special thanks for general holder for meeting earlier this afternoon with a group of law students. a distinguished lawyer and devoted public servant, attorney general holder has held a wide range of positions in his career. as a federal prosecutor, united states attorney, superior court judge. a graduate of columbia university law school, the general joined the department of justice following graduation and was assigned to the newly formed public integrity section for investigated and prosecuted corruption involving officials and local state and federal government. in 1988, president reagan appointed him to the superior court of the district of columbia. he remained a judge until 1993

when president clinton appointed him to the post of u.s. attorney for the district of columbia. in 1997, president clinton promoted him to deputy attorney general of the united states. in july 2001, he joined a washington, d.c., law firm. in 2008, president barack obama nominated him to be the 82nd attorney general, a nomination confirmed by the u.s. senate. general holder is the first african-american to serve in this critical post. he oversees the efforts of federal prosecutors, investigators, analysts, and fbi agents who work on counterterrorism. during his tenure, the justice department's work has been

marked by significant national- security achievements, successfully confronting some of the most significant terrorist threats since 9/11. strengthening the department's decade-long track record of successfully prosecuting terrorists in our federal court. dismantling a number of potentially deadly plots. he has forged and strengthen the international partnerships that are proven so integral to our success in combating terrorism. he has secured convictions and prison sentences against the christmas day bomber, the times square bomber, and many others. he participated in a successful operation that resulted in the killing of osama bin laden last year. on behalf of the northwestern law community, i want to thank the attorney general for his

service to the legal profession. please join me in welcoming the honorable eric holder, attorney general of the united states. [applause] >> this is my kind of crowd. i have not said a word and i already have a standing ovation. i should leave now. thank you, dean rodriguez for your kind words. and also for the outstanding leadership you provide for our nation's legal community. it is a privilege to be with you today and to be among the distinguished faculty, members, staff, alumni, students.

for more than 150 years, this law school has served as a training ground for future leaders and as a meeting place for issues of national concern. this afternoon, i am honored to be a part of this tradition. i am grateful for the opportunity join with you in discussing a defining issue of our time. a most critical responsibility that we share. how we will stay true to america's founding and an enduring promises of security, justice, and liberty. since this country's earliest days, the american people have risen to this challenge. as we have seen, and president john f. kennedy described it best, in the long history of the world, only a few generations have been granted

the role of defending freedom in its hour of maximum danger. half a century has passed since those words were spoken, but our nation confronts national security threats that demand are constant attention. we have reached an hour of danger. we are a nation at war. in this war, we face a nimble and determined enemy that cannot be underestimated. i begin each day with a briefing on the latest and most urgent threats made against us in the past 24 hours. i go to sleep each night thinking of how best to keep our people safe. i know that more than a decade after the september 11 attacks,

there are people currently plotting to murder americans. they reside in distant countries as well as within our own borders, disrupting and preventing these plots and using every available and appropriate tool to keep the american people save has been and will remain this administration's top priority. just as surely as we are a nation at war, we are also a nation of laws and values. even when under attack, our actions must always be grounded on the bedrock of the constitution and must always be consider the statutes, court precedents, rule of law, and our founding ideas. not only is this the right thing to do, history has shown

that it is also the most effective approach we can take in combating those who seek to do us harm. this is not my view, my judgment is shared by senior national security officials across the government. as the president reminded us in 2009, at the national archives, we uphold our most cherished values because it strengthens our country and keeps us safe. time and again, our values has been our best security assets. history proves this. we do not have to choose between security and liberty. and we will not. today i want to tell you about the collaboration across the government that defines and distinguishes this administration's national- security efforts. i also want to discuss the legal principles as well as the special role of the department

of justice in protecting the american people and upholding the constitution. before 9/11, today's level of interagency cooperation was not commonplace. government lacked the infrastructure as well as the imperative to share a national security information quickly and effectively. those who attacked us on september 11 chose military and civilian targets. they crossed borders and jurisdictional lines. it immediately became clear that no single agency could address these threats because no single agency has all of the necessary tools. to counter this enemy aggressively and intelligently, the government had to draw from all the resources and to radically update the operations. as a result, today, government

agencies work together to address a range of the emerging national security threats. the lawyers, agents, and analysts at the department of justice work closely with our colleagues across the national security community to detect and disrupt terrorist plots, to prosecute suspected terrorists, and to identify and implement the legal tools necessary to keep the american people safe. the fact and the extent of this cooperation are often overlooked in the public debate. it is something that this administation and the previous one and the previous one can be proud of. as part of this coordinated efforts, the justice department plays a key role. we must and will continue to use intelligence gathering capabilities congress has provided to collect information that can save and protect american lives. at the same time, these tools must be subject to appropriate checks and balances, including oversight by congress as well as within the executive branch

to protect the privacy and civil rights of innocent individuals. this administration is committed to making sure that our surveillance programs appropriately reflect all of these interests. the attorney general and the director of national intelligence may authorize collection aimed at foreign intelligence targets. this insures the government has the utility that it needs to identify and to respond to terrorists and other foreign threats. the government may not use this

authority to target a u.s. person here or abroad or anyone known to be in the united states. the law requires special procedures to make sure these restrictions are followed and to protect the privacy of any u.s. persons whose nonpublic information may be acquired through this program. the department of justice and the office of the director of national intelligence conduct extensive oversight reviews and will report to congress on implementation twice a year. this establishes a comprehensive regime of oversights in all three branches of government. it is the top legislative priority of our nation's intelligence community. surveillance is only the first

of many complex issues we must navigate. much has been made of the distinction between our federal civilian courts and military commissions. the reality is both incorporate fundamental due process and other protections that are essential to the administration and we should not deprive ourselves of any tool in our fight against al qaeda. our criminal justice system is renowned for its fair process and respected for its results. we are not the first administration to rely on courts to prosecute terrorists, nor will we be the last. far too many choose to ignore the fact.

the previous administration relied and criminal prosecution in federal court to bring terrorists to justice. the attempted shoe bomber, 9/11 conspirators were among the hundreds of defendants convicted of terrorism related offenses without political controversy. without political controversy during the last administration. over the past three years, we have built a remarkable record of success. for his role in the attempted bombing of an air point in christmas day. he was sentenced last month to life in prison without possibility of parole. while in custody,he provided

significant intelligence during the briefing sessions with the fbi. he described in detail how he became inspired to carry out an active jihad and how he traveled to yemen. he made contact with a leader of al qaeda in the arabian peninsula. he detailed the training that he received as well as the specific instructions to wait until the airplane was over the united states before detonating the bomb. in addition to the attempted times square bomber, three individuals who plotted an attack against jfk airports in 2007 have begun serving life sentences. convictions have been obtained in the cases of several homegrown as well. last year, a united states citizen and north carolina resident pleaded guilty to conspiracy to provide material

support to terrorists and conspiracy to murder, kidnapping, and injure persons abroad. a u.s. citizen and illinois resident pleaded guilty to attempted use of a weapon of mass destruction in connection with his efforts to detonate a truck bomb outside a federal courthouse. i could go on. that is why the calls i have heard to ban the use of civilian courts and prosecutions of terrorism related activities are so baffling. they are so dangerous. these calls would significantly weaken our ability to incapacitate and punish those who attempt to do us harm. since 9/11, hundreds of individuals have been convicted of terrorism in article 3 courts and are now serving sentences in federal prison. no judicial district has

suffered any type of retaliatory attacks. these are facts, not opinions. there are not two sides to this story. those who claim that our federal courts are incapable of handling terrorism cases are not registering a dissenting opinion. they are simply wrong. federal courts are not our only option brick military commissions are also appropriate and proper circumstances. we can use them as well to convict terrorists and disrupt their plots. this administration's approach has been to ensure that the military commission system is as effective as possible. strengthening the procedural protections by which the commissions are based. with the president's leadership and the bipartisan backing of congress, the military

commissions act of 2009 was enacted into law. meaningful improvement have been implemented. it is important know that the commissions draw from the same fundamental protections of a fair trial. they provide a presumption of innocence and require proof of guilt beyond a reasonable doubt. the accused has the right to counsel and the right to present evidence. they prohibit the use a statement obtained through torture. they have the right to appeal to article three judges. a key difference is that in military commissions, roles reflect the realities of the battlefield. statements may be admissible even in the absence of a miranda ordinance. you cannot expect military personnel to administer warnings to an enemy captured in

battle. instead, a military judge must make other findings. the statement is reliable and that it was made voluntarily. i have faith in the framework and the promise of our military commissions, which is why i have sent several cases to them. there is quite simply no inherent contradiction between using military commissions inappropriate cases also prosecuting other terrorists in civilian court. their differences between the systems that must be weighed carefully. such decisions about how to prosecute suspected terrorists are corp. executive branch functions. in each case, prosecutors and

counterterrorism professionals, conduct an intensive review of case specific facts. several practical considerations affect the choice. first of all, the commissions only have jurisdictions to prosecute individuals that are part of al qaeda. or you have purposely and materially supported such hostility. this means they may be members of certain terror groups that fall outside this jurisdiction of military commissions. they lack ties to al qaeda. civilian courts cover a much broader offensives. this means the federal prosecutors have a wider range of tools that can be used to incapacitate suspected terrorists. those charges and sentences can

provide important incentive to reach plea agreements and convince defendants to cooperate. there is the issue of international cooperation. a number of countries have indicated that they will not cooperate with the united states. if we intend to use that cooperation in pursuit of a military commission prosecution. the use of military commissions in the united states can be traced back to the early days of our nation in their present form. there are less familiar to the international community that our time tested criminal

justice system and article 3 courts. we will continue to reject the false idea that we must choose between military commissions and federal courts instead of using them both. trial attorneys from the department of testis are working with a military prosecutors on mack case and others. -- that case and others. if we were to fail to use all necessary and available tools at our disposal, we would undoubtedly fail in our fundamental duty to protect the nation and its people. that is not an outcome that we can accept.

this administration is working in other areas as well to ensure that counterterrorism professionals have the flexibility they need to fulfil their critical responsibilities without divergent from laws and core values. last week marked the most recent step when the president issued procedures. last tuesday, the president exercised his authority under the statute to issue procedures to make sure military custody will not disrupt ongoing law enforcement and intelligence operations. an individual could be transferred from civilian to military custody only after a thorough evaluation of his or her case. as authorized by that statute, the present wave of the

requirement for several categories of individuals. these procedures expressed intent of the sponsors of this legislation. they address the concern the president expressed when he signed this bill into law at the end of last year. i have gone into considerable detail. it is preferable to capture suspected terrorists or feasible. -- where feasible. so we can gather the valuable intelligence from them. that we must also recognize that there are instances where the government has the clear authority and responsibility to defend the united states with

the appropriate use of lethal force. this principle has long been established under u.s. and international law. in response to the attacks perpetrated by al qaeda, the taliban, and associated forces, congress has authorized the president to use all necessary and appropriate force against those groups. we are authorized to take action under international law. a constitution empowers the president to protect the nation from any imminent threat of violent attack. an international law recognizes the inherent right of national self-defense. none of this has changed by the fact that we are not in a conventional war. our legal authority is not limited to the battlefields of afghanistan. neither congress nor our federal courts can limit the geographic scope for us to use force. we are at war with a stateless

in any -- enemy. over the last three years, al qaeda has directed several attacks against us from countries other than afghanistan. our government has both a responsibility and a right to protect this nation and its people from such threats. this does not mean that we can use military force whenever and wherever we want. international legal principles, including respect for another nation's sovereignty, constrain our ability to act unilaterally. the use of force in a foreign territory would be consistent with the international legal principles after a determination that the nation is unable or unwilling to deal effectively with the threat to the united states. furthermore, it is entirely

lawful under both the united states law and law of war principles to target senior operational leaders of al qaeda and associated forces. this is not a novel concept. during world war ii, the united states tracked the plane of the commander of the japanese forces and shot it down specifically because he was on board that plane. as i explained to the senate and judiciary committee following the operation had killed osama bin laden, the same rules apply today. some have called such operations assassinations. they're not. the use of that loaded term is misplaced. assassinations are unlawful killings. for the reasons i have given, the u.s. government use of lethal force and self-defense against the leader of al qaeda

or an associated force that presents an imminent threat of violent attacks would not be unlawful. it would not violate the executive order banning assassinations or criminal statutes. it is an unfortunate fact that some threats we face come from a small number of united states citizens. they have decided to commit violent attacks against their own country from abroad. based on generations old legal principles and a supreme court decision, as well as during the current conflict, it is clear that the united states citizenship alone does not make such individual's immune from being targeted. it does mean that the government must take into account all relevant constitutional considerations with respect to united states citizens, even those who are leading efforts to kill innocent americans.

of these, the most relevant is the due process clause. the government may not deprive a citizen of his or her life without due process of law. the supreme court has made clear that the due process clause does not impose one size fits all requirements. it mandates procedural safeguards that depend on specific circumstances. in cases arising under the law and due process law, including a case involving a u.s. citizen, the court has applied a balancing approach. when the private interests will be affected against the interest of the government is trying to protect. where national security operations are at stake, due process takes into account the realities of combat. here are the interests on both sides of the scale are extraordinarily weighty.

an individual's interest in making sure the government does not target him erroneously could not be more significant. it is imperative to protect the innocent people whose lives could be lost in their attacks. in a decision to use lethal force against a united states citizen, even ones intent on murdering americans and has become an operational leader of al qaeda in a foreign land, is among the greatest leaders the government can face. the american people deserve to be assured that actions taken in their defense are consistent with their values and their laws. i cannot discuss any particular program or operation, i believe it is important to explain this legal principles publicly.

let me be clear. an operation using lethal force in a foreign country, targeted against a u.s. citizen who is a senior operational leader of al qaeda or associated forces, and who is actively engaged in planning to kill americans would be lawful in the following circumstances. . .

>> given these facts, the constitution does not require the president to take action until some precise time and place until an attack becomes clear. the second would create an unacceptably high risk that our efforts would fail, and that americans would be killed. whether the capture of a u.s. citizen is a fact-specific and potentially time-sensitive question may depend upon whether capture can be accomplished in

the window of time to prevent an attack and without risk to u.s. personnel. it is the nature of -- of course, any special use of lethal force -- civilians directly participating in military objectives may be targeted intentionally. under the principle of proportion nalt --

proportionality, collateral damage must not be excessive. fimely, the principle of humanity requires a few weapons that will not inflict unnecessary suffering. these principles do not forget the use of stealth or advanced weapons. in fact, the use of advanced weapons may ensure the best methods are available for carrying out operation, but the risk of civilian casualties can be minimized or avoided all together. some request that permission be given from a united states court before going after an al-qaeda member. this is not accurate. due process and judicial process are not one and the same, particularly when it comes to national security. the constitution guarantees due

process. it does not guarantee judicial process. the conduct and manage many of -- management of security operations are core to our executive branch. military officials must often make decisions on the need to act, the existence of options, the possibility of collateral damage, all of which could depend on expertise that only the executive branch may possess in real time. the constitution's guarantee of due process is ironclad and it is essential. but it does not require judicial approval before the president may use force abroad against a senior operational leader against a foreign terrorist organization of which the united states is at war, even if that individual happens to be a u.s.

citizen. now, that is not to say that the executive branch has or should ever have the ability to target any such individuals without robust oversight, which is why keeping the law and our constitutional system of checks and balances, the executive branch regularly encounters counter-terrorism activity, and would follow the same path when lethal force is used against united states citizens. these circumstances are sufficient under the constitution for the united states to use lethal force against a u.s. citizen. it is important to know that the legal requirements i have described may not apply in every situation, such as operations that take place on traditional baltl fields. the unfortunate reality is that our nation will likely continue to face terrorist threats that at times original nature with our own citizens.

when such individuals take up arms against this country and plot to kill fellow americans, there may be only one realistic and appropriate response. we must take steps to stop them. in this hour of danger, we simply cannot afford to wait until deadly plans are carried out, and we will not. this is an indicator of our times. but it is not a departure from our laws and our values. for this administration and for this nation, our values are clear. we must always look to them for answers when we face difficult questions such as those i have discussed today. as president obama reminded us at the national archives, our constitution has endured through secessinon, civil rights,

through world war and cold war. it also provides a foundation of principles that can be applied pragmatically. it provides a compass that can help us find our way. the sacred values of justice and liberty for all citizens must continue to unite us and guide us forward and help us build a future that advances our ongoing uniquely american pursuit of a safer more just and more perfect union. in a continuing effort to keep our people secure, this administration remained true to those values that inspired our nation's founding, and over the course of two centuries has made america an example of strength and a beacon of justice for all the world. this is our pledge. thank you for inviting me to discuss these important issues with you today. thank you so much.

[applause] >> watch super tuesday election results tomorrow night on the c-span networks. while you watch, use our -- your tablet or laptop to see results, and a public forum for tweets and those of other viewers. you can also watch our

"mentioned on c-span" blog. use a laptop to expand viewing from our web page. c-span.org/screen2. >> republican presidential candidates santorum, romney, and gingrich will be speaking at the israel public affairs conference tomorrow on super tuesday. live coverage gets underway at 8:30 a.m. eastern on c-span3. >> there's a real anxiety within the central part of black america with returning black americans who are successful in the wider society because there is this anxiety that to be successful, to get the backing of white people, to get the trust of white people what do you have to do to get that

backing? what did you have to do to get that trust? what did you have to do to get that recognition? there is a fear that one of the things that you had to do was bee tray in some form your community. >> the first sunday of every month book tv's "in depth." randall kennedy spoke about race, blicks, and the obama administration. watch it on c-span library with over a quarter century of politics and public affairs on your computer. >> republican congressman kevin brady unveiled today legislation that would revamp the federal reserve board by narrowing its mandate, expanding the board and increasing transparancy. he spoke at the american enterprise institute. following his remarks, a panel of former federal reserve officials discussed his bill.

>> this idea is to generate as much dispute as possible. [laughter] so when we invite a politician such as mr. brady to come -- we invite mr. brady and then we have an all-star line-up of former fed officials to discuss the merits and lack -- and mr. brady's proposal. mr. brady will go perhaps as

long as an hour. he has some prepared remarks before we turn it over to the round-table discussion. there has been a lot of anger in washington about the fed's bail outs and questions over whether the fed somehow did an end around and a back-door t.a.r.p. a lot of that anger has given to pretty kooky ideas about monetary policy. i should say when i heard that the joint economic committee was turning to the question of how should the fed really be reformed, that he was reassured, because again some of the ideas of reform of the monetary system in the u.s. struck me as cockemaymie. we start with i -- a staff of senior elected officials who are usually bipartisan and academic

in their approach. and the fact that they were taking up the idea meant that something a little better than let's go back to your gold standard would likely be. and so it was with great enthusiasm over the weekend when i finally got a chance to see what mr. brady's remarks would be that i could say that the joint economic he committee would do what it always did. it presented something that while we can debate whether it will work or not, it means there is sound argument for it, and we're going to see that today. our first speaker, congressman kevin brady is one of the first reporters in washington. that in addition to serving as vice chairman, mr. brane brady is the g.o.p. deputy whip and a senior member of the ways and means committee. more importantly to me, as rpt of the urban baseball foundation, i can say mr. brady is also a former m.v.p. of the

congressional baseball game. he plays a mean second base, and surprises us every year that a person of his advanced age could be so competent on the ball field still. so we're delighted to have mr. brady here to discuss his new role on the federal reserve, and as soon as he's done we'll assemble the panel. mr. brady. [applause] >> kevin, thank you so much for hosting this forum today, for your confident willingness to engage on economic issues, to tax issues, policy issues, fiscal monetary and on the ways and means committee as well. thank you so ever. i appreciate the enterprise on their hosting this event. it is a delight to be here today.

i also appreciate the panelists who agreed to be part of the roundtable. each of you bring tremendous insight. thank you so much for taking time from your busy schedules. some say the 19th century belongs to the brits, the 20th century to the americans, and the 21st century perhaps to the chinese. well, not so fafert. -- well, not so fast. in are challenges ahead. if we look to our economic future, washington should have one goal, which is ensuring that america has the world's strongest economy throughout the 21st century. to ensure the 21st century as another american century, we have to renew our commitment to what works well in the free enterprise system and what doesn't always work well, which

is the federal government. in the context of building a strong economic future for the next 100 years, we have to thoughtfully and clearly define the role of the federal reserve. in my view, the sound dollar is the sureest foundation for long-term economic growth. a sound dollar creates certainty, fill tathestates new business investment, and long-term jobs. therefore the folks at the federal reserve should be protecting the purchasing power of the dollar by maintaining price stability. are there other fundamentals that america must get right to obtain or economic standing in the 21st century? absolutely. the congress and president must make our tax system simpler and more competitive by lowering marginal tax rates, by moving to a tutorial system and ending the losers in the free market.

congress has to reform social security, medicare, and medicaid. we have to transform our regulatory system into one where we can achieve our goals, including a clean environment, but doing bun that is more efficient and less destruct -- destructive as it moves forward. and allows our american companies and workers to sell throughout the world to the 95% of consumers that live outside the united states and do so in a way that we compete to win. however, these reforms by themselves will be insufficient. if the federal reserve fails to maintain the purchasing power of the dollar over time. we should evaluate what it should be doing going forward.

it is important to maintain stable process sezz over time. you only have to look to the depression to see that both price deflation and price inflation are destructive. both reduce things below what they otherwise should have been. 1977, congressman dates that the federal reserve for monetary policy to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. since inflationary expectations, the goal of stable prices and moderate long-term interest rates are interrelated. this is why the federal reserve is described as having to do a mandate. the employment mandate,

reflected in the employment act of 1956 required the federal government to pursue policies to promote maximum employment. the price stability mandate reflected rising public concerns about price inflation in the 1970's. when thinking about the federal reserve, i recall the economist robert modell. "to achieve a policy outcome, you must use the right policy." here in 2012, chairman bernanke and others recognize monetary policy is the right lever to maintain the purchasing power of the dollar. they declared inflation rate was prime mayorly -- mainly

determined by monetary policy. they did declared the maximum level of employment is largely determined by nonmonetary factors. congress delegates monetary policy to the federal reserve and should hold it accountable for its conduct and monetary policy. however, it makes no sense for congress to charge the federal reserve to control what it cannot control, except in the very short term, monetary policy cannot boost real output. instead using monetary policy as a short-term tool to speed growth may actually harm the economy. ultimately it is the president and the congress, not the federal reserve that controls the budget tax and regulatory policy that creates the business times that drive economic growth and job creation. there is no substance. since congress gave the duel mandate, governments in many other countries have revised the

charters of their federal bank. in most cases, these governments gave their bank either a single mandate in price stablet stability or a primary mandate for price stability with other goals clearly subordinate. among the 47 banks monetary authorities surveyed by the bank of international settlement, the bank of canada, and the federal reserve have organizational laws that give other goals equal weight to price stability. so how should the fed pursue its mandate. the choice of discretionary regime and rule of face regime. a discretionary regime creates uncertainty because it relies upon the subtive assessment of central bank policy members. in contrast, a rules-based regime reduces uncertainty

because it follows well established rules with a clear focus on the long-term goal. inflation target sg a rules-based regime under which the central bank establishes a target inflation rate expressed in terms of the broadbased index of conservative. the central bank tightens monetary policy when the inflation rate rises and looses monetary policy when the actual inflation rate falls below its target. the last four decades of u.s. monetary policy demonstrates a rules-based regime over a discretionary. during the 1970's the upon tri policy quickly swung from ease to tightness and back again. this incoherence produced a highly volatile situation of rising inflation. a sea change occurred with the

appointment of paul volker to the federal reserve in 1979. under the chairman the fomc tackled inflation by the control of the money supply. this strategy toward a rules based monetary policy. while the economy did suffer back-to-back recessions in june 1980 to june 1980, inflation was measured by the consumer price index, dropped dramatically from 13.3% in 1979, to 3.8% in 1982. between 1983 and twue, the period -- 2000, the period known as great moderation, the fed pursued a rules based monetary policy, essentially ignoring the second half of this mandate.

two long economic boons resulted. they were interrupted only by a short shallow recession related to the first persian gulf war. between 2000 and 2005, the fomc deviated moving to a discretionary regime by keeping interest rates too low for too long. this loose monetary policy contributed to the unsustainable housing bubble that eventually triggered a global financial crisis. since the height of the financial crisis during the fall of 2000, washington has increasingly relied on the federal reserve to take unusual intervention acts, up -- such as tripling the size of its balance sheet by purchasing the debt in the residential mortgage-backed securities issued by fanny and freddie as well as treasury.

indepeed they justified these extraordinary actions by invoking for the first time since late 2008 the employment half of federal reserve's fuel maintenance. ultimately, the open markets took these actions to compensate in part president obama's failure to pursue pro-growth budget acts and regulatory policy. and they may continue because just as low -- the federal reserve's monetary experimentation continues to prevent -- permit the white house and congress to shirk their responsibility for creating a competitive business environment. congress should give the federal reserve a single mandate. the federal reserve should turn

to a rules based system. to provide the foundation of long-term economic growth in america today i'm unveiling the sound dollar act. it reforms the federal reserve in several important ways. it replaces the duel mandate with a single mandate for long-term price stability. it increases the fed's accountability and openness. it diversifies the federal committee, it ensures federal neutrality for future fed purchases and institutes congressional oversight from the financial protection bureau. critics also charge focusing on a sound dollar implies the federal reserve will somehow ignore the employment needs of america. it is just the opposite. americans can only maximize our real economic output with long-term price stability m.

thus protecting the purchasing power of the dollar provides these strong foundations for lasting economic growth in job creation. a mandate gives the federal reserve the right goal. it does not alone ensure the federal reserve achieves price stability. that requires us to move away from discretionary regime back toward a rules-based regime. in january 2012 the fomc found a price index. chairman bernanke and the other members of the fomc of this step toward a rules-based inflation targeting regime. however, this is merely a policy that can easily be reversed. therefore, the sound dollar act mandates that the open markets committee which targets inflation, continues inflation

targeting. as you know, accurately measuring inflation isn't easy. in the last decade we clearly saw the price indices of goods and services don't always report the prices in our economy allowing asset bubbles to inflate undetected. the open markets committee inflation target relies upon the price index of personal consumption expenditures. however, this index should not be the sole indicator the federal reserve uses. the sound dollar act requires that the open markets committee also monitor the prices of and the returns, including equities, corporate bonds, state and local government bonds, agricultural real estate commercial and industrial real estate, and residential real estate. it also insists that they

monitor the price of gold and the foreign exchange value of the u.s. dollar. the sound dollar act doesn't create any specific action. the appropriate response is hour we depend upon the sish. these responses might include a tightening of monetary policy, supervisory persuation and regulatory action to reduce the flow of credit. discretion with respect to the best response should be left to the open markets committee. however, identifying an asset price bump may help the mal investment which must be lick which dated at -- liquidated at a heavy loss. let's turn for a moment to the federal open markets committee. as important as they are, there

is more to the u.s. economy than new york and washington. to broaden input, increase geographic diversity and reduce the overwhelming influence of new york and washington into the open markets committee decision making, the sound dollar act grants a permanent fee of fomc to every regional federal reserve bank president. currently only the governors and the president of the federal reserve bank of new york have permanent seats. four of the remaining 11 presidents rotate on and off fomc each year. implementing this change restores the origin tent of congress to establish the fed of representative of a diverse american economy. that will also firmly be committed to the federal reserve in conducting monetary policy. that's why i'm particularly troubles by the fomc decision of september 2011 to re-invest the

proceeds for maturing federal agency debt into new rmbs. [captions copyright national cable satellite corp. 2011] [captions performed by the national captioning institute]

>> the fomc could purchase other securities for the system of open market accounts so long as they are liquidated within five years after the unusual circumstance. looking ahead to the next crisis, it is important to note that in its nearly century of existence, the federal reserve has never articulated its lender of last resort policy. economist alan meltzer described the problem this way. gaps in last-resort policy has three consequences. first uncertainty of increase. second, troubled firms have a stronger incentive to seek a political solution. they ask congress for the administration for support or to pressure the federal reserve or other agencies to save them.

and third, repeated rescues encourage banks to take greater risks and increase leverage. this is a well known moral hazard problem. each of these problems became manifest in 2008. to avoid these problems in the future, the sound dollar act requires the federal reserve to publish this lender of last resort policy. of course, we don't expect a precise tactical plan. president dwight d. eisenhower observed, war plans never survive the first battle, nevertheless, war planning is essential to victory. in the same way the federal reserve cannot anticipate every nuance, publishing a lender of last resort policy will reduce future market uncertainty.

monetary policy decision making. there is an additional step the federal reserve should take. the sound dollar act releaves fomc from three years -- to five years. if that is the case, perhaps we different fomc members. a flee-year lag will allow congress to review these fomc transcripts before a fed chairman is reconfirmed, which is absent from the delibrages today. in another reform, the sound dollar act eliminates the slush fund that has been reviewed by both democratic and republican administrations. my measure liquidates all of the nonfdr acts until three years

and uses proceeds to reduce federal debt. as you may remember, in 1934 congress placed the goals in the valuation of the u.s. dollar into the exchange stabilization fund and authorized them to intervene in foreign exchange markets to support fixed exchange rates. congress issued the international monetary fund into the exchange stabilization. after the system of exchange rates collapsed in 1971, the treasury has used a non-fdr asset in the fund for purposes the congress never intended, such as bailing out mexico in 1975 and gaurpting market mutual -- guaranteeing market mutual fund in 1978. finally, the dodd act diverted

the federal reserve projects which would otherwise be paid. this is a truss presence. nothing other than the operating process of the federal reserve should be paid for out of its profits. that's the sound -- in the end there is no justification not to. so to conclude, it is appropriate that we have this discussion and debate about the fed's role in the future of our economy. on this day in 1933, 24 hours after he became president, franklin d. roosevelt ordered the banks closed, the export of gold, and called congress back

to its special session. so this is a historic day, and a reminder that we ought to focus not on the reactive results of the fed, but the strong pro-ament active rules on which we want them to operate. to ensure america has thoughtfully prepared for the challenges ahead, the sound dollar act poses the best path to help the united states obtain its economic pre-eminence. it does so by giving the federal reserve a single mandate for price stability and strengthening the fed's independence, even as the act increases the fed's accountability. these reforms, i believe, are critical to ensuring the 21st century is, indeed, another american century. with that, thank you. [applause] >> at kevin's at kevin's proddi be glad to take questions at

this time. >> hi. my name is michael feinberg. i'm a student at george washington university. you just mentioned the guarantee of money market funds during the 2008 financial crisis. do you think that was an inappropriate policy to take or ãcro you think that the way tha it was taken was what was wrong? >> you know, there is debate about what were the appropriate actions to take at the time of the middle of the financial crisis. my spt that the federal reserve should not be taking those acks diy tem them -- actions by themselves using those dollars and ought to be a function in the discussion with congress and lawmakers. >> michael warren from the

"weekly standard." what's the political future for this bill? are you seeing this being a bipartisan agreement? what do you see -- can you see the president signing this bill into lth c? >> i would like to see a bipartisan effort. i don't see the president signing this bill. i really think this is a long- term discussion on the role we want the federal government to play if we are to compete to remain strong in the next 100 years and beyond. it has reforms included in it that i think not only intoay the tronk strongest foundation for job growth but for certainty and accountability and openness that will allow the market to maximize with it. i think those are goals that could be embraced by both republicans and democrats. our goals today is to introduce some legislation and start what role we want the fed to play. we are going to begin seeking

sponsors as we mpwe forward starting today, but on the way over here, we got notice from scott garrett, one of the key leaders to the financial services committee that he will be a? legislation. so we will start to grow it from there. la> thank you. i'm from the peterson institute. you talked about requiring a two-thirds vote for the federal reserve to purchase. they are currently oludy going o agency guaranteed instruments. with the ttutalkhirds eqte woul your bill all. s them to move into other assets such as corporate bon ab? on ould you intoimit it just to agencies? what about the foreign exchange fund. if you close that down, would they tn be allowed foreign

exchange or would they need a two-thirds vote? >> in the first case we want to give the feds to respond to unusual circumstances, which may occur. so we give them that flexibility to do that. the two-thirds eqte seems to be that fair standard where circumstance could certainly e reate that type . on ould it limit the ability or ban the ability for the fed to get involved in the foreign exchange rate? >> thank you. >>? you mentioned or encompassed in

your motion of inflation along on ith consumer prices and referred to such things as real estate prices and equity and so forth. i think rightfully there was a way to deal with an asset bubble early, that would be a good thing. does the proposed intoegislation make comparable, in other tutrd are consumer goods prices, to be augmented by index extensionn ag or is this difficult situation alluded? >> it is more of a recording aquiet for the fed. obviously to be looking at the possibility of a bubble and to be sharing those thoughts with congress as it goes forward. the hope being if there is an opportunity to detect early on an aquiet bubble, you can make the moves necessarily to deflate

that before we have another serious financial crisis gchasn forward. so it really is an effort to try to raise the profile of those potential bubbles within the fed and also within congress as on eln't >> you mentioned in your remarks that during the period of the great moderation, if you look at their behavior during recessions ãcruring the time period from t early 1990's when the fuds did cut rates considerably and then kept them low during the early stages of that recovery, which is also considered a jundalequi recovery, did the fed ignore the normal pagis of the mandaten ag la> it made the primary f bous their actions. i also think they were up to a lot of nonmonetary actions that

affected the economy. my belief is that gchasng forwa compeermentation we're seeing today has -- experimentation we are seeing today has mixed results. when the fed focuses on inflatio ex gin trding against deflation, it creates a strong foundation gchasng forward. i do not intend to d. snplay the role of employment in our economy. i just kn. s if the fed dsibs its role correctly on price strarealllet what could follow h the rt rht business climate is the maximum job creation and the strongest economy gchasng forwa. i look toward what role we want them to play over the next 100 years or whatever intoong-term period we're looking at. that's the strongest foundation.

tha we s the stable, potential growth. wi wi la> as you think about a price stability objective, do you think of it in terms akin to on hat lookiper seevet in- perce feds to be, a forward-looking inseeation target, or do yo prs it more in terms of what would be called a price level target so if endaors are made in one direction, they would be made up in the other over time? >> my thoug fe is long term. wi

>> i am from the international monetary fund. much of the traditional activities of the fed in 2008 and 2009 had to do with structural weaknesses in liquidity. we were talking about bills only. much of that activity was not through open-market operations but through lending to very nontraditional sort of counterparts. it seems to me a lot of this flows from the primary system which makes no sense in an economy like the united states. this is a structural weakness in terms of how liquidity is allocated. i assume your bill does not

really address that kind of thing, but it seems to me an important structural element in why the fed went so far afield from its traditional approach. >> not being an economist, my thinking is that the bill addresses this in two ways. i believe having a lender of last resort polar tick lated helped to find the rules going forward in the financial crisis. as you know, there is a big difference between lending to an insolvent institution and lending to one that is simply liquid, but in those financial crisises, those lines blur quickly. i think any working thought in gain we can put in ahead of that potential crisis puts us in a better position to make good decisions during that crisis. we sort of looked at it from that direction. >> hi. i'm randy forman.

i'd like to ask about the greek bail out. you think it is going to go through congress, what is the cost going to be? will you guys act to stop it? >> as far as the fed's role in swapping currency with europe, i wouldn't want to predict what the actions of congress would be in that area. i know that the interest is growing about what the u.s. role is in currentsy swaps and those types of actions. we also, i think, in congress, there is a much higher level of interest about the role of europe, and their economy is tied to the u.s. obviously, you know, we have a great deal of banking and financial relationships. they are buying one out of four trade dollars we are selling around the world. if our economy was flying at 50,000 feet strong and steady, turbulence is not a problem.

when you are flying low and slow, it's a real problem. i think that portion of the global economy has sunk in, in a major way with policymakers. it hasn't yet moved to what do we believe -- what role do we believe the feds should play. we are watching it very intently. >> thank you very much. >> thank you. i appreciate it. [applause] >> i would ask the panelists to now come forward. i would have to commend mr. brady for having the courage to stand up here in front of all the lenleds of the fed and take some of their hard questions. we'll begin in just about 10 seconds.

>> we now turn to the nerdy part of the program. for those of you that have followed the fed for decades will know we have an astonishing line-up of key fomc members and fed staffers and key fed staffers to discuss this issue. since we have a television audience and they do not all have access necessarily to the bios, i should read the bios, which is a little stilted for me, but the folks at home can know who we are listening to. our first speaker is don cohen. he's a senior fellow at the brookings institution. mr. cohen is an expert on

monetary policy and macro-commick economics. he advised ben bernanke in the 2008-2009 financial crisis and served as a key advisor to alan greenspan. he was a 40-year member of the federal reserve. before this he was an advisor to the board, secretary of the federal open market committee, director of the division of monetary affairs and deputy staff director for monetary and staff policy and a few more junior positions. he's also written extensively on monetary policy and implementation by the federal reserve. >> thank you, kevin. thanks to poth kevins, actually. thank you congressman brady for the opportunity to read your proposed legislation and for the opportunity to comment on it. this is a very welcome effort. in my opinion this is a constructive way to respond to

concerns about past and potentially future performance of the federal reserve. open up the debate on objectives. the optimal central banking is often thought of as the elected representatives giving the central bank the objectives and the central bank having the independence to move their instruments around to achieve those objectives and then be held accountable for achieving them. i'm going to concentrate on the monetary policy aspects of the legislation and get into some of the other aspects later. a lot of what i'll say is on title one, the object fiffs. i certainly agree that long-term price stability is the appropriate long-term goal of central bank and it is a goal that is under the control of the central bank. over the long run, full or maximum employment is an estimate given by market

structures, not something under the control of the central bank and over the long run price stability is the way the central bank can contribute to maximum ememployment, to high employment. chairman bernanke has talked about price stability as an end and a means to an end. the means to an end being the means to high unemployment. so he would agree with that. i also agree that credit-fueled asset bubbles that undermine asect predictability. this was true in the 1980's and 1990's. and the federal reserve would agree to put both of those character zations -- they have been reflected in chairman's speeches and testimonies, and as you noted in the most recent statement of principles. now, reflecting that recognition by the federal reserve, inflation outcomes in the united states have not been distinguishable from inflation

outcomes in inflation targeting countries over the last five, 10, 15 years both in level and in their variability of inflation. the federal reserve has been focusing on inflation forecast. it has been engaging in implicit flexible inflation targeting. over the last five years c.p.i. inflation has been 2.2%. that is less than the u.k. and new zealand and a few ticks more than sweden. in the last 15 years u.s. c.p.i. has been 3.4, the same as new zealand and only .4 more than u.k. and canada. the standard variability of inflation in the u.s. has been roughly the same as in most of these other countries. and some countries with inflation targeting, low and stablet inflation have experienced considerable asset

boons. one reads about concerns in canada right now. most inflation targeted countries have as explicit in their mandate or on the web site explained their mandate that the central bank while pursuing price stability first and foremost will limit also within that context and minimize fluctuations of income around unemployment, around full employment as they pursue that depole. there is no long-run conflict. fluctuations in output hurt business planning, make it hard to make capital investments. if you don't know what the demand for your output is going to be. so there is no reason why a central bank can't pursue full employment or try to minimize the fluctuations around estimates the same time it pursues price stability. the role of asset prices and capital allocations emphasized in your bill is tricky and

difficult. people care about having certainty about the purchasing power of their incomes in terms of goods and services including the cost of imports and the cost of housing services. every inflation target, at least that i'm aware of, is in terms of the c.p.i. and doesn't add in asset prices per say. the bill recognizes the -- a number of the metrix put forward in the bill have a similar flavor, difficult judgments, overriding private markets about asset prices and capital allocation. at the same time it is certainly true that asset price distortions can get in the way of long-term economic stability. as we have seen, this should be

both macro-regulation. so the bottom line on the title 1, on the objective is it is fine. it is ok to conform the legislative mandate to the common understanding of the hierarchy of goals. but that has already been done by the fed in words and acks, and it would not have made any difference in my view about monetary policy in the past 30 years, including the past few years or in the future as well. the federal reserve should be instructed to stablize output around full employment and promote growth. in pursuing both price stability and minimizing fluctuations, the federal reserve should pay attentions to imreply menation for financial stability. the federal reserve should include its assessment of these in its semi-annual reports to congress and it should tell congress what distortions its

sees and what problems it sees and what the regulators or whomever, or the congress or the federal reserve should do about it. so i think all those elements should be there, but i'm not sure -- well, those elements should be in there. let me comment a bit on the other titles. the federal reserve presidents on the fomc. the presidents do bring valuable and diverse perspectives to the policy process. i think it is wonderful that they each have their own research departments. they are not dependent on the board staff for their views. we can see in their public speeches, and i can assure you inside the fomc there is quite a variability of views expressed. but the open-market committee is already an anomaly in the u.s. system in that it has people sitting on it, making important

public policy decisions that don't go through the constitutional process of appointment by the president and confirmation by the senate. and i am concerned about the democratic legitimacy and support for the institution over time if all the open market were given the vote. we are given privately appointed officials to be a majority of a critical policy making body, diminishing the authority of the president and the senate. the reserve bank presidents are not accountable to congress and i'm concerned that putting them on the committee would undermine support for federal reserve independence over time. you may like the current policy inclinations of the president, but that could change over time, and if the concern is group think on the board of governors, we might concentrate on ways to

attack this to get a better variety of people on the board, et cetera. title four was on transcripts. in my view and shortening the years from five to three in my view transcripts have already had a bad effect on deliberations. i'd be interested in al's view on this. there is less give and take, more prepared statements that don't, compared to before 1994, that don't respond well to other people's views. .

they are usually undesirable and should return to a treasury-only focus as soon as consistent with achieving congressional goals. the open market committee agrees with that also. i have two points of concern about the current wording. i would not use the usual words

that tie to discount windows. i would tie it back to taiwan. i would say, -- i would tie it back to a title want. -- title 1. asking for a report about what you think it is necessary is perfectly appropriate to me as well. tie it back to the objectives of legislation. i would not dictate the timing of the unwind. consistent with achieving the objectives of title 1. you could ask for a special annual reports as long as those agencies are saying why they

were there. >> our next speaker is retired from the reserve bank of richmond. served as president from 1993 to 2004. he served as a member of the federal open market committee. he held a variety of positions, including director of research. he is the member of the economic advisory panel. he is currently a director. he is a member of the board of visitors of a virginia commonwealth university. >> thank you very much, kevin. it is a pleasure to be here and to participate in this program.

for most of my career, i've been observingt the fed coreor it reasonably at close range. i have seen a lot of proposed legislation. congressman, i applaud you for this proposal. i have some strong reservations about some pieces of it, but i think by and large it is a very important proposal and i salute you for making it. i thought what i would do is go through each of the titles briefly. most movie reviews give you some type of star rating system. if it gets five stars, that is outstanding. one start means a much weaker movie. i thought i would share my star

ratings for each title. i hope it does not sound arrogant. it is my way of trying to give you a reasonable bottom line. on title line, i have many of the same thoughts. this would replace the current dual mandate. i would give this title five stars. i think it would be great if we could go there. i recognize the political imperative over the years for a dual mandate to never made sense to me for a central bank. the economics seemed clear to me. we have already heard this the fed and other central banks can directly influence and control the price level. it cannot control output, jobs,

in any meaningful way. many of us are persuaded -- many of us believe the price stability it would do a lot to maximize growth. a single mandate focused on price stability seems to me for monetary policy. i salute you for proposing it. i have to confess some discomfort with the right up i was sent on this metric evaluation. it would require the fed to monitor various acid crisis -- acid christ -- asset prices. monitoring would be ok if it is strictly monitoring. some sort a supplement to evaluating the behavior of the conventional price indices.

what would worry me is that this monitoring might morph into something a little bit different. it would be focused on targeting something like that with something like exchange rates. that would undermine some of the value of the price stability mandate. nonetheless, that i give five stars to the overall title despite those reservations. the current dual mandate intentionally undermines the ability of the fed to conduct would i would think of as optimal monetary policy. title 2 regarding the fed articulating a lender of last resort policy gets three stars. i understand the motive, the differential treatment of bear stearns and lehman brothers on the other. i give it only three stars

because frankly, i did not think the problem is an unclear policy. i am not sure what the legislation says exactly, but there is a policy that is reasonably clear. it is to provide temporary liquidity against good collateral. it seems to me to be -- i know this is easier said than done -- if congress would establish some type of specific fiscal crisis -- process, somebody other than the fed will do the bailing out. this is a big topic and i would leave it that for now. title 3 is the one -- it would make all fed bank presidents

permanent members of the fomc. that has some emotional appeal to me as a look back at my years at the table. it makes me feel a little uneasy and a little disloyal to the banks, congressman, to give this title only two stars. i have a lot of the same concerns. the basic issue is the fomc's legitimacy. for the fomc to be fully legitimate, as a practical matter, a majority of the voting members must be appointed by the president and confirmed by the senate. enactment of this title would require that for all reserve banks. the way things work in this town, that would mean that as many as two or three reserve

banks would not have a president. vacancies, if governor's appointments are any indication, you might have extended vacancies. these are big institutions that have to be run day today. that is not healthy. you guys have enough gridlock appear. i did not want to greet an opportunity for any more that would involve the -- create an opportunity for any more about involved the president's. s. i do not think getting meaningful input into fomc discussions is too much of a problem. all of the nonvoting president's still attend all the meetings

and participated in the discussion. if there reserve bank president does his or her homer, they could be employed when till even if they do not have the vote. i can remember many meetings were i did not know who had the votes and who did not have the vote. with the disclosure procedures now, they do not get to publicly dissent. they have ample opportunity to put their views forward. that is my view on that. title 4 would require the release of transcripts and three years rather than five. i take issue a little bit with you on this. i would go to three. i think five may be better, but not for exactly the same reasons. if you go to three or two, a lot of the focus will be what somebody said in the recent past.

i would be fine with three. it's seems to be essential that you need to go there to have another transparency to ensure credibility, but i am not sure it is optimal. i will give you four stars on this title for pushing for more transparency. more transparency is a good thing. title 5 addresses the relationship of the fed's monetary policy to the value of the dollar. it is currently vulnerable to misuse and abuse. to the extent that the fund can be used, the fed may get drawn into, it has the potential for

being harmful to the independent fed and to credibility. i give the second part of title 55 stars. the first part of the title would require the fed to report to congress howled the monetary policy is influencing the value of the dollar. that sounds innocent enough. but for many of us to live to the long arduous process of establishing credibility for low inflation, something like this smells to me like another mandate sneaking into the back door. that could undercut the credibility your single mandate for price stability is trying to achieve. for this reason, and i confess to some possible paranoia, one star. if a congressman wants to know how the fed feels monetary

policy is affecting the foreign exchange value of the dollar, ask the chairman. did not make a formal requirement. title 6, it addresses what my long-term colleague at the richmond fed calls a fed credit policy. it can affect macro credit allocation. title 6 would still permit sec's action -- such actions by the fed. i think of as a nebulous term. whether that is the case or not to be determined by a two-thirds vote of the fomc. at the end of the day, even with this legislation, it might seem constructive at the time, it

could undermine the independence. at a minimum, i would hope that if the fed is going to continue to be engaged in these kinds of operations, they should require the consent -- concurrence with some fiscal authority. i give this title 3.5 stars for addressing this issue. finally, title 7 would require congress to fund the operation of the new consumer financial protection bureau. five stars, enough said. i would give it a composite average of four overall. maybe 4.5. bottom line, i would love to see at least some of these elements

become law. thank you very much. >> thank you. i will give the presentation 5 stars. >> our next speaker recently joined citigroup as global head of international economics. his own research focuses on global things with an emphasis on the position of the united states in the world economy. previously, he worked at the federal reserve board for 18 years in a variety of positions. he served as the director of the board's division of international finance bridges also served as one of the three economists in the open market committee. he represented the federal reserve at many international meetings. from 2006 to 2007, he worked as a senior adviser to the u.s. executive director at the imf.

he worked on a range of issues. he has lots of academic research. >> i am very happy to be here today to discuss these important proposals. i will focus my remarks on four key features of the act. i think it is fair to say that i am a little less enthusiastic about some of this. even so, i see this proposals as being very constructive, very helpful, and very serious proposals that deserve to be carefully considered and debated. first, given the balance of the academic evidence, i agree that if you are establishing a new central bank, there would be a good case for considering a

single price stability mandate. the euro area countries went exactly through this exercise during the 1990's. the united states is not establishing a central bank from the ground that. -- ground up. i have several concerns in this respect. i think the federal reserve's record of achieving price stability over the past decade has been strong. as a practical matter, central banks, whatever their explosive mandates, was respond to the evolution of academic -- economic activity. the bank of england with a single mandate for price stability has been particularly aggressive in its quantitative easing program.

inflation is running well above target. i also doubt that present circumstances with millions of u.s. workers unemployed or underemployed are an opportune time to shift the fed's focus away from the objective of full employment. the dual mandate strikes me as powerful. i very much agree that the central bank cannot directly influence the long run levels employment in the economy. the stance of monetary policy can have a significant effect on how quickly the economy returns to full employment. i think that consideration at limbs quite large at present. -- looms quite large at present. this would be closely aligned with the european model where all national central bank governors representing

individual countries consistent -- constituencies. i see the important underlying question as being how to balance the public versus private aspects of federal reserve governance. i believe both of these are desirable and important. on the one hand, i share the view that reserve bank presidents to bring valuable geographical diversity to the fomc deliberations. on the other hand, the board members who now vote at every meeting have strong political standing. they are nominated by the president and confirmed by the senate. this is a policy choice. another observation, it leaps out from the fomc transcripts, the voting and non-voting participants are treated in an entirely symmetric way during

fomc meetings. opera to 32 reports on their districts comment -- opportunities to report on their districts. i see this as unlikely to change the underlying dynamics and discussions at the fomc meetings. frankly, likely to on change -- unlikely to change the fomc policy decisions. i very much agree that the art of central banking is ultimately about striking and appropriate balance between rules and discussion. much of the academic literature has concluded that the political process should establish the goals and objectives for monetary policy, namely the central bank's mandate. they should have a fair amount of flexibility to choose the

instruments and approaches they will use to achieve those objectives. my observation after watching central banks around the world formulate policy during the crisis and over much longer horizons is the central banks with operational flexibility including the capacity to use tools and instruments to influence policy, have been most affected. as such, i am very much in favor of planning, i am uneasy about proposals that would limit the range of assets and which the fed transacts. lock the fed into a lender of last resort policy. i think this is the key points, the dollar's performance over the past decade has been quite sound. in terms of the value against goods, we have seen average inflation of about 2 and 1/4%.

the fed's recently announced an inflation target. the commodity prices, this has been beyond the fed's control. 1.9% over the last decade. the value of the dollar against major currencies has been on a depreciating trend over the past decade. much of this -- more broadly, i see the foreign-exchange value of the dollar as in line with deeper considerations regarding the sustainability of u.s. trade and current account balances. the u.s. current deficit has narrowed from 6% to 3% of gdp in recent years. it means the u.s. economy much closer to a position of the external balance. during the height of the financial crisis, we saw massive

inflows into u.s. treasuries and a sharp appreciation of the dollar. the dollar retains its status as a safe-haven currency. my experience suggest the treasury and the federal reserve have a very effective relationship in managing the dollar. including the drafting of public statements and decisions regarding possible interventions. the treasury brain's enormous expertise to bear on such issues -- brings enormous expertise to bear on such issues. i believe there are distinct benefits in having the treasury deeply involved and taking the lead upon such issues. i see these proposals contained in the bill as important and very substantive. in my view, the burden of proof rests on the proponents of this

legislation to make the case is reforms will lead to better monetary policy. >> thank you very much, nathan. our next speaker is a resident scholar at aei. we decided to recruit an economist who is reasonable. welcome. he joined us after a career at the federal reserve board. he was actively involved in the fed's analysis of the u.s. economy and financial markets. his research spanned a wide range of paul -- of topics. he is a visiting scholar at the ucla center for real estate.

he also maintains an economic consulting practice. as does every former fed economist, apparently. [laughter] >> i am really pleased to have the opportunity to participate in this panel. i would like to congratulate congressman brady for starting what is an important discussion about the status of the fed and the conduct of monetary policy that will extend far beyond today's discussion. i did not come up with a star rating, but i think my overall assessment of the bill is probably more in line with nathan's than al's. i am probably more in the three- star range. there are some that gives me pause. i will try to go through the

various titles to hit the high points on each. on a single mandate, i think the more important thing is whether there is an explicit inflation target. then what the specific mandate is. the fed now has an explicit inflation target. even before there was an explicit target, the fed was implicitly and inflation targets are. the behavior of the fed has not been seriously constrained in terms of establishing a stable inflation by the dual mandate. i do not think changing the dual mandate will actually have a material affect on the inflation performance of this economy. nathan made the point that the actual behavior of central banks is a lot more similar are around the world. the inflation targeting central

banks than their mandates are. that is certainly too. i would like to mention that there is recent research that has compared the behavior of the fed to the ecb and the behavior of the fed to the bank of england those other two banks have hierarchical mandates in the sense that their first goal is price stability and subject to meeting that goal, they are instructed to pay attention to other economic conditions. the research i have seen it really suggest the actual responsiveness of the fed and those other banks to fluctuations in output inflation is three similar. does not relieve the mandate language that drives the behavior. -- it is not really the mandate language that drives the behavior. there are other goals in the shorter run that need to be pursued. i would say if there is a desire

to change the dual mandate, i would not change it to the single mandate that is in the bill now. it makes no mention of what the fed's shorter run objectives are supposed to be. something more like the hierarchal mandate would be a more imparted mandate for the fed. -- informative mandate for the fed. perhaps they found this section to be very confusing. it is very confusing because it is written as if the dodd-frank act did not exist. it was not clear to me as to what part of this act was trying to achieve it. specifically, the dodd-frank act and section 11 already requires that any lending programs before the specific purpose of providing liquidity in a broad based program and not to a specific and single company.

a bill out of aig would already be prevented by this provision of dodd-frank. second, dodd-frank requires the collateral be sufficient to provide tax payers -- to protect taxpayers from losses. it prohibits the fed from lending to borrowers that are insolvent. it requires the fed to terminate any such lending programs in a timely fashion.

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[captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] and there are at least three things that that pen can sign. one, he can approve the keystone pipeline. [applause] that is 700,000 barrels a day to houston from canada. two, he could approve going back to a pre-obama opening of the gulf of louisiana to taxes. that is about 400,000 barrels a day. and three, he could open up

designated parts of alaska, about one million barrels from alaska. he would open up 2.3 million barrels a day, or 800 million barrels a year of oil coming into the united states. that is not anything new. that would have a significant impact. the president said, the republicans have a three-part strategy. part one, drill, part two, part three, drill. [applause] i just want to say, mr. president, you understand exactly. drill, drill, drill. [applause] these energy speeches are actually why i would love to debate him, because the next part of his speech he explains

the drilling will not solve the problem. and he offers a solution. does anybody remember what it was? algae. [laughter] i am surprised this has not become a "saturday night live" skit. it was a little bit like the scene in the graduate where a man comes up to dustin hoffman, the newly graduated student, and he says, i have a word for you that will change the rest of your life. and hoffman is eager, the big moment. he says, plastics. this is sort of for the nation. this is barack obama sharing with the nation his vision of an energy future, which is algae. let's be clear, i believe in biotechnology and alternative fuels. over time, we will find a way of doing things through

developing methods for generating energy. but i do not believe that if someone was at the station in chattanooga and somebody pulled in and the price was about $5 and i said, hi, would you like some algae? [laughter] i just don't think it is going to work. this will be an american campaign open for every american. [applause] i do not care what your background. [applause] i don't care what your background. i do not care what your ethnicity as. i do not even care what your ideology is. if you think algae will solve your gas problem, you should vote for barack obama. and if you think drilling is more likely to solve your gas

problem, you should vote for new gingrich. [applause] i picked $2.50 because i talked to a number of oil experts and they said that's the price that you have a continuing expiration. several people have already attacked me saying, how can you say it is going to be $2.50, etc.? if you expand supply, the high cost is going to go down. when i was speaker, it costs about $1.13 per gallon. the day obama was sworn in, the national average was $1.89. i would say to my friends in the news media, i want you to go back to -- i'm not even carrying you back to a pre-obama world. i picked $2.50. i took a look at this issue of

what is happening with natural gas. in the president's speech, he says that drilling will not get us there. and then two pages later, if you read it is a fascinating study in psychology -- two pages later he says, it is really great. we have had this huge break through in natural gas and now we have 100 years' supply of natural gas. and we will create 600,000 new jobs over the next decade with natural gas. i thought, that is terrific. then i began to think to myself, how did we discover the natural gas? [laughter] all right, ok. let me be fair here, we are going to participate. everybody who thinks that alge

found in natural gas, raise your hand, and you should be at an obama rally. everybody thinks that would probably drilled to get to the natural gas, raise your hand. [applause] by the way, natural gas has dropped from its peak by 73%. if you did apply that to gasoline this morning, that would get you to $1.13, what it was when i was speaker. but i just saw one of our three guests -- is robert here? no, you are not robert. robert. [laughter] [applause]

before we get around to the guy you have already met, this is our grandson, robert. who is wonderful. and robert is one of my two debate coaches. i wanted you to meet one of the people that helps me do pretty well at debates. he is a very good chess player. we were just at his weibelo ceremony two weeks ago. we also got him a shotgun for christmas. he beats me at chest and he beat his father at shooting. it is an inspirational moment. this is his mother, jackie, who has been campaigning. [applause] like calista, she has written a bunch of books .

i know you probably recognize another person, but before i let him talk, i want to tell you my 9-9-9 story. cliff and i are in nashville and we are with senator fred thompson. we are campaigning at a rally. some guy says, i want you to tell herman cain that i have figured out barack obama's 9-9-9 plan. and i said, what are you talking about? and he said, i'm serious. i want you to tell mr. cain that i have discovered that the president has a 9-9-9 plan. i said all right. he said, the president wants us to pay $9.99 per gallon. the guy that made 9-9-9 famous and was one of the great marketing geniuses in america and is a terrific personal friend and we are thrilled to have him as a supporter fresh from oklahoma, where he has been campaigning with j.c. watts all day, herman cain. [cheers]

>> thank you. thank you very much. i am honored to be here again. [cheers] jackie and i campaigned in tennessee together friday and saturday. and we heard you all were having this little party without us, so we thought we would crash it. and we're here. but more importantly, i'm glad that you are here. normally, for the last few days, jackie would go first and introduce me and she would steal all of my lines. now i get to go first and she will not have anything to say what i get done. i want to thank speaker gingrich for having us here, giving us this opportunity. and i will share with you very briefly the message i have spread all over tennessee, all

over oklahoma, and all over the country. this country is at a defining moment in its history. it is at a defining moment in its history and we need a president who will define future rather than be our history and that is speaker newt gingrich. [applause] how do i know that he will help define the future of america? because that is who he is. at first of all, he is a bold leader. we do not need a namby-pamby's leader, or as j.c. watts says, someone who is going to gracefully manage the destruction of this country. no, we want somebody who is going to prevent the destruction of this country.

that is why i support speaker newt gingrich. [applause] number one, he is a bold leader. this is why i'm helping to support him spread the word. secondly, he is not afraid of bold solutions. $2.50 is bold. not exactly 9-9-9 -- [laughter] but $2.50 is bold. somebody asked me today, the you think the speaker supports 9-9-9? i'm working on him. give me a little bit of time. but do you know what mitt romney said about the $2.50 per gallon gasoline program? that newt was pandering to the american people. pandering. [boos]

i've got news for you, that is not pandering. that is leadership, because the american people do not need to pay more than $2.50 for a gallon of gasoline. and here is the other reason i love the $2.50 per gallon gasoline plan. he actually has a plan to get there. [applause] he's got a plan to get there. the way i know is because i wrote about it in my weekly commentary. go to hermancain.com and look it up. he's got a plan to get there. he was speaker of the house when it was $1.13 and he knows how to get it down.

i am trying to raise awareness about the fact that he is the right candidate for this. the other thing i admire is that he is not afraid to be bold for the people. he will reject the mainstream lapdog media and he will reject the establishment if he has to. [cheers] [applause] we are at a defining moment. and we've got to win this election. that is why i want to encourage all of you. i want to encourage all of you to make sure that you stay informed. there is a lot of garbage out there about this and that, about people's pasts. who cares how somebody voted in 1850?

[laughter] this is 2012 and we are at a defining moment. i encourage you to stay informed. i encourage you to stay involved. that is why you are here. if you stay home, we lose. you cannot stay home. we are surging in tennessee. newt is surging in tennessee, he is surging in oklahoma and he is surging in a lot of other places. the mainstream media, they want you to think that they know what is going to happen so you can stay home and not, number three, stay inspired. stay inspired. i would not be here if i did not believe that newt could do this along with your help. you would not be here, none of us would. i have been an underdog more times in my life than i can remember.

i know what it is like to be perceived as an underdog. at but you better watch those underdogs that have a big arc and a big bite. that is what is happening now and in this election coming up on super tuesday. but stay inspired. let me tell you, finally, what inspires me. i'm glad to be with jackie and robin. we are having a great time. and yes, i'm not just doing this supporting newt because i had to pick somebody. no i didn't. i was the unconventional candidate. i did not have to endorse anybody, but i did. and that is, because i wanted someone who would be a bold leader with bold ideas. [applause] america is that one of those defining moments. let me share with you one of the defining moments in my life. and what that can do to you. it was in 2006. i had a very successful business career.

i had a very successful radio career, had even been seen a little bit on television. and life was good. life was really good. then i was diagnosed in 2006 with the stage four cancer. that meant i had cancer in two organs in my body, in my colon and in my liver. i went to the doctor that day and met with the surgeon. my wife of 34 years was with me. and when they gave me the news that i had stage four cancer, my first question was what is that? she said that means you only have a 30% chance of survival. in order to be able to survive, what are they going to have to

do? she said, most likely they are going to have to take out 30% of your colon and 70% of your liver. never before in my life had i had such a defining moment as that. i said, let me get this straight, doctor, you mean that my only chance is that if you take out 30% of my colon and 70% of my liver. 7-0. do you mean i can live off a sliver of liver? [laughter] i did not know that. she said yes. you know, the liver grows back. my wife and i walked out of the doctor's office and imagine if you had been told you only have a 30% chance of survival. as my wife and i were about to

get into the car, i was standing on the driver's side and she was standing on the passenger side about to get into the car. she looked at me and she saw a look on my face for the first time in my life and in her life, and she said to me, do you need me to drive? i said, no. and she said, are you all right? because she could see the impact of that news in my face. and i looked at her and i said, i can drive. and she said, are you all right? i said, i can do this. and she said to me, we can do this.

we can make newt gingrich the next president of the united states of america. [applause] this is our defining moment in history. [applause] >> well, since it is impossible to top herman cain, i'm not going to try. but before i give you a final request on my part, i thought i would ask jackie to tell you about what is going on in oklahoma, because we have a very exciting race out there as well. >> i am thrilled to be here. i'm not quite as thrilled to follow herman cain, because i've been introducing him the whole time. it is a whole lot easier to introduce herman cain that is to follow him.

but i'm glad that you are here. and after hearing that story, i believe i know why god saved herman cain. because god knew that we needed someone with bold ideas and solution, someone who when he stepped out in the president's race would not step back and do nothing, but would come and work for us. that is why he is here and that is why i'm here. we had a great day in oklahoma. i traveled with j.c. watts and i traveled with herman cain. there is nothing like traveling with two rock stars when you are not a rock star. it was so much fun ever we -- wherever they went. they had pictures taken. people took pictures of them and flocked to them. and i know that we get a lot of good work. congressman watson was working this weekend for my dad, speaker gingrich, and i know he had an impact.

i'm going to repeat it one more time. i know that with your help, it can be done. i know that with your help, we can elect my father president of the united states. i know that because he is the only person in this race, including barack obama, who has actually balanced the national budget four years in a row! come on! give it up for him! absolutely. [applause] not only that, but he is the only man in this race that has performed with an entitlement program. he did it with welfare and i know he can do it again. [applause] we need someone who can stand up to washington, who will not give in, who will not give up, who instead will work for you, for the american taxpayer. that is exactly what my dad will do. he has always been a hard worker. he has always put his country first.

i'm sure it comes from 27 years in the infantry. he knows what it means to serve his country, and he is here to serve us. thank you for coming in tonight. e mail and call people because with your help, we can win. thank you very much. [applause] >> here is my request. we put together a very people-oriented campaign. we cannot raise the kind of money that mitt romney can raise in wall street. but we can arouse people to use the internet in an effective way. now have 04 $170,000 already. 95% give less than $250. we have a very broad base of support. a couple of questions, how many are on facebook? when you get a chance, go to your facebook page and just put in "newt equals $2.50 per gallon." how many are on twitter? if you have a chance, go to #$2.50gas.

that's new thing we built on twitter. encourage people to go to newt.org where they will see the 30-minute speech that outlines the plan to get us back below $2.50 and make us energy independent from the middle east. and finally, if your friends say what can they do to help, there is a space where they can go and give one newt gallon, that is, $2.50. it gives us a bigger and bigger network of volunteers to reach out to. we are not here to get you to help kalista and me. and we are here to get you to help the country.

i hope you'll take this campaign and make it your campaign. if everybody will do a little bit between now and election day, we will win an astonishing victory. together, we will get america back on track and we will create a country for our children and grandchildren that is more prosperous, safer, and freer, and is worthy of the american tradition. thank you very much. [applause] ♪

. ♪>> republican presidential candidate ron paul was in idaho for a town hall meeting. the texas congressman has been

campaigning throughout the state. 32 delegates in the super tuesday caucuses. this is in idaho falls. ♪ >> thank you. thank you. [crowd chanting "ron paul!"]

>> i have to say, that is one of the best welcome's i have ever had. thank you very much. [applause] i always knew people out here loved liberty. now you have convinced me. thank you, thank you. thank you. before i start, i would like to make sure that my wife and one of my grand daughters, linda and carol with me tonight. [applause] with this enthusiasm, we have to do well tomorrow. do you think? [applause] will you all be out voting tomorrow? is that what will happen? [applause] it is a lot of fun. but we still have to go to the bottom line. the bottom line is not only

voting, but becoming a delegate. that's important as well. we expect to do very well. i don't make bold predictions, but there is no reason we cannot win this thing. i suspect we will do exceptionally well and i thank you so much for your hard efforts. it really isn't anyway galvanizes or energizes you. there is a need this this country. there is a great need, and there is not a to difficult answer. we have too much government and big government undermines liberty. we need less government and more liberty and we will solve our problems. [applause] the founders of this country had a beef with the king, so they had a little revolution and they wrote a document called the constitution. they did their very best to

provide for us a republic and there were hopeful that it would last, but they were very leery about whether or not we would live up to the task. and unfortunately, in the last 100 years i think we have slipped a lot. that does not mean we have lost it, but if we continue what we are doing right now, we will lose it and it will be difficult to recover. but right now, the people are being energized. washington, i can guarantee you -- they are sound asleep. they do not know what you want. we have to send a loud and clear message to the people of this country, and especially washington d.c. that we want them to live up to their oath of office and shrink the size of government and expand people's liberty once again in this country. [applause]

one of the best measurements of the size of government is how much money they spend. and the next best measurement is how they spend money they do not have. [laughter] and then they go out and borrow. and another little trick, how many -- how much money they spend that they don't have and then they go and print it. it undermines the economy and destroys the currency and then they get involved in very dangerous actions, like entitlements that don't work and then a foreign policy of policing the world that gets us into trouble, undermined our national defense, and helps to bankrupt our country, and we ought to change it. [applause]

there is so much i see of our problems today that would have been prevented if we only have had what people in washington who took their oaths of office seriously and understand the constitution. if we had done that, i think we would not have the problem of overspending today. if we had followed the constitution, we would not have a central bank. we would not have a federal reserve system. [applause] the founders knew something about monetary policy. as a matter of fact, the monetary issue has been around a long time. it is a biblical issue. honest weights and measures. you should not cheat people, debasing the currency. basically, people found out about inflation because they have run away with the continental dollar. they said only gold and silver

can be legal tender. you cannot make bills of credit, which is printing press money. and there is no authority to have a central bank. think of all the mischief that would have been avoided if we had just obey that part of the constitution. we would not have the government sized this big. jefferson argued that the federal government should not be able to borrow money. if you want to spend, tax the people and then they will know how much government is costing. borrowing money is deceitful because you delay the payment and you build up interest and you can borrow it for a long time. then they said come what we want to institutionalize this principle of printing money through the federal reserve system. this provides the opportunity for those who like the government. and they are not all liberals. there are some conservatives -- at least they call themselves conservatives. i do not think we should grant

them the title of conservative if they want more money. [applause] but unfortunately, the spending habits are bipartisan. they keep saying they do not have enough bipartisanship. for spending, we have had too much bipartisanship because they both have been spending too much money. [applause] if you have groups coming together, i would like to think there are more coalitions, and they can have different opinions. but we should come together for cutting spending and realizing deficits are bad and printing press money is bad. therefore, we have to come together on how we are going to cut. then cut in both areas, whether the entitlement system or the foreign entitlement system associated with our excessive military spending around the world. if we do that, we can literally come up with a solution because it should be the easiest place.

the easiest place to cut should be the overseas spending. [applause] unfortunately, the provision in the constitution that was provided for -- and this was an explicit mandate from the founders because they resented the fact that the king could initiate wars and then tax the colonists. it also use the military to invade their houses. this is why we have a fourth amendment for governments and not coming into our houses. but they said the king, the executive branch, should never be able to go to war in a free society, in a republic. the people should make that decision through their representatives in washington and no war should be funded unless it is declared by the congress, not the president. [cheers and applause]

but to add insult to injury, since world war ii, we have gone to war and most recently we have engaged in wars overseas. our president just recently decided they wanted to go into libya and egypt. he said, well, i get my authority from nato and the united nations. [booing] this is very dangerous. we want sovereignty -- actually, the true sovereignty is with the individual or a very local government. the federal government should be kept very small. but we are moving in the wrong direction. this is the reason since the early 1980's i have always introduced resolution to get

out of an united nations, not to listen to their system. [cheers and applause] today, we are in the midst of a financial crisis because we do not obey the monetary issue. and what are they doing now? the world knows that we are in this mess. it is not just a few of us them realize that the system that we have is coming unglued, the debt bubble is getting worse and they have not gotten us out of this mess yet. but guess what, we agree we need a new currency. discussions are going on that the very moment to have a new world currency at the imf and the united nations. [boos] that will lead to less sovereignty, more one-world government, a trend is that we have to reverse. we have to defend our constitution, defend our right to be a sovereign nation, defend our right to deliver most of our government through the local people.

most of the personal responsibility of our own personal lives to the individuals and to the families. [applause] in the last 10 years, we have been fighting constantly. it nobody knows exactly how many countries we are in and how many bases we have. it is approximately 900 bases in approximately 135 countries, but we keep adding to these each time. because instead of us taking advantage of the wonderful opportunity when the soviet system collapsed and the cold war ended, it would have been a perfect time for us to get a peace dividend. lay off of all of the spending. how many more bombs do we need? do we have enough bonds right now to blow up the world -- we have enough bombs right now to blow up the world 20 times.

we spend more on weapons than the rest of the world put together and we sell more weapons around the world. it is a big business and has nothing to do with our national defense. we should adhere to the admonitions of the founders when they said that national defense is a federal issue. as the federal government responsibility to provide for a strong, national defense, but just spending money on the military doesn't translate into defense. there is a big difference and eisenhower warned us about this. he said if you are not careful, the u.s. will be involved in more militarism and not national defense. we're in that position today because we are vulnerable and we ought to listen to that advice. [applause] but in these last 10 years, we have racked up a lot of debt. we are currently running up debt and $1.30 trillion to $1.5

trillion a year. everybody knows that is unsustainable, even if we are getting away with borrowing and printing money if the dollar doesn't collapse, it will eventually collapse the dollar. during these last 10 years we have added to our national debt more than $4 trillion for the wars in the middle east. and what have we gotten for it? we lost about 8500 americans when you count the independent contractors and all the military personnel. we had over 40,000 individuals come back with severe injuries, amputations and severely handicapped because of the war. hundreds of thousands of veterans coming on that cannot get their medical care. and we are spending this money, going around looking for trouble, and we have an entitlement system of control, and we are not taking care of the people we have an obligation to take care of, and that is, our veterans. [cheers and applause]

it seems to me if these wars are unconstitutional and declared unwinnable, and if they are hurting us and causing our debt to explode, it mandates that we have to look at this and change our foreign policy. and we have no choice about it. that is what happens to great nations. that is what happens to empires. usually, they do not get defeated by another empire. we did not have to fight the soviets. they defeated themselves because they had deeply flawed policy and they destroyed their own economy. today, our greatest threat is not come from externally. it comes from internally, both with our financial condition and the threat from our own government with our civil liberties. we have to look inwardly and remember the constitution says that we will defend against all enemies, foreign and domestic as well.

[applause] but it seems like it would be the easiest place to start cutting, the overseas spending. bring our troops home rather quickly. and let them spend their money at home rather than in germany, japan or korea, all over the world. we can cut a lot of money out of there. i propose we should cut the budget by a trillion dollars. how would that be a start? [applause] i am convinced if we keep doing what we are doing, of we will destroy the dollar. the dollar is being undermined. if you do not like the price of gasoline, do not say it is somebody making too much

profit. and why don't you say it is ben bernanke? plintsing too much money. -- he is printing too much money. that is where the problem is. if we continue to do what we are doing, we will run into a much more economic crisis, destroy the value of currencies. there will be a lot more inflation. interest rates will rise, and the more the government does trying to keep up with inflation, the worse it gets, so the only way i see out of this is to say instead of waiting for that day, we more or less have an addiction, so we keep spending money, and it seems to keep hiding them over. if we did its now, we could have priorities and say there are a certain class of people who have been taught to be dependent on the federal government, and some of those

programs and would have never been started, but i am willing to say the best way is to cut overseas spending and take care of those fat are dependent. -- people who are dependent. those who are told if we take your money, you will get social security benefits. we ought to protect those who received about, and if we do it right we could work our way out of debt, but we have to change foreign policy. [applause] there would have to be a lot of other cuts. i propose we cut five departments. what should be one of the easiest to cut, because there is no authority for the federal government to take care of our education, so i would start with getting rid of that.

[applause] the federal government has one responsibility in education, and that is over the city of d.c., so why shouldn't the american people look at the example and look at the ability of the federal government deal with an educational system. it is probably the worst one in the country, unfortunately. i mean, it has more crime. it has more drugs, a terrible educational system and very expensive. every year people from the city come to the congress, yeah, we're having trouble. give us more money. inevitably they get more money. they are up to about $18,000 per student. i understand if you are home schooling, you can educate a child for a lot less than

$18,000 a year, and guess what? if you are on home schooling or you have a private school, you do not have to ask the government if you can say a prayer. or read the bible. you have your right to do that. [applause] then they say, maybe they will not get as good an education. i think that has been disproven. they find people who are home school do quite well. they say you will not get a sense to do well in sports. i was talking to a football player the other day, i think it was tim tebow. something like that. [applause] most people know he was home schooled, and he is doing pretty well for himself. [applause] there are alternatives. people think of the government does not do it, it will not

happen. that is not case. if the government does not do it, maybe we will do it for ourselves much better. [applause] people get a little bit nervous when i say i would like to cut $1 trillion dollars, and the things the world would fail if the government did not spend the money. i said, it is going to get much better if the government does not spend, but the point is if the government does not spend one trillion dollars, who gets to spend it? you get to spend it. that's who. [applause] over the years i have met a few politicians and a few bureaucrats, and i guarantee they do not know how to spend your money. they are not smart enough to know what is best for you.

[applause] this is the whole thing, the assumption the government should be taking care of us is based on the assumption they know what is best for you. only you know what is best for you. if you make a bad decision, you should suffer the consequences. you should not be able to get bailed out. richer or poorer, shouldn't be able to do that. if you make a mistake, it is your business, and only you suffer. even in a larger area, if the state makes a problem, it is the state, and that is why the founders did not want a national government they wanted it to be local, but the governments can't know, individuals can't know what is best for you. so if they can't understand what you want or if they make a mistake, it is universal when it comes to the federal government.

if they make a mistake on the principle of entitlement, it is devastating. if they make a mistake about going to war, it is devastating to us. and we need to get back to the understanding that self-reliance and local government isn't a default. it is not saying that we don't want governments. we want it from ourselves, from our local people, from our families, from our church, but not from the federal government or the united nations. the founders asked a basic question when they wrote a constitution. what should the role of the federal government be? they were fed up with a king and the military marching into their homes. they wrote that but they understood that the role of government is precise. it is to defend liberty.

it was not written to provide secrecy of government your good it was there to protect your privacy. it was there to protect your privacy is. we need to flip the round -- that around again. [applause] the government was supposed to protect the value of our money. and they were down on counterfeiting. as a matter of fact, in 1792, they said anybody who debases the currency would get the death penalty. that's how strongly they felt about that. good thing that is not in effect today. there would be a lot of people in trouble in washington. [applause] the government is supposed to protect contracts, but they are always interfereing with contracts, always dictating, having rules and regulations, and when there is a problem they will settle a

dispute. they are supposed to protect private property, but there is an abuse of eminent domain in that some people believe your land is not your land. if you look at some of the environmental regulations and all the rules. a lot of people think it is their land and not ours, so not only is our life and liberty, we should have the right to keep the fruits of our labor, which means our property, we have to restate once again that the people own the property, not the government. [applause] there are some that would argue with us, and they would say, you people just want to run your land and take care of your land. you don't care about the environment. there is no evidence to show government land ever took better care of private property and land owners.

there is no evidence whatsoever. [applause] a more dictatorial, the worst the environment has been in the past. the free market, you are not allowed to pollute your neighbor's property. you cannot dump your garbage in your neighbor's yard. you should not be able to encroach their land or water. unfortunately, the government and a big business frequently got together and call luted the land and water and the air, so it is not an -- and polluted the land and water and the air, so it is not to say if you have strict property rights it would be worse taken care of. as a matter of fact, it would be better taken care of. you cannot get worse than you have a socialist dictatorship that destroys the environment. [applause]

when we sacrifice our liberties, whether for the entitlement system or the foreign policy, we realize there are basic definitions the -- that have gone astray. entime-out titlements sound like we have gone astray, but entitlement sounds like people are entitled to their neighbors' property as long as the government gives it to them. that is not a good definition, so the entitlement system undermines the concepts of rights and people are entitled to their life and their liberty and their own property, but they are not entitled to their neighbor's property, and that has to be institutionalized once again, because if not we are going to continue to undermine our liberty, and we are going

to continue the process of what we have been doing for almost 15 years, a steady weakening of our economy. our employment system has gotten worse since the year 2000. it is not just four years. we have no net increase in productive jobs since the year 2000, and jobs are going overseas. we have a currency system is deeply flawed. we overtax, over regulate, and businesses are not invited to bring capital back home, so it is not just an accident. big business didn't become un-american and say i'm leaving. they are in the business of making money. they will go overseas. and every other country says if you make money overseas and bring it home we will not tax you, but we said you pay the taxes over there and if you bring it back we are going to tax you again.

we have to look at this tax code. i do not like the tax code. especially the income tax. that tells you they own every penny of what our earnings are. that's why we ought to repeal that. that is based on the assumption they have control of 100% of your money and they allow us to keep certain percentages according to their rules, but the other one that undermines accumulation of capital, if you have a family or a farm or a house or a business, if it gets to a certain level and you want to pass it on, the government says we own this part of it. you have to give us this. you do not have enough to pay taxes. that destroys capital. we want to build capital. the liberals to believe that capital does not come from savings. it has to come from savings.

capital has to be what is left over after you take what you earn and to live on it, but -- and what you save becomes your capital. they don't believe that. you don't have to save it all. we have saved very little. they think, we will replace that with printing money, and that will be our capital, but dilutes the value of the currency, but the worst part is that is distributed by the politicians taking care of their friends. if you have savings and put it in the accounts people have to borrow from, the market and distribute that, but why should anybody saved today? some people do because they did not want to take risk in the stock market and who would want to buy 30-year treasury bill

when you're losing 5% a year. when i brought that up with greenspan and bernanke, i said, you keep interest rates low. it benefits the banks, but what if you believe in self-reliance? what've you want to retire and take care of yourself and you do not want to go into the stock market. you are going to make 1%? they both said basically the same answer. they understood that, but some people get worried when you have to protect the big picture of the financial system, so they believed they are protecting a certain group of people and others will suffer, and in the process, they destroy the whole process of capitalism and free markets, and therefore, we need to hold their feet to the fire and say we understand this business a lot more than they think that we do and there will be a change, as there always is with a monetary system that self-destructs.

we are going to follow the constitution and say only sound money can be used. only gold and silver as legal tender. [applause] under these conditions, whether it is the economic crisis where they say, if you do not bail was out of whole country is going to fall apart so, the wealthy get bailed out even though they have been making the all along and all the bad debt gets dumped on the people, so the emergency action is usually making things much worse, and overseas as well, what about all of the excuses for going into iraq? we have to go. we have to go into iraq because they have weapons of mass destruction. they have ability to deliver a message over here. they are harboring al qaeda, and on and on.

it was not true. we went in there and had these unnecessary wars. now we're in afghanistan, always frightening people getting people to go along with it. now they are beating the war drums to get people to do the same thing with syria as well as iran. we need to make sure they tell us the straight story, that they should not be taking us in supporting the roles that are not permissible. [applause] these conditions lead to a very careless attitude about the real purpose of government, and that is to protect our personal liberty. today our personal liberty is under threat. if there is one thing you have to work on protecting, it is personal liberty. some people say, that means you have to give time, money and

effort. yes, but it is not like you are donating something. and we have an obligation, those of us that have come to a conclusion it is for the benefit of our family and our kids and our community. it is not a sacrifice to do th this is necessary for self preservation. the steady erosion of personal liberty, all you have to do is think about the humiliation some people have to go through at airports. they do this without search warrants. they do this with the power they go from the patriot act tos of things. they can look at our internet. they can go on and on.