to keeping at zero for the next three years. mortgage rates generally follow that trend but not always. the mortgage rates as with any long term rates would be determined by the global bond investors fortunately at the moment many of the global bond investors are saying they are willing to put money into the u.s. as a result of the historically low rates. but as one looks at countries like greece, the bond investors are shying away so the i want rest rates are much higher.

so one long term concern is that the budget deficit in the u.s. has been rising and rising and at some point it could lead to some bond investors moving out of america. and in that case the interest rate will be rising independent of the federal reserve. the other question about the long-term benefit of home ownership, people who bought in 2005 right at the peak, a lot of suffering. people who bought back in 1980 saw the bubble, saw the crash even with the up and down trend for the long term investment they would have seen a tripling of the value in their homes and further more if they had made their mortgage payment consistently over the past 30 years using a 30-year fixed rate mortgage they would own their home free and clear today. so that equity gain and free and clear home that's a great proposition for long-term home ownership. host: nunal phillip on our democrat's line. caller: i have two questions.

one has to do with the fact that market is currently addressing the fannie and freddie mac loans but there's no market for the jumbo loans that are actually in the industry. and i'm wondering if there's going to be done there and is there any governing body for the investors that have those loans that the individuals are paying on time and not behind in their mortgage but want to modify it and the investors are not forth coming with trying to do that. so what is happening is as we know many of the loan to values are out of whack. people are walking away from their homes and it's affecting other home owners. is anything going to be done there? guest: the congress unfortunately lowered the loan limit late part of last year which means that more consumers are now facing the jumbo

mortgages, which is very unfortunate, because one looks at who are these people who are taking out jumbo mortgages? these are people who demonstrated a great financial responsibility all throughout their life. they have worked up through their economic ladder and now they want to buy a good home in a good neighborhood and it just happens to be a more pricier home and therefore they need to take out a larger loan amount. and you have a situation where people with a very high credit score yet they are getting punished with higher interest rates which just doesn't make sense. and so they have been lobbying to say that given the pure private capital which the jumbo market depends upon is not yet functioning properly that the higher loan limit needs to stay for the benefit of the american consumers. and congress lowered it. so we are trying to work to revert that to assure that the people who demonstrated a great credit history are able to tap into the historically low

mortgage rates. host: ab e-mail. guest: that's an excellent question. because we don't want to have a repeat of this case of so much foreclosures. it's damaging to the community damaging for the country. we still accept a long history one can see from the second world war to the 1960 period when the government provided much help regarding the fha loan program. the home ownership rate increased from 40% to 60% and one can clearly say that america at that point moved from a working class country to a middle class country where people could enjoy the fruits of their labor. now, so we need to have a consistent sustainable home ownership policy. during the bubble you had a credit market bubble where the wall street provided easy

lending on subprime mortgages and as a result it went to excesses. if one said for example the veterans affairs mortgage which has zero down payment after the second world war 4 million veterans took advantage of a zero down payment mortgage. yet, they became all successful home owners because they stayed well within their income. and the lender said we are not going to provide you with an excessively high loan amount. so i think the fundamental is that not everyone can be renters. but those people who want to become home owners, stay within your budget and things will be fine. host: new hampshire. john on our independent line. caller: good morning. host: go ahead. guest: i'm calling in reference to the program right no ufment i'm basically past month or so i have been looking at -- i'm paying 5-3/4% and i'm

interested in all this talking which i don't really believe in but the whole thing is that i called my own bank on this particular piece of property. i've owned six properties in my life and never had a foreclosure or nothing or anything. and the idea that i called my bank just, saying you can lower your interest rate. but by the time they get done with you they want to charge me 3800 to -- they had my loan for 10 years. they want to charge me 3800 to refinance it plus $400 to have an appraiser come in. i've had an appraiser on my lakefront property and these guys are so out of whack with the prices they come in on. ok? you know they're so far overboard. i know i could never get it.

but the point is they value it at that and they work themselves down. the whole point is that no matter who i call up, they want to -- i call up mortgage companies. i'm retired basically and the idea is i just wanted to -- if it's ok to save myself a couple hundred bucks a month ok. but by the time you get done with the fees the banks are charging you and the mortgage companies are charging you it's going to take you five years to pay the charges. guest: i think this is the case where you have a responsible homeowner stuck with higher mortgage rates than the prevailing 4% mortgage rates so one is saying why can i not refinance? first, it does not make sense because it's the same individual carrying the same credit risk yet to put on an additional feed to refinance when in fact the refinancing will make the homeowner much

healthier and less likely to default on the mortgage. so this is the area where we're trying to help streamline and trying to put off some of the loan backed by fannie and freddie effectively is owned by the government which means owned by the taxpayers. so tax payers with same credit risk makes much more sense to get stream line refinsing areas. >> i find that the governor would regulate the response of the short sales, he would get

more confidence. people walk away because sometimes it takes two or three months for the banks to return. guest: you are not the only person who had expressed frustration with short sales. prices have fallen so that what they sell for cannot cover the mortgage debt is outstanding, so they need to get a bank approval to get the short sale, but even a simple courtesy call for when a short sale that is offered is sent to the bank, even the courtesy call of the banks responding -- that is not happening. we are hearing from all members that the banks do not respond even up to three months, and as a result, there's a lot of frustration among buyers and sellers in the marketplace. they had to make legislation to expedite the process trying to force banks at least to provide an answer within a timely manner

so the person would know whether the deal would happen. one thing our organization has been trying to push legislation this year, i think, which will be very important for many consumers is that regarding short sales, when a bank gives a loan forgiveness of a certain amount, as in the case of short sales, it is possible that the banks will -- the irs will consider that as taxable income. how homeowners under a tremendous amount of stress in a short sale even foreclosure, and the irs will come in and say that loan forgiveness is a taxable income -- that does not make sense, and we want to make sure that does not happen. host: let me get a quick response on settlements with banks as far as mortgages are concerned. what is your response to how that one? >> -- guest: this is a

complicated situation. if the money is spent in the right way, if they can help reduce foreclosures, help facilitate the short sale process, it would be very helpful, but in terms of the substance -- i would sit him of values are a mess in the bank's should be punished for not signing the documents correctly but on the substance of the matter, only a handful of people who have been responsible homeowners making payments on time got for close upon. most were people not making payments, but due to the robo- signing issue, it is coming through. if it is the case that it reduces the rate of foreclosure it is helpful, but if it is the case where it is a money grab and prevents the banks from lending to buyers who want to

make a purchase, it would be a negative impact. host: columbus, ohio, democrats line. go ahead. caller: 10 years ago, there was a lot of talk about a european model for 30-year fixed-rate mortgages. has there been any new talk about renegotiating a lot of the homeowners that are under water on to a 40 or 50-year fixed rate? and even if the house is under water, could someone renegotiate those 30-year mortgages? that should help the homeowners a lot. i will take your answer offline. guest: absolutely that would help. going back to consumers, they took out mortgages at 6% or 7% mortgage rates but today's prevailing rate is 4%, so why not give consumers that rate through refinancing and under normal circumstances people would refinance, and there would

not be so much delay. but right now many people are in the under water situation and because of that thanks do not want to refinance. but given that most of the mortgages -- banks to not want to refinance. but given that most of the mortgages are now back by the government or the taxpayers or the taxpayers are helping out the consumers regarding 40 or 50-year mortgages, there has not been a movement on the federal level, but individual community banks are negotiating to reduce mortgage payments by moving it into 40 or 50 years, and it will help the consumer increase the chance of staying at home. that negotiation is occurring among some of the smaller size banks with regular consumers. host: here is a tweedt -- guest: one can judge in hindsight whether it was

successful lamotte. most of the tarp money has been paid back, but at the time, the banks were bleeding. even the healthier banks were on the verge of collapse, so to prevent the collapse, the tarp money was provided, but some of it was to help the broader economy. right now, banks are sitting on a very high pile of cash reserves, and that money is not flowing into the economy. it is just sitting on the sideline as a moment, which is very frustrating policy. i would have thought that a larger portion of the tarp money would have been dedicated for the housing, but that was not the case. it went straight to the bank balance sheet. now, the thing that much of the money has been paid back, but nonetheless, if taxpayers will help that the critical moment, perhaps banks could loosen up some of their underwriting standards at the moment in order to facilitate the healthy market

recovery as well as the economic recovery. host: how does that help from the government has various programs to get consumers out of trouble? does that help the government side of the program when people come to them for help with these kinds of mortgages? guest: the program is to help distressed homeowners modify the mortgages, reducing the principal amount. in a joint partnership banks take a hit. the government takes a hit half the way in order to reduce the mortgage payments. some have worked. in other cases, the default rate has been running above 60% which means that after restructuring the mortgages, the homeowner is still in default. it is implying that not all homeowners can be helped. in this case is, when it is clear there is going to be default, not all homeowners can

become homeowners, and we need to help clean out some of the distressed property. the only way is for this economic payments to go through foreclosure and have the healthy homeowners purchase that. host: republican line from california. go ahead. caller: is it true there will be a 3.5% sales tax starting in 2013 on the sale of property in the obamacare? and if this is true, why isn't the national association of realtors preening? this will make people walk away in spades. thank you. i will take your response. guest: first, we have been talking with all the members of congress and the administration about this. 3.8% tax that goes to very high income individuals. it is not on the transaction of

all homes. most transactions will not be impacted. in fact, all transactions will not be impacted. it is about the rental income of people who are in the high- income category. an additional 3.8% tax once the income threshold is above a certain amount. but it was snuck in at the very last moment in the context of the health care legislation, and we do not think that the real estate will be the ones taking a hit. there's all the benefits we can debate on the health care legislation, but to sneak in at 3.8% tax that impacts some of the rental income for high- income individuals -- we did not have a chance to debate, so we are frustrated. caller: you interviewed a gentleman on your show probably

in 2005. he was talking about the bankruptcy of abuse prevention consumer protection law, and a new bill was introduced called the bankruptcy equity act. i'm pretty sure he will have a hard time with this one. basically saying that the reason we are in the situation we are in dallas because the bankruptcy laws that were passed in 2005 is what got us into this situation -- the reason we are in the situation we are in now. people were not able to refinance and save their homes. this is what the problem has been. write a book about it and be sure to share the proceeds with me. that is all i have to say. guest: i do not have any comments to that. i think many economists have looked into the housing market

crisis and the source of it. there is, for example, the credit rating agency which was providing aaa ratings to various risky products. the easy lending conditions. some people even say the federal reserve holding back the mortgage straight for extended time contributed. certainly, from the real-estate industry, when people were saying everyone should become a homeowner -- well, that is not the case. many people were willing to stay within their budget, they should be because we want to have successful sustainable homeownership. host: good morning to pat independent line. caller:. in the 1980's, people got ripped off by the banks, insurance companies, and real estate companies by telling and that acreage was worth a lot.

this is the same root of today by telling the homeowner that their houses were worth a lot. thanks. guest: you are right. the appraisal process during the bubble years by any economic metrics was completely out of whack, but the actual market transaction prices were way above any fundamentally justifiable levels. as a result, some homeowners took a tremendous amount of cash out refinance and were using it for the long haul equity but unfortunately, america lost sight of what the true long-term home benefits of homeownership for. host: where do you think the future of mortgage interest deduction lies? guest: i did not think it will go anywhere because americans

clearly recognize the benefits. all the surveys imply that 80% of americans -- sometimes it is often just throw on the table but it is shut down because we are glad that we live in a democratic country so that people can express their feelings. i do not think that even the president made the proposal that was going anywhere. host: how often are subprime loan still being issued? guest: in terms of people who have subprime mortgages, they are still in the pipeline from the legacy impact of the bubble years, but in terms of loan origination, it is not occurring. in fact, 95% of new originations are 30-year fixed rate mortgages, and that will be the foundation for a much healthier housing market going forward. host: louisiana, thanks for holding.

donald, republican line. you are on. caller: they keep talking about people are due this housing like barney frank and all theat. but the thing that befuddles me is that people should be responsible and know what kind of house they are going to buy. these kids have to go into a three-story house and are not able to make the payments. we need to go back to a 20% down payment requirement and let these people live like we did coming out of the depression, start out in a 1-room shack if they have to. they have the right to own a house, but it is their opportunity. it is not for the federal government to give it to them. guest: i agree with the caller that the u.s. way is to earn their way but i would disagree with the collar about the 20% down payment requirement.

if the consumer wants to make their own choice, 20% 30%, all good, but in terms of the requirement, it would greatly limit the number of people who could access mortgages. veterans' right after the second world war took the advantage of the zero downpayment mortgages. they became successful owners because they stayed well within their budget. it is not about downpayment requirements but people staying within their budget. >> what about the village -- host: what about the ability to get a mortgage if you do not have perfect credit? guest: credit underwriting standards within the budget that people have demonstrated a clear history, so not everyone should be able to get a mortgage. we want to have responsible people getting mortgages to become successful homeowners but the mandate of a 20% down payment or 10% down payment will affect potentially a large segment of consumers who want to

become a successful middle class but will be denied that opportunity. host: thanks for your time. guest: thank you. host: in our last segment, we look at the economic issues on the state and local level. a recent analysis shows that spending in localities and states dropped $26 million. we will speak with the author and take a look at reasons why when we come back. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> the chemicals in cigarette smoke, i had a hunch one might be an addictive drug. i'm going to go down the road and ask each a simple question under oath and we will see what their response is. >> i believe nicotine is not addictive, yes. >> cigarettes and nicotine clearly do not meet the classic definitions of addiction. >> will take that as yes or no.

>> and not believe nicotine is addictive. >> not addictive. >> not addictive. >> in the 1970's, they wanted to remove nicotine from cigarettes and replace it with a drug that was equally addictive but it would not cause the heart problems and brain stroke. they had all these molecules that they invented, but they had no way to test them. that was my job, to come in and find the molecules and the rat's brain would say they liked it and the rats hart had no cardiovascular problem. >> the discussion with the subject of "addiction inc. orporated." 8:00 p.m. eastern and pacific on c-span. >> julian bond was prevented from taking his seat in the statehouse after he was voted not to be seated to do his

stance against the vietnam war. his appeal went to the u.s. supreme court. >> i went to the courts to hear the argument. i was sitting in the court just behind the bar with the lawyers in front of me. i was sitting next to my lawyers partner victor rabinowitz. the attorney general of georgia was making arguments that georgia had a right to throw me out because i had said things that were treasonous and seditious, and i think it was judge white said to him, "is this all you have? you came all the way up here and this is all you have?" so i said to live under its "we are winning, are we?" >> discover more about african- american history on c-span3 and online at the c-span video library. search and share from over 30 years of c-span programming.

>> "washington journal" continues. host: our next guest takes a look at spending nine states and localities. our states and localities spending less these days? guest: they did in the last quarter of 2011, which was the first time in a couple of years that spending had actually declined. host: talk a little bit about the figure of that decline and some of the practice that led to the amount that was not spent? guest: there is a decline of about 1%, and there were several factors. the biggest was the decline in medicaid spending, which is the health-care program for the poor that as a combination of state and federal revenues. in the stimulus bill, it is part of the state bailout that the federal government increased the share of this $400 billion program that it paid.

that expired last june 30. after that with the states have been spending and with the total spending has been declining. in addition, other factors are that states and cities and school districts in particular have been reducing the size of their work forces during in the last two and a half years, that has gone down by about 600,000. if you are interested in the stimulus what is interesting is that spending on big capital projects, shovel ready, has declined pretty significantly throughout the recession. host: we were talking earlier about the three-year anniversary. how much of the funding overall comes to the backstop of spending that is not going on these days? guest: the timing of the stimulus money turns out to be very well time when state and local tax revenue declined.

that is in the federal money came in. now that it is expiring, about 80% or 90% has gone through the state and local system, and tax collections are going up modestly, so they are sort of offsetting each other. but it has been fairly well balanced. host: when it comes to a look at revenue, and we pulled this from the analysis you did overall $26 billion of spending has been dropped from 2010 to 2011. in 2009, we talked about a stimulus money used, and expand on this as far as sales tax annual sales tax place today when it comes to how states and localities are functioning. >> guest: --in the long term, sales tax has been the no. 1 source of revenue for state and local governments. federal aid became number one for the first time in history during the recession on what

states and localities dependent on, before the first time at the end of last year sales tax reclaim its position as the number one way that states get money. host: our guest with us until 10:00 to talk about state and localities spending. if you want to ask questions about not only was going on overall but what is happening and give us an example of what is happening in your state level or locality level this is how you can do so. you can reach us at journal@c- span.org if you want to send an e-mail, and twitter.com/c-span wj. you talk about medicaid, spending falling for the second half of 2011. when you talk about the drop in employment, is this just for

those employees on the state and local level, public employees? guest: that is right. throughout the recession, state and local government increased their work force, but at the time the recession ended is when they started the slow, steady decline. it is hard for the government to manage its work force like the private sector does. the private sector waxed out swiftly and decisively but the government does not work that way, but government response over a longer time, so you had a 3.4% decline. people do not realize how many people work for government, especially local government. 20 million people work for state and local governments. only 2 million work for the federal government. you hear a lot and i have written a lot of federal pay

but it is really just a fraction of the work force. host: a lot of those teachers, or are there other areas that get hit when employees are laid off? guest: in this instance, you have seen the biggest decline in local and education in public schools. most of it has not been through layoffs. if the precise data does not come out for a year or so to see what is happening at the knees but at the state level is where declines in employment have been. some attending not to be teachers as much as office staff or administrative. host: when you factor in as costs for employees are concerned, even if they lead to attrition pension benefits for health care benefits, does that factor into the overall cost? guest: it does, so when a

government employee leaves, it can shift who is paying for it but of the government goes on to the pension, then there is still a cost there. retirement costs, retiree health-care costs, which are totally unfounded in america and have a liability at the state and local level of more than $1 trillion, is something that has been confirmed in the future. we do not see it at all today. host: first call comes from baltimore, maryland. good morning. caller: thanks for taking my call. my question in regards to spending for local municipalities come state and local, with the previous guest talking about property taxes

would that be an issue you are seeing with regards to the drop in the price? guest: surprisingly, you are not because the property tax is by far the most stable tax, and there is a few reasons for that. appraisals are usually delayed one, two, three, even six years. 46 states have property-tax increase limitations. most of those limitations allow the taxes to increase by the rate of inflation. say it has been tapped for the last 20 years. as it went up, there's still a lot of catch up room, but even in florida, california, you could increase two or three years where you get back to the market value. you cannot say it across the country.

there's 90,000 state and local governments in america each with its own rules, but overall, the property tax is the most stable tax and has never fallen. host: dallas, texas, jody, go ahead. caller: regarding the taxes going up, on our energy bill, on our time warner cable, the tax on that is $15 that went up just this month. that is something that for every old and elderly person, it is knocking the way out of us, as i assume it would all the younger people. what is the deal with that? can you explain it? host: what do you pay in sales tax there in texas? caller: it is 9.3, i believe.

something like that. host: has that been stable over the years or has it gone up? caller: it has gone up. host: thank you very much. she talked about taxes over the jewish doctor services but reference to her own sales taxes in texas. guest: i'm not familiar with that tax, but when tax increases occur, politicians like to make them user fees. that might be one thing that affects her? host: does it affect how much people will buy it after today. host: -- guest: the sales tax is covering only a fraction of what it used to cover.

it needs to cover things like on the internet, much is not taxed so it has to cover that, said the sales tax is struggling to adapt to the new economy. caller: i wanted to ask you -- it seems like corporate extortion going on from state to state, city to city, county to county. in ohio, we are bidding for the lowest tax rate and tax subsidies for shell oil bidding against three other states. the city of $500 million a year to each state under corporate subsidies. guest: he's referring the -- to the plant that shell wants to build which basically breaks down propane and methane from the shell oil gas, and it is used in every product we use.

it is essentially a massive industrial product that is beneficial, that will create a lot of jobs in pennsylvania ohio, and west virginia are competing for this, and they are basically offering every tax break in the book to try to get this plant. it is a tough situation because you want the plant makea deal but on the other hand, you shrink your tax base and when a company in ohio does this as a matter of policy, almost every business gets a tax break so you are shifting taxes on to other people. especially places that you do not know whether they will be successful as job creators or entrepreneurs, it is a very difficult situation. host: from georgia, helen is on our republican line. caller: since obama has come

in my daughter has spent for her cost of gasoline $6,200 pier that much money, she could have stimulated the county pay sales tax and being able to purchase other things. she is buying her own home, and it is taking everything she can extra just to buy gas. she may lose her home one of these days because of the price of gas. that would be more stimulation if she had more money in her pocket to pay for the entrepreneurs that of trying to start business or trying to do something like that. she could support them rather than supporting the gas taxes. guest: the gas tax is a very politically unpopular tax, which is why it seldom goes up. however, what we pay in gas tax as a percentage of our income is

at or near a record low, but how much we hit the roads is at or near a record high, so the gas tax relief does not cover as a user fee or impact fee the cost of building and maintaining roads. it is a difficult thing. nobody wants to pay a tax, but people want to service them, and this is the kind of thing that gets balanced out by legislatures. host: let me get you to expand on something in your story. you said that investment and infrastructure fell 4% growth in 2010 and 2011 and during the real-estate boom, state and local governments increased spending on roads buildings and bridges more than 8% a year. host: governments have their own real estate boom as well. there is somewhat less of a need, but there is even less of a desire to do this type of spending because it is generally not york -- it is a high

priority, but schools might be number one or medicaid, so even though the official goal of the stimulus was to build the infrastructure long-term shovel ready products, the data shows that it did not really happened. the stimulus was sort of a tug- of-war between the federal and state. that is but a lot of strings on it to get what they wanted but state legislatures are pretty clever in working around it, so you do not know how it will work out when it first happened but if we see how it played out now infrastructure was not a priority but medicaid and schools did tend to get -- that is where the money flowed. host: you mentioned medicate, that health care spending on reports fell sharply that the federal government was allowed to pay 74% a year of the program during the heart of the recession compared to 59% at the end of last year. guest: that is right.

part of the fall in medicaid spending may be artificial because states were very aggressive since the extra aid ended june 30, and it was based on when you filed the bill. not when the service occurred or anything else, so states literally were working overtime in sending out messages to hospitals "send us your bills now." and they send it on to the federal government so that they got the big match from the federal government, and it was a big difference. the typical matched, the federal government is 57% of the cost, but during the stimulus, it peaked at 74%. you are talking about tens of billions of dollars, and that is really how the stimulus eighth came to the states. they said it was for medicaid money and it was, but that meant the states did not have to spend on medicaid and could spend on other things. host: what does it mean now for a medicaid recipient? what is the end result? guest: so far, it has meant

little. right now in this legislative session, real tug of war and settled on how to manage medicaid costs. now, there is more on the state end. states are trying to do a whole range of things to limit costs from copays to more aggressive fraud detection using computers but it also affects how obamacare plays out in the future because this is a big part of that. the obama administration has been very assertive in not allowing these changes. stimulus law, one of the strings attached was you had to have a maintenance of effort. which meant if the money ran out, you could not just cut the program. they have not given states yet any permission on how to modify the program, but it is part of the discussion that is going on and probably will occur in the next few months. host: jim on our democrats line,

you are next. caller: i would like someone to explain to me how we can pay these retirement programs, okay? these people are getting just excessive amounts of money. $150,000 a year working for the police department. fire department is the same way. teachers -- anywhere from $50,000 to $150,000 a year we are retiring these people with. most of the people i'm surrounded by half $15 an hour jobs. how is it that we can afford to pay these people these exorbitant -- i know the union is working really hard to get the best they can for the people that they work for, but that is my tax dollars going to pay somebody that worked as a police officer $150,000 a year -- how

is that being paid? how was that being addressed in this time of strife? guest: the employees to contribute some to their pensions. in addition, about 1/3 of government employees do not get social security. that is why their pension would be a little larger but the caller's point is the unanswered question that we have huge unfunded pension liabilities and there is no obvious way that we will pay it. we know how we will pay it -- either higher taxes or lower spending but it is really unclear how it will play out. in this current session states have been making a stab at dealing with the problem. rhode island did quite unassertive pension reform but most of it does not deal with the heart of the problem, and the truth is that is something we will deal with in the future. host: next caller is on our

republican line. caller: yes i would just like to make a comment. everybody is talking about taxes. everybody is talking about being able to own a home. without a job, you cannot do any of this. that is my comment. host: jacksonville, florida. next line from new mexico. independent line. are you there? one more time for joe. let's move on to mansfield ohio. chad, democrats line. caller: thanks for taking my call. i want to go back to the issue of the property tax. for the last 10 years our state assembly in columbus has ruled the it is unconstitutional to fund schools by property tax.

i wanted to ask you guess what he thought going back to that discussion. you mentioned it being a real stronghold as to how states and locals get their tax. let's go back to the property tax in the state of ohio. i will take your answer offline. guest: the state of ohio a similar in terms of total revenue that it turns in. the ohio supreme court ruled three times that the funding of education is unconstitutional because it is on equal, a decision that has been seen in many other states, but basically, nothing is going to happen on it, especially in a time of financial crisis. in the last two years, we have

had new formulas in ohio as well as other states on how state aid is distributed, and it has been somewhat more favorable to the poorer districts than the more affluent districts, but it is sort of tweaking around the margin. host: tell us a little bit how states are generally going to fare because of these decreases and which states will probably fare the worst because of it. guest: that is a good question because we are generalizing about all states, but every state has its own culture and its own financial situation. if you think about how much you have heard about florida's state financial crisis, you have heard almost nothing, but you hear a lot about california, but florida had sharper and larger declines in revenue than california did but the florida legislature -- florida has long had a aaa bond rating -- goes in, rolls up its sleeves, and yells at each other, balances the budget and leaves.

california has a political culture that is very difficult to solve these problems. long-term, the states that have problems are the ones that have huge pension liabilities, places like illinois, the industrial -- old industrial states like ohio and indiana face real challenging futures, but it is very difficult to predict because north dakota suddenly gets an oil boom. pennsylvania suddenly gets an oil boom. but if you want to know how your state is doing, a pretty good proxy is just look at the bond rating. to me, it is more about the culture of the state. we have the ability to manage how our money comes in. host: you spoke about pensions. are more being asked to contribute more?

guest: they will probably not see decreases on a monthly benefit. employees generally claim and lawyers tend to agree that it is illegal based on many state constitutions to lower any benefit. some are being asked to contribute more. there's talk to switching them to a 41 k-style system. biggest change i have seen just happened at the federal level with the social security tax extension where it called for new employees starting in 2013 instead of paying 0.9% to their pension to pay 3.1%, which is quite a substantial change, and it got almost no attention because the social security tax got attention, but it shows the substantial changes can occur. host: sean on our republican line, good morning. go ahead. caller: first on the state level, we had the problem with

you have people retiring after 20 years, and they get a nice pension of $150,000. then, they go back into the county government at a different level and get another job and retire on another pension. basically that, they are getting two pensions. on top of the infrastructure in maryland, the governor, mr. o'malley, once in turn around and at 60 cents on to the gasoline tax. on top of that, he rated the trust fund so many years the transportation trust fund to make a general shortfalls. now they do not have any money for infrastructure. it is like a cat chasing its tail. people are crazy. i will hang up and take your comment of the air. thank you very much. guest: the caller is expressing anger in first part of his, over

double dipping and even triple diapers. people collecting one, two, even three pensions. i do not know if there are any quadruple dippers, but it would not surprise me if there were a few out there. it is just the way the system is structured. legislatures are not the shrewdest business people. they like giving up things, and they often give out things that will not cost anything for 20 years. right now, some of this is coming to fruition, and that is what we are seeing. host: tampa, florida. it sounded like at least in maryland's case, there was manipulation going on to meet these ends. it happens in a general sense. now that no new sources of revenue are coming in. host: -- guest: it is, at the

state level to call things one thing, the late things. states ultimately have to do it. i would say that it is declining now, something you see when the downturn first occurs. they made a lot of funds. they make a lot of accounting tricks. they cursed the payroll payments from june 30 to july 1 so it does not count in the budget year, things like that. we are sort of pass that game playing stage. host: tampa florida lisa, democrats line. you are on. go ahead. caller: yes, hi. my problem is i'm a state worker. talking about the workers suffering a lot because of it. we have not had a cost-of-living raise in six years.

some of us make $26,000 a year. and we have not had a raise in six years. we had like, 100 caseworkers with nine, maybe 10 support staff. we are doing a lot of suffering. guest: think about what i said about the legislature going in and balancing the budget. that is what i said about the larger fiscal picture. to some extent the cost-cutting

she has seen at the local level. the larger fiscal picture is problematic. it depends on whether you are looking at the management or worker level. at the local level, it can feel much more problematic. host: we have a comment on twitter. guest: it is possible. it has not happened. no state has defaulted since arkansas, and they eventually paid it. no one else has a right to

default, and as a sovereign, what can you do about it? all of this is really untested waters. if there is a true financial crisis in the future, this will be played out in that. host: minneapolis, minnesota, good morning. paul, independent line. caller: the price of gas was $140 a barrel a few years back. the price was about $4 a gallon. it is still there with oil about $100 a barrel. instead of giving oil baron subsidies, we should make them pay. thank you. i will hang up. guest: the price of oil and energy really is market-driven. the demand from the rest of the world is -- i will say that

america is less dependent on foreign oil than we have been in a long time. the shale blum is creating a lot of gas, and eventually, it will lower the price of oil because energy does shift overtime host: we have someone on twitter asking how many states are turning over functions like private highways to foreign corporations, to maybe take some of the burden of them and ease that burden as far as privatizing certain aspects of state and government workings. guest: states have been trying to lot of different things, whether you like them or not. they have slowly become more fiscally astute. when the crisis hit, a lot of states formed panels of business people on how states could be more efficient, and i have

talked to some of those leaders and they scratch their heads on why this efficiency does not occur. it is not necessarily the ethic of government. governments often have huge holdings of real estate that are not used. and the buildings, etc. -- empty buildings, etc. almost all these panels recommended having one payroll system for the whole government because many governments have 10, 20, 50 different payroll systems and a business person looks at that and says that it is crazy but a business person will look at a payroll department that has 50. if you could get it down to 20 and do the same thing, that is good for business. in government, that is 50 jobs that may be lost. you look around the country that basic efficiency of one payroll system -- it still has not occurred, even though every

one says it needs to. caller: i'm just wondering if there is a way to cut pensions. they claim after $75,000, you are now have the ear, so why should people correct the pensions of 150,000 when there is many people working four jobs for $8 an hour. why are they afraid to collect and internet tax? they collect it from stores. we need more revenue. otherwise, we are going to go bankrupt. but it just seems that they are not utilizing what they can. plus, they have got to cut out a lot in the ways of corruption, and they have a lot of that here in florida.

guest: the legislatures could cap pensions especially future pensions. in some places, a constitutional amendment might be needed because if you have paid into this existing formula, you would be entitled to it. in that tax is a very complicated issue that has been fought in congress rather than at the states. congress has limited the ability of states to tax internet sales across state lines. host: ultimately, she is talking about creating new sources of revenue, essentially. guest: right. states and cities in particular would like to tax internet sales because the sales tax not disadvantage is the local business that has the store that you go in and pay the tax, but the law limits it very much right now, federal law. host: next, kenny on our democrats line. caller: good morning. i just wanted to ask a question.

i'm unemployed now, and i was trying to find out how come the local governments could not find positions to even do voluntary work for their local government instead of sitting home getting a check. i've been calling my mayor to do something because sitting home collecting unemployment makes you lazy. you know what i'm saying? how come they could not set up a system where they could have kept the person on the job and subsidized their pay with the unemployment checks? i believe that would have saved a lot of money. let's put the unemployment to work. thank you very much. guest: certainly it could you had a local government that was willing to do it. unemployment basically is a federal state program. the caller has an interesting idea. host: illinois, you are next.

republican line. caller: retired fireman. receiving a pension from an audit. it has to be unlawful in the returning to the pension fund. the board has made a decision. this has been on the books and law of the town for over 10 years. moving forward our pension fund is more solvent than our community we work with them. host: what about the folks that are making that decision? caller: the state of illinois in its their books and made that decision.

guest: i'm not really familiar with that case. i'm sorry. host: new mexico, joe independent line. caller: yes, this insider trading that they were talking about here the other day that they got caught with and made it more or less illegal for them to have inside on stock markets and stuff, and then you take these speculators -- they are driving our gas prices up. what is your comment on that? guest: i do not think you would have much of an insider-trading problem at the state level partly because the decisions they make do not have that much to do with directly moving stock prices. i could be wrong on that.

i've never seen or read anything written about it at the state level. host: one more call from kentucky. caller: good morning. i'm a 44-year-old gentleman who has decided to return to school. i know there are a lot of people just like myself. i want to know what the state is doing in relation to transitioning these individuals into jobs. i just want to know if the states are doing a good job with this. host: -- guest: states have been dedicating a lot of money to community colleges and retraining, vocational education. when you look at state spending going up or down, it is easy to lose sight of what is going on

within that mix of state spending. what is really going on within that mix of state spending is money is going to health care and money is still going to education, and even within that, it is going very heavily toward adult education and the type of concerns the caller is talking about. host: talking about an analysis on state and localities spending. thanks for your time. guest: thanks very much. host: it is presidents' day weekend, but monday, you can take a look at first ladies and their role in the presidency on c-span3. part of a special package we have devoted to this weekend especially looking at president's day. you can see the exhibit at the smithsonian taking a look at the dresses and formal wear that the first ladies wear as part of their role in the white house.

that is on american history tv, part of a package you can see this coming monday on c-span3. do not forget our newsmakers program with representative fred upton. that is tomorrow at 10:00 and 6:00 in the morning. he talks about a variety of things. passage of the payroll tax cut and other issues as well. that discussion will take place at the this program on sunday, 10:00 and 6:00. speaking of tomorrow's show, three-hour program for you today -- grover norquist of about tax issues will -- grover norquist will be here to talk about tax issues. presidential historian leo ribuffo will give his perspective and i got 15. that is tomorrow. we will see you then.