weighing on demand and subtracting from growth. in the long run, it should help bring growth back up again and improve the competitiveness of the greek economy. >> all right. would you like to make any final remarks, any message? all right. thank you very much for joining us. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> we ask students across the country what part of the constitution was important to them and why. today's second prize winners selected the eighth amendment. >> your state has executed 234 death row inmates. >> no. did you just see that? >> take a book.

>> your state has executed 234 death row inmates, more than any other governor. [applause] have you struggled? >> when i see this clip in makes a wonder what they world as a coming to. >> you deserve the ultimate punishment. >> we have three questions concerning the death penalty. excessive bail shall not be required nor excessive fines imposed nor cruel or unusual punishment. >> and it talked about why the death penalty did not count as

cruel or unusual punishment. >> no. american ever voted to adopt a constitutional amendment that eliminated that. the constitutions will say times have changed and it is up to me to decide what is going on. that is a constitution that has no bite. >> we went to new york to interview to get the point is someone who opposes the death penalty. >> our supreme court has found that the death penalty is fine under a constitution. our constitution prohibits cruel and unusual punishment. our supreme court has found that it does not meet that. there have been instances where it certain methods have been challenged.

we have moved forward in terms of our supreme court has said that it is unconstitutional to execute it. the past decade or so the supreme court has moved in that. >> these are punishments that should not be available for mental retardation. despite this, many have certain inherent limitations. >> let's stick a look. is the death penalty races? >> no states should deprive anyone from liberty are property without due process of law. >> i think the problem with the death penalty in america and probably anywhere in the world is that we are human beings.

there is no way to make sure that we are always right. there is no way to apply the death penalty in the system that we have currently in a fair and equal way. >> most able to get executed in texas and the u.s. tilt someone's wife just to interrupt my tirade with its cystic -- with a statistic. blacks and whites are victims of homicide in equal numbers in the u.s. and the modern death penalty, at 80% of the people who have been executed have been executed for killing a white person. that does everything you need to know about whether the death penalty is a racist regime. >> i feel it should not be applied. >> people of going to think it

is racist. we're not going to stop either of those things. all we do is make sure we have the right perpetrator. >> there is a big difference. the second look at the last question. >> they show the murder rates are not any lower and states or there is a death penalty. >> we wanted to know what staff members thought about whether it makes them safer. >> my mind sometimes tells me yes. when i as a mother think about something happening to my children, my first thought is that they will pay for it. >> do you support the death penalty ta?

we have no right to take a life no matter how dirty that person is. >> if you do the crime he must do the time. >> and by word to -- if i were y no.te, i would asa >> people can be and executeexer innocence. >> there are other and gesture led stations of the world but applaud the use of this barbaric form of punishment. >> have the struggle to sleep at

night with the idea that any one of those might have been innocent? >> i have never struggled with that. when someone commits the most heinous of crimes, they get a fair hearing. they go through a process. they go up to the supreme court of the united states if that is required. in texas, if you come into our state and to kill one of our children are killing a police officer, you are involved with another crime and to kill one of our citizens, you will face the ultimate justice in this state of texas. that is you will be executed. >> what do you think? thank you for watching. >> no. what all the winning videos and continue the conversation about

today's documentary -- you can watch all the winning videos and continue the conversation about today's documentary at this is video library. president obama announces a plan to restrict speculation in the oil markets. later, a hearing for law enforcement. timothy geithner visits the brookings institution tamara. -- tomorrow. >> this weekend, coverage starts at 2:00 p.m. eastern.

clarence darrow and jfk. column with their questions for the author of "hollywood left and right." sunday, watch for eric alterman. then it cannot run surveillance and secrets. the entire schedule for the weekend is online at booktv.org. >> jury selection began in the retrial of former major league pitcher robert clements charged by federal prosecutors for knowingly lying to congress not good to thousand eight on performance enhancing drug use. >> let me read you what his wife said in your affidavit. i do propose that he had a conversation with roger clemens in which roger in mid it to him

using human growth hormones. -- admitted it to him using human growth hormones. he said the conversation never happened. if that was true, why but they tell her about the conversation. >> our relationship was close enough to know that if he went there, he was knowingly knowing that i had taken hgh. it came to ask me about the effect of it. >> watched the 2008 testimony. >> the house ways and means committee held a hearing on the different kinds of retirement savings one.

witnesses discussed what tax incentives are most effective in getting workers to save. he chairs this to our hearing. -- chairs this two hour hearing. >> good morning. we meet today to continue the dialogue on a bipartisan camp for words. in recent weeks much of the reform is centered on the corporate side especially after japan lowered its corporate rate on april 1, living america with the dubious distinction of having the highest corporate tax rate in the industrialized world. it is unacceptable that they face such a burden.

they ensure that we address the needs of american families. as such, we must consider the individual side of the tax code. i need one that improves prospects for job creation. faster they processed 142 million tax returns. the also received some 0.5 extension forms that were costly and time-consuming. with nearly 4500 changes in the last decade, 579 of them in 2010 alone, the code is far too complex. this has led to cost of complying with the tax code. taxpayers spent $163 billion

complying with the income tax rolls. american families and not list any more money complying, -- therebeen a more mone also spending more time. whether it is the compliance, that the impact of expiring tax provisions are the affect of isplementing roleconvoluted rut preventing them. tax incentives quickly becomes clear to lay the foundation for comprehensive tax reform. as many americans were to meet the deadline, at today's testimony reinforces the wide popularity. the overwhelming majority are

participating in that plan. they have access to the workplace plan. 66% of all full-time workers participate. they participated in an employer sponsored retirement plan. similarly, irs data indicates that 38 some of those participating make less than $57,000 a year. the proliferation has occurred a specific need have led congress to create new ties a plan with different rules. some have questioned whether

the plans and eligibility criteria needleast to confusion. they could change the default rules. as they continued their work, it is important that these vehicles affect average people who depend on these resources for their retirement. simplification, it increased participation middle income taxpayers.

they also has simplify savings in their report on tax reform options. these are worthy of consideration and discussion. we also have an expert panel of witnesses that will evaluate how existing rules measure to these criteria. i would like to emphasize said the hearing is not about conclusions but making sure that as congress approaches reform, we do so with information. we have spent too much time acting first and asking later. we deserve better than and trial and error approach to policy. this is our opportunity to gather input and get the facts. i yield to the ranking member for an opening statement. >> thank you for coming. today's hearing is the examination of what to tax reform might mean for a very specific set of provisions, designed to promote retirement savings.

the have benefited tens of millions of american families. the estimates of how many very. most find that 40% to 50% of workers are covered by an employer sponsored retirement plan. including defined contributions and defined benefit plans, private and public sector, hold assets of 9.3 trillion dollars. in addition, 49 million households hold $4.7 trillion. employers are not required to offer retirement plans.

i think we will hear that employers understand the current system in that it works for them in terms of allowing them to offer retirement benefits to their workers. most of this committee agrees with that. there has been a resolution in support of our current system. it has been co-sponsored by 115 members, including 26 of this committee, reflecting bipartisan agreement that these provisions are of vital to encouraging retirement savings. that is not to say the current system cannot be improved. of course it can be. today we will hear several ways to do that. what should be clear is that the basic structure of our current

system should be preserved. it should not be repealed to pay for tax reform. tax reform should approach retirement savings incentives with an eye toward strengthening our current system and expanding participation, not as an opportunity to find revenue. one of our witnesses sums this up nicely in the written testimony -- "expenditures should not be reduced or tinkered with to pay for other initiatives whether inside or outside of tax reform. those funds are the primary retirement nest egg of millions of families. they should not be taxed to finance more government spending, and deficit reduction, or to offset other tax initiatives, including lower marginal tax rates."

and wanted to note that while today's hearing is focused on defined contribution plans, our retirement policy has traditionally been and a three legged stool. the other legs defined pension and social security. they are also vital components of ensuring americans retirement security. thank you. all of us look forward to your testimony.

>> it is my pleasure to welcome the excellent panel of witnesses before us today. they have experience in working with retirement accounts and it will be helpful as we take a look at the complexities at this part of the tax code. i would like to welcome doctor jack vanderhei. he has been with the employee institute since 1998 and has published more than 100 papers on employee benefits. we will hear from judy miller, director of retirement policy at the american society of pension professionals and actuaries. third, we will welcome mr. bill sweetnam. he specializes in benefits and tax counsel. fourth, we will hear from david john, a fellow and financial institution adviser at the

heritage foundation. he has testified on the improvement of security plans. and we welcome mr. randy hardock. he is a compliance specialist and maintains a practice focused on rising on retirement and savings. he is testifying on behalf of the american benefit council. thank you for your time today. we have received your written statements and they will be made part of the record. each of you will be recognized for your aural remarks. mr. vanderhei, we begin with you.

>> members of the committee, thank you for the opportunity to speak with you today on tax accounts. i am a research director of the employee benefit research institute. we have conducted research for the past 34 years. ebri does not take policy positions or lobby. we have extensive research or the last 13 years as well as annual analysis on the behavior of tens of millions of participants from tens of thousands of plans dating back as far as 1996. measuring retirement income is an important and complex topic and ebri started to brightness in the 1990's. 43% of households were projected to be at risk of not having adequate income for basic expenses and health care costs. even though this number is large, this is 5% to 8% lower than 2003.

it would be my pleasure to explain why households are better off today than they were nine years ago, even after the crisis in 2008 and 2009. the in positive impact from automatic enrollment in 401 k plans. a similar analysis for 401 k plans. the number of years they are eligible makes a tremendous difference in their times ratings. generation x are stimulated to run short of money 61% of the time were as those with 20 or more years of eligibility have a situation 18% of the time. knowing the percentage of households at risk is important for public policy. equally important as knowing how large deficits are likely to be. the deficit numbers is estimated to $4.3 trillion. of those focus attention, they do little to help policy makers understand where they're coming from.

figure three provides information on retirement shortfalls for gen x. those fortunate enough to have 20 years of eligibility to find their average deficits reduced more than 70% of the average deficit for those with no future eligibility. ebri has shown that the traditional type of 401 k has the potential to generate some, that when combined with social security, would replace a sizable proportion for those with continuous coverage. the automatic enrollment 401 k when combined with provisions has the larger retirement accumulations for most of those covered. there has been proposals to modify the existing tax incentives by capping annual contributions or changing the before tax nature of the employee contributions in exchange for government matching contribution.

the senate finance committee held a hearing that focused on the second type of proposal.

ebri presented evidence of that time of a possible impact on future 401 k accumulations. surveys have allowed ebri to do this more accurately. last month we should be projected changes on 401 k balances in reaction to the proposal. figure of 11 shows a 22% reduction in 401 k balances for young workers in the lowest income quartile. those at risk for insufficient income. the results are more dramatic four small plants. figure " shows the low-income employees at 36%. given that the financial state of the future generations appears to be so strongly tied to whether they are eligible to participate in employer sponsored plans, the logic of modifying the incentive structure for employers for defined contribution plans needs to be examined. the potential decrease of income resulting from modifications to existing retirement plans or reducing

contributions needs to be analyzed carefully when considering the overall impact. i look forward to your questions. >> ms. miller you are recognized. >> thank you. i am judy miller, chief of the retirement policy for the american society of pension professionals. we work with employers of all types but our primary focus is small business. two key features distinguish that from other plants. they are efficient at delivering and come across the

spectrum. unlike other incentives, retirement savings are deferrals. they are not permanent. when mortgage interest and deducted, and they will never be taxed. with a traditional tax, no income taxes are paid when they are added to the account. but they are included in taxable income when paid from the plan. every dollar exempt from tax now will be subject to tax in the future. since most of those are outside the budget window, looking at the expenditure for retirement plans overstates the cost of this incentive. new estimates show that a better measure for define plans is more than 50% less than the estimate over five years. as you consider these issues,

this is a deferral. that amount to romney you might think you're raising is not real revenue. it is a bookkeeping fiction. the second feature make sure that incentives to not discriminate in favor of the highly paid. this incentive is more progressive than the current code. households making less than $100,000 paid 26% of all income- tax is but they get 60% of the tax incentive. this understates the benefit for these households because it does not recognize a good part of a business owners is transferred to workers in the form of contributions. a small-business owner considers a plan when businesses are profitable. it could save enough money and the personal income taxes to pay most of the cost of

contributions required for employees by nondiscrimination rules. it is a beautiful thing. become curring contributions for workers. the data shows the key to promoting security is workplace savings. 7% of workers participate in a plan at work. lesson 5% save on their own. 78% of workers have access to retirement plans with 84 percent anticipating. that is a success story. more needs to be done. we support the proposal as a way to expand replace savings by building on the current structure. recent proposals include cuts to contribution limits, a cap on the value for households making over a certain dollar amount, or conversion to a credit.

all of these proposals would reduce the incentive for small business owners and would be a step in the wrong direction. i have 20 years experience selling plans to small business owners. the current tax savings was a critical factor and often the only factor supporting the decision to put in a plan. it is not that they're selfish. in real life, they are not sitting on a lot of cash. savings generated provides cash to help make contributions required. reducing the incentive reduces the amount of cash. there is not a doubt that reduced incentives would mean fewer plans toward retirement. one of the questions is whether or not there are too many types of plants. the simple answer is no. a proposal to put them all into a single type plan but combining them would disrupt savings. when you're talking to an

employer, about setting up a plan, options and flexibility are not the enemy. one size does not fit all. that is not to say simplification is not needed. we support the pension promotion act and would be pleased to work on the committee on these and other simplifications. the road to improve to security -- is the opposite of what needs to be done. i would be pleased to discuss these issues further with a committee or answer any questions you have. >> mr. sweetnam, you are recognized for five minutes.

>> thank you for the opportunity to testify. i am part of a law firm that focuses on employee benefits. prior to joining i was tax counsel at the office of tax policy at the department's treasury. i will testify today about the simplification proposals for retirement savings that we developed at the office of tax policy and that were included in the bush should ministration's proposals for 2004 and 2005. i am speaking today on my own behalf and on behalf of the firm or any client. one of the reasons to simplify, the code provides incentives for individual retirement savings and for other savings, such as the payment of medical expenses or education. all of these savings have different eligibility requirements and the amount of benefits could change based on income status or participation in other programs.

employer provided savings present their own level of complexity. there are a number of savings vehicles that employers can adopt, including 401 k and others. some very depending on the type of plan and there are limitations that can adopt certain types. multiple nondiscrimination rules add complexity to the administration of these plans. while they are a means of making sure that lower-paid employees share in the benefits provided under these plans, some argue that the level of complexity is excessive in relation to the benefits that lower-paid employees receive.

the 2004 proposal outlined a simplified system of retirement savings with three types of vehicles. lifetime savings accounts, retirement savings accounts, an employer savings accounts. individuals would be able to contribute $5,000 to an lsa. amounts contributed would grow on a tax-free basis. no limitations on who could contribute. distributions could be made at any time, regardless of the individuals aged and could be used for any reason. those individuals with limited means to save might be more willing to contribute to anlsa because they could access the money in the event of an emergency, which is different and making contributions to retirement based system. rsa's, individuals could contribute $5,000 with account earning scrolling on a tax-free

basis. no income limits would apply to contributions. qualified distributions, those made after an individual was aged 58, would be tax-free. all other distributions would be included in income to the extent the distribution exceeds basis. employer retirement savings accounts. it would be available to all employees regardless of the type employee of etiquette. it would follow the existing rules for a 401 k plans, including the limit, and the availability of a broad contributions. rules would be simplified and eliminated if lower-paid employees had high savings rates. although the efforts did not advance in congress, our efforts to review and recommend a comprehensive changes to the current system was worthwhile.

any effort to advance tax reform will likely include a review of retirement savings. if one goal of reform is to simplify the current system, i would recommend the committee examine the work of the office of tax policy during the bush should ministration. thank you for this opportunity. i would be happy to answer your questions. >> mr. john, you're recognized for five minutes. >> at trichet the opportunity to testify before you this morning on ways to ensure that all americans have the opportunity to save for retirement. i am a senior research fellow at the heritage foundation and the deputy director of the

retirement security project. this is an issue that transcends ideological and partisan differences. for those who access to a deduction savings account, the system works well. millions of americans lack credibility. in theory, they could say it in an ira but only 5% sent to seoul on a regular basis. many of these workers who lack the ability to save through payroll deductions are part-time employees of smaller businesses, women, minority groups, younger workers, or all of the above. social security only provides half of the retirement income needs. either we can insure that everybody has the ability to save to provide for themselves or the congress will face demand for additional benefits.

those demands will be hard to resist. insuring that all americans have the opportunity save will require hard decisions. the proposal core automatic ira's would find a simple way for millions of americans. the automatic ira would enable them to save by allowing them to contribute from their own paychecks. the plan is simple for employers and employees. employees would be automatically enrolled in to the automatic ira. it is a process that is proven to build participation, which employees light and under which employees have control of their own retirement savings decisions. to avoid confusion, all of them would offer a three, and only three, investment choices. for employers the plan is also simple. they would be asked to do the

same thing they now do except that the money would go into an ira instead of to the treasury. employers would not be required to comply with other types of regulations that apply to 401 ks. eliminate almost all of the costs associated with an automatic ira. it also includes a tax credits designed to cover any other cost. while the automatic ira is valuable for new savers, it would also be valuable for others to change jobs or from a company that offers a 401 k to other companies. under the automatic ira, and they could roll over their 401 k and continue saving.

it would also work if they went to a larger company. this is not a partisan proposal. the concept has been endorsed by a number of publications such as national review and conservative and liberal officials and other types. earlier this year, richard neal introduced h.r. 449, the automatic ira act of 2012. while the heritage foundation is a non-profit and does not endorse any legislation, a policy contained in his bill would improve our savings system. my written statement also discusses the value of simplifying the current savings accounts so that ordinary americans can better understand them.

in addition, a statement discusses proposals to use tax information to encourage taxpayers to consolidate their accounts if they desire to do so and to include social security administration on an annual 401 k statement so that the countdown has a complete picture of their expected income in time to make a change so they could increase savings and improved their potential outcome. it also discusses a multiple employers to share a platform and a thought or two about retirement savings. i would happy to discuss them at any point. i look forward to your questions. >> mr. hardock, you're recognized. >> thank you for the opportunity to speak with you today. i am an attorney with 30 years'

experience specializing in retirement plans. i served at tax counsel for the treasury and was the senate finance committee tax counts responsible for retirement issues during the 1986 tax reform act. this committee has been responsible for every major improvement in retirement savings, including the bipartisan act passed in 2001. the legislation that established a successful framer for defined contribution plans that is still in place today. that bill was co-sponsored by you, chairman camp, by new ranking member levin, thank you for that. it was co-sponsored by others. it is an area where republicans and democrats have been able to agree and we urge you to continue your support in the context of tax reform. the current system is working. it is working for the 80% of full-time employees with access to plans.

it works for the 100 million americans who have saved a through iras. the first and most important principle to consider when you discussed tax reform is do no harm. in 2012, 80% of households with defined plans said that tax savings or an incentive to contribute. almost half said they would not contribute at all 20 retirement savings if it were not for their defined contribution plans. today coverage and various other rules insurance of the benefits are delivered across all income groups also providing bounced incentives that encourage business owners to maintain retirement plans encourage employee participation.

any major restructuring of the system that tries to reallocate existing incentives is a gamble we cannot afford to take when dealing with the security of working and retired americans. reducing savings to pay for other initiatives would be counterproductive. proposals that appeared to increase tax revenue from changes in their retirement savings get those additional revenues because individuals are saving less for retirement. making matters worse, short term revenue gains from changes under the current rule is an illusion. when a worker saves less money today, it will mean smaller distribution and less revenue when the person retires. the attack expenditure also does not paint an accurate picture. the book of the estimated retirement expenditures comes from six savings already in retirement plans and ira's. not from new contributions.

that number cannot be turned into revenue. not without taxing the nest eggs of americans. that would be seen as a breach of trust by those who contribute and those employers on the assumption that the money would grow tax free and be taxed on the distribution. the retirement system can and should be improved for all americans, especially those with lower incomes to find it difficult to save. tax reform offers the opportunity to do that by building on the existing system, not by tearing it apart. employee sponsored plans make effective use of payroll

deduction, and typically include employer contribution. more americans need access to those savings plans and all americans should be encouraged to save at higher levels. when area that deserves attention is the automatic enrollment and increase strategies. workers must opt out rather than opt in and where the default contribution levels are increased each year. these increased participation and savings rates, especially for low-income and minority workers. more employers are adopting these designs each year but greater incentives should be considered. much could be done to reduce the cost of administration. regulations on delivery of notices should be brought into

the 21st century to better accommodate electronic delivery. we are ready to work with members to assist members in continuing its history of promoting savings. >> thank you for that excellent testimony. today is tax filing day. americans have to spend millions of hours preparing their taxes. because our system is complex, not only is compliance complicated, but long-term financial planning is complicated because of bar code. i would like to explore and ask each of you how the tax code is performing in security and employers who want to offer a plan, they have a choice. there are many proposals with different rules. individuals trying to save for retirement have one set of rules, individuals trying to save for health have another system, and families trying to save for education also have many options. each with its own set of rules.

my question is, should the system of existing tax advantaged savings, should those be consolidated to make it easier for individuals to save? do you have an opinion on that? >> most americans are happy with the plans they have. planned participants cannot choose between 401 k, they simply have one. those choices are not difficult and when they come into play they are made by employers.

what you get if you try to consolidate is you make everyone reconsider and amend their plans. that can be disruptive for the individuals and expensive for the employers that have to do that. and other members are concerned about any proposals that would consolidate retirement savings options with savings for other purposes like education or health. most people out -- confusing that message could be counterproductive. >> i understand what my colleagues said but when we talked to multiple small businesses, the number of types of savings plans are confusing. it caused anxiety among small businesses that were considering starting some sort of a plan, especially the ones early in the process.

something that would consolidate or simplify, not the least of which is a simple technique to change the name of the blasted thing. what is a 401 k would be useful. there is another aspect that you referred to savings for different things. there are a wide variety of types of advantages or treatments. it would be simpler if you treated all savings the same way and exempted it from income without having to have one level for 401 k, one for college savings and others. savings that is not consumption is a valuable thing and should be encouraged. to the point you look at

simplification, it is the matter of savings itself. >> mr. sweetnam. >> let me focus in on the individual savings. one of the things we tried to do was to eliminate the income limits because when you have them, you're not sure whether you are eligible to make a contribution to an ira. if any of you remember prior to the income limits being put on, banks used to stay open on tax day until midnight in order to accept ira contributions. there used to be blinds to make those contributions on april 15. once we put in the income limits, they went away. i think that was one of the things we tried to do. the second thing we tried to do, and i think david alluded to this, was our lsa proposal.

it was a means for people to save and to pull money out of those accounts for any reason. one of the things people have to realize is that people's savings means change over time. young people may be thinking about savings but they may not be thinking about retirement savings. i have a 30-year-old son. what is he saving for a tax

saving to buy a house. when he gets older, he is going to be saving for retirement. what we tried to do with our proposal was to give lower income people, people on the margins, a way to have a tax vehicle in order to have savings. one of the things you have seen, over the years congress legislates to make the difference between the various types of retirement plans less and less and less. what we were trying to do in our proposal was to take the final step. we had all of the plans with the same contribution amounts. finald, let's take the step and eliminate to the various code differences between the two. congress has been going that way over the last few years. >> i would like to focus on the

employer side of this sanitizing to the individual in that when you're talking to a small employer, it is not that confusing. when you say here is this and this and this. but if you are saying he wanted a retirement plan, he want to have an ira or one that has a trust that your employers are more likely to put your money in. for them, and they cannot pull it out right away. a simple plan, they might run off with it. then you are really talking about how much can you afford and what would you like to do? this is where i get concerned about the proposals for individual savings in that right now we have the $5,000

ira moment and then you can go up to $10,000 for a simple plan. there are rewards for stepping up and providing better benefits. that is why the system has been working so well. there is a proposal for -- it deferral-only safe harbor of $8,000. what happens is if you have somebody that can put $5,000 in an ira, there is no reason in the world in terms of what they can save for them to put in a simple plan. right now, they have the $5,000 ira. $10,000, there are going into a simple plan. you have to be careful that what you're doing does not disrupt the structure that works well on the individual employer side. when you look at it from an

employer's perspective, there are options. there are things you can do as opposed to the ira or it is telling you when you cannot do something. with the employers, it is, here are your options. >> ebri does not take positions on proposals. i find a lot to agree with what randy and judy said. from an abstract viewpoint, if you look to employers, you introduce a new set of non- discrimination testing if you did something like this. the other thing is many employees are targeted in what they're saving for. what you would need to keep in mind is if you make it amorphous, it is going to be more difficult for any individual to find out whether or not they are on track for a specific income.

>> thank you very much for your testimony. i think this is a hearing that has significance for tax reform for this issue and beyond. while there are some differences among you, some, i think everyone believes that we can improve the system. i think your testimony issues a warning to those who propose to eliminate all tax expenditures or those who equate tax expenditures with tax loopholes. because this tax expenditure is not a loophole, it is a policy. bye have said, let's start eliminating them all and go on from there.

some proposed getting down to a certain point, assuming the elimination of all tax expenditures. do any of you favor eliminating this expenditure? >> no. that's a big no from this end of the table.

>> no. >> no. >> i am not sure this is the way to put it. mr. hardock, you said, after talking about the importance of retirement savings, for that reason the first and most important principle we urge the committee to consider is to do no harm. i am not sure i would put it that way but maybe as to this area, that is true and the same is true in other areas relating to policies embraced in tax expenditures. i will leave it at that except to say, mr. sweetnam, i think there is a distinction between what you save for.

i am all in favor of support for education purposes and for buying a house, the proposal to eliminate the present provision on purchasing a home, eliminating that without reference to any income level or anything else is a mistake. but i do think that you feel the retirement structure is more or less working. i think we need to be careful not to lump everything together and lose the emphasis on a strong social security system which is added to buy savings for retirement.

i think we need that combination and i think we want to drive home, you mentioned that the percentage who save has improved a bit but we need to try to build that up and not by eliminating social security but adding onto it. i think your testimony as importance for this issue and all other issues relating to tax reform. we need to look at it but with care and not with such broad strokes that we would sweep away a system like retirement savings that is working, basically working. >> may respond? >> i think we are having a good discussion. it is important that i do not

think anyone is proposing eliminating this area. the closest thing was the commission on fiscal responsibility, which capped this but did not eliminate this. there is no proposal to do such a thing. >> in the chart on page 29, it has a number of alternatives. including eliminating all tax expenditures. >> that is one reason i voted against the commission. >> thank you for your work you put in the automatic proposal. as somebody from a small business, the first question that many small-business owners will have about any kind of mandated ira is, what is this going to cost me? would automatic iras create any

burden on employers who offered them? >> it would not. it is simple enough that most employers that are covered, 97%, according to studies by a variety of firms, already use some form of a payroll processing software. for those, having had discussions with both of those industries, this would be a new module that would be added. plus the fact there is a tax credit. it has two components to it. one part, which would cover any capital costs of setting up, and the other which would last for six, and could be extended, would provide a certain amount to cover the cost of putting

employees on and off the system. it is a simple, easy to understand system and we found and major insurance company that did research with employees and founded the more they discussed it with the employers, the stronger the support for the proposal went up. >> did the rest of you agree with this? >> i definitely would agree with that. even for those who do not use a current provider, we have members who are interested in providing this. the credit should more than cover any costs incurred by the employer. >> mr. john, i understand your proposal would utilize private financial institutions.

in the past, there has been proposals to create a personal retirement accounts that would be administered by the social security administration. some might argue it would be simpler for small businesses if this was tied together. can you discuss this? >> this is separate from the proposal in 2005 to set up a personal retirement accounts. there is a private sector funds management industry which works well. we do not see any reason to supplant it by government entity. we do have the ability, if the private sector chooses to have it, a retirement savings account similar to the bond which has

been at a savings account for a number of years. that would allow them to accumulate $5,000. then that would be rolled into the private sector. we feel that the private sector is going to be more innovative and create more jobs and do a better job of keeping costs lower. >> thank you for holding this hearing and your leadership on these issues and tax reform. as someone interested in pension and retirement issues, i look forward to working with you. and others on this issue. i think we need to make sure that americans have the tools and the education necessary to feel as though they can make the right choices with respect to

retirement. one of our panelists did a study. only 14% of americans are confident to afford retirement. more than half reported they had not calculated how much they will need to live during retirement. you are nodding your head in agreement. those are unbelievable numbers. i have a friend of mine who is a lawyer who took a 401 k plan and put in in an ira and a real-estate investment. it is doing well according to him. notes' others who have quite an understanding of how much they can put in because of the limits or what they can put it in.

my question to all of you, carl -- i will start on my right, whether it is simplification, reform, whatever it is. how do we get more americans to change the 14% number so they have a better understanding and can make better choices and can have that number be something substantial, like the americans who feel they can live and understand what they need. how do we get there? >> i like to think of the american people falling into three buckets. there are people who are not going to save matter what you do.

there are people who will save matter what. that is my mother. then there is almost everyone else that wants to do the right thing, knows they need to save, and does not know how to do it. doesn't want to government telling them how to do it. but wants to do the right thing. strategies like auto-enrollment send a signal that these are the levels you should be achieving to get to retirement security. bill's son is saving for his first home. my son asked me, he wants to buy a home. but the money in the 401 k plan first. do people say it for retirement? we need structures and incentives that let people know

how much to save. we will see those numbers start to go up even more by starting them young and getting them involved and changing the culture of saving. >> i have four thoughts and they repeat. you will hear much of the same thing. obviously everyone has to have access. we can talk all you want about doing it on your own but 95% of people do not. the second is to start young. another thing is the auto enrollment and escalation. look at the 3% default rate for auto enrollment. people will have the same participation rate if it is 5%, 6%.

people think they are doing the right thing and the 3%, that must be the right amount for them to save. they find themselves in a trap later on. >> when of the things we were looking at when we did our proposals is that we thought, we were trying to harness the industry to do more advertising with regard to savings. one of the things we looked at was eliminating the income restrictions for iras so people in, there would be advertisements for people to do this. we saw this happen when congress enacted the roth ira. i was working on his staff at

that time. when the roth ira was enacted, for all of different types of savings, everybody was promoting it. >> i see we are over that time. >> i think it is an important hearing to have to talk about. i agree, we have the same concern over people's security. i go back and forth between seattle where united airlines has its largest base. most of the flight attendants are 55 to 60 years old. one of them told me a story. i would like you to respond to this. her husband worked for a bank in seattle. washington mutual. one day they close to the bank and he lost his entire 401 k.

boom, gone. all gone because it was invested in the bank. because he was required to invest it in the bank. they have gone through bankruptcy, united airlines. each time they go into bankruptcy, the first thing the judge does is to scrape off the retirement. this woman, who has flown for 29 years, now has a guarantee of $231 a month from a pbgc, on top of social security. middle-class americans who did everything right and they got clobbered by the system. i want to hear that this automatic system is going to protect those people.

this woman said, i and my husband are going to work until we die because we have nothing but a social security. >> the situation is horrible. congress has acted to prevent a company forcing employees to put their money into employer stock. that is no longer permissible. you guys did a great job on that. hopefully that will not happen again. the key on automatic enrollment is all of the defaults. one of those is investment. nppa -- >> you heard him talk about how many people know how to invest or understand. 14%. how in the world can anybody sit up here and sensibly believe that we could design a system that says we are going to give all of your choice, but only 14 term know what there is

an? >> most people do not take advantage of that. i think the key is still having a six year and appropriate default investment. there are changes made. i think there has been a recent study. >> does that mean they have certain places they can put the money tax can they do whatever they want? >> they choose the provider. the type of investment is a find. it is like a target day fund. there is ample evidence that what ever you say is where most people are going to end up putting their money. >> they could put it into

something that is judged to be by whom? who would say this is a safe investment. >> you define the parameters. >> the treasury will ultimately put the blessing. they will bless the company that will make these investments. >> it would be that the sponsor would be the one that is using their investment adviser. the investment adviser will have judiciary responsibility for choosing a company that provides this. >> who is on the hook if they made a bad choice? any investment counselor would be responsible for this?

>> in theory, there are not many situations where you have a company that the investment has gone down to zero. when you have responsible people tousling investment advisers, there are horror stories. they are more rare. >> this is what you will get? >> this is a whole other thing. >> it seems they should be connected somehow. >> this is a very equal

important area of retirement security. you need to look at how you can promote responsibility and savings. whatever we do, i certainly appreciate the attitude. can we simplify and yet maintain flexibility? i remember when i was running a small medical practice and focusing on the clinical side of my practice, oftentimes individuals come into work. they have worked somewhere else. they have a retirement account. if they may also have an ira on

top of that. there are a variety of rules that govern this. talk to me about the complexity that these present to a business owner. is this an area we can simplify? >> i will just start by the problem you have described as been around since 2001. it allows individuals to combine when they switch jobs assets from one employer to the next.

this was a major improvement in really made it possible for a business owner to take the assets in. it is complicated. you have items that were put in pretax and others that were post-tax. they exist today. the cannot take away anyone's treatment. we have made enormous strides in improving those roles. >> i think there has been awful lot of progress made. i also think if you look at the options that are available, it these days you are more likely to have someone that comes into your practice that also had a 401k plan. there is more simplicity. sometimes we talk about consolidation, in the medical practice maybe there was a 403b. the rules have been simplified. in most instances, you now will

have somebody coming from a similar type plan. i think that really sniff it. there are roles that can be change that make it a little easier. i think we should get rid of the rules that trip people up. they would apply. it is plain common sense. >> if i may, people forget to combine. i have an ira that was rolled over 20 years ago. i keep meaning to roll it into the plan. i have yet to do that. we have seen people who lose

their accounts, especially over the years when the employers go out of business and the providers change. there is a suggestion in my written testimony about a way to use tax and information to allow people to find their accounts and encourage them to combine them. >> are there steps that allow them to have an annuity problems? >> i think this is something that the irs and treasury department are currently looking at. it has been something that policymakers are really looking to give people that ability to address to use an annuity. i am not speaking for the

current treasury department are the irs. i think what they do to eliminate some of the difficulties under the current law to move into this product. i think this is something they have been looking at. >> thank you very much. >> thank you for holding this. i have a question for you. the president's 2013 budget proposal includes a capping individuals itemize deductions to 28%. the exclusion under the proposal includes the exclusion deduction for pretax employee contributions to define contributions.

given that this is a deferral and not a permanent right off, wouldn't eliminating this result in double taxation? what are your thoughts on how the president's proposal would affect retirement savings rate and small-business owners? >> i appreciate this question. i was very disappointed to see retirement savings included. it would mean double taxation. this is a deferral. if you have someone who is at its 31% marginal rates and you are given them 28% cap on that,

that they are paying factories are now. when they pull it out, there is the special accounting. they're pulling taxes on it again. it really is double taxation. if you are being honest, why would they want to put themselves in that position? i do think it would be harmful for small-business owners. it will discourage customers. >> your testimony mentioned that following the proposal is simplified this area. many interested parties work concerned about the proposal. it offers a savings vehicle. the 2005 budget proposal address some of those concerns. can you elaborate on what you

heard? >> the others to things that were problems, one in 2004, we had be lsa and rsa amount at $7,500. we reduced it to $5,000. some people might say that i can put them 7500 in my lsa and rsa, and i don't need any further savings their employer provider. we tried to simplify some of the nondiscrimination rules. one of the things we did was we pulled out, we eliminated all

the various testing methodologies that are currently available. one person simplification is another person's opportunity to make the various changes. we listened to them. we just reduced the general complexity of the test.

we did not reduce some of the opportunities that small businesses would have been ordered to create more flexible types of plans. >> thank you. i yield back. >> i have a longstanding issue. i work with bill thomas before here is the chairman of this committee. this is not a favor at the time. he carried the rsa proposal. the clinton proposal was an addition to social security. the bush one was a substitute for social security.

i introduced this bill five years ago. at least three of the panelists have already endorsed it. i suspect the other to have some sympathy. this proposal that could raise it by nearly a billion dollars a year, endorsed by brookings. now with hard work we have developed this proposal. it is not everyday that a massachusetts democrat legislation is endorsed by the foundation. we have done just that. but we tell you who else supports it, the aarp. the latinos for secure retirement. putnam provincial. i must say i cannot get one republican to sign on to this

legislation. he was headed in the right direction. he was headed in the right direction as it began to question it. >> we enjoyed working with you. i also enjoyed working with their staff. savings changes behavior. it takes people and it brings them closer to the community. it makes them more future oriented.

a variety of cultural changes that are very important. a second one that is equally important is that they have the alternative. this allows people to start of one company and move to another and continuously save. inevitably, we are going to see the data that he had initially. people do not have sufficient retirement savings. we do not have the money for that. >> can you tell me why you have endorsed the ira proposal? >> it really build on the employer structure. you cannot do this about having

an employer involved. we feel that once employers are used to doing this, they feel comfortable with that. it'll be easier to approach them. once they're in the system they will feel more comfortable moving up. >> de require no matching contribution. 30 years ago, a different story. it to be so easy and so little trouble for the employer to make this work. >> why you liked the proposal? >> we need to do all we can to

get more employers. this of be a big step in this direction. it gives incentives to employers to do that. it is attractive for employers to go in that direction. it is something well worth employers doing it. >> thank you. >> thank you. i want to thank our witnesses. we have 10,000 baby boomers retiring every day. a lot of them are very uptight about they are planning on retiring with all the concepts they have. now they're getting to the point that they can retire. what can congress do to help

bring a little more security and dignity? what would be one thing that we could do that we are not doing to make a difference? i am slowly getting to that age where friends are concerned. they're working longer. any thoughts on that? >> we're talking about baby boomers. there are catch up situations. it is still very good. it is really important to engage in a number people.

we need to look more at the delivery of things. we're very supportive of disclosures. people do not necessarily a book there. if we could approach people more was something that is interactive, it should be easier for them to plan and get engaged. it does allow you to enable more electronic delivery. >> we are talking about where they are at. they rely on social security. >> if you reach for 6546 economy do not have the flexibility.

we have a second crisis that is coming with the baby boomers. the first, not having enough money. the second is not managing an appropriately. they are even more worried when they're 85. to make sure we do not have the same individuals worried now even more worried. >> in terms of congress, i am concerned there are a lot of

small employers of their where employers would like to have some kind of employers. what incentive can we help a small businesses in terms to make sure that as many provide some type of retirement package? >> i think many members of this committee are supporting incentives and start of credits for small business. they are sending that signal. we will help you with that. i think he has this in. others in the past have supported it. they can easily be expanded. that is where our problem is. this is partly because of the cost. it is amazing how expensive it is to send out of this paper.

>> thank you. i yield back. >> you both state that despite what some may claim, study shows tax incentives for savings and retirement are quite progressive. what would be the effect on progress if you lower the top marginal rate to 25%? >> that is a very complicated question. it depends in part on what you have done. it is a pact that as it decline, there is less consensus for tax deferral. you're saving less money when you contribute.

there are other competing ways to save. it depends in part on what is happening with gains and dividends. if you have the tax, it becomes very difficult to incentivize an employer to put in a plan unless you have a target if tax credit or some other specific benefits. i think this is something that is particularly sensitive. there are also declined. you have to be careful not to give it a double hit. maybe you need to increase the

contribution limits in order to maintain an incentive there. >> thank you. >> i like to just amplify this a bit. we had done some work last summer, looking more at the some symbols type commercial. i think a lot of this could be expanded if you are reducing the marginal ones. you are changing the talks later of providing that to the employees. judy has a grass that actually shows as much as an 11% decrease in the number of small plants because of the 20/20 limits. we could very easily modify that to look at the impact of

decreasing it could be. i will get back to you on that. >> i think we would be interested in that. that is an all of our proposals. what would be the overall effect on retirement savings of adopting the 2020 proposal? >> i am not a macro economist. i'm not really modeled it. >> we have a figure that takes a look at what would happen. as the biggest hit would be on this. we found that people if it were applied today would have about 815% reduction on average on their retirement balances. what comes as a surprise to many is that the second-biggest hit actually comes on the

lowest income poured tile. that is because of the 20% not because of the 20,000. a lot of times people will come back into the work force later. they may find that because of ketchup or what ever they have the ability to put much more of their one in. -- their income in. they end up turning the 20% as opposed to the high income that trigger the 20,000. 10% reduction in account

balances. >> i think that is understated. small-business owners would have about zero incentive for pretty a plan in. the safe harbor executions would be gone. i think that really understands the negative impact. >> thank you. >> thank you. >> thank you for holding this hearing. >> there are folks up there that can benefit for some good work. i want to follow up on a couple of questions that were asked by other members. you mentioned that employers to do not offer any sort of and chairman plan site business concerns. does your research show any downturn of the folks that were offering its?

>> i do not have any data on that. the plan is gone. employers say they're putting this in. there are a few of top line reasons. they do not think the employers care. if they say give me cash, and the employer would rather just give them cash. small businesses are notorious for not lasting very long. if you are not sure you're going to survive, and then you are hesitant to do something

that says i have arrived. most commonly the issue is that they do not feel they can afford to make a contribution or to promise to make a contribution. they will find that employers really do appreciate it. you can kind of get over a couple of hurdles at the same time. >> i told him i was co-author this bill. is anything there that knocked your socks off?

>> they were both good and bad. if you look at new zealand, new zealand has a form of the ira puree to the only have three. one is that is a huge mistake if the united kingdom. they went through. back in 1997, they increase the taxes of retirement plans by about 5 billion pounds a year. the net result was a collapse. the u.k. continuously tinkers. they said the program. they have a brilliant program that starts to go into effect this fall. the government just announced within the last week for so

that they're looking at a completely different approach. it breeds confusion and distress. >> is there anything we should take from different programs that you evaluated and look at? >> they start people young and keep them saving their out. australia has a mandatory system. it works exceedingly well. it is possible to do a very simple system like the ira and keep it sheet. we studied overseas systems very extensively. >> thank you for being here. >> thank you. obviously, if the goal in this whole thing is how do you make it simple and easy to pick the

right plan. part of the testimony you talked about simplifying things and having an automatic ira. my question to you, and a simplification come first? do you do this and then do simplification after its? >> given the simplification, it is crucial because the people do not save and not get started early on, it does not matter if you simplify its are not? >> i have one out of the box question. people are going through different jobs. a lot of younger people have

been to two or three different employers. here is what they are offering. has there been anything out of the box? they would make the decisions on what is the right package for them. as they went in and out of different careers and jobs, employers might pay into their individual plan rather than the sponsor plans. >> there have been some examinations of that. key factor is that most people do not have the expertise to make that kind of choice. this is the value of the

employer sponsored plan and the payroll deductions. as time goes on, a proportion of people who started out in auto enrollment took more control over their activities. >> i think it is very hard to motivate an employer to participate in that kind of an arrangement. they are looking at the tax benefits. they're also looking at what works for their company. it is forgotten when talking about a simple plan. employers still use schedules.

if they're putting on a contribution, it might be fully vested because it is a safe harbor. they do not like the idea of giving money to something that is going right away. the money will not necessarily be vested right away. it will divest after a few years or graduated schedule. there is the flexibility that they have. >> thank you. to follow up on his sentiment, one of the issues icy is the need. we talk about employers and the government. they are the ones to choose the individuals.

they have this attitude appear that i tried to fight every day of washington knows best, just trust us. i want to get to the ways to try to enhance individual accountability. people are allowing them to control their own destiny. are there things we can be doing to encourage literacy and comes to financial planning? any ideas or thoughts from the panelists and where we can change the mindset of individuals as they go into the workplace? we need to have something in the bank to take care of us. >> all of the back to the electronic delivery in getting people engaged. there are some amazing things going on in terms of enrolling people and having their own individual information set up on their ipad are setting them up.

they'll see what it is really going to be like. there are constraints on how everything has to be handled right now that minimizes what you can do. it almost ties -- this market is incredibly creative. it cannot always do what it needs to do. >> can you give some examples of those constraints? regulatory tax affects their regulatory constraints. we have all this paper that is due out for disclosure on investments. it is going to be where we support the disclosure. people are going to be getting a stack of paper. i do not think they will read it. if you were able to have their

e-mail address, we get people at work and e-mail address. you cannot use that if that is not routinely part of their job. they have may use part of the web site. you should be able to drive them to the web site. once they're there, there are fun things you can do. right now you have to send them the sack of paper. it is really a major expense. it really discourages creativity and a truly engaging people that are so much into electronics. if we cannot deliver this information on their iphone, and they are not reading it. >> i agree with everything judy has said. there are other areas. the u.k. has a thing called the platform which combines a

retirement savings account. one of the things that they found that works exceptionally well is that because the employer knows how old this employee is and what stage of life they are common they can shoot them little target of videos. if the individual has a child, if they can shoot a video about what you can do to start saving for your child's future. if you just married coming here is what you can do to start saving for a house. we found studies that these work exceptionally well. they work better if the person who is recorded is someone that is a co-worker. >> what about the elementary school?

any thoughts of? >> my older daughter he was 25 went through one of the finest high schools in the united states in montgomery county. she took a variety of courses in photography and cooking. she did not have to take a single financial literacy course. >> that is a great point. >> mr. lewis is recognized. >> i want to apologize to members of the panel. i had to run out and speak to a group of eighth grade students. bake at me for a while. -- they kept me for a while. i heard your testimony. i want to thank you for being here. i thank you for your service. it is good to see you again. thank you for all that you do. many of the people who criticized this argue that there for the wealthy.

these laws favor high income people. do you find this to be true? do you have any idea is to make it easier for people to save for retirement? >> that is a question. if you look at this, there is a cap on compensation that can be considered. it is 250,000. i cannot help but think we have already capped it. we are testing for nondiscrimination. someone might make a million dollars but when you are comparing this, use the 250,000. we are have something that is built in.

if a business owner wants to put in the maximum of $50,000, those workers are going to be getting a contribution. they're going to be getting employer money. there really is additional money.

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9/11 at the fbi had cut and reliable information that an individual on one of the grounded airplanes had a backup plan and that he was going to fly a private plane filled with explosives into a skyscraper. >> but there is a clear distinction. a predictor and a descriptor. >> no, no, no. >> you say -- why would we not go after that class of people to fly and so on and so forth.

that is a descriptor. but when you conclude that because they were all muslim you should -- we should take a look at all muslims in america. >> i did not say that. the line your drawing is a great one. is it not predicted when the fbi in my hypothetical says the individual who is going to fly this plane into a skyscraper is not somebody -- it has not already been done, we are trying to predict who is going to be. we're going to look at the passenger list on a grounded airplane and we have only limited resources and limited time and we're going to start by looking at individuals with arabic names. that is racial profiling according to your bill. but i think it would be

eminently reasonable. >> i certainly disagree. >> you do not think that would be reasonable? >> when you go that far, why you start with arabic names? why would you include all of muslim religion? that strikes me as the core of why we are gathering. if we're going to say to people across america, you have certain rights and freedoms because you live in america and we have certain values -- it does create more of a challenge to law enforcement. maybe much more efficient in many respects, but it isn't america. >> in my testimony, in my whole organization -- the whole focus -- i take it very seriously. but what i am saying is, there are going to be some circumstances where i think it

would be very unwise for congress to say that law- enforcement agencies cannot give some limited consideration to an individual or organizations geopolitical background. >> this is very complicated. do you think you have been ever racially profiling? -- profiled? >> probably. i cannot say i understand, because i do not. i have never been in that situation. but the fact that you are a law- enforcement officer and a sometime in your life you have been suspicions and -- the

zimmerman case is a private individual not a law enforcement organization. i think i understand the problem. i just do not know where the line is between good law enforcement and racial profiling. one thing about congress, we will be the first one to jump on you when you are wrong. when you get phone calls that someone looks suspicious and a neighborhood and you ask a bunch of questions, well, that does not seem to justify us going in. and that person wind up killing someone or rubbing or raping someone, we will be the first one to blame you. when it comes to the war on terror, i could not agree with you more. the reality of the fact is that i wish we had done more, not less. there's some websites out there that i am glad we are monitoring. there are some groups within america that are seeing some pretty radical things.

i hope we follow the leaders of these groups to find out what they're up to. homegrown terrorism is on the rise. how you fight it without fighting religion? how you fight homegrown terrorism without fighting people of america who belong to a particular faith? i do not know. i know this, if the law enforcement community in this country fails to find out about this, we are the first one to be under case. why did you not follow this website? he said these things in this meetings, why did the supervisor not tell about this, you of someone who is out of sorts here. as an air force officer, when you go to a wing commander and say, this person said something that made me feel uncomfortable. you do so at your own apparel.

>> i know what the problem is. i think in the last decade, we have made some progress. maybe having legislation that makes us focus on this problem more may make some sense. maybe we would look at redefining it, collecting information to show exactly what happens day in and day out in america so we can act logically. i know you want to say something but to the fact of the matter is that great britain and france are going through a similar situation right now where they have groups within the country with radical ideas. they just expelled someone from great britain and just today or yesterday who was saying radical things. i do not know when national security stops and individual liberty begins.

what is your thought? >> and want to endorse what some of my co panelists have said. it is very important in the war on terror that we have the cooperation of the overwhelming majority of individual americans come arab americans and muslim americans. >> one of the great strengths of our country is that, even though home from terrorism is on the rise, -- home-grown terrorism is on the rise -- we are actually the example to the world of how you assimilate. >> that is correct. stereotyping is very dangerous. most americans are not muslim americans believe they are christian. cannot look at someone's name and conclude things about them. and as my co-panelists said, it

is important to of the cooperation and trust of arab- american communities. i do not want to give the impression that i think that it should be open the season. open season on anyone. on account of their ethnicity or religion. i am simply saying that there will be circumstances where -- >> what we should be looking for is actions within groups. statements made that send signals that this is not where practicing religion should be taking one. is the activity on the internet. that is what i want us to -- and how we do that is very complicated because when you monitor these websites, maybe you capture some innocent conversation so that having judicial oversight -- i guess that is what i am looking for is sort of objective indicators of

-- this is getting out of bounds. >> you're absolutely right. this is about the behavior. that is the key to everything. in making statements, whether out loud are on the internet -- that his behavior. here's the problem we have, if you're an air force member and you have an american-muslim in the group and they say something that alarms you, you have to think, well if i say something, will i get myself in trouble? >> if i may interject? part of the problem we have in a country that is dedicated to free speech is how you draw that line well in a way that does not quell speech we want to protect. i know that, perhaps, might view -- we have different views on abortion. but i think you and i would completely coincide that anyone

who dares to blow up an abortion clinic is a criminal. >> that is not speech. >> would you feel comfortable surveiling the anti-abortion website for individuals who would be willing to blow up an abortion clinic, just because they may share the point of view of the radicals who would blow up a clinic -- i know you would not feel comfortable. >> i know exactly what you are saying. >> the context is not that different. speech that we region of speech that we find odious. that is what america is about. democracy should never be quiet. we all agree that it is not the america we know and love. >> having fought against the government or expressing yourself in an aggressive way, you can be radically pro-choice, radically against abortion, you can feel the way would like to feel, you can speak your mind,

but there comes a point in time and the rest of us have got to defend our way of life. what i hope we will do in this discussion is not ignore what exists. there is a lurking, looming threat against this country and against our way of life. i hope we will not get so sensitive to this dilemma that we will basically disarm ourselves. when it comes to basically the emigration issue, if there was a reason to fix our immigration system -- this highlight it. millions of people here are not illegal. i would be greatly offended if i was a poor folk coming back from afghanistan that happen to have a hispanic last name and got stopped because someone thinks i could be here illegally. i could be greatly offended. but the fact is, there is a

downside of illegal immigration in terms of crime. the way to solve that is comprehensive immigration reform. thank you all. this has been a very good hearing. we will see if we can find something more bipartisan. >> let me answer one question. you asked mr. gale if he had been profiled -- i have been profiled and i have profiled. that is what we bring to the table. in many cases, -- at the end of the day the result is that you're addressing issues at the table. we must acknowledge that it is human behavior that no one is exempt from. we hold ourselves accountable so that we do not have these

outcomes. is what we are talking about. is easy to focus on the small percentage. only a small percentage of our profession is racist. bigger issue.h >> thank you. i'm going to take an extraordinary risk and put this committee at the hands of .enator frank ca thank you. >> you may regret this. [applause] >> in that case, i will turn it over. >> if i may, i have a question.

to follow up on the remarks that you made. under what circumstances have you profiled. if you could talk more about what limiting principles you think should apply to profiling when it is used legitimately come if it can be used legitimately in your view. >> when i was a police officer in oakland. and have an area that would-be -- we would identify as high crime. this area was very close to the freeway. customers coming in from out of town to buy narcotics. often there were white. the presumption was that any white person in the neighborhood would be buying narcotics. the problem with that assessment -- the only way that the neighborhood could be judged was on the actions of a few. your criminalizing everyone that

lives there. and that suggests that the only reason that a white person would visit a black is to buy drugs. it did not work. we got better and moved on. we learned how to watch behavior's. someone at leaning into a car. someone exchanging money. someone exchanging signals. it works a lot better. doing proper investigations. circumstances in which i think crown could work could be under criminal profiling when you're looking at behavioral aspects of what someone is doing. a person when they're selling drugs, they behave in certain behavior is. whether it is how they drive, movements and a car, something specific to theirpende actions. in fact, i would say that racism and up being a huge destructor. now, we see this time and time

again. we did operation pipeline in california. we basically did not get what we are looking for because we were so busy looking for black or brown people driving on a freeway. we are proven wrong again and again. we lose the support of our community. >> added to the problem is the difficulty of using eye-witness testimony where someone identifies a potential defendant in a lineup and we -- that is plain wrong. because of race being a factor. >> yes. a bunch -- we're looking into the dangers of basing convictions and arrests based on lineups because they can be inaccurate. one of the questions that came up earlier was about officers guessing on race. if i can say, it is interesting because we are supposed to

assess race. i not think we are suggesting that race has no place. if something comes out on the radio that you're looking for a black male, six-foot tall, 200 pounds, very handsome. i can understand why you might arrest me. [applause] -- [laughter] >> if i may ask you to comment on general principles that race or other similar characteristics alone, it used for identifying or profiling individuals can be distracting or undermining to credibility, and should be used in combination with other, if at all, characteristics, mainly

conduct, behavior and so forth. what would you think about that? >> conduct drives it all. when you talk about -- because i've the commander of the training department of my company. we talk about -- the stop situations. it's all driven by conduct. you teach that, you teach that it is driven by the conduct of the person and you are determining if their conduct shows there involved in criminal activity. i think the destructor is that now you have criminals who are involved in criminal activity who will now use the racial profiling as a destructor as they complain for having been arrested or stopped because of their criminal conduct. i think there is a presumption of by some, and wrongly so i

believe, that no criminals ever complain against police officers. no criminals ever a knowledge that they do crime. in my experience in 23 years, it is very rare to come up on someone engaged in criminal conduct and say -- you have me, i am guilty. they do not do that. they look for any way they can to get out of the process. the destructor is now that if you pass a bill like this, -- the destractor. you cannot use race as the basis for how you do this. conduct is it. the bulk of my testimony is that, i think we're trying to fix something that does not need to be fixed, because you're trying to fix it with a law as opposed to saying, there is a problem and the problem is that police work.

>> i've been involved in law enforcement for more than 23 years. combining both federal and state attorneyattorney and as a general in connecticut. i would be very low to create with your of charitably called distractions, defenses, but i think that one of the roles of legislation is to provide guidance, raise awareness and provide direction to police or their departments who may not be as aware as you are or the other witnesses here. >> thank you. officer gail, i must take some time to visit denver, it does not look like any of the major cities i have visited in my 10

or 11 years as the director of the aclu. your very optimistic. let me give you data that i know quite well. in new york city, the country's largest police department, from 2000 to to 2011 there were more than 4.3 million street stocks, 88 percent of those, that is nearly 3.8 million were innocent new yorkers. that means there were arrested were summoned or arrested. let us break it down by race. new york is not a good place for people who are african-american or latino. in 200011, a record 685,000 new yorkers were stopped by nypd.

88% were totally innocent of any crime. 53% of those were black, 34% were latino. 9% white. a remarkable number of guns were found on the 0.2% of all stopped. with all due respect, i must be more when you say that this is all conduct driven. clearly, a fact beg otherwise. there is a problem. i would say that the reason my -- one point where we agree is that police nationwide lack of the trust from communities of color. you have a pr problem with communities of color. the reason my you might have that difficulty -- you are there to serve and they know these facts.

that is precisely why the racial profiling act is essential. but put in place some remedies. your point about the supreme court and equal protection clause giving sufficient comfort to those -- that is not true. basically, it allows police officers to make a stop based on race, ethnicity and national origin. at times, we get it wrong. that is why we have congress and senate step in it. with all of that, i thank you. >> my time is up. i want to thank all of the witnesses. it is been a very useful

hearing. we had some areas of disagreement, which i think we need to explore further. but i want to thank mr. gale. i want to thank the chairman and substituting chairmen for their tolerance and patience. >> i think you called me chairman? [laughter] >> protocol. >> i have a right to remain silent. [laughter] >> i do have to have an appointment. i will ask my questions and you will get the gavel and you will be the chairmen. you will get every due respect. thank you. >> everyone has talked about the importance of cooperation

between law enforcement officers and the communities they serve. it seems everyone agrees that racial profiling and undermined trust and the authorities and can cause resentment among targeted groups. minnesota is home to large population of somali-americans. in my experience, no community is more upset than the somali community when we learned that a few somali-americans had then -- had gone back to somalia and become involved with --. when i talked to the fbi and when i went back to the twin cities and talk to a special agent, both said that the somali community had been cooperative and fbi

investigations. i think it was because of good police work and good work by the fbi and making sure that they earned the trust of the somali community. my question is for chief davis and officer gail, both of you served as law enforcement officers. how you earned the trust of the diverse communities that you serve? some of whom may be initially skeptical of the police? >> thank you, senator. one stop at a time, one day at a time, one interaction at a time. we have good knowledge of the history that police have played, the role of law enforcement with regard to race in this country. we of generations of people who are still here that remember when the police were the enforcement tool and the role of

law with regard to black codes. we have to a knowledge that we may start off with this lack of trust and confidence. so it is one interaction at a time. the first thing law enforcers can do is take our heads out of the sand and acknowledge that we have a terrific history. we should knowledge that we are still engaging in practices -- we should put our defenses down and realize we are here to serve. we will only be successful if the committee in cages with us. ess more we engage, the la mistakes we will make. the stronger the relationship between the police and minority communities, the greater the crime reduction will be. we do it one interaction at a time. we hold officers accountable. we do it by a acknowledging that

in front of us. for someone to look me in my eyes and insult my intelligence by telling me that it is not profiling, when everyone knows that it is -- we need to stop doing that. >> officer gale. >> i agree. you need to do it one person at a time. you've got to be more global. docca to book of the commodity research and the different populations in that community. -- you have got to look at the community you serve and the different populations and that community. years ago i was in the military. the head emmanuel that said any problem no matter how perceive is still a problem. i still believe that. it does not matter if it is not the actual problem. if it is believed to be a

problem, we have got to listen and dialogue through it. we've got to take agencies and train agencies to understand who these populations are that they are serving. i agree also with chief davis that we have to acknowledge the history of law enforcement -- it ofnot always been one stellar conduct. that is being done. we talk about it honestly and honestly. it is important to do those things. to hear what they have to say. it is important to explain to them with the challenges are. what we have to do if we're going to protect people. what we're faced with as the challenges, when we are protecting communities. it is important for us to

illustrate that. two individuals in the community. -- to individuals. i think when there are these honest misunderstanding, we can move past them. >> in your written testimony on behalf of the aclu, you wrote about a recently uncovered training materials, fbi training materials, that rely on the muslims. we can all agree that those materials are not acceptable. fbi director acknowledged that those materials damaged their relations with the muslim community. i am working on a letter to express my concerns. what action should the fbi take to show that it is serious about

reforming its training programs? >> thank you. yes, what i would first point out is that those numbers and training manuals surprised us. when we used -- we go after documents that we do not know exist. we use the freedom of information act as a democracy x-ray. we used hunches based on conduct of what we've seen already. we had a hunch that they had to have training materials that were going to be troubling and problematic. our hunches were correct. frankly, one thing the fbi -- i

would encourage, the director is a man who we have great disagreements. we've sued him many times. but he is a man of enormous credibility. i have the greatest personal regard and respect for him. with all of that, i would encourage you to encourage him to take a much more active position on these threat assessments. i fear there only the tip of the iceberg. the attorney general guidelines allow them to begin investigations on anyone they choose. so long as they can claim they're doing it to gain information on criminal activities, national securities or foreign intelligence. the amount of reporting on those credit assessments are limited.mited that is

at the very least, you can ask the fbi to a more vigorous reporting, even if it is not on camera. retraining is essentials. all of those who got that chart, showing the arab mind is a cluster mind. i am quoting verbatim. is a clustered thinking while the western mind tends to be a linear thinkers. they were trained on at this. until we told them that was never the case, they will continue to do those activities. retraining is essentials. probing into the assessments and how those assessments have been used -- i think it would be a place of importance. >> thank you.

thank you, chairman. i noticed your back. you already took the gavel, didn't you? [laughter] >> senator? >> thank you. thank you for calling this hearing. and thank you for your leadership in this area for this legislation and this hearing. in my own role, i worked hard and supervision of about a 380 sworn officer department to make sure we had effective and strong outrage, and not just traditionally subject to harassing trinity's like the african-american or latino. -- harassing communities like the african-american or latino.

making sure we stayed as a policing organization, engaged and accountable. i want to start off by thinking you for your leadership in the policing community. i appreciate you by helping me understand, what is the impact on a police force that practices racial profiling. as a part of history or current practice? what is the impact? it has been touched on, but as you notice -- >> inside the organization, we did not talk about, an agency does engage in systemic racial profiling usually has low morale. now you have officers inside your organization that are engaging in it. it is a conflict within itself. within the community, i would

argue that the community is suffering because you have a practice in which they're losing touch with their community. makes them ineffective. it makes them much more expensive. now you have the cost of crime going up. you have the cost of litigation. people are now seeking some type of redressing the court system. you've low morale issues, you have increases in sick leave, workers' comp claims. it is a very expensive venture when you engage in racial profiling. as a county executive, you cannot serve the community effectively if they do not trust you. there will always be challenges and strains, but to the extent that there is a legitimate out reach to that in which we are trying to -- listen and respond and respect. i we have a better chance of

being successful. from an executive perspective -- it is poor managerial practice. results and loss of revenues, support, it causes internal strife. it is not effective. >> do you agree this is bad policing? >> absolutely. the consequences of bad management in any agency results and that these perceptions and the committee that the police are not responsive and their victimizing citizens. there is somehow another force. that is what it all drives from the management philosophy of the organization. the police is correct. it does result in low morale. the resulting low morale, not just because you have people who and the agency that disagree with the practice. the fact that there is no up corporate accountability for

officers acting outside professional conduct. has low morale when the community that we serve becomes complaining about being unprofessional or the reputation of the agency. that of a victimizer as opposed to a protector. the chief is correct. it starts with the management. it starts with the top person and the top level people allowing these things to occur in individuals that they will not hold accountable. as a captain in my agency, i believe it is my charge to hold people accountable when they conduct themselves and professionally. and i do so. some people have said here that there seems to be some kind of great thing going on in denver, i will tell you, and i love my city, it is a great city, please feel free to visit at any time, but i will tell you, we hold

people accountable in my agency, we hold them accountable and that is expected. we do not have to have specific rules that say you cannot do this. we all know that behavior when we see it. when you challenge people and hold them accountable, there will not be a problem. the end result is that officers will shut down and not conduct any type of police work and then the city does not get protected. >> if i may add one point, there's a phrase we have. about a moment of pause. when an agency does not have the confidence that we're losing to in discussing, in many cases you have people sitting there. if you look at history, there's some type of incident, it gets confusing, many times the incident may not be -- it may be a legal incident, it may be something that may not make sense or call such a response, but it reflects the kind --

enough is enough. when agencies are blind to this, they're sitting on these powder cakes. and then we see large demonstrations and you start seeing race riots. it is the buildup to that incident. the it lack of acknowledgement of where we were at before. >> if i have heard all of the memories of the panel correctly, they said that it is bad policy, it is not just those powder cake moments, it is the simmering distrust and disconnect from the community you seek to protect and serve it can have a negative impact on your ability to do. i want to move if i could to a question about standards. if you look reasonable suspicions, the ability of law enforcement to stop and question

and individual. profiling appears to me to be a much more larger problem. how have you seen that play out? i'm going to want to move to this bill and why it might be necessary. >> thank you for the question. you are correct. put your finger on something important. the reasonable suspicion the standard -- it allows police officers to use stop when there is suspicion. the problem is come and where this can intertwine with profiling, reasonable suspicion is a very low legal standard. it is lower than a probable cause. probable cause is somewhere near my waist and reasonable suspicion is below my knees. you have a standard where you can use a very of little

evidence to take significant police action. where we see this showing up in the context of profiling, to give you one example, is in the stock on frist activity in new york city over many years. as a good example because there is significant data on this. we often find that even though the standard is reasonable suspicion, there's hardly anything recorded, and sometimes nothing at all recorded reflecting reasonable suspicion were the idea is simply thought of as boilerplate. with that low of a standard, profiling and other ineffective ways run rampant. >> thank you. if racial profiling can be a violation of civil rights, as i believe it is, under a whole line of cases, these are not

cases i am familiar with personally, but that is the line of analysis by the supreme court that laid this out. why do we not see more force meant actions for racial profiling -- enforcement actions for racial profiling. how do we in the gap between the formal policies create police entities that are accountable, professional and all levels, are engaged in the moving us forward towards a more just and effective policing timidity? >> thank you for the question. when you look at the testimony we cemented, you will see that we detail a number of racial profiling cases. some of them brought by david harris. what may be instructive is it to track when the incident occurred, and when the case was

decided. you will note that in many instances, and the one i am looking at now, we're looking at a span of several years of time between when you're getting pulled over by a police officer on the highway, and ultimately when that case was decided, and for many minority group members, especially those in our families that lack resources to hire private attorneys, it is not simple or economic to retain private counsel. even when you have been wronged. we turn away many cases the right was every day because we lack the resources to take on every case. we take on cases where we think we have an ability to have a high impact. the number of heartbreaking letters i sent back saying i understand you were profiled, but we have them under a consent

decree so -- it is not give the individual, even if they're willing to step forward, much comfort. that is what is at stake. the burden on hundreds of thousands of new yorkers. but as a the 400,000 plus that i have cited that have been wrongfully stopped by police. a 400,000 of new yorkers that were innocent, and yet stopped by police. i cannot believe that any member of this chamber would believe that would be an efficient use of our resources. this is one time when -- taking action and putting in place a legal regime and being able to stop the rush to the courthouse. both the economy and our civil liberties of service. >> if i may, the question you had about the lawsuits, or why people filed a complaint.

it may follow a legal stop. this is what the legislation is critical. when we are profiling people, we think that the stock itself may not have legal cause. we have a phrase in policing -- give me a car, two minutes in the vehicle and i will find a reason to stop you. cracked windshield. you will see those discretionary stops being used quite often. and anes it hard on i individual basis. but in fact, they did have a cracked taillight. >> i see that i am well past my time. i appreciate the concerns that have been raised by this conversation about the definition of racial profiling

in the difference of of being nearly targeted. but i am grateful for your crafting a bill that insists on training on data collection and on a nearly crafted response. thank you very much. >> thank you. one of the obstacles is that when you are dealing with the question of whether or not race or ethnicity or profiling is the sole cause for the stock, run into a real obstacle. our staff did research. it turns out this is not the first time that congress has talked about this. arguing that discrimination should only be provided it is based solely on -- by offering an amendment to limit the reach of discrimination based solely on race. a case in new jersey said no

matter how clear the violation was, an obstacle is so great is to make the title worthless. limiting the civil rights act based solely on race would negate the entire purpose of what we're trying to do. courts have set a standard. it makes it extremely difficult. chief davis, in your examples, it might be a cracked taillight. but we found in illinois, searches by police in 2010, hispanic motorists in my state were 2-4 times more likely to be searched. african-americans are 2-3 times more likely. however, white motorists were 89% more likely than hispanic motorists and 26% more likely than african-american motorists to have contraband and their

vehicles. >> there's no sense from a law- enforcement viewpoint to do this. and yet, it is done. i.t. white for this hearing. i am sorry that we need to get back together. but to put it in historic perspective. the go back to our nation's beginning, our founding fathers started wrestling with issues, race, religion. this year's presidential campaign wrestles with issues of race, gender and religion. as an ongoing debate in this nation. there have been moments of great leadership. moments of ignominious conduct. as far as accountability, this would hold law enforcement accountable, but i hope we hold every person in our government accountable, including members of congress. i came to this job saying, remembering what bill clinton

would of said when he was being interviewed before becoming president. is there any issue you will not compromise on? >> he said he would never compromise on race. he grew up in arkansas and saw segregation. you saw it to in your hometown. i look back and remember in my time in the house, voting for a measure that turned out to have a dramatically-racial impact and the establishment of a cat -- crack, cocaine scare. years later and was given an opportunity in this committee to try to make the right and try to make it right. i cannot give the job done because of the nature of compromise, it has been reduced to 18-1. still a terrible disparity. but an improvement. we lost trust in the african- american community i'm not want

to send that person away for 10 or 20 years because of a crack, cocaine a violation. we lost their trust and i can see among the judges came and talked to us. but whether we are in an elected or appointed office and our government, we serve the public. that accountability has got to be part of your service. this will not resolve the issue. as i mentioned earlier, it is more complicated today. because of concealed carry and some of the standards being established in states. more complicated because of the war on terror and it raises legitimate concerns about the safety of our nation. how far will we go to respect the national security without violating our basic values under the constitution? i think you all for your testimony. it's been very positive.

we need to engage in this even further. there's a lot of interest in today's hearings. to under 25 organizations have a testimony, thank goodness they did not come here and speak. but we're quanta of their testimony. -- we are glad to have their testimony. -- national immigration forum. south asian americans. the statements were made part of the record. it will be kept open for one week. as possible someone will send you a written question. if they do, i hope he will respond in a timely way. without further comment, i think all my witnesses for their patients and attending this hearing. i look forward to working with all of you. [applause]

>> thank you all for being here. we had an extraordinary turnout in today's during. i want to thank the leadership conference for civil and human rights, the aclu, the naacp. i want to complement chairman

durbin for calling this hearing. he is, as i said in my comments in my testimony, he has been responsible for having the subcommittee that focuses on human rights issues. he is a leader on so many different issues in our community as relates to human rights here on ending racial profiling. i think this hearing was a major step forward. i think there was general consensus by all of the testimony and the answering of the questions that we have a problem. we have a problem in this country that needs the federal government to respond to. racial profiling is wrong. the it isunamerican. -- unamerican. it is a waste of resources. in which we have a limited

amount of resources that need to be used to deal with those who are -- who need to be held for investigation. it compromises the community to work with law-enforcement in order to keep the community say. all that is jeopardized by racial profiling. i also think it is quite clear from today's hearing that racial profiling is occurring in america. occurring too frequently. it is in the too many communities. it needs to end it. i thought that there was a good discussion. i appreciated senator gramm's comments pretty wants to work with us to resolve some issues. perhaps clarification. i think that is legitimate. i think that is what a legislative process is about. to make sure that the language, shows what we have set out to do. what we have set out to do is

end racial profiling in america. we can find the right language working with all of the senate, we hope we will be able to advance that. i can tell you i have already talk to the leadership on the floor today about this hearing. looking for opportunities to try to get the bill ready for end enactment. i think that we have an opportunity in this congress to move this along. there was not a lot of comment about specifics that were in my legislation. i want to thank the leader in the last congress on this issue. i was a co-sponsoring. when he did not return to the senate, i took up this position. i am proud that we have a 12 co- sponsors. the language of the bill is pretty clear. it defines racial profiling.

it defines it in a straightforward way and makes it clear. random investigations, law enforcement cannot use racial profiling in the them. simple as that. you cannot pull someone over because they look a certain way. your got to have solid police evidence as to what you're doing in an investigation. that is the essence of what we're trying to accomplish. we make it clear that the best way to do this is through training. we want all law enforcement training. this not only the police officer, it is all of those who act under the authority of our police. the need to retrain as to the proper procedure. as spelled out in our legislation. we believe that we need to have the facts. there are federal funds available for best practices that we share. i just want to respond to one of the concerns expressed during the hearing. that is whether we are setting

up a problem for a technical -- a technical problem for convictions of people love committed crimes. i do not believe that is the case at all. -- for convictions of people who have committed crimes. i do not believe that is the case at all. we've heard this argument over and over again. frankly, racial profiling is poor police work. the whole purpose here is to get proper police work so that when people are charged with criminal offenses, they will be prepared for the court proceedings in the appropriate manner. i want to to know that i felt very encouraged by today's earrings. i am looking forward to working with senator durbin, senator gramm and all the members of the senate. my colleagues in the house, i thought they were very persuasive. we're going to be working with the members of the house. and also with the department of

justice and the obama administration. we have some clear communications and we're working -- we're going to work very closely with the obama administration. what we will do now, there are several individuals who we will ask to come forward. before i do that, i want to acknowledge bishop richard sennett, the head -- i thank you for joining us. you will be hearing from some of the other distinguished people. because of our lunch which takes place in about 10-15 minutes, it is possible that this issue will be on the schedule of our lunch today, i'll have to excuse myself and about 10 minutes. if there are speciqu