is that an end run are around the deadline to withdraw from afghanistan? >> i would think so. there is no other way to have u.s. forces take on a lot of these responsibilities without slowing down the timetable for drawn down troops. >> is there another bill like it's in the senate? >> i do not see it going anywhere in the senate. with the hearings this week with hillary clinton, there was a great deal of concern from a number of lawmakers about the recent increase in violence in afghanistan and the feeling that we should be leaving their. >> what did you hear? >> i >> i think he harbors personal doubt about whether did ministration is maybe not being tough enough, but strong enough.

in its communications with iranians and making clear to both the israelis and the iranians what we will do and why. he will not discuss it in detail. he had a classified briefing yesterday. i'm guessing he heard something he did not like. >> colin clark, donna estada, i appreciate both of your time. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> c-span takes you live now to the american israel public affairs committee in washington, d.c., and the is really president shimon peres will be speaking shortly followed by president obama. right now they're watching a video on president peres.

>> it is a terrible thing. i felt that someone caught my body in half. i was left alone. it was a great deal of chagrin. >> that tragic moment, like so many others, did not cause shimon to lose hope or walk away from the path of optimism. "somehow you always find a way to tie your idealism to a practical sense of how to turn greeted to reality. -- dreams into reality partially by never giving not. >> skepticism is a waste of time. after 88 years of my life, i do

not forget. i saw the great criticize hours, the great skeptics. i left in hope. >> it is said that a sum of a man's life is not where he wound up but the decals that brought him there. i cannot help but think the last words shimon's father spoke to him, "be jewish, never give up," he wants to give a better tomorrow to the better generation. that is why shimon peres is my hero. >> the children are our future. let's give them a different future. let us build another future.

it is up to us to live in peace. >> ladies and gentlemen, the president of israel, shimon peres. ♪ ♪ [applause] [applause]

[cheers and applause] >> thank you. [applause]

thank you very much. thank you. dear friends, as the president of the state of israel, first and foremost, i say on behalf of my people thank you. [applause] thank you, president obama, for being such a good friend. [applause] thank you, aipac, for your dedication and excellence as an organization like yours. friends, but it's great to be

here. together, to be here strong, united. i see old friends and new ones. i see many young faces, young boys and girls, the future, it belongs to you. israel loves you. [applause] i am moved by your generous gift. i stand here before you. i am a helpful man, proud to be jewish, proud to be is really. -- proud to be israeli, of proud to be here to serve my country for 65 years.

[applause] throughout our alliance with the united states of america -- i am proud of our alliance. israel, like america, was considered -- conceived as an idea created a new world by breed together the past in the innovations of the future. friends, the restoration of a jewish faith after 2000 years in exile is a historic merkel. -- miracle. we started as a doubt and we wound up a long way.

we had to fight six wars in six decades. we did not lose one. we never will. we cannot afford it. we have to defend ourselves so it is our light an obligation. [applause] with all will land the, water, or resources, israel groom tenfold in population and the 50 fold in gdp.

israel's high-tech and innovation made herself a green. israel is building new cities, universities, new theaters. our children are speaking the language of our profit. -- our prophets. hebrew literature is flourishing. from a disparaged people, we became a united democracy. no day of war ever interrupted a day of democracy. never. dear friends, permit me a personal moment.

in the eye of the storm, i was 11 years old. he said only three words to me, "shimon, stay jewish." those were his last words to me. i never saw him again. when i arrived in his village, they forced him with the remaining jews into the wooden synagogues and set it on fire. but no one survived. no one. what remained of my grandfather

was his legacy, his last words to me. "stay jewish." [applause] dear friends, i was privileged to work as the father of our nation. the unforgettable david. my grandfather's legacy became my compass which is comprised of four things -- our pursuit of peace and security, our quest

for knowledge, and our alliance with the united states of america. [applause] we returned to the book and its values. it has helped the jewish people survive for 4000 years, not because of our quantity of because of our quality. not because we had thousands of guns but because we had 10 commandments. [applause] we are guided by the call of our profit. -- our prophen. i tell you what it means to me.

to never denied justice to others, the pursuit of peace for us. it is not opportunity. it is a moral imperative. it is a tenet of our nation's security. to make peace, israel must be strong. let me assure you. israel is strong. [applause] israel is undergoing its greatest storm in history with horrible bloodshed in syria. a tyrant is killing his people -- killing his children. i admire the courage of the syrian people and i wished them peace and freedom from the

depths of our hearts. [applause] in spite of the storm copper -- in spite of the storm, we have to reach out to the young generation in the arab world, to those who strive for freedom, democracy, and peace. dear friends, the palestinians are our neighbors for life. these can and must be achieved with the them-- peace can, and must, be achieved with them. [applause] a peace based on a two-state solution, a jewish state of israel, and of palestine. it was accepted by past and

present israeli prime ministers, and american presidents like bill clinton, george w. bush, barack obama, all of them. the president of a two-state solution is a paramount is really interest. we want to preserve in israel that is jewish, democratic. i need from time to time with president habbas and the prime minister. they need and they want peace. i believe that it is possible with them. they are our only partner. it is a piece that is a dream

for both of us and it is a nightmare for iran. they are afraid that we shall make peace. iran is an evil, kroll, morally corrupt regime -- cruel, morally corrupt regime. it is an affront to human dignity. they are the sponsor and finance are of world terror. iran is a danger to the entire world. [applause] it threatens berlin as well as madrid. it does not threaten just israel. their ambition is to control the metal least so they can control the major powers of the world economy. it must be stopped. it will be stopped.

[applause] israel experienced the whole of war. it does not seek it.peace is alt option. if we are forced to fight, trust me, we shall prevail. [applause] president obama is leading in the implementing an internationally complex policy imposing economic and political sanctions against iran. president obama made it clear that the united states of america will never permit iran

to become nuclear. [applause] he made it clear that containment is not a viable policy. as the president stated, all options are on the table. dear friends, the united states and israel share the same goal to prevent iran from developing a nuclear weapon. there isbetween us. our message is clear. iran will not develop nuclear weapons. ladies and gentlemen, the quest for knowledge defines jewish

history. judaism is in constant debate. it is about asking the right questions. it is about being a liberal and pluralistic society. i believe jews are never satisfied because they are always seeking nuances, a better world, a different tomorrow, or what we call [speaking hebrew]. i believe the next decade will be the most scientific it, the best chapter in human history. it will expose possibilities that today's sound like science fiction. research.ter will be

the more we shall not about ourselves, and the more we shall be able to control our souls. it in a global world, without a global government, self control is vital. friends, a world of science and knowledge, on in a world of signs of knowledge the jewish people and israel have an exciting world play, much to contribute, and so we shall. friends, members of congress, may i say america and is, and will remain, the indispensable leader of the pre-world -- free world. [applause]

the indispensable friend of our people. today, more than ever, the world needs america. [applause] i have had the privilege to meet all american presidents in the last 50 years. democrats and republicans. i was always impressed by their deep commitment, at their real character is real. their commitment was, and is, my comfort. mr. president -- [applause] mr. president, members of the

administration, members of congress on both sides of the aisle, but we are forever grateful to you. your unwavering support, but you're unparalleled alliance between america and israel. thank you from the depths of my heart. [applause] thank you. [applause] i first met president barack obama, our great friend, when he was a senator from illinois.

i saw before me a born leader. the care and devotion to israel's security was already it then evident to me. mr. president, i know your commitment to israel is profound. [applause] under your leadership, security cooperations between the u.s. and israel has reached its highest level. [applause] ladies and gentlemen, we have a friend in the white house. [applause] it reflects the values that have

made america great and makes israel secure. thank you, president obama, on behalf of my people. [applause] soon, i will return home, a great challenges and opportunities await us. i know this. thank you for your love and commitment and america's great friendship. ladies and gentlemen, i return home much more hopeful, much more encouraged. thank you. really. all of you. from the depths of the hearts of my people. god bless america.

god bless israel. shalom to you. thank you very much. [applause] ♪ ♪

[applause] >> mr. president of israel, shimon peres, the people have had the impact, and continue to have the impact, on a nation and a people at that u.s. -- as you have. with your remarkable intellect and your incredible energy, you have brought your vision to the people for all these years. you have helped to make it possible for all of us to stand as a community and say, "i'm israel." [applause] >> thank you.

[applause] manch >> every person loved someone in israel. everyone.

when we start our journey from ethiopia to sudan, i was 11 years old. we walked from ethiopia to sudan. it took about one month. it was 800 kilometers. tuesday 30 bodies buried every day -- to see 30 bodies buried, to hear the screaming and crying, for the kids and old. it was a traumatic experience. we arrived in israel on a sunday morning. it was a really exciting experience. we kissed the land.

here, i feel home. nowhere can i feel home. i can do whatever and be whoever i want to be. when i got to study in boarding school, i start to hear that america was really involved w ith the operation. i started to appreciate it. they do not know me. they did not know who i am. i am just a jewish ethiopian girl. it took such an effort to bring me to israel.

i start to think that if you give something to somebody that you do not know, but they needed that, what makes you a great person. the americans can be proud by being americans because it who i am today is because of them. >> the vote for the foreign-aid bill is the single most important and consistent about that a member of congress casts in any given year in support of the israel-american relationship. this year, it even generally supported members are under pressure to reduce the budget and they may be resistant to vote for the overall aid package. aid to israel is contained in

the broader foreign-aid bill. polls show american thinks foreign aid it makes up 25% of our budget when it is actually only 1%. this 1% works hard to keep america safe, strong, and prosperous. it helps keeps our allies secure. it helps us secure peace. it helps american companies develop overseas markets to keep jobs here at home. it this is a lot less than 1% of our overall spending. the president has requested $3.10 billion in u.s. military assistance to israel. with mounting instability in the region from iran, syria, and egypt, israel's defense needs are growing dramatically. israel party spends a larger portion of its gdp on defense than any other industrialized nation, so u.s. aid is vital and

ensuring that yoisrael has the means to defend itself. 'm esther kurtz and this is lobbying in one minute. >> ladies and gentlemen, please welcome the aipac chairman of the board, lee rosenberg. [applause] >> good morning. it is my great honor to welcome back president barack obama to the aipac policy conference, the

central address for america as a pro-israel community. [applause] last year, as many of you may recall, i remind the president's that while our) should goes back many years, to his days as a state senator, he has not yet invited me to play basketball with him. well, another year has gone by without that invite. as i continue to shrink in height with each passing year, i am beginning to think there may be a strategy to this delayed invitation from my friend. or maybe it is possible that the president is just a little nervous that i could be the next jeremy lin. [laughter]

in the meantime, what a year and has been. mr. president, in just the time since you last spoke to was at last year's policy conference, you have continued to demonstrate your unshakeable commitment to the unbreakable bond between the united states and israel. [applause] with an understanding that israel continues to live in a dangerous and tumultuous neighborhood, and even under immense pressures to cut spending, you included $3.10 billion in your budget to strengthen israel's defenses. [applause] under your direction, mr. president, your administration has continued to expand bilateral security consultations with israeli officials.

tomorrow come you will meet with prime minister netanyahu in the white house for the ninth time during the presidency. [applause] you continue to stand with israel in international forums, fighting delegitimization. your speech to the u.n. general assembly this past fall was an extraordinary demonstration of your personal commitment to the jewish state of israel as a historic homeland of the jewish people. [applause] in the ongoing efforts to bring a lasting peace between israel and the palestinians coming to declare your opposition to palestinian attempts to circumvent direct negotiations with israel.

and, in an act of clarity and purpose that demonstrates that those who threaten israel also threaten the united states, when israel's embassy in cairo was attacked by hamas, you acted decisively to help rescue the israeli hostages. [applause] under your leadership, your administration has heightened global awareness to the dangers of iran's pursuit of a nuclear weapon. the world community has rallied around you. you have implemented a tough, fighting sanctions that have left the regime more isolated than ever before. however, the islamic republic remains the greatest security

threat and its quest to become a nuclear power continues. as you said, from this very podium, you will do everything in your power to prevent iran from acquiring a nuclear weapon and, indeed, mr. president, we are counting on you. [applause] thank you, mr. president, for being a great friend to america's greatest ally, israel. ladies and gentlemen, the president of the united states, barack obama. [applause] ["hail to the chief"] ♪

♪ >> thank you. thank you so much. thank you. everyone could have a seat? thank you. good morning, everyone. rose, thank you to your kind

words. i have never seen him on the basketball court. i bet it would be a treat. [laughter] rosie, you have been a dear friend of mine for a long time, and a tireless advocate for the unbreakable bond between israel and the united states. as you complete your term as president, i salute your leadership and your commitment. [applause] i want to thank the board of directors. as always, i'm glad to see my longtime friends in the chicago delegation. [applause] i also want to thank the members of congress here with us today and will be speaking to you over

the next few days. you have worked hard to maintain the partnership between the united states and israel. i especially want to thank my close friend and leader of the democratic national committee, debbie wasserman shultz. [applause] i'm glad that my outstanding young ambassador to israel is in the house. [applause] i understand dan is perfecting his hebrew on his new assignment and i appreciate the constant outreach to the people of israel. i'm pleased that we're joined by some money officials -- so many officials including michael horne. tomorrow, i'm looking forward to welcoming prime minister netanyahu and his delegation back to the white house.

[applause] every time i come to aipac, i'm especially impressed to see so many young people here. you do not yet get the front seat, so i understand. you have to earn that. but students from all of the country who are making their voices heard and engaging deeply in our democratic space. you carry with you an extraordinary legacy of more than six decades of friendship between the united states and israel. you have the opportunity, and a responsibility, to make your own mark on the world. for inspiration, you can look to the man who preceded me on this stage, who is being honored at this conference my friend,

president shimon peres. [applause] shimon was born a world away from here. in what was then poland. but few years after world war i. his heart was always in israel, the historic homeland of the jewish people. when he was just a boy, he made his journey across land and sea towards home. in his life, he has bought for israel's independence, fought for peace and security. as a minister of defense and

foreign affairs, as a prime minister, and as president, shimon helped build a nation that drives today, the jewish state of israel. [applause] but beyond these extraordinary achievements, he has also been a powerful moral voice that reminds us that right makes might. not the other way around. [applause] shimon once described the people -- the story of the jewish people by saying that it proved that arrows in gas chambers can annihilate man but they cannot kill dignity and freedom. he has lived those values. he has taught us to ask more of ourselves and to empathize more

with our fellow human beings. i am grateful for his life's work and his moral example. i'm proud to announce that later this spring i will invite shimon peres to the white house to present him with the presidential medal of freedom. [applause] [applause] in many ways, this award is a symbol of the ties that bind our nation's. the united states and israel share interests, but we also

share those human values shimon spoke about. a commitment to human dignity, a believe that freedom is a right that is given to all god's children, an experience that shows us that democracy is the one and only form of government that can truly respond to the aspirations of citizens. america's founding fathers understood this truth just as israel's founding generation did. president truman put it well, describing his decision to formally recognize israel only minutes after declared independence. he said, "i had faith in israel before it was established. but i believe and has a glorious future before it, as not just another sovereign nation, but as the embodiment of the great ideals of our civilization."

for over six decades, the american people have kept that faith. yes, we are bound to israel because of the interests we share in security for our communities, prosperity for our people, the new frontiers of science to light the world, but ultimately it is our common ideals that provide the true foundation for our relationship. that is why america's commitment to israel has endured under democratic and republican presidents and congressional leaders of both parties. [applause] in the united states, our support for israel is bipartisan and that is how it should stay. [applause]

aipac's work continually nurtures this bond. you can expect that over the next several days you will hear many fine words from elected officials describing their commitment to the u.s.-israel relationship. as you examine my commitment, you do not just have to count on my words. you can look at my deeds. over the last three years as president of united states, i have kept my commitment to the state of israel.

at every crucial juncture and at every port in the road, we have been there for israel every single time. [applause] as the book for you and i said israel's security is cypress site. it is non-negotiable. -- their security is sacro sanct. my administration's commitment to israeli security has never been closer. our joint exercises and training has never been more robust. this has increased every single year. we are investing in new capabilities. we are providing with israel --

israel with more technology, products, and system that only goes to our closest friends and allies. we will do what it takes to preserve israel's military edge because israel must always have the the felt -- the ability to defend itself, by itself, against any threat. [applause] this is not just about numbers on a balance sheet. as a senator, i would speak to it is real's troops on the lebanon border. i have been to visit the families to have known the terror of rocket fire. that is why as president i have provided critical funding for

the system that has intercepted rockets that may have hit homes, schools, and hospitals in those towns and in others. [applause] now our assistance is expanding israel's capability so that more people can live free from the fear of rockets and ballistic missiles. the family, no citizen, should live in fear. just as we have been there with our security assistance, we have been there through our diplomacy. when they unfairly singled out israel for criticism, we challenge them. when israel was isolated in the aftermath of the flotilla incident, we had their backs. we would always reject the

notion that zionism is racism. [applause] when one-sided resolutions has brought us to the human rights council, we oppose them. when diplomats feared for their lives in cairo, we intervened to save them. when the efforts to boycott or the best from israel, we will stand against them. whenever an effort is made to delegitimize the state of israel, my administration has opposed them. there should not be a shred of doubt by now that when the chips are down, i have israel's back. [applause]

which is why it is during this political season you hear some questions regarding my administration's support for israel. remember that this is not backed up by the facts. remember that the u.s.-israel relationship is simply too important to be distorted by partisan politics. isrica's national security important. israel's security is too important. [applause] of course, there are those who question not my security and diplomatic commitments but rather my administration's ongoing pursuit of peace between israel and palestine.

let me say this. i make no apologies for pursuing peace. israel's own leaders understand the necessity of peace. prime minister netanyahu, the defense minister, president peres, each of them have called for two states, and secure israel living side by side with an independent palestinian state. i believe that peace is profoundly in israel's security interests. [applause] the reality that israel faces, shifting demographics, emerging technologies, to an extremely difficult international environment come and resolution of this issue, i believe that peace with palestine is consistent with israel's founding values. because of our shared believe in self-determination, because

israel plays it -- place as a jewish and democratic state must be protected. [applause] of course, peace is hard to achieve. there is a reason why it has remained elusive for six decades. the upheaval and uncertain in israel's neighborhood makes it that much harder, from the horrific violence raging in syria to the transition in egypt. the division within the palestinian leadership makes it harder still. most notably, with hamas's continuing israel have has no right to exist. we should not and cannot to give in to more despair. the changes taking place in the region make peace more important, not less. i've made it clear that there

will be no lasting peace unless it israel's security concerns are met. [applause] that is why we continue to press arab leaders to reject israel. that is why we will continue to support the peace treaty with egypt. that is why, just as we encourage israel to be resolute in the concerns of peace, we insist that any palestinian partner must recognize israel's right to exist. [applause] that is why my administration has consistently rejected any efforts to shortcut negotiations or impose an agreement on parties. as well as you noted, last year is the before you and pledged that the united states would stand up against the kurds to

single israel out of the united nations. as you know, that pledge has been kept. [applause] last september, i stood before the u.n. general assembly and reaffirmed that any lasting peace must acknowledge the fundamental legitimacy of israel and its security concerns. i said that america's concern and commitment to israel's security is unwavering. israel must be recognized. no american president has made such a clear statement about our support for israel at the men in such a difficult time. people usually give those speeches in instances like this one, not before the general assembly. [applause] i must say that there was not a

lot of applause. but it was the right thing to do. as a result, today there's no doubt anywhere in the world that the united states will insist upon israel's security and legitimacy. [applause] that will be true as we continue our efforts to pursue peace, and it will be true when it comes to the issue that is such a bogus for all of us today. -- such a focus today, iran's nuclear program. let's begin with a basic truth that you all understand. no israeli government can tolerate a nuclear weapon in the hands of a regime that denies the holocaust, threatens to

wipe israel off the map, and sponsors terrorist groups committed to israel's destruction. [applause] so i understand the profound historical obligation that weighs on the soldiers of benjamin netanyahu, a good barack, and all of the political leaders. a nuclear-armed iran is counter to israel's security interests. it is also counter to the national security interests of the united states. [applause]

indeed, the entire world has an interest in preventing iran from acquiring a nuclear weapon. and nuclear-armed iran would certainly undermine the nonproliferation regime we have done it so much to build. there are risks that an iranian nuclear weapon could fall into the hands of a terrorist organization. it is almost certain that others in the get their own nuclear weapon, triggering an arms raised in one of the world's most local regions. it will involve the regime that has been was its own people and emboldened by rahm's profit to have carried out terrorist attacks. phets's profi y

to have carried out -- who have carried out terrorist attacks. when i took office, the efforts to apply pressure on iran were in tatters. iran had gone from zero central future spending to thousands without push back from the world. the reason was that iran was a symbol increasingly extending its reach. the iranian leadership was united and on the move. from my very first months in office, we put forward a very clear choice to the iranian regime. a path that would allow them to rejoin the community of nations if they meet their international obligations or a path that leads

to an escalating series of consequences if they do not. in fact, our policy of engagement quickly rebuffed by the iranian regime allowed us to rally the international community as never before, to expose iran. because of our efforts, iran is under greater pressure than ever before. some of you will recall the people predicted that russia and china would not push to move toward pressure. they did. in 2010, the un security council overwhelmingly supported a comprehensive sanctions effort. few thought that sanctions could have an immediate but on the iranian regime. they have. of an immediate bite on the

iranian regime. they have. many thought we could hold the coalition together. but our friends in europe and asia and elsewhere are joining us. in 2012, the iranian government faces the prospect of even more crippling sanctions. that is where we are today. because of our work. iran is isolated, its leadership divided and under pressure and, by the way, the arab spring has only increased the use trends as the hypocrisy of the regime is explode. as a result, the assad regime is crumbling. so long as iran fails to meet its obligations, this problem remains unresolved. the effective implementation of our policy is not enough.

we must accomplish our objectives. and in that effort -- [applause] i firmly believe that an opportunity still remains for diplomacy backed by pressure to succeed. the united states and israel both assessed that iran does not have yet a nuclear weapon and we are exceedingly vigilant in monitoring their program. now the international community has a responsibility to use the time and space that exists. sanctions are continuing to increase. this july, a european ban on iran in oil imports will take place. [applause] faced with these increasingly dire consequences, i ran's leaders still have the

opportunity to make the right decision. they can choose a path that brings them back into the community of nations or they can continue down a dead-end. given their history, there are of course no guarantees that the iranian regime will make the right choice. both israel and the united states have an interest in seeing this challenge resolved diplomatically. after all, the only way to truly solve this problem is for the iranian government to make a decision to forsake nuclear weapons. that is what history tells us. moreover, as president and commander in chief, i have a deeply held preference for peace over war. [applause] i have sent men and women into harm's way. i have seen the consequences of those decisions anin the eyes of

those i me to come back gravely wounded and the absence of those who do not make it home. long after i leave this office, i will remember those moments as the most searing of my presidency. for this reason, as part of my solemn promise to the american people, i will use force when the time and circumstances demand it. and i know that israeli leaders also know all too well because the consequences of war. even as the recognize their obligation to defend their country. so we all prefer resolving this issue diplomatically. having said that, iran's leaders should have no doubt about the result of united states. [applause] just as they should not doubt is

rell's sovereign right to make its own decisions about what did should not doubt israel's sovereign right to make its own decisions about its own security needs. [applause] i have said that when it comes to iran to obtain nuclear weapon, i will take no auctions off the table. and i mean what i say. -- i will take no options off the table. and i mean what i say. [applause] that includes all efforts of american power. an economic effort that imposes crippling sanctions and, yes, a military effort to be prepared for any contingency.

[applause] iran's leaders should understand that i do not have a policy of containment. i have a policy to prevent iran from acquiring a nuclear weapon. [applause] and as i have made clear time and again during the course of my presidency, i will not hesitate to use force when it is necessary to defend the united states and its interests. [applause] moving forward, i would ask that ightinessmember the wearineswe

of these issues, the stakes involved for israel, for america, and the world. already, there's too much loose talk of war. over the last few weeks, such talks have only benefited the iranian government by driving up the price of oil which they depend on to fund their nuclear program. for the sake of israel's security, america's cigarette, and the peace and security of the world, -- america's security, and the peace and security of the world, knows all the time for bluster. now is the time for letting pressure sinking in. now's the time to heed the timeless and vice of teddy roosevelt's. speak softly, carry a big stick. [applause]

and as we do, rest assured that the iranian government will know our resolve, that are coordination with israel will continue to do that our current -- that our core mission with israel will continue. these are challenging times. we have been through challenging times before. the united states and israel will get through them. we have both benefited from the bonds the bring us together. i am proud to be one of those people. in the past, i have shared in this for just why those bonds are so personal for me. the stories of a great uncle who helped liberate buchenwald to my memory is returning there with elie wiesel, schering books with -- sharing books and

experiences with my friends on the campaign trail and in what has been to my friends in this room and the concept that has been written gutted my life. -- that has enriched and guided my life. [applause] israel's story is one of hope. we may not agree on every single issue. no two nations do. our democracies contain a vibrant diversity of views. but we agree on the big things. the things that matter. and together, we are working to build a better world, one where people can live free from fear, one where peace is founded upon justice, one where our children can know a future that is more hopeful than the present.

there is no shortage of speeches on this friendship between the united states and israel. but i'm also mindful of the proverb that man is judged by his deeds, not his words. so if you want to know where my heart lies, look no further than what i have done. [applause] thank you very much, everybody. god bless you. god bless the people of israel. god bless the united states of america. ♪

♪ >> so that was the beginning of the conference. it is time for all of us to go learn. the breakout sessions begin. follow your program and we will see you all together this afternoon.

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] ♪ >> president obama wrapping up aipac,.rst session of a pac he cautioned of too much loose talk of war. you can watch the president's remarks again tonight as well as israeli president perez. we'll have those remarks here on c-span. our coverage continues to more of the aipac meeting on c-span 2. it will begin with senator joe

lieberman and it will be followed with prime minister netanyahu. >> who'll lead -- who all we've vetevetted. >> obama just changed the entire dynamic. >> looking to the new hbo movie and get the inside story on what happened in the 2008 presidential campaign. >> i like those talky moms. -- those hockey mom spent in what they say is the difference between a hockey mom and apple? lipstick. >> -- and a pit bull? lipstick. >> for the weaker 10 days, she was. the democratic side, there was a lot of concern as the mccain- palin came out of that

convention ahead of obama in the national polls. people on the democratic side were short of freaking out. >> will talk about "game change" today at 6:30 p.m. on c-span. >> if you had said in 2006 that the world would be begging for the united states to use force again in the middle east within three and half years, everybody would have said you were crazy. >> robert kagan is not only an adviser to the romney campaign, but also serves on secretary of state hillary clinton's board. >> there is a lot of continuity in foreign policy, more than we expect, a lot of broad consensus. i think where you see here is the kind of consensus that exists in the foreign-policy community. there is a lot of vocal lobby -- a lot of overlap between the two parties. >> tonight at 8:00 p.m. eastern

on c-span's q&a. >> on wednesday, federal reserve chairman ben bernanke said the economy is doing better than expected and that the fed is not planning on taking additional measures to stimulate the economy. he testified before the house financial services committee in one of two yearly appearances that he makes about the state of the u.s. economy. the portion of the hearing you are about to see is one hour 20 minutes. it begins with the chairman's opening statement.

>> limited information available for 2012 is consistent with growth proceeding in coming quarters at a pace close to or somewhat above the pace that was registered during the second half of last year. we have seen some positive developments in the labor market. private payroll development has increased since the middle of last year. the job gains in recent months have been recently widespread across these industries. in the public sector by contrast, laos by state and local garments have continued. the employment rate has moved up appreciably since september, reaching 8.3% in general. new claims for unemployment insurance benefits have also moderated.

the unemployment rate is somewhat more rapid than is expected given the economy appears to be growing at or below the longer-term trend. continued improvement will likely require stronger growth in production. notwithstanding the recent data, it remains far from normal. it brings elevated long term unemployment near record levels. household spending advanced moderately in the second half of last year boosted by our fourth quarter surge that was facilitated by an easing of constraints related to the earthquake. the fundamentals continue to be weak. household income in welt were flat. in the housing sector, affordability has increased dramatically. many buyers lacked a down payment in credit history required to qualify for loans. others are reluctant because of

concerns about their income prospects and the future path of house prices. it puts downward pressure on house prices. manufacturing production has increased 15 term since the recession and has posted solid gains in the middle of last year. more positive signs include a pickup in construction. manufacturing production has increased 15% since the trough of the recession and posted solid gains since the middle of last year. supported by the recovery in motor vehicle supply chains and ongoing increases in business investment and exports.

real spending rose -- real business spending rose at an annual rate of around 13% in the second half of 2011. it slowed somewhat over the same period. the members of the board recently projected that economic activity in 2012 will expand above the pace registered in the second half of last year. the projections have a tendency of 2.2% to 2.7%. this is lower than the predictions. they indicated the recovery have been somewhat slower than previously estimated. in addition, the strings have a way that the growth in problems

in u.s. housing is a mortgage markets have continued to hold on not only construction but also household wealth in confidence. looking beyond 2012, and expect that activity will pick up gradually supported by a continuation of the accommodative stance. it is projected to remain closed. they do not expect further substantial declines over the course of the year. they continue to edge downward toward levels consistent with the statutory mandate.

increases, stresses in the banking system and a reduction of economic activity in the year area. to help prevent strains from spilling over, at the federal reserve agreed to modify the terms of with other major banks. and number of constructive policy actions have been taken in europe including the european central banks program to extend loans to european financial institutions. european policy makers agreed on a new package of measures for greece.

critical fiscal and financial challenges remain for the eurozone, the resolution of which will require concerted action on the part of european authorities. further steps to be required for competitiveness and a number of countries. we are in frequent contact with their counterparts in europe and will follow this closely. as they discussed, inflation picked up during the early part to 2011. a surge in the price of oil put upward pressure on motor vehicle prices pushed overall inflation to an annual rate of more than 3% or the first half of last year. as we expected, they appeared transitory.

it is close to the average pace in the preceding two years. the committee anticipated that over coming quarters inflation will run at or below the 2% level. the central tenancy of participants for inflation in 2012 range from 1.4% to 1.8%. looking farther ahead, said they expected the subdued level to persist beyond this year. since they were made, a gasoline prices have moved up. it is a development likely to push up inflation temporarily. we will continue to monetary markets carefully. -- to monitor energy markets carefully. longer-term inflation expectations is measured by

indicators and appear consistent with the view that inflation will remain subdued. against this backdrop of restrained growth, the committee took several steps to provide additional accommodation during the second half of 2011 and an early 2012. the steps included changes to the guide and adjustments to the federal reserve holdings of treasury and agency securities. the target range remained at zero-1.4%. in august comment they committed the guidance and to economic conditions including low rates in a subdued outlook for inflation were likely to give low levels to the fund rates through the middle of 2013. by providing a longer time horizon, the statement and it to put downward pressure on longer-term interest rates.

at the january 2012 meeting, the amended it further, extending it over which they expect economic conditions to warrant low levels of the funds rate through late 2014. in addition to the adjustments, the committee modified the policies regarding the holding of securities. the committee put in place an extension program that combines purchases of longer-term treasury securities with sales of shorter-term treasury securities. the objective is to lengthen the average maturity of our holding without generating a significant change in the size of our balance sheet. removing longer-term securities should put pressure on longer- term interest rates and help make market conditions more supportive of growth than they otherwise would have been. to help support conditions, at the committee decided to reinvest principle preseason and the holdings rather than continuing to reinvest in

longer-term treasury securities. the seven the practice since august 2010. -- this had been the practice since august 2010. the plan to adjusted to promote a stronger economic recovery. how like to say a few words about longer run goals. the statement reaffirms our commitment to our statutory objectives given to us by the congress of price stability and maximum employment. the purpose is to provide increased effectiveness. the statement does not imply a change. transparency is enhanced by providing greater specificity about our objectives. because the inflation rate is determined by monetary policy, it is appropriate for the

committee to set a numerical goal. the fomc judges say an inflation rate of two% is measured by the price index and is most consistent over the long run with the statutory mandate. on maximum employment stands on an equal footing with price stability as an objective, the maximum level of employment is largely determined by non monetary efforts. the committee can estimate the level a maximum employment and use it to inform its policy decisions. in our most recent projections, the estimates of the longer run had a tendency of 5.2%. the bubble a maximum employment in an economy is subject to change.

it can be affected by ships in the range of economic policies. if they estimated that the maximum level had increased, we would adjust accordingly. the dual objectives are generally complimentary. the committee judges that sustaining a highly accommodative stance is consistent with promoting both objectives. in cases where the objectives are not complementary, the committee follows a balanced approach and following them. there are potentially different time horizons a reds their projected to return. thank you. i will be pleased to take your questions. >> thank you.

the biggest driver of the ever increasing deficits faces is the runaway growth. you have repeatedly stressed that the united states needs to return the federal government to a sound footing over the long term. the administration's 2013 political budget does nothing to reform these programs are written in their cost. we did address military spending what are some of the consequences? if we do make major long-term changes, do you see immediate or short-term benefits?

>> you talked about the importance of establishing the long run the stability. if you look at the budget office's, what you see is that under current law is that over the next 10 or 15 years you see an increasing exploration. it is not going to be sustainable. there is the ability for the government to maintain fiscal stability. there are numerous risks. the most extreme case of a financial crisis. the interest-rate above levels

and they normally would be. they also may borrow from foreign lenders. it is important to address this issues. one point i will make is that there may be some problems with the focus on the 10-year window that is part of the effective analysis of congress. many of the problems are becoming most severe after 10 years. i would ask congress to consider not just the window, but the longer horizon implications of their policy decisions. i think that a credible plan put in place that would strengthen the view that the

united states to be fiscally it sustainable, it would have benefits. >> thank you. you are a member of the financial stability oversight council which is charged with responding to threats of financial stability and mitigating the problem of too big to fail. the congress publicist a piece called "to big not to fail. -- "too big not to fail." it will outweigh and what they may come of it. will the council consider the threat and financial stability that the cost and complexity of dodd/frank poses to the

financial system and find out how to minimize that cost and complexity? how do you view the fed's role? >> i have been quite pleased with the functioning. we have met regularly. every principal comes to every meeting. we have extensive discussions among the senior staff. there's been a lot of interaction. there are a lot of benefits. we have talked about making sure our policies are as consistent as possible. we want to avoid redundancy. we supported the basic goals of dodd/frank which are to create a more macro approach. it is very important to make sure that we get the best results. we need to make sure that we are putting out roles that are

effective at reducing the risk of financial crisis and that minimize the regulatory cost, burst go the before the smallest banks. >> thank you very much. >> thank you for that reputation -- for that tation of thefuatio

notion that the board is causing these problems. it is bipartisan in nature. when the major contributes was an appointee sheila bear. i was at the treasury department yesterday and noted the portrait of hank paulson that has gone up. he noted his reforms that wanda and the financial reform bill. -- that wound up in the financial reform bill. he was also there. i do want to go back to the deficit. the chairman said he agrees. he talks only about the entitlements. we talk about the level of reduction, if you are going to get that all all, you're going to be doing damage. you start with overseas military expenditures. given the importance of a longer-term policy, there are policy preferences than i know you do not want to get into. from the macroeconomics standpoint, would it be different if they came from

reducing the cost-of-living increases or for some change in the tax code? would there be any macro economic difference? >> the main thing is to retain sustainability. that means the deficit's come under control. it is important to make good decisions about how you spend your money. >> a want to go back to this question of the door mandates. the notion that somehow cannot do much about it. you have done this in practice. about a year ago, they did a paper about how the recession was put to an end. he has been bipartisan. they talk about aggressive

fiscal and monetary policy that not only averted a great depression but are resulting in the beginnings of a recovery. only defied these into two components, we estimate that the latter was substantially more powerful. this assessment of how we did better said that monetary policies or even more important than the stimulus. this effort to denigrate the role seems to be greatly mistaken. i can without a chart to the press. -- i also have handded out a report to the press. as you look to look to page 17 of your report. there is a chart. that change shows that it measures monthly job loss. the worst monthly jobs loss comes in early 2009.

we get one of the steepest rise is i have ever seen. -- steepest rises i've ever seen.he get a very substantial increase in employment. it takes a place in the numbers moving. it goes into a positive thing. it levels off. this starts to rise. not only does this show a very sad again position there's a -- very significant position. there's a point now where the monthly increases in 2012 are equal to what they were in 2005. the total losses were so great. i also know that you correctly point out that we had done

substantial improvements. it has been diminished somewhat by reductions in state and local governments. if state and local government hiring had been even, if hiring can -- have been even, the unemployment would now be under seven%. one of the major problems we've got that may keep us from a continued upward trends would be troubles in europe. the role that you in your agency have played in helping to give europe to avoid greater troubles has been very helpful. it is striking that you are getting criticism for a series of very constructive actions. i want to express my support.

the greatest threat to the american economy is in europe. i should know. the american economy is the best performing economy of the developed world. you have been developing that. the attacks and what the fed has been doing to try to keep you from doing the right things are a spot as disastrous a prescription. -- are about as disasterous a prescription of u.s. policy. >> thank you. would you tell me whether or not you do your own shopping at the grocery store? >> i do. >> you are aware at the prices. this argument that they're going up, the people on fixed incomes are really hurting. they're losing trust in government. their inflation rate is much

higher than the government tries to tell them. this whole idea about pricing, if you're lonely $100.20 years $100 in 20e loaning years and you get $90 back, you'll be very upset. we pan back that money. if it is worth 20% less. nobody seems to do anything about it. it is very upsetting. if i do not give you your $400

back, i'm stealing's $10 funny. someone is doing well. it is very upsetting. in january, you said that you put a little bit of fun at people. if you say it is too and i say it is 9, it is compromise. it is not hurt you unless you're one of the people that stick your money in the mattress. are you going to put it in a seedy and not make any money at all? -- in a cd and not make any mon ey at all? it does not make any sense. is not encourage savings. i do want to make a point about prices. prices go up. that is that the insulation. that is one of the bad consequences of the inflation. it is one of the bad effects. he took over the fed in 2006. i have a silver ounce here. this ounce of silver bat in 2006 would buy over 4 gallons of gasoline. today it will buy almost 11 gallons of gasoline. that is preservation of value. that is what the market has always said should the money. money comes into effect in a natural way. it is money.

why is it that we cannot consider the two of us an option. you a paper money. i the money should be honest. why don't we use it? why don't we allow currencies to run parallel? they do around the world. as much as i would like to do something with the fed, i say the fed will self-destruct eventually anyway when the money is gone. why wouldn't we legalize competing currencies? why can people put this in a -- why can't people put this in a master's the record of what you have done and the last six years is destroy the value of real money. at the same time a money is preserved. a competing currency, we already have a silver eagle. it is legal tender for a dollar.

some people say it is legal tender, it is a dollar? they use it and they get into big trouble. did the government closes them down. you can get arrested. what would be around with talking about competing currencies? this is something that i think would be a compromise and that we could work along. >> it is good to see you again. [laughter] just one word on the inflation. those numbers are constructed by the bureau of statistics, not by the fed. these are independently constructive. i think they're done in a serious and thoughtful way. on alternative currencies, and nobody prevents you from holding out the silver or gold if you want to. it is legal to do that. you are privately find to hold

other currencies. in that respect, you can do that. >> that is not money. when you pay taxes to buy a claim or the have capital gains. if you have to settle a lawsuit, it is settled in depreciating as federal reserve noticed. that is nothing near money when it is illegal to use it. but to do it, you'd have to repeal the legal tender laws. you'd have to legalize this. you'd have to get over the sales taxes. you would have to get rid of the capital gains taxes. even in mexico they are talking about this. they have been wiped out too many times with the inflation that wipes out the middle class. they are allowing people to save in silver currency. i hope we move along in that direction because there should not be any overwhelming changes all of a sudden. people could vote on it. maybe they will give up on the federal reserve and vote for federal money. >> i would be happy to talk with you about it. >> miss waters. >> i would just like to make an

announcement for the democratic members. we will not be able to get to everybody here. the committee is too big. but our policy will become a when mr. bernanke comes back with his second appearance this year, we will begin where we left off so that members who did not get to ask other questions to it, we will start from there and they can ask their questions the second time. >> thank you. dr. paul and chairman bernanke, you're getting along marvelously. ms. waters, i hope you will continue as cordiality. >> thank you. i am interested in housing. everyone agrees that this economy is not going to rebound until the housing market is vigorously operating. i want to find out a little bit about what is happening with the servicers and something about

principal reduction. on february 9, the federal reserve set monetary policies on the five largest markets servicers. you issued it in annabelle 2010. these five services also have to be part of the settlement between the state attorneys general and the to the government announced on the same day. as i understand it, the penalties paid by the servicers under consent orders issued by the fed can be satisfied by loan modification that they make under the state's settlement. in other words, unless the servicers and failed to comply, there will be no money inabilities but servicing violations identified. but we do not know all the details yet because the state ag settlement terms has not been released. this can aptly satisfy some of the requirements of the

settlements, including investor loans and all the loans they service. would servicers be able to use the write-down of loans by investors to satisfy the penalties the rest by the fed in response for unsafe and unsound practices? that is the first one of my questions. >> know, we're part of the overall agreement. by participating, we helped make it happen. we just released our engagement letters and action plans for those companies that we oversee. the banks will have to verify that they have reduced their own holdings, their own assets by the amount that they are taking credit for in the overall holding. if they do not meet those full amounts, they will have to pay the rest in cash. >> on the issue on whether to pursue principal reduction modification in residential mortgages, york federal reserve

white paper report acknowledges some of the problems thaof negae equity. i wanted to ask you what you thought of the speech by a new york fed president after your paper came out. in his remarks, mr. douglas suggested that principal reduction to minimize loss of value on the delinquent loans they guarantee and a shared appreciation approach could have problems with that giving policy owners a windfall. what do you think about the ideas proposed by mr. dudley? does this help avoid some of the problems? could this not shared predicament this shared appreciation -- couldn't this shared appreciation be a difference?

>> first of all, we were careful not to make explicit recommendation because we felt that was a congressional prerogatives to make those determinations. we tried to provide a balanced analysis of principal reduction. it is not that we disagree in the goals. we want to reduce foreclosures and delinquencies. we want to help people want to move to be able to do that. but there are often a number of alternatives. for example, if the ideas just to be able to move, then a short sale may be the most effective way to do it. if the goal is to reduce payments, the refinancing of lower interest rate or modification would be the best way. there are some interesting questions from the perspective of public policy on what the best way to proceed is, whether it is the most cost-effective approach or not. >> you have interested many of us in principle reduction. principal reduction modifications for underwater bar wars would be too costly.

-- underwater borrowers would be too costly. if you're not supporting principal reduction and you're not talking about how homeowners can get out from under this foreclosure problem, what are you suggesting we do to improve this housing market? >> we discussed a whole variety of things in our white paper. although, again, with a provider that the goal was to provide a background analysis to help congress make decisions. for example, we have a big overhang of homes in the market. one of the ideas that we discussed is moving the real estate owned to rental, which is something the fha has thought interesting. we have talked about lowering barriers to do that on a large

scale. but that is one direction. there are a lot of issues with the tightness of mortgage standards where people are not able to get mortgage credit, even when they meet the gse standards. we have talked about clarifying the representations and warranties better part of the mortgage contract. fha have looked at that as well. i think that could be a constructive step. servicing is an important issue. you referred to it in the beginning, the servicing agreement. since early last year, we put consent orders on all the major servicers required to improve their practices and principal points of contact for individual borrowers to provide more counseling, other controls, and so on. there is a whole variety of things to be done. not all the more congressional. some of them and did not all of them are congressional.

-- not all of them are congressional. >> thank you. >> you describe the recovery moderate in historic terms. when you add in those who are underemployed, those who have left the labor force due to giving up, the true unemployment rate is 15.4%. half of all americans are now classified by the census bureau as either low-income or in poverty. and one in seven now have to rely on food stamps. from the perspective of my constituents, the use of the term "modest" is indeed modest. i would like to first return to the subject of our structural debt. one of the major players in our economy and the major driver of our long term liabilities,

everybody here knows it -- it is medicare and medicaid -- and our health care spending, nothing comes close. that was our president barack obama. i would suggest that -- i would ask this simply. even if we cut the pentagon by 25%, make it 50%, that we solve the long-term structural debt crisis in our nation -- >> you refer specifically to health care. this is a cost that is going up much faster than gdp. the output of the health care industry is not that markedly better than other countries. clearly, not only for fiscal issues, but also for private- sector productivity, it is an important issue to address. as a matter of arithmetic, it is true that, over time, increasing shares will go to medicare,

medicaid, and other health- related programs. it is very important to address that. >> thank you. in dealing with your dual mandate, you said the maximum level of employment in an economy is likely to be determined by non-monetary factors. i really want to pursue this theme. i certainly agree with the assessment. but i question, after three years in the most highly accommodated monetary policy in the history of our nation, the recent announcement that we will continue this policy for two more years -- i know according to your own statistics, public companies are now sitting on $2.10 trillion in excess liquidity. banks have $1.50 trillion excess liquidity. perhaps monetary policy is not the challenge that we have today. recently, the dow president

should make a harvard business study that the effective taxation and red tape. roughly half believe that health care government regulations is what is causing them not to hire more workers. you have a job creator after a job creator, like bernie marcus at home depot, saying that the impediments that the government imposes is far too difficult to deal with. i would add to the voices of just about every small business person i have talked to in the fifth congressional district of texas that i represent. it begs to questions. number one, the limits of the efficacy of monetary policy and, frankly, the risk as well. it was brought up early that we retirees who are being squeezed. pension fund, savers, you know

that community banks are feeling squeezed. many of them are lending out on risk curve. i am very grateful that you have shown your concern and anxiety over the structural debt. but to some extent, you're one of the major players by creating these artificial rate that i would argue masked the true cost of our fiscal folly. and to some extent, by keeping rates artificially the slow, are you not simply postponing and exacerbating the problem, particularly the unintended consequences of another asset bubble? do you do you share these concerns?

>> congressman fright pointed out in sharp movement in march 2009. that is when we began qe1. i do not claim responsibility. monetary policies are not the answer, but in partnerships with other economic policies ranging from trade, regulation, education, infrastructure, tax code, and so on. i certainly would agree that monetary policy is not a panacea. it can help offset cyclical

fluctuations in financial crises like we have had, but the long- term health depends on decisions taken by congress and administration. >> thank you very much. >> thank you for your public service. in your testimony today, you had some encouraging points, specifically that in january the private sector gained over to under 60,000 private sector jobs and we have seen over the past 23 months a steady gain in private sector employment, and i believe your chart the ranking member pointed out is very graphic. we were losing 700,000 jobs per month when president obama took office and we have been moving forward with the economic

recovery and i thank you per your brave and innovative leadership during this time. we're still facing many, many challenges including the challenges of the long-term unemployed that seems so persistent, deep, and strong. over 40% of the unemployed have been so over six months. i would like to know whether or not you feel this is a structural or something we can address with improved conditions in our overall economy. i am deeply concerned about the fact that we are facing the largest income disparity in the history of our country. the gap seems to be getting larger and larger. the challenges for the middle, a low, and moderate income people become strong group for them to make progress -- harder for them

to make process. what are the things that we could accomplish in order to stabilize our economy and create the conditions that would improve more job growth? i believe in the dual mandate. specifically, do you think at this point in the cycle that we need the kinds of budgetary tightness or shrinking of the government that my friend on the other side of the aisle are advocating for? does it make more sense in terms of our fragile economy to have more fiscal stimulus, to pass the transportation bill, to help create opportunity in our economy. >> is very worrisome, the high

level of unemployment, 40% or more have been unemployed for six months or more, the highest in the course to war-time. -- in the post-war time. the dropoff was so severe that firms in panic stricken mode caught many, many workers and many of them have not yet found work. the seventh on a potentially serious consequences. for individual workers, if you are out of a job for a long time and find a new job, you would typically be much lower paying more much less secure. the concern in particular are the people out of work for six months or more will start to lose skills, attachment to labor force, so they will not know what is happening in their field industry. that is one reason for urgency to try to bring the economy back to normal labour market.

that is something we're paying a lot of attention to. there's obviously no easy solution. you addressed fiscal policy, and i have tried to make three. about fiscal policy. as we already talked about, achieving long-range sustainability and providing comfort to the public and the markets that deficits will come under control over time is very important for confidence in creating more support for the recovery, but at the same time we also have to retype the near term. under current law, and generate first, 2013, there will be a fiscal cliff of tax increases and a hope congress will look at that and tried to figure out ways to achieve the fiscal improvement without it all happening in one day. >> mr. chairman, if i could? my time is running out.

in some ways, monetary policy has replaced fiscal stimulus. would the recovery happen faster if we had a better balance between the two? can you comment on the need for more fiscal stimulus? >> you do that come in needs to be part of a two-handed plan, so did speak. the actions you take in the short term, whether it be infrastructure, education, tax reform, what ever come of i hope that they are considered and wisely chosen, but it's also important we keep in mind the long-term necessity of making fiscal policies sustainable. the need to think about those two things together, i think. >> thank you very much. >> the chair recognizes the chair the subcommittee on financial institutions who has

actually done some very good work on housing issues. i commend you on that. >> thank you, mr. chairman. i would like to return to housing for a moment. today, through fha, fanny, and friday, the federal government and taxpayers back this nearly 100% of residential mortgages. is this healthy for the economy? what are the barriers to private capital re-entering mortgage lending in the secondary market for home loans? >> you're correct that government-supported agencies are now pretty much the entire securitization market. they do not make the loans, but they securitized and by most of the mortgages. that's not healthy, obviously, and we would like to have a more diversified system with greater private-sector participation. we are not seeing that.

the reasons are not certain. i think, in part, the private label so-called mortgage markets are recovering from the shocks of the financial crisis. there is uncertainty about where the housing market is going, there for the uninsured securities put together by non- tse securitized hours are not as attractive as before. there's still uncertainty about the framework for securitization in the future, so there's a lot of reasons. >> does dodd-frank help or hurt the reentry of private capital into the market? >> i think it's important to create more certainty and we are not there yet. there's still a lot of discussion about risk-retention requirements, for example, which have not been specified.

it would be helpful to get greater clarity. i think it also would be helpful to get greater clarity about what the long run housing or mortgage market structure will be. there has been plenty of discussion about gse reform, covered bonds, and other fiscal uncertainties. >> moving on to another question. dodd-frank effective date for the volcker rule is july 21st. we've heard the regulators think this is a daunting task. do you have any plans to phase in implementation of the poker rollbacks >> yes. the statute allows for a two- year transition period we will certainly be giving institutions adequate time to adjust and adopt to murder rule is being put out.

>> thank you. i have heard from some of my constituents insurance companies that the fed staff has been deployed to insurance companies. what is the purpose for their presence given that the insurance companies are regulated by the states? is the fed simply increasing insurance expertise or does this give the fed authority to regulate insurance? >> we do not have any authority to regulate insurers and last, in the future, a systemically critical an insurance company, as so designated, and it has not happened yet. i'm not quite sure what you are alluding to. there have been discussions to give ourselves better insight. >> what i'm alluding to is that there have been insurance companies where there have been 10 members of your staff that

have moved in in and taken up residence in the offices. >> i will find out and communicate with you. >> i'd appreciate that. >> what kind of discussions are you and your staff having with the new federal insurance office which was designated to be a federal insurance expert on national-international issues? >> we have been in directing with them. under previous question, it could be the insurance companies in question hold risks, in case we would have some oversight. >> thank you. i yield back, mr. chairman. which chairman bernanke, while credit conditions for small businesses have improved over the past year, the number of

smaller loans come under to under $50,000 or less, remains below pre-recession levels and these are the types of loans that are important to startups. do you think credit availability for these loans will ever really rebound to 2007 models? >> absolutely. there are a number reasons why the number of loans being made a lower. given the economy is not that strong, the demand for loans is not quite what it was. secondly, lending standards have tightened since before the crisis. some of that is appropriate. as you know, the credit standards were a little too easy before the crisis. there are some reasons why lending has fallen which, no doubt, will improve over time. i think that is still the case

that we are a little bit too far in the other direction and we're certainly working with banks, particularly small banks, and i will reiterate this point. it is incredibly important for banks to take a balanced approach. on the one hand they make safe and sound loans, but they are making loans to creditworthy borrowers because they are important for our communities to recover. >> banks are only making big loans because they are the probable ones. in that regard, this is why we have the small business lending bill. the banks were lending community banks money that they would use to pay back tarp money but it did not make the loans that we were expecting for them to make. given that scenario, do you think that it is still important

and meaningful for the federal government to clear role in providing lending programs that would fill the gap that exists from the private sector? >> the fed is had a good relationship with the small business administration and there were some additional provisions during the crisis that gave them more flexibility, more funding, and that could maybe be an area worth looking at. >> under your leadership, the fed has significantly increased its commitment transparency from all the more press conferences and releasing interest-rate forecasts for the first time in its history. while these policy tools are good for the financial markets and wall street firms, they are of limited use to the general public. would you consider releasing guidance for household and small-business is of the fomc

meetings and what monetary policy means to them? >> it's an interesting idea. we have, of course, many speeches and i am here giving a report to congress about monetary policy. i would like to think about what that would look like. obviously, we're trying to communicate to the broad public. i have been on tv programs and the like. later this spring, i'll be giving lectures at george washington university which will be available to anybody online about the fed and financial crisis. we're working to approve communications in your suggestions are more than welcome. >> thank you, mr. chairman. >> thank you, mr. chairman. a quick footnote. we heard much about the wall street reform bill coming and we will continue to, and he said the bill is bipartisan and the

nature of that should not be overlooked. i would just like to point out that the bill is so bipartisan that it is called dodd-frank. mr. bernanke, thank you for being here today. in your testimony and written remarks, there are some things coming from michigan, a very hard hit states struggling to come back in this stagnant economy. there are some things that bear repeating. on page two, "the economy appears to have been growing at the time frame at or below its long-term trends. continued improvement in the job market is likely to include a jump in production. notwithstanding, it remains far from normal. the unemployment rate remains elevated. long-term unemployment is still near record levels. the number of persons working time -- part-time for economic reasons is very high."

it goes on. real household income and wealth are flat in 2011. access to credit remains restricted from any potential borrowers. consumer sentiment has rebounded but remains relatively low. now, two questions and then i will be quiet and listen. in terms of the credit, still not getting potential borrowers. what specifically do you think the reason for that is? what you think can be specifically done by this, if not by you? i'll understand why you cannot discourse on that. finally, my concern is a question about how this operates. it says on page 6 that the target range for federal funds remained that 0% 5-point to 5%. -- 0%-.25%/

does this have an effect on personal savings rates? is that the case? could this could stop them being a higher rate of return? would that not constitute them essentially subsidizing the operations to try and get money to the banks or other people still not getting credit which leads to the horrible things that i started my remarks off with? >> on your latter point, we are certainly paying attention to the effect of lower interest rates. banks complain about low interest rates. they say it reduces their interest margins so it's not a profitable thing. from the point of view of savers, for most savers, i think, on average, something less than 10% savings by retirees is in the form of fixed interest like cd's.

people own equities, and money- market funds, mutual funds. they have to borrow one -- 401k's and a variety of things. these are assets returns depend on how strong the economy is. in trying to strengthen the economy, we are actually helping savers by making returns higher, as you can see in the stock market for example. >> those are very important point. personally, i did not subscribe to the fact that it was ok to have their rate of return artificially lowered. i think what you're saying is that yes, they are subsidizing this, but in the long run it's better because you believe it will equal amounts of growth. we will get to the second part of my question, and that very much remains in doubt, does it? >> the economy has been

recovering. monetary policy is set appropriately to help the economy recover. you cannot get good returns on last you have growth. the other thing we're doing, as you know, is we have set inflation targets and we want to keep inflation low and stable. it is the adjusted rate of return that matters in the end. >> in short, it is almost you have decided you will invest in what the potential rate of return would be in your recovery for the economy. it is either at or below long- term trends and we have trouble getting money down into the hands of people for credit come into the and the people who grow this economy and testing. this does not necessarily sound like a good investment if i'm sitting in your spending my

money on the recovery. >> we're not spending anybody's money. it is arguable that interest rates are too high and being constrained but interest rates cannot go below zero. we have an economy where demand falls far short of the capacity of the economy to produce. we have an economy where the amount of investment in durable goods is far less than the ability to produce. that would suggest interest rates should be lower than rap -- rather than hire. i would argue that help the economy with good returns of the best way to get savers having returns. on providing credit, that was one observation in the news this morning that bank lending increased last quarter of a the fastest rate since the recession. >> thank you. the housing market declined in 19 of 22 major markets.

we're seeing signs of deflation. >> thank you, mr. chairman. i just wanted to let my friend know the protocol has been to name bills after people who head the committees of jurisdiction which is why the bill was called dodd-frank. be a majority in the house and senate. when it was split, it was sarbanes oxley. oxley was a republican because we were in the majority. the republicans were in the majority in the house. we are following the same protocol. >> at the gentleman will yield? >> you know, we did not vote for it either. >> the name of the bill is voted for as part of the bill. you lost that vote.

no one has reversed it yet. >> of the gentleman will yield? >> let me get on to what we're here for. chairman bernanke, when there are problems set out on the horizon so far, as you said the accommodative policy horizon out through late 2014, the private sector starts to expect that and circumstances change, they are crawling back off of that limb and it could be very difficult from a private sector perspective. what if things really do change substantially in the different direction, as i assume the fed

has given itself enough leeway here to say we can go back to a more aggressive a less accommodative policy, i presume. is that correct? >> the policy is conditional based upon what we know now. this is where we think we will be. but there is a substantial change in the outlook, we will adapt. >> i know how the private sector relies on accommodative policy. we do not need to go any further on that. i just wanted to make sure that everybody knows that you can go in the opposite direction, that the fed has that authority. on page 5 of your statement, you talked about continuing to monitor energy markets carefully.

one of the real uncertainties out there is gas prices and the extent to which we rely on gas prices as an indicator of how the economy is going and what we can do in our own individual lives. are there really any things that we can do as congress? i know you cannot do anything in the fed, but are there things that we can do? is there a menu of possibilities that we might could consider on energy? >> there are many things that you can debate about long term development of natural resources, hydrocarbons, and so on. in the short term, the main problems are coming from this

supply disruption or the fear of a supply disruption, but iran. the best thing we could do is resolve the situation, but that's beyond my capacity, or anyone's capacity. i'm not sure what can be done to provide relief in the very short term. >> i guess president gingrich is getting ready to tell us at some point out to solve that problem, although we did not solve it when he was the speaker. maybe he thinks he can solve it now. let me ask another question. europe, obviously, is even more major than oil prices, as what happens in europe matters. are you satisfied that they are taking steps in the right direction to try to satisfy

their problems? have we done as much as we can reasonably do to help with that? >> they have taken positive steps recently, as i mentioned in my testimony. the ecb had their second long- term refinancing operation. they are still working on getting of the greek deal done. some of the other countries in fiscal trouble had been taking strong steps to improve their budget balances. there has been some progress on a fiscal compaq thereby there would be more coordination between countries, but there's still a lot to be done. in the short term, there needs to be more efforts on providing so-called firewalls, financial backstops, in case there is a potential contagion. in the long run, the real problem that has not been solved is that many of these countries are not only physically challenged, but they're not competitive. they have large deficits and

their costs are too high. that process could take a long time to fix. >> thank you, mr. chairman. i yield back. >> let me point >> one thing we need to look at is energy. we have 2500 reserves. we ought to take a vintage of that price differential and i know we do that with natural gas vehicles. >> thank you, mr. chairman. welcome, chairman burning xie. it is always a pleasure to -- welcome, chairman bernanke. it is always a pleasure for you to be here. i have heard that there are concerned about an interest-rate sqquuze -- squeeze.

how do you recommend that they proceed? that they anticipate the challenges that we are facing because of the way in which we have to have an accommodative monetary policy? >> we have had numerous discussions of insurance companies and pension funds and others and it is a problem in the sense that their obligations to put money into fund can be greater with low interest rates. i agree that is a problem and what we have discussed. again, going back to my conversation on the other side, we are trying to strengthen an economy that will give them higher returns in their portfolios. it cuts both ways. i have talked to insurance companies. they recognize a low-interest rate is not a permanent

condition. the economy has to get back to the situation where interest is can be more normal. we are trying to help the economy. we recognize there are some side effects of lower interest rates and we are attentive to that. again, our first responsibility is to meet our to amend it and try to support the economy and keep inflation near its target. >> a similar question could be asked on behalf of our community bains who are concerned about, you know, their long-term loans that are being offered at low interest rates. same sort of approach, i assume? >> yes. i discussed this in a speech i gave a couple weeks ago at the fdic. i made the same comment that the interest margin has two parts. the difference between say for it in low rates. the ability to make profitable

loans depends on having a healthy economy. in the short run, the costs of low rates should be worth it if we can get the economy moving. >> chairman, if i may, a bit broader question or perhaps more of a 30,000 to a question. -- trick question. if you have pointed out how important it is to have federal policy that reflects the impending crisis we face in terms of banishing the dead and how that weighs on economic growth. -- vanishing that debt and how that ways and economic growth. do you feel you are talking pastor administration and congress -- we are talking past each other and how can we make your message resonate? people like me are sympathetic to it. >> these criticisms are easy for

me to make because i do not have to do with politics and i know they are difficult. it is are to explain to people why you have to tighten your belt. on the one hand, i think that educating the voters is an important thing in making sure people understand what the trade-offs are. if they understand, they will be worse but that it to the tough choices we face at the country. -- more sympathetic to the tougher choices we face as a country. we have had some very close calls recently in terms of making progress and we have this fiscal cliff on january 1 -- that might prove an opportunity to negotiate a longer term outcome. we will see. those are the two directions. one is trying to create a free working congress for debates. maybe a set of goals. the other is to get the voters

on our side by education . >> i sympathize very much with that point of view and have said so myself that it is about education and awareness. the fiscal cliff to which you refer would be the enormous tax increase that we face? >> we have a number of measures including both tax increases -- the expiration of the payroll tax cut, the sequestration that comes out a the super committee negotiations. all those things are hitting on the same day basically and that is a big impact . >> thank you for emphasizing how important that is an thank you for your great work. i yield back, chairman. >> romney, plenty, bloomberg, -- none of them. >> obama changed the entire dynamic. >> look inside the new hbo movie

and book in the inside story on what happened in the 2008 presidential campaign >> i love those hockey moms. the difference between a hockey mom and a pit bull, lipstick. [laughter] >> today -- >> she is an on allied asset for the campaign and for the week or 10 days beyond that, she was. and the democratic side, there was a lot of concern as the mccain-pellet ticket came out of that i had a barack obama -- mccain-palin take it came out ahead of barack obama. people were freaking out. >> we talk about "can change" today on c-span or any time at c-span.org. >> if you have set in 2006 that the world would be begging for the u.s. to use force in the middle east within 3.5 years, everybody would have said you were crazy. robert kagan is not only an

adviser to the romney campaign, but also serves on secretary of state clinton's for a policy advisory board. >> what i have been writing is that there is a lot of continuity in american foreign policy. a lot of a broad consensus. what you are seeing here is the kind of consensus that exists in the foreign-policy community and probably there is a lot of overlap. >> more on foreign policy and his latest book tonight at 8:00 eastern on c-span's "q&a." >> defense secretary leon panetta and joint chiefs of staff chairman general martin dempsey were back on capitol hill tuesday testifying before the senate budget committee. secretary panetta warned senators against budget cuts is saying they would hollow out the military with devastating results for national defense. the president's proposal calls for $525.4 billion -- a 1%

decrease in discretionary spending from last year in a $487 billion in cuts over the next 10 years. >> i want to welcome everybody to the senate budget committee. we examined the defense budget request. our witnesses are the secretary of defense, leon panetta, general martin chen -- general martin dempsey. we also have robert hale. i want to think secretary panetta for being here today.

it has been some time since the secretary of defense has . before secretary of defense has . before the senate budget committee. as a former omb director and house budget committee chairman, secretary panetta understand the important role of the budget committee and we especially appreciate his willingness to appear here today. secretary pam -- secretary panetta told me he would come today and i appreciate his keeping that promise. we look forward to his testimony as well as that of general dempsey and controller hail. we also understand the time constraints that you are under. we recognize that you have many issues on your plate. especially with what is happening in syria and the middle east and of course north korea's and china and russia and on and on it companies. we recognize the heavy burden on

your shoulder. we will keep our commitment to get you out of here as expeditiously as possible. i want to begin by highlighting the budget crisis facing the country. despite the progress in bell last summer's budget control act, we remain on what is fundamentally an unsustainable course. animal mollen is chairman of the trustees -- joint chiefs of staff in the required -- described the debt as the national security threat. general may not share that assessment but nonetheless, recognizes this is a key challenge facing the country. we will not be able to remain a global superpower if we fail to stop the explosion of debt. we are at a gross debt of 100% of gdp. what is of even greater concern is where we are headed.

the congressional budget office tells us that if we stay on our current course, we will go to a debt to hundred and 30% of gdp. under the scenario, and debt will reach 102% of gdp, well above the 90% that many economists believe that as the beginning of the danger zone. it will continue rising to 120% in 2022. will be on that in the years beyond 2020 to. the reality is that the defense spending both in core defense budget and the core defense budget -- work costs has grown dramatically and has been a factor in contributing to recent deficits. in 1997, we spent $254 billion on the department of defense. in 2012, we will spend about

$645 billion on the department. this is down slightly from the peak in 2010. all of the decline from 2020 to 2012 came from a reduction in war costs. the court department of defense budget has been about flat since 2010, but remains at a very high level. if we compare recent overall defense spending and budget function 0502 reece and non- defense discretionary spending, weekends we did we that nondefense spending is about $554 billion since 2010, not including war costs. non-defense funding has fallen from $540 billion to 419 -- 4 eggert $89 billion in 2012. of the discretionary pot, defense is level. non-defense is down slightly. looking forward, the president is proposing a small reduction

in department of defense funding in 2013. bringing it down from 534 billion in 2012 to 524 billion in 2013. over the next 10 years, the president's department of defense request would roughly match the level set in the budget control act, not including the sequester. as we can see from -- as we can see from the blue line, the request would provide a steady increase in the defense budget from 2013 on. the red line on this chart shows what would happen to department of defense funding if the sequester were implemented. we would see a much steeper drop in 2013, but then steady growth after that. i believe that the steep drop in 2013 required by a sequester would be a mistake. i also believe further reductions beyond the budget control act levels must be considered.

the green line represents the proposed department of defense spending over the simpson bowles plan, which provides a smaller drop in 2013 than the sequester, but slower growth in funding after that. obviously, all of these have to be reviewed. in light of the defense threat that we face at that time decisions are made. all of this -- all of us understand budgets are taken at a point in time. we also -- we all understand our threats facing this country that are unpredictable. as i noted, war costs have came down. war funding dropped from $one 59 billion in 2011 to $1 15 billion in 2012. the president's budget provides a $86 billion and includes a number of $44 billion per year

for the remainder of the 10 years. this next chart put our defense spending in a historical perspective. we that even with the drop in war costs included in the president's budget, defense spending would remain high by historical levels. near the peaks of the korean war, the vietnam war, and the reagan defense buildup during the cold war. defense spending came down more dramatically following those conflict. it is. we all understand none of these can be compared because we face a different threat now than we faced after those conflicts. i want to conclude with a quote from the former defense secretary. in an interview on cbs's "60 minutes" he said this -- "the budget of the pentagon almost doubled during the last decade. our capabilities did not

particularly expand. a lot of that money went into infrastructure and overhead and frankly, i think a culture that had an open checkbook." we cannot afford an open checkbook anymore. i recognize the administration has are taken steps to eliminate some inefficiencies in the defense department and to and some unnecessary or wasteful programs. we applaud that. we know we will have to do more. i have always been a very strong supporter of defense spending because i believe providing for the national defense is the government's corporation responsibility. make no mistake, congress will continue to provide our troops everything they need to complete the missions they are assigned. and to keep them safe. we have to keep -- we have to recognize that we still face very serious potential new

threats. i mentioned some earlier. i want to focus on iran, syria, the middle east, pakistan -- these are all of deep concern to members of this committee. i know they are of deep concern to you, secretary panetta and your entire defense team. given the fiscal crisis that we confront, we are going to have to find more savings in the core defense budget. we cannot rely on declining work cost for savings and we need to insure that every dollar going to defense is essential in promoting the country's national security. with that, we turn to senator sessions. then we go directly to the secretary for his remarks and then we open 90 to questions . >> thank you, mr. chairman. we are honored to have you with us today and general, it is a

pleasure to see you again. i have worked with you in your new position here. mr. hale, good to have you. america is blessed with the greatest man military -- greatest military. we must a short it will remain so -- parkshore it will remain so. the defense is a court function of government. i fear that a budget hearing today may not the a good use of your time. the senate democratic leadership is refusing for the third straight year to bring a budget plan to the floor. has the majority forgotten the warning that admiral mullen gave us? he told us that the debt is the greatest threat to our national

security. how will we be able to defend this country when we are broke? general tmz, the sequester -- general sense, i know that you feel like a sequester is too draconian. it is a direct result of on sustain debt and it does threaten our national security if we do not break that cycle. america leads the western world in per person government debt. amazing. at $44,000 for every man, woman, and child, america's per capita government debt is worse than greece. the president has submitted a budget plan that will continue the course and increase our gdp by another 75% over the next 10 years. from about 15 trillion dollars to 26 trillion dollars. the budget also raises taxes by almost $two trillion, not to

reduce the deficit, but to pay for a 1.6 trillion dollars spending increase. we just projected -- in other words, he is spending $1.6 trillion more than the levels we agree to in the august debt deal. almost a shocking as the administration's unwillingness to tell the truth about our situation to the country, i sent a letter to the budget chief asking him once again to -- whether their budget plan increases spending relative to current law, a very simple question. >> i received -- i received a response that refuse to answer the simple fact. if the administration thinks they can sweep this under the rug, they are wrong. congress and the white house

committed 2.1 trillion dollars in spending reduction, a 3% reduction in the expected growth, not in spending, but in >> -- in expected growth over the next 10 years. this results in a 45.5 trillion dollars spending through 2020 to. -- 2022. this is the starting point for much needed reductions. after a few months, the president is proposing abandoning those small cuts. this does not mean we should not reorganize where the initial 2.1 trillion dollar cuts fal. l. one sixth of the budget is defense spending -- we will experience a 26 sign -- a 26% decline. if this sequesters days -- stays, the defense department will take a 20% cut.

non-defense spending, the other 56 of the budget will create -- experience a 50% increase. it is critical that we reorganize the budget control act, but also we must not reduce the size of the total cut we promised the country just a few months ago. it thereby increasing spending over the modest reduction that was agreed to. instead, we should be taking thoughtful action to place this nation on a sound fiscal path. the first step in the process is to dispense with some common myths about the defense budget. senator conrad, -- i would like to provide some points i think also provide inside. myth 1 -- the defense spending is at an all-time high. the truth during the war on terror is it has averaged about

4% of gdp. around half the post-world war two average. and 50 years ago, national defense made up 48% of the budget while entitlement spending accounted for 26%. next year, and entitlements but will be 60% and the defense will and out to 19% of the budget. -- amount to 90% of the -- 19% of the budget. we can cut the pentagon. the truth overtime, and heineman organizations will consume a larger share of federal spending. and 2030, a years outside our budget window, in 2013, and taught and obligations will be as much as six times greater than -- entitlement obligations will be as much as six times greater than defense spending. eliminating the fans would not balance the budget. eliminating it entirely. myth 3, defense spending has

seen the fastest growth of any item in our budget. pentagon's base budget has increased 10% since 2008, three years, non-defense discretionary spending increased 24%, not counting the stimulus during just the first two years of president obama's presidency. the cuts that showed in the non-defense discretionary are part of the budget control act agreement that are projected out there, but that is from accelerated levels of spending. over the last three years, medicaid has increased 37% while the defense department has increased 10%. the department of indication --

education grew 70% compared to the previous three years of education spending. food stamps have seen a 300% increase since 2001. myth 4 -- a war in iraq and afghanistan have been leading contributor to th deficit. >what has imposed costs, this year's deficit alone, 1.3 trillion dollars, equals the entire cost of the wars. were spending represents four% -- of the total government outlays in the last 10 years. i share these numbers because it is essential that washington engages in fax based -- fact- based budgeting. we will have to experience reductions in all areas, including defense. i know you are working on that now and that is important for you.

these decisions should be guided by an honest assessment of facts and the fact is, the only thing the president seems willing to cut significantly is defense. the rest of the budget will continue to surge out of control. by the year 2013, nearly every penny of revenue the government receives will go to the entitlement and interest payments. leaving no money outstanding for defense education, highway and other matters. we should chart a different course, control the growth of government, and in power the public sector to maintain a strong cost effective national defense. if we do this, we will create growth, good paying jobs, reduce health care and energy costs, and pass a better future to our children. thank you gentlemen for your service to your country and i look forward to a discussion today. >> let me say in the interest of

providing balance, i agree with many of senator sessions's observations. that was useful going through some of the things that people think about defense spending. and providing an additional perspective. that was very useful. i think we should also remind ourselves that the budget control act passed congress. we voted to have $500 billion in savings out of defense. that was passed in the budget control act. i understand some did not vote for it, but the fact is, the vast majority of the senate did. 74 boats. the house passed it, signed by the president. the budget control act also provided for special powers to the special committee to deal with entitlements and revenue. they did not succeed. that leaves us with a sequester, which was also passed as part of

the budget control act that says we have to cut an additional $535 billion over the next 10 years on top of the other almost $500 billion in savings out of defense. the other thing i think we should remind ourselves is when we talk about cuts, cuts really to a baseline. this is what you were getting at, senator sessions. quds relate to a baseline. a baseline is inflicted by his doric -- inflated by historic experience. so, when they think about cuts, most people think you will get less money than the year before. other than this venture, what we are seeing is that -- this next year, what we are seeing it as increases in spending are being slowed rather than getting less money than you got the year

before. in the case of defense for the next year, we do see a $5 billion reduction in the president's proposal. 5 billion -- $5 billion less than last year. with that, mr. secretary, welcome back to the budget wars. [laughter] i know you spent a lot of time in this room and so have i.. i do not think anybody has given more distinguished service to this country and some in the different roles then you have. i did you are a -- outstanding as the chairman of the house budget committee. you are outstanding and everything you do. you played a key role in getting us to a balanced budget in the clinton days. the last time we have ever had won was when you were at the helm. i was a very willing ally in your efforts. at the cia were you did such an

outstanding job and now skier, we have a lot of confidence in you could. -- in you. we know that you have tremendous challenges. >> chairman, if you may retake i think you get a nice summary of what the situation is that we are facing. the defense department is looking at almost $500 billion in cuts. they're working hard. they said, yes, we are going to do that. that would put you in the leading part of the entire government in reducing spending. however, the see cluster -- language that was put in without any tibet -- any debate and another $500 billion in cuts. it is that cut that i think is risky and i believe the secretary believes would be devastating as he said to the

defense budget. i will say we agreed to the cut -- there was no debate about where they would occur. i truly believe that we should not give those up and say just because they cannot be placed additionally on the defense department that the remaining $5 billion is protected from any cuts. i think we need to look at maintaining vella all of spending we agreed to in the budget control act -- the level of spending we agreed to in the budget control act. maybe we are in agreement, maybe not. that is the challenge we face today. >> center sessions, you and i may not be in agreement exactly how to accomplish it, but i think we are very much in agreement that we have to maintain that level of savings. we have to find level of savings. all right. mr. secretary, please proceed.

>> mr. chairman, senator sessions, members of the committee, i want to thank you for the opportunity to have a chance to be here before you to discuss the president's budget request for 2013 for the department of defense. as pointed out, as a former chairman of the house budget committee and a former omb director, i have a very deep appreciation for the important role that is played by this committee. having spent a lot of time in this room on budget cuts and bruises over the years -- budget covers is over the years, your goal is to help set the government's overall spending priorities. as you know and as you mentioned, mr. chairman, i worked and most of the budget summit's during the 1980's and 1990's that ultimately helped produce a balanced federal budget. i know firsthand what a very

tough and critical job you have, particularly given the size of the deficits that unfortunately face our country again. it is no surprise that there is a vigorous debate in washington about what steps should be taken to try to confront the challenges. we went through many of the same debates in the 1980's and 1990's. thankfully, the leadership of both parties were willing to make it difficult decisions and that had been made in order to reduce the deficit. today, you face the same difficult choices. wilander stem the differences, there should be consensus on the fact that -- while i understand the differences, there should be consensus on the fact that the leaders have a duty to protect " our national and physical security. -- protect our national and physical security.

i know it is the -- i know this duty is serious. i do not believe that we have to choose between fiscal discipline and national security. i believe we can maintain the strongest military in the world and be part of a comprehensive solution to the deficit reduction. the defense budget we present to the congress and the nation seeks to achieve those goals. the fiscal year 2013 request was the product of an intensive strategy review conducted by senior military and civilian leaders of the department and the advice and guidance of the president. the reasons for this review are clear -- first, we are a strategic turning point -- we are at a strategic burning point after decades of war and substantial growth in the defense budget.

second, congress did pass the budget control act of 2011. this imposes spending limits that reduce the budget by $47 billion. -- $487 billion. we made the decision and got the power to establish a new defense strategy for the future. we develop a strategic guidance before making any budget decisions to make sure that budget choices reflected the ne stetterw g. we were driven by strategy, not simply by budget reduction. we agreed that we are at a key inflexion point. military mission in iraq has ended. we are in a very tough fight in afghanistan. 2011 did more significant progress in trying to reduce violence and transitioning to an

afghan-wide responsibility. we and nato have made a commitment to continue this transition until the end of 2014. last year, there were successful nato operations that led to the fall of gaddafi. we have had targeted counter- terrorism efforts that significantly weakened al qaeda and estimated its leadership. even though we have had these successes, unlike past drawdowns were threats reseeded, we still face an array of the security challenges. the chairman referred to a number of those. we are still at war in afghanistan. we still confront terrorism. if not here, in somalia, in yemen, and north africa, and elsewhere. there is still a proliferation of weapons of mass destruction in the world. iran and north korea continue to

undermine stability in the world. there is continuing turmoil in the middle east. any one of those events in the middle east could be thurst upon us in the future. -- thrust upon us in the future. there are growing concerns about cyber attacks. we must meet these challenges. we must meet these threats. if we want to protect the american people, this must be done. at the same time, as we try to protect them, we are responsible for fiscal discipline. this is not an easy task. we made the decision that we did not want to repeat the mistakes of the past. we have gone through drawdowns in the past. we decided to be guided by these guidelines. number one, we wanted to maintain the strongest military and height in the world. -- military in the world.

we we can every area of defense by cutting and that is what results did holing up a force. to not have that, we have to take a balanced approach to two budget cuts and look at every area in the defense budget and put everything on the table. lastly, we did not want to break faith with the troops and their families. those that have had to be deeply time and time again over 10 years of war. the president's budget request $525.4 billion in fiscal year 13 for our basic budget and an $88.5 billion to support the war efforts. in order to be consistent with the budget control act, our budget request had to be roughly $45 billion less than we had anticipated under last year's budget plan. over the next five years, defense spending will be $2 59 billion less than planned that

we had in the fiscal year 2012 budget, a difference of 9%. over 10 years, starting in fiscal year 2012, it will be reduced by $487 billion. to meet these new targets and our national security responsibility, we have to fundamentally reshape our defense spending priorities faced by a new strategy. the department of defense has stepped up to the plate. to meet its responsibilities under the budget control act. with these record deficits, the budget can be balanced on the back of defense spending alone. for that matter, no budget can be balanced on the back of discretionary spending. based on our own budget experience, i believe that all areas of the federal budget must be put on the table. at that is a responsible way to

reduce deficits and an irresponsible way to avoid sequesters. this sequester would cut another roughly $500 billion over the next nine years. these cuts would, in fact, all out of force and inflict severe damage to our national defense. budget putst's forward a plan to try to avert sequestration and reduce deficits by 4.3 trillion dollars over the next decade, whether you agree or disagree. to encourage the committee to look closely at the president's approach and to hopefully adopt a large balanced package of savings that the trigger sequestration and maintained the strongest national defense in the world. the $47 billion in 10-year savings come from four areas of the defense budget. he efficiencies, force structure

reductions, procure and adjustments, and compensation. let me summarize each of those areas. first of all, he efficiencies or disciplined use of defense dollars. on top of $1 50 billion inefficiencies' proposed by my predecessor as part of the fiscal year 2012 budget, we added another the other side 60 billion. primarily from streamlining support functions, consolidating enterprises, refacing military construction programs, and consolidating inventory, and reducing service support contractors. as we reduced force structure, something that secretary gates mentioned has increased as a result of large budget over the last 10 years, we have a responsibility to provide the most cost-efficient support. for that reason, the president requests the congress to authorize the process for 2013 and 2015.

as somebody who has spent for the process, i had it happen in my district and in california, we lost a reservation which constituted 25% of our local economy. i have been for black. -- through brac. i know what it does to people in the local community. at the same time, i do not know of any other e effective way to achieve infrastructure savings. -- any other effective way to achieve infrastructure savings. achieving audit readiness is another key initiative that will help the department achieves greater discipline and the use of defense dollars. as you know, i have directed the department to achieve audit readiness by the end of 2014. efficiencies are not enough. to achieve the necessary savings that are mandated, but to reductions of this magnitude requires significant adjustments to force director, procurement

investments, and to compensation. the choices we made reflected five key elements of them in defense strategic guidance we developed as a department with the support of the service chiefs, the undersecretaries, and the secretaries. let me describe the key elements of that strategy and the decisions that follow. one, the course of the future will be smaller and it will be leaner. that is a fact. at the same time, it should be agile and flexible, ready and it should be technologically advanced. we knew coming out of these wars that the military would be smaller. we would be doing a drawdown in the military. we made a conscious choice not to maintain more force structure than we could afford to properly train and properly eclipse. we are implementing reductions consistent with the new strategic guidances' for a total

savings of about over the next five years. we are resizing the active army and going from $-- 560,000 to 0,000 by 2017. that is a level th is higher than where we were prior to 9/11. we are doing the sehinggoingm to e aifo,000 200 2000's lose their retirement benefits that were promised to them. that, in summary, is the package. this has not been easy. this is a tough process. obviously, we need your support to review the proposals we have made and to give us your best guidance as well. i am a believer, as someone who comes from congress, that we need your partnership to implement this strategy.

as you know, this committee, in particular, this is a zero sum game. if you are going to restore cuts, you have to find places to cut it. there is a narrow margin here for mistakes. if you are going to restore funding in one area, you have to cut more in other areas. that is the process we went through. also, make no mistake there is no way i can reduce the defense budget by half a trillion dollars and not have it impact all 50 states. that is a reality. in addition to that, i cannot reduce the budget by half a trillion dollars and i increased risk. bottom line is, we think these are acceptable risks. there are risks. you are going to have a smaller a force and we will depend on mobilization. we are going to defend the

development of new technology. we have to meet the needs of troops as they return home. find jobs. find support systems in their communities. as i said, there is no margin for error here. congress mandated on a bipartisan basis that we reduce the defense budget by $487 billion. that is what we have done. in many ways, this will be a test. everybody talks of a good game about deficit reduction. everybody talks about cutting costs. this is a test of whether or not this is about talk or about action. whether or not we do this right or whether we walk away from that responsibility. mr. chairman and members of the committee, as a former member and chairman of the budget committee, this committee must never cease being the conscience of the congress when it comes

to fiscal responsibility. and doing what is right for this nation. i look forward to working with all of you closely in the months ahead. to do with the american people expect of their leaders. to be fiscally responsible and develop the force of the future, a force that can defend the country. a force that will support our men and women in uniform. a force that is and always will be the strongest military in the world. you, mr. chairman . >> thank you, mr. secretary. general sense, you have a statement. we would like to welcome you to make that at this point and then we will go to questions. first of all, i want to thank you, general for your service. -- i appreciated the busy you paid to me several weeks ago. that was about as frank and forthcoming a discussion as could be had. that is what has to happen. we are all going to have to be part of a solution.

if we are going to actually produce one. welcome, general dempsey,. >> thank you, chairman. i assure you, it is a great honor to put the uniform on every day. i do commit to you to continue to have those frank conversations as we collectively tried to do what is right for our nation. this budget represents a responsible investment in our nation's security. it strikes a balance between succeeding today and preparing for tomorrow. it also keeps faith with the nation and with the source of our military's greatest right, which as you heard secretary panetta say, are americans who serve in uniform. as we sit here, they are out there will be on our shores doing everything that our nation asks them to do. in just this past year, our soldiers crippled our enemies.

they shifted more responsibility on to afghan shoulders and predicted the libyan people from your slaughter. they help japan recover from a tragic disaster. they brought to a close more than 20 years of military activities over and in iraq. and behind the scenes, they defended against cyber threats, sustained our nuclear deterrent, and harder to prevent conflict. what is more remarkable is that they have been doing this for the past 10 years. they have been doing this during what i think we would agree is the most during periods in our nation's military history. they have done it with uncommon pride. they do with moral courage with unsurpassed skill and they do it with the unassailable support of their families. it is a privilege to serve with each and every one of them. they are our nation's pride and it is our responsibility to keep faith with them. our budget does that.

one way the budget keeps faith is by being strategy-based. our new defense strategy draws on the lessons of the past 10 years of war. dangerous and is a competitive security environment and affirms our need for a joint force that is always ready and always dominate. this budget helps us build up just such a military. it resource versatility at an affordable cost. it retains our conventional overmatched by mainlining emerging capabilities like cyber. it puts us on a path for a joint force in the year 2020 that is global and networked, versatile and response at -- responsive. we also keep it by reducing risk. riz is inherent in all strategies and in all budgets. in nine judges, the risk here lies not in what we can do, but what we can do and how often we are asked to do it. this budget helps by down the

risk. it does this in part by preserving a strong reserve component in developing the to and capabilities we need for an uncertain future. more importantly, this budget invest in our people. it insures our troops have the best equipment, training, and leadership. to me, this is a non-negotiable imperative for the nation. it is how we win wars. in order to do all of this, we had to achieve the right balance amongst the modernization, operations training, pay, and benefits. not just within each service, but overall. what i want you to know is that this budget is a budget for a joint force. not the aggregate of individual service budgets. changes need to change is not informed by the risk of ending that balance and could compromise the entire force. indiscriminate changes such as the cuts looming on the horizon through sequestration would cause self-inflicted and potentially irrevocable was to

our national security. finally, this budget honors our commitment providing our military family with a compensation and care they give birth -- they deserve. there are no-action is. there are no lessening in the quality of health care. for active-duty members in particular, for are medically retired in wounded warriors. family support and child care are safeguarded. but, we cannot ignore hard realities. pay and benefits are now roughly one-third of defense ending. we simply have to act to slow this was. the raises are slowing and retirement reform gets a look. we are adopting increases in health-care fees for retirees. we must act now to make our health care system sustainable. if we do not come it is very likely we will come into problems. i know there are concerns. i have for them. our troops, our veterans, families, and you have out my commitment -- have my commitment

to work on these. we need to look ways to -- we need to look to ways to retain the very best. i offer my sincere thanks to this committee and to the entire congress. thank you for keeping our military strong. thank you for continuing to take care of our family. thank you for supporting those who serve, who have served, and who will serve. i know you share my pride in them and i look forward to answering your questions. >> thank you for that excellent statement. we are going to go to questions. we will do five minute rounds today given the number of people and given the need for the secretariat and the chairman to leave here at inappropriate hour. first of all, -- at an appropriate hour. first of all, this is and challenge for all of us. we face the circumstance in which we are borrowing 40 cents of every dollar we spend. our revenue is at or near a 60-

year low. in terms of share of the economy. our spending is at or near a 60- year high in terms of the share of our spending. our gross debt is now 100% of our gross domestic product. these are hard facts. secretary panetta, having worked with you before, as i indicated earlier, being an ally in your efforts to get a balanced budget before -- the last time we have before -- the last time we have