we also see what is happening, the rising power of china and they are making a military in the asia-pacific region -- region and we have other conflicts like the conflict happening now in syria. the course of where we are right now in our national security, this is not a time for us to make decisions that will undermine our ability to confront the challenges that we face right now. let me talk briefly about what we know so far will be the impact of sequestration on our various forces. with respect to the army, i told you that the initial four hundred $87 billion in reductions will result in approximately a 72,000 reduction in our army. everyone who has looked at this would agree that getting out of iraq and a gradual decline in

the level of forces in afghanistan that we are going to do some downsizing of our ground forces. so the initial reduction of 72,002 or army is happening. but with sequestration, general odierno has testified that we would be facing an additional 100,000 production in our army if we allow sequestration to go forward, with 50% debt reduction coming from the guard and reserve. i think this is an issue that governors are not aware of fully at, although elected officials are becoming aware of it. the council of mayor's recently issued a resolution on the effects of sequestration, urging congress to come to an agreement on it. but think about this. 100,000, 50,000 from the guard and reserve, and the function

that are guard and reserve played, we could not have fought in iraq or afghanistan without the guard or reserve, and they also play a very important homeland function for our security as well as responding to natural disasters for our governors. now let's talk about the marine corps. under the initial reductions that are likely happen, the marine corps is going to be reduced at this point by 20,000. if sequestration goes forward, the marine corps will face, according to the assistant commandant, an additional 18,000 in reduction in our marine corps. here is the thing that keeps me up at night. the assistant, not for the marine corps came before the readiness subcommittee. i asked him about the impact of sequestration and he said this. sequestration would render the

marines incapable of conducting a single major contingency operation. think about it. our marine corps. that, to me, is a shocking statement, and one that cries out for us on a bipartisan basis to resolve this issue. and if the department of defense chooses to protect manpower accounts when the army and marine corps have to cut even more deeply into training, maintenance, and modernization funds, which of course would have a negative impact on industry, which we are going to talk about in a minute. secretary panetta has said that sequestration would result in us having a navy bringing us back to 1915, ground forces back to 1940, or where we were before world war ii, and the smallest air force in the history of our country. we would have to potentially

undermine contracts and agreements that we have, including the joint strike fighter, the casey 46 a supertanker and many of our modern nation -- modernization efforts that are underway right now that are very, very important to making sure that our men and women in uniform have the very best equipment to protect our country. but in conjunction with this, no one would say that the department defense is an area where it is a jobs program, but the reality is that sequestration not only undermines our national security, it will hurt our economy, and it could fundamentally terror our defense industrial base, and that is a deep concern, not only to my membership on the senate armed services committee that as a member of the small business committee. often with are essential weapon system, it is not just the large

defense contractors that will certainly be impacted by the sequestration cuts, but they rely many times on very small contractors and in some areas, there is one contractor, a small company is producing the component where you have a sole supplier. when these businesses go out of business or they decide to do something else because they cannot build with the -- cannot deal with the uncertainty of where we are right now, or they cannot address or keep their bottom line in a sustainable way because of the cuts that are coming, they go out of business and they don't come back. it is not easy for us to recreate that capacity so quickly if we suddenly find ourselves in a situation where we need that type of equipment or that part, and that just does not happen overnight. that is a deep concern not only for our large defense contractors but for many small businesses throughout this country that serve those

contractors. so we are not just talking about the jobs issue, which is of course a concern to anyone who served in congress. we are talking about lost lives if we don't give our men and women equipment that they need, the very best, and we don't stay on the cutting edge of technology when it comes to areas like i sr and other areas where we need bible information to protect america. there have been several reports about this which i think probably will be talked about today with the panel. the national association of manufacturers issued a report last week that studied the impact of sequestration, the bipartisan policy center, and the center for security policy have also looked at this issue. george mason university has done a study to look at state- by-state to see what are the impacts on jobs if we go forward with sequestration.

here is what the report says. more than a million private sector jobs including 130,000 in effect on jobs will be lost in 2014 if we just continue to sit on our hands in congress. total job losses will increase unemployment by 0.7% and the gdp to be impacted by almost 1% lower in 2014. think about it. where are we nationally with our unemployment? over 40 weeks plus at over 8% unemployment. not only do we undermine our national security, but a lot of people will be out of work if we continue on this path. just a couple of numbers, the neighboring state of virginia is estimated will lose approximately 123,000 jobs. ohio, 18,000 jobs, connecticut, 34,000 jobs. i could go through every state in the nation. my own home state of new hampshire, 3300 jobs.

we are a small state. i can tell you, 3300 jobs matters very much to our state, but we are one of the smaller impacts if you look around the country. some people may believe around here in congress, collectively in congress, that this is an issue that we can wait until the lame-duck session to address. but the problem is this. that part of the fence and the pentagon are already paralyzed by sequestration. they don't know if it is coming. they worry that we have the political will to resolve this, and so they are holding on right now in terms of action or inaction and our contractors are ready feeling the impact of it. box -- bob stephens, the ceo of lockheed martin, i have talked about this paralyzing effect of where we are right now with sequestration. he said the very prospect of sequestration is already having a chilling effect on the

industry. we are not going to higher, we are not going to invest in incremental training because of the hands certainties' -- because of the uncertainties are huge disruption to our business. yesterday his students came forward and talk about the fact that they are likely lockheed martin's contact the issue what is called the war and activist. our large defense contractors have a duty under federal law, before 60-90 days before a potential lay off occurs, they have to notify their employees that they may be laid off. so there are potentially hundreds of thousands of warn act's notices that would be issued before the november election, which i don't know if that is not a wake up to members of congress that this is an issue that needs to be addressed now.

the bottom line is, our defense industrial base, they report to their board of directors. they have responsibilities to their employees. they cannot wait until december to take the actions that need to be taken. so we will feel the impact of sequestration before the lame- duck session. it is one of the compelling reasons why this is an issue that i hope will be addressed on a bipartisan basis before the election. we owe that to the american people. our foremost responsibility in this cover and is to make sure that they are safe and protected. let's not forget that without protection and safety, our economy cannot thrive and grow. we all saw what happened on september 11. not only the loss of human life, but also the devastating impact on our economy of an event like that.

so there is a relationship not only in keeping us safe but in making sure that we can continue to prosper as a nation. so where are we and what is next? there are three proposals that have been out on the table. they are republican hopefuls, mainly. one is one that i am cosponsoring along with senator mccain and several other republicans in the senate. it would deal with the first year of sequestration, to deal with your one is about $109 billion. it addresses both defense and nondefense sequestration, because we appreciate that members may come to this to resolve it for reasons, and some may come because they are concerned about the non-defense reductions, and some may come like me because they are concerned about the impact on our security. in order to do that, basically

what we did was, simpson-bowles recommended for our federal work force, for every three positions that came open that you really feel one. our bill would set for every three positions that come open, you can feel to out of three, and we would keep the federal pay freeze through 2014. that covers us for your one of sequestration. chairman mckeon in the house has a similar proposal. his is just implementing the simpson-bowles for every three positions that come open, that you can only fill one. then of course, congressman ryan and house have actually passed through reconciliation bill that would address sequestration. what i would say is my hope to what will happen is that we will see a bipartisan group get together before this election, because this is too important to

kick the can down the road to a lame duck session, for the reasons i just described. i also do not believe they should be used as some kind of chip in the lame-duck session where we have the tax rates, we have you name it, it will be up in the lame-duck session, and our national security should not be put at risk for that. here is the issue of where we are. some have said that they would not, harry reid has said without taxing -- without increases to our tax rates we are not going to resolve sequestration. i think that is a false choice. there are those of us that have already said on republican in, we are willing to work with you on revenue but we are not going to further hurt our economy by increasing tax rates, but there were areas of revenue that the super committee came up with that we are willing to sit down and talk to you about to resolve

this issue before the election. i would hope that members of both sides of the i would see this is an area where we need to find common ground on behalf of our national security. not only that, but this is not a time to further hurt our economy by devastating our defense industrial base. that is pretty much where we are. i appreciate all of you being here today. the reason i became so incensed about this issue is because i don't know how we can look the american people in the eye and say we are not going to put that foremost responsibility of protecting our country and making sure that we fulfill that responsibility, and we should not allow our lack of courage on big picture fiscal issues to stop us, and that is what worries me around here, that we all have to show some courage and make sure that we look and

address the debt. there's no question that it has to be addressed, but we also should not create a national security crisis on top of our current fiscal crisis to do that. so i appreciate you all being here today and look forward to answering any questions. thanks. >> thank you very much. one question, please. we'll start here. >> i am just confused by all the talk of austerity and sequestration and reduction in defense spending. what i see our military doing around the world, where we open a new base in australia, we are talking about returning to our

bases in thailand and the philippines even, vietnam. we are still in central asia. 13,000 troops in kuwait. we are beefing up our forces in the persian gulf in contention with iran. we are talking about possibly intervening in syria. we have already intervened in libya and we have special forces all over east and west africa. we are talking about opening missile bases in eastern europe grew will have reactivated the fourth fleet and talking about opening bases in panama, colombia, and peru. it seemed like a disconnect between this talk of military spending reduction in what i see as the expansion of the military presence around the world, which i am tempted to add, which is in line with the increase of our national debt, but i will resist that temptation. is my perception wrong? >> i think i would respectfully

disagree with your perception in this sense. let's start with the administration of new national security is at it, which is a shift in focus to the asia- pacific region because of the investment that china is certainly making in its navy and its military. that being a very important part of the world in terms of our economy and the entire world economy. conjunction with that, the a administration has said they are going to keep the focus also in the middle east, and rightly so. if you look at what is happening right now with iran making efforts to acquire the capability of reducing -- producing a nuclear weapon, the presence we have right now in the straits of hormuz is very important in terms of our protection, the protection of our allies. we also see other areas of the world where we have dealt great

blows to al qaeda, but they are also continuing to drive in areas of africa. there are grave risks that exist around world that need to be addressed. the one premise i would disagree with in terms of how you frame it is defense spending is being reduced. i think there is bipartisan agreement, although difficult choices on the rough number of the initial reductions. what we are talking about is let's not be irresponsible given the risk that exist around the world, of the additional cuts that are coming across, the meat axe approach coming in january, between 500 and 600 billion. i agree with the administration's shift of focus to the asia-pacific region so long as we keep our eye importantly on the middle east. i don't think the world as any safer that we should suddenly be withdrawing from at, and/or

significantly diminishing our capability. let's not forget that the strength of the world economy, there is a direct relationship between not only the thriving economy of america, our relationship with economies around the world, and our strength. in security for our country. >> anybody else? >> if you flatly reject any kind of tax revenue increases, what kinds of revenue increases do you have in mind that you would be happy to talk about? >> here is what i flatly rejects. these are two separate policy areas, but i think we have a broken tax code. i don't think you should -- there is no question that on a bipartisan basis, we have to do

a large fiscal agreement for the country that would not only include tax reform, i think there is bipartisan tax support around here for simplifying our code, and also eliminating loopholes deductions, however you want to look at it, and making it a simpler, fairer code. i think that in the context of that, and the super committee did some examination of areas of revenue that are not increasing our tax rate, but areas were could find revenue whether eliminating loopholes are other areas that do not further hurt our economy. that is something i think republicans would be willing to talk about. what we are not willing to talk about is taking are broken tax code and saying we are going to increase tax rate on individuals to do this. i think that is the wrong way for us to go for america.

the super committee did look at a whole host of revenue raisers. i will give you an example. last year i voted to eliminate the ethanol subsidy, for example. it expired on its own, even though the senate had voted to eliminate it. that is an example where maybe we could find some common ground within the tax code. the super committee looked at a whole host of issues like that, saying let's bring that back up. let sit around the table. let's get it resolved. there is some common ground there. i think we did see a way forward with it, but to take our broken tax code, to increase tax rates, that is not something i see a core group of republicans willing to do when the road for to tax reform is going to be to simplify our broken tax code.

int's needs to be done hopefully a big deal with entitlements. if you look at where we are spending our money in federal spending, the growth of the mandatory spending program is going up dramatically. we could cut defense spending to the bone, to the absolute wrong, and we will not get hold of the fiscal crisis unless we take on the big picture of where our money is going and how we are handling things within our government. >> please join me in thanking senator ayotte. [applause]

>> thank you, everyone, for staying with us. we like to begin our first panel. i have a great group here discussing things. our panel will have a brief break and then we will convene the second panel. bob haskins is a single fellow of economics at brookings. he worked on capitol hill in the 1990's in welfare reform. he has always been balancing his concerns for fiscal restraint in care with his concern for our nation's neediest and for its economic future. that continues to be the theme of much of his work recently. to my right is david warren, one

of the most innovative and dynamic defense companies in the u.s. today. david has been good enough to join us on previous events on the future of the defense industrial base. his perspective is extremely informative. he works for a company that has been innovative and trying to help our country with more economical means. he is a voice that is willing to consider various kinds of fiscal restraint, but i will let him speak for himself and put that in perspective in terms of how to make sure our country stay strong in the process. to the far right is steve bell, who has been in washington for a while. is the right hand of senator deminici.sh

he has been one of the most effective american statesman at trying to assure our nation's fiscal sovereignty and economic future for many decades. of course he had some success in that endeavour back when they were in charge. steve has also been central in the new bipartisan policy center report on sequestration. i will begin with that and just work this way. each person will just give a few opening thoughts as i add -- as i ask them a broad question. we just had this excellent presentation from senator ayotte talking about the broad challenges of the defense budget how the defense department would be affected by a possible sequestration scenario. just to review the basic point, it would be about $500 billion in additional cuts over the next decade on top of $500 billion that are already happening on

top of additional reductions and more spending, which were always intended to be temporary. nonetheless it is worth putting it in context. if you would summarize what you are most concerned about concerning sequestration, for better or killed. i don't want to prejudge the conversation. not everyone here is as adamantly opposed to a sequestration scenario. i think probably most of us are against it, but i will let steve speak for himself and highlight what the bipartisan policy center report indicated about this potential scenario that could kick in in january if nothing happened on capitol hill in the meantime. >> it is always a pleasure to be here, especially with a former cbo analyst of high repute. in 1985, i was staff director of

the budget committee at the time. bill hoagland was my deputy. it fell on us to have to write that language. that was the first time we had sequestered, as far as i know, as a legal term in the budget lexicon. i did not approve of it then and i don't approve of it now. i don't think congress needs this coming down because it cannot do its work. i have been in 11 campaigns in addition to doing work on the budget. we elect them for a reason. we elect them to vote and to get things done. when someone is willing to say publicly as the ninth state senator or congressman, we cannot do this, we need something to force us to do this, or to do it for us, then you know something really important has gone wrong. our report is very simple.

jim jones is the msn director, dan glickman who was the chairman of the house intel committee. the white paper says three things. it is stupid fiscal policy. it is stupid defense policy. it is stupid economic policy. why? if the sequester goes through, both on defense and nondefense, it does not change our approaching 100-200% debt to gdp ratio except for two years. with 100% of those cuts taken from the smallest part of the budgets, about 35%, and the largest and growing part untouched. so it is stupak visit -- stupak fiscal policy. i had the fortune -- stibine fiscal policy.

i cannot imagine a more running time to be doing silly things with serious subjects. i think this is a silly thing. what possibly 1 million lost jobs and civilian and on civilian areas over two years, people have bigger numbers, but the fact is that starting this august, when the unions and the companies start talking about war notices, people are going to be scared. and the economy will continue to slow down. as someone who collaborated on a report said, a sequester has already started. that is why cbo reduced its growth estimate for the second half of this year. it is why the fed board of governors came out with its unusual -- can you imagine

anything dimer then taking all programs regardless of merit and just cutting across the board by 15% over the last three quarters? so you have a program seven years old and you are finding it out. another program is two years into its 10-year course, and you are going to cut both by 50%? that is not good defense policy and i think it was unanimous in our group, and we did have a variety of people, that there are lots of ways to cut defense. this is the worst. >> a very provocative and helpful opening. david, let me turn the question to you. i know you are not unafraid to consider defense budget changes, even reductions.

how'd you situate sequestration within the context of overall defense budget reduction? is it doable? can you just speak to the general subject of where we are in the defense budget reduction process and what is that seek -- what the sequestration policy means to you? >> first of all, thanks for having us back. we are always pleasantly surprised to get invited back to the party. i will beg your forgiveness in advance that if i say something crazy, it is because i am from california. it is difficult for me to begin to engage in this thinking about this because it just seems so crazy when you get into the details. i will try to parse out some of the craziness from some of the underlying issues that are involved in this conversation. first of all, on sequestration,

we will add our voices to those same as currently proposed it will have a very bad impact across the board. it is our hope that something rational will happen. as an engineer, my mind immediately jumps to the classic game of chicken problem where you are driving down the road and you find yourself in a game of chicken, and the correct strategy is for you to very visibly ripped your steering wheel of the column and be seen to throw it out the window. that is clearly the approach that a part of defense is taking when you are going around saying -- going around town saying we are not even going to think about this. you put yourself in a position where to rational parties are unable to avoid an inevitable crash. if it is, bad things are going to happen, certainly. we do think there are some

interesting and more logical elements of this conversation to be discussed. implicit in a lot of people's responses to the sequestration question is this underlying belief that lower defense budgets inevitably lead to less and capabilities and a diminished industrial base. i have spoken at this group before about our thoughts on both of these points, and in summary, we don't necessarily think that either -- in this environment it would be silly for us not to acknowledge that the government needs to figure out how to spend less money on these things. the events will inevitably suffer somehow, even if it is just the 10% on top of 8% that might already discussed. if we care about these outcomes, we should be talking about those questions as well, not just the insanity of the proposed approach to sequestration.

the underlying meaning that is prevalent in the valley these days those one layer deeper to ask the question, is there something more fundamental that we are overlooking right now? absent economic growth, arguing about whether we spend 3% or 4% of gdp misses the point. the pie is getting smaller and 1% does not matter. the rate of innovation in this country is that even more fundamental level. there is an opportunity here for some interesting discussion as well. >> if you could frame for us why people in this group are a defense specialist, first and foremost. we often talk about sequestration as the guillotine hanging over the head of the department of defense.

i wondered if you could -- also as an economist who looks at macroeconomic issues. you could talk about sequestration from your vantage point. there has been discussion at the domestic side actually grew too much in the last 10 years. maybe this is the wrong way to do it or the right way to do it. help us begin to frame that conversation. >> led the first observe that i have never been on a panel at brookings or anywhere else where steve bell was on the far right. >> from the audience perspective, he is on the far left, which i think might be even worse. [laughter] the biggest problem of sequestration is it is way too small. the problem with the comments the senator made is, we are going to have to do six, eight times as much as we have already done, and if we do it in bites

like this, especially for a cut defense contractors, and if you start with the fence, to me, that is the worst thing to do because defense is very powerful -- if you start with defense. we ought to have across-the- board cuts. we ought to go deep, as steve and his colleagues have been saying for years, so the whole approach is just flawed. the second thing is, across-the- board cuts are truly insane. that is really a crazy way to do things. i spent a lot of my time studying the obama administration's emphasis in the scholarly world that what we pay more attention -- as the president said several times, we ought to cut things that do not work and spend more money on

things that do work. so across-the-board cuts is absolutely the opposite of that, so that is a crazy thing to do. we made a promise, and i would slightly disagree -- i do agree that we ought to make decisions and we elect people to make wise decisions and so forth, but if we get sequestration, that will be a good down payment. so there is some progress, so let's give a little credit, even though they want someone else's fingerprints on a rather than the committee. it still is a move in the right direction. all things considered, it is a lousy way to do things, but we have to do it, and we have to do a lot more of it. there will be big political repercussions either way. if we continue to kick the can down the road, then there will be repercussions down the road. if we take big steps now, there

will be repercussions now. the worst thing about the way we are doing it now is we are going to take a big hit on public dissatisfaction, defense contractors, and so forth. and we will have to come back and do it again and come back and do it again. we need a big agreement, and to the extent that it takes any of the steam that of a big agreement is a mistake. >> in the interest of having a full discussion today, where there are obviously some people adamantly against sequestration, let me make sure i hurt your right. it sounds like you the big problem is we have not gone far enough. it does not sound like you are unduly worried about cuts in the discretionary budget, either defense or non-defense. it sounds like you are concerned about the budget deficit is so great that it from its whatever ugly issue might forecast in the

way the sequestration ax is going to hit. >> i completely agree with that. i think we do need defense cuts. we need cut in domestic discretionary, and you were right, that have been increasing quite rapidly. we can find ways to do it that would be ok, but everybody knows we are not going to make serious progress until we do something about revenues and entitlement. it relieves the pressure a little bit, but that is nothing compared to what we could get. so we need to reform entitlements. we need more revenues. republicans are going to have to come to the table. they cannot continue to avoid it. so yes, i am guilty as charged. >> we don't want to be preaching

just a single message. so let me press the same point with david. you summarize the different types of cuts we are seeing, first of all in it were spending. more than $100 billion a year. it is headed down to 50 in the next couple of years. that is more than 100 billion out of the annual defense budgets. then there is about a $50 billion chop coming from the first tranche of the budget control act. now there is this additional roughly $500 bill in cuts that would happen to the part of defense under sequestration. how much of that can you live with? is it not so much the numbers but the time sequencing andy blind weight they apply to all

accounts? at what point, if you could rewrite sequestration, how would you do it? >> is that one question? >> yes. perhaps you could focus on the last part. >> implicit in that statement are those two points of started with. there is an assumption that less money being spent on defense implies less capability and a diminished industrial base. certainly if we just do what we are doing right now and spend less money on it, i think it reasonably follows that we will have less capability and a less responsive industrial base. the point i have tried consistently to make is that there are perhaps opportunities now to look at less spending, to create a different pattern of spending, and i often get chided by my peers in the valley, but

somehow we are living in this capitalism exclusion bubble, that somehow when there is less money to spend, it does not immediately mean that capitalism will respond to look for market- based solutions to those new challenges. it does not follow to me that we have to pay more to get less, or pay less to get less, perhaps. i believe that more innovative spending within the government, more opportunities to look for ways to open of government programs of record as one possible example. just recently have seen that this works like in the area of space launch. the market will find a way. that is largely what this country is premised upon. what will the impact on the

industrial base be? if you believe that the total depends spending is being allocated across the markets, then spending less will be less spending across that base. is not a contentious point to make that there are inefficiencies in the allocation of the defense spending. if you can cut that without cutting into the muscle is perhaps where the debate is occurring. my experience shows it is possible to do more for less in the government and not the way the government is traditionally chided for doing less for more or the same for more. >> you made very punchy, eloquent statements earlier suggesting the dangers of sequestration.

what we are looking for from our colleagues on the panel is a little stridency in their objection to at least some aspects of sequestration. what bothers you most about sequestration? you already mentioned the way it would affect programs, but if you could rewrite sequestration, how would you do it? how much cutting is ok and how much do we need to mitigated to have a good bill? >> that think we all know from laron over here that the defense budget is suffering from the same thing several budget suffer from. payment for personnel, benefits for personnel, retirement, retiree health benefits consume larger and larger proportions of the budget. when someone says to you, you spent 4% of the budget as a

percentage of gdp on defense, it is not relevant. in 1975, we did not have an all volunteer army. we did not have to give people 20 and out. i have a 100% disabled brother from the war and a 100% disabled step father, so our family has always been in the military. i asked my stepfather would you be willing to pay $20 a month more for health care for life. he said sure, $20 a month. we have a federal budget that is being eaten up by medicare, medicaid, and retirement programs. we have a defense budget that is being eaten up. if you look at the lines across, this is what we spend for personnel and this is what we

spend for everything else. we spend more for personnel and benefits than we do on all the rest of the stuff we do, including the stuff we spent overseas in war. that is the real problem that people do not want to wrestle with. when we started this work, the general said you know the concern is building -- the concern in this building, the vfw. those are the people that are going to be upset. the people who get the benefits now and were promised to get benefits forever, and we propose a new benefit change. you really have to look at the budget in little discrete pieces and say what are you going to do about the hollowing out that is already occurring because of all the money we have to spend on benefit. i think it is a little more complicated subject, and not one that sequester is going to

solve. it is going to take a couple of years to solve, when people stand up and say we are spending too much money on benefits. >> a quick point here, why are we here and have sequestration? think of the logic of it. 30 or 40 years ago we spent something like to keep up% of our budget on programs we now appropriate. now we are down to something like 35%. so there has been a huge shift in federal spending to the entire month. and we are not willing to increase revenues are do anything about entitlements. so we screw defense and come up with some immediate thing like sequestration. to focus on this one area because politicians are reluctant to tackle the heart of the problem, it just does not make sense.

meetings like this and comments like the senator made show that we are a wow -- we are where are that we could be jeopardized in our national security. americans are listening that. it is supposed to put so much pain on people that they will do the right thing, because otherwise they will not do the right thing. we have to convince republicans and democrats that we need more revenues and we need to change entitlements. >> steve, if i understood you write, it sounded like you were saying that you might or might not be able to live with the additional $500 billion in

tenure defense cuts as long as you could have some control over where they were applied and over what period of time they were phased in. is that a fair summary? >> it is. you go down one level and see where the money is really being spent. please, no one take this as a call for reinstatement of the draft. you take a look at where the money is being spent. you look at someone who had been in for 20 years, gets out at 39, and he lives to 79. plus care for life. have to ask yourself, can we afford, even for policemen, firemen, those kind of important people, can we afford to do this while we are not getting in

ambulances or new fire trucks or the most modern i.t. equipment. i really believe the money that needs to be found in defense, by and large, is money we are unwilling to touch because it benefits people to whom we have made promises, and which promises we probably cannot keep in their entirety, and nobody is willing to say that. >> i will just make one comment myself. i am the token hawk on this panel. there have been a lot of very rich and provocative statements and we are going to be living with the need to do a lot of the things you have been talking about. my impression is there is not enough savings even any ideas you talked about to realistically get that additional $500 billion out of the department of the fence budget.

i think it cuts into the muscle and make it unrealistic that could rebalance and stay strong in the asia-pacific region. the obama administration is hoping for efficiencies and reforms that may or may not generate the savings they are planning on. we would do very well to add another 100 billion over the next 10 years. for me, the arithmetic does not add up. by this wanted to add that to the mix. the same ground rules that before. please identify yourself and pose a question. you can choose to whom you are directing the question. >> thanks to the panel because this is a very stimulating and provocative session. i think you guys are wildly optimistic. i think it will be a lot worse case.

the world economic situation is dicey at best. if the euro collapses, the pressure on us will be huge. you have a political system that is broken. think there is very little chance of anyone -- anything rational being done. worse than that, no matter who wins the election, you'll probably have a real change in the leadership so will be five or six months or more after the election until you have people in position to actually talk about reprogramming. you are absolutely right that we have to make far greater cuts to our overall spending and there probably will not be any agreement between the differences over taxation and spending. give me a couple of big ideas how you deal with the system that is broken. we have to accommodate by cutting trillions of dollars in a sensible way, and who do we get to lead the charge? mr. obama is not going to do

that unless he is reelected, and maybe not then, and mr. romney is not going to do that unless he is elected, and maybe not then. tell me how we deal with this looming catastrophe that everybody recognizes is coming, but nobody wants to stand up and take the tough choices that we need. >> in this room, five or six years ago, someone stood up and said during a debate like this that she was afraid we would not solve this crisis until the disaster occurred, until there was a crisis, and i think that is still a realistic possibility. we are going to have to have some kind of disaster even worse than the recent financial disaster, before politicians will face what they have to face. having said that, i think the revenue side is the easiest in

many ways, because our tax code is so bad that everybody agrees that we ought to broaden the base and the lowest rates possible. you can do that by getting rid of a lot of loopholes. you have to wound a lot of people. you cannot just do it for a lot of people. there has to be a lot of sacrifice, and then a lot of sacrifice on the spending side. republicans can say we fixed the tax code but we are not raising taxes. then put in a provision where if you don't get a certain amount of revenue, then you have to have some failsafe procedure where you regulate or do something to raise the revenue.

eventually we will do something like that. on the spending side, i remain convinced there is lots of spending that would be safer for the country than defense spending. we spent a lot of federal dollars on education. i cannot see that it has done a lot of good. wickets at $30 billion on education spending. you get a couple of places like that and i think it adds up. five years ago we propose all kinds of cuts like that. it added up to a very substantial amount of money on the spending side. i think it could be done in a way that would do the least damage to the country. the less government money is spent, it will have an affect on the economy and increase unemployment. it is inevitable.

>> i am glad you asked that question. i am surprised to be characterized as an optimistic perspective. when i look at the data and it shows median household incomes stagnant for the last 30 years, my concern is that we have an economic growth problem here. everything becomes zero some and we are sitting around trying to figure out which paul to rob to pay which peter. the prospective that has increasing resonance in the valley is that there is a technological innovation component of this that we really need to refocus on. we have perhaps all been blinded

by the computer age and thought we are living through an age of technological innovation here. if you sat for a few moments and thought that other sectors, perhaps transportation, where we are moving slower today than we did 30 years ago, is that still the engine of growth in this country? this is a particularly relevant conversation for this group because the department of defense clearly has a history of helping this technological innovation in this country. there is no reason that necessarily has to be true. an article yesterday proposed any number of areas where it is ready to fire up technological

innovation in this country. asset growth, we are having 0 some conversations and everybody is unhappy. i do think there is a way out of this, but it will be hard. >> let me mention briefly about something that is extremely complicated but which i have been speaking about for the last two or three weeks. can we avoid as much damage as possible in the lame-duck session? i am not talking about huge things. i am talking about one thing. had we pass a continuing resolution by october 31, get through the elections, and then minimize the damage a lame duck will do, while maximizing the opportunity in the 113th congress that we actually might be able to go towards the big deal that ron mentioned. there is a way to do that.

as someone said to me, steve, that is great. that is rational and intelligent. but we are not rational up here. that is a way to compel behavior short of sequestration. because we have so meeting with the congress who are new, it is going to be very difficult to tell them how to do this without them saying more washington, d.c. gobbledygook. using the powers the senate and house have, using something along the lines of enhanced reconciliation, i think there is a way to get us into next year with minimal damage and the best

chance to get the big deal, which is taxes and entitlements. some senators and congressmen are thinking about it now. they don't dare say it out loud before the election, and i don't blame them, but there are some people thinking about it. and there are some very good members on both sides of the aisle and other people over the last two weeks to understand what is coming out, thinking actively about minimizing the damage, getting a big deal, even with this congress after the lame duck. i m still going to think about the happy outcome. >> will come back to this. i will take to questions.

>> to talk about the clustering. -- you talked about sequestering. he made the point that we do not have to worry about the intent. he says the other point is it the biggest supporter that he goes back to his district. they did not have interest to this. they are worried about what is happening to their retirement income. the issue she brought up about the garden everything else. the chief of staff and secretary of the airforce made a difference on the duty. you cannot use this. everything is going to have to

be put on the table. have you convince the american people how serious this is? >> i am from the observatory group. that an agreement is not possible in the lame duck session. to what extent does the administration have discretion in terms of the timing of how soon it implements this? may have someav discretion. >> it maybe you could flush out a little bit of this idea that you have to avoid it. >> there are two things you have to have in mind. the anti-efficiency act and something called the impoundment

control act. in between those things which says you cannot spend money you did not have appropriated to you in the cannot compel money except for certain specific crises. most agencies are going to have to spend some money in the first quarter of this year. it sounds very arcane the very important. some people say there'll be no obligations. it seems highly improbable. how much will be spent by the agencies in the first quarter? are estimate is about 22%. how many games can be played by omb within that 22? in 2013, almost none. this is a program project activity level.

very granule level. you are going to have to reach it if you're the department of treasury. you will make very hard decisions. you have 5% of contacting. this week we're going to try over $150 billion of national debt. they are going to have to let some time lay off people. that is what it is going to come down to. they to lay off people permanently. there are not as many that can be played in fear. how come the stock these games that really there but to make

the final calculations. they're going to go down to the lowest enumerated specifically. you know the categories better than anybody. >> do you want to comment? >> once people see what the cuts will be, all will break loose. congress will have an opportunity to mess around. i do not think they have the opportunity to come to $1.20 tryon.

this is more rational than across the board. they are speculating what is going to have them. they're going to be mad. they're going to do something. >> this is the military pace. i guarantee you, my brother used to live outside their. when they see what the impact is going to be on small businesses the service the personnel, to housing in all of that, at some point it is going to be in september. they will stop carryin

caring about something other than the 401ks. there are some people in this audience that have already started slowing down what they're doing. guys are going to go back to their banks where they have have lines of credit for 20 years. he is going to say i am going to read up my line of credit. do you have that contract signed? why don't we wait? why don't we wait till you get the contracts signed that i cannot wait that long. that is not an exaggeration. a do not this is something they made up. if you go out to new mexico

where defense spending is really important, you are starting to see the slowdown. it is not because we are laying off 400 people. it is a bit by bit by bit. people are scared. there are not doing anything. you are going to worry when your wife or husband loses his or her job. >> we will have one final round for our panel before break. is this more right than wrong? a realize sequestration is very hard. is the following statement mostly right? the typical federal agency is going to have to find 15% reductions in its workforce expenditures. since he can only slow a certain amount, it means for the workers

have two months of furlough. >> you cannot reduce people's pay in the federal government. that is against the law. this is where you stay. at some point, you're the manager of an agency. you will have to say i do not know how long will be able to keep doing this. i am doing everything i can. we're not going to hire a replacement when she leaves. i need three more of you by the end of the year. in an economy that is weak, where people are slowing up their retirement plans anyway because of the last 3.5 years. this is not good tidings. >> let's have a final round of responses. we will go over here. >> here is the aisle.

>> she is coming. wait for the mike. >> i have not heard any discussion about a government shut down. what you think about the possibility that force people to act? >> over here if we could. my name is jordon. this is mostly for david. i know there has been a lot of talk. they are supposed to help them survive watching cuts. the government with export it isol reform so that th more broad. they're trying to transition

from manufacturing to services and things. services do not get cut as hard when the hammer comes down. could you speak to how this is? >> do you want to start? >> i think the overarching theme is the debt to which you have probed the insanity. this is something that i cannot come close to touching. the export reform is something that has benefited us tremendously. i know for larger companies that will hold true as well. i mayor a lot of the commercial industry and harboring deep

skepticism because plus model inherent in a lot of these services that were given. i am not sure i am as bullish. that may be great for the industry. i do not think that i'm as bullish as that one. >> i hope that everybody will -- they talk about contacting their congressman and senator. this decision will be made by about six or seven people. it will be made at the leadership level. it is going to be a very difficult thing. will we have a government shutdown? i was involved in the last one. i was told do not worry. clinton will get the blame.

in 1997, january, i got to stand in the frozen front. i am not speaking for him. my sense is the house republican leadership more than anything in the world hopes they can avoid the hint of a government shutdown. they are not suicidal. i do not know if they have the votes to do a clean one. i do not think anyone does. when we get to the debt ceiling, which is not a government shutdown and is much more interesting, you could look and see as not pay our debt. this will become a moment of

real truth. if we go through what we did last august acting like we were children in not understanding we were dealing with the global infrastructure. friends that used to work with me in the bond market are going to run. when my best friends said do not worry. he said that the panic starts i will be the first one out the door. >> let me ask you one final question. i want to make sure with your expertise that that we give people a sense of what is the issue. we talked about furloughs as one of the necessary responses. it has to apply in all these different accounts. let me imagine a big ship being built.

a shift thatis takes four or five years to build. it is one or two years into construction. congress has the right to look at that process and decide if they still need it. there are huge inefficiencies. what is going to happen in sequestration? they will have 80% of the funds they would have needed to do the construction at the pace it was intended. does that mean they fired 20% of their work force and drive this because of the inefficiency they introduced? >> i do not know if there are any contract officers. the governor will probably save the determination and they will go and say we told do a subject

to appropriations. we do not have it. the been the contractor will say we have a contract here. its as if you do this to us will be billion in damages. at some point you have to say how much will we save by cutting best? , is will we pay in damages because of the contract? we trying to do this now. define this. you're going to have to cut more than 500. you're going to pay substantial penalties for weapons systems that are half way through. because this kind of silly. >> if you could sum up anything that is on your mind. >> i agree that the government

will shut down. if i did not agree, i will not say so out loud. we went through the two government shutdowns. they did blame clinton for it. the other thing they said is that no one cares. they're not even going to notice. i would say with in about eight nanoseconds the washington post fisher stories about these employees but worked so hard all year long and now they will not get their check. they cannot buy presents for their kids. this is what is going to happen. they're not going to let this happen. they will dare they can to keep it from happening.

in my be a good thing. we need an outraged public. we have to do something. the final thing i would say is that sequester is a horrible idea. i completely agree. >> i am constantly reminded of the ecilosopher quote change only in necessity. i've a full bad if i did not say the [inaudible]

this is an opportunity to think about the bigger items. we're missing a real opportunity. this is the solution. >> i just have to add one thing. i agree. for assad agree you are right. in order to see these you need leadership. that is the main of greeting we lack. we do not have leaders in the administration or on the hill. >> we will take about a 10 minute break and then reconvene. please join me in thanking the panel. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> coming up, a group of

republican senators continue to call on the obama administration to appoint a special counsel. then the pentagon holtz and events recognizing gays and lesbians to serve in the military. not a conversation with president obama's campaign manager david axelrod. >> david axelrod, a senior strategist of the obama campaign here in chicago. in any campaign, there are things you can control and cannot control. >> there are two things i'm always considering. 1, external events, particularly as we watch your, and the -- europe, and the economic impacts of things around the globe. that's a big concern of mine. second, the money that is being spent. we would be the first incumbent president in modern history to be about spent because of the advent of the superpac. we expect $1 billion to be spent

against democratic candidates. this is a new development in modern politics. what concerns me is -- these are the things that concern me. what does not concern me is do we have the right candidate? do we have the right message? i think we do. >> all right. talk about the people of around two. what is the message? what is the roadmap to a second term? what are you telling voters? >> it is a central issue, not just in this campaign, but a central issue of our time -- how do we rebuild our economy so that people who work hard can get ahead, so people are rewarded?

everyone gets a fair shake and a fair shot. that's really what it is all about. we've had a longstanding problem before the economy collapsed in 2008. there is more and more pressure on the middle-class. more and more difficulty on working into the middle class. the question is, which candidate has a vision that has at its core the revitalization of the american middle-class? president obama does. that's what his whole life has been about. when you think of the two plans for the future, you can hardly discern what governor romney's plan is. one looks forward to rebuilding the economy. his looks back to the policies

from the last decade that crushed the middle-class. >> but you look at the polling, and you know you're not there yet. in denver, they are saying the president is in trouble. how do you get there? >> i have a huge regard for peter. i think he is one of the best in our business. i would be reluctant to stick an analysis to one focus group. you know, i'm listening all the time. i'm not pollyannaish about this election. i have said it's going to be a close election. it has to be a close election. th is going to be a much closer election. but voters understand president obama's commitment is with the middle class, that his vision is about building the economy in which they can move ahead.

the real question -- there are real questions about governor romney because of his background and what he is proposing now. i think he has a long way to go to build any kind of trust with the american people on this issue. >> is this a choice election or a referendum? >> i think every election is a choice election. i do not think there's ever all -- ever an election where the candidate can step back. there are issues that they do not really want to talk about with mitt romney. they will -- they don't really want to talk about his record. they really don't want to talk about his plans. what was remarkable of those interviews was how little he was willing to say when he was pressed for specifics on his programs, when he was pressed for specifics on what he would do. and almost every instance, he would not answer the question. he would be an artful dodger. i do not think the american people are going to elect an artful dodger for the president

of united states. >> is this going to be a negative campaign with the obama campaign against ronnie's characteristics? >> we began our media campaign in the battleground states in may. we spent $25 million on positive ads on where we have been as a country over the last two and half years and where we're going. we will only continue to make that case. are we going to fill in gaps the governor romney went about his record? yes. its important to have a level playing field so people have a good comparison. but i think this is about the future and what kind of future we want for our country, for our children. we are a country where people have an expectation that if they work hard, they will get ahead and be rewarded. we are going to be a stronger country if that is the future we pursue.

if we go back, thinking we can cut our way to prosperity, cut taxes -- particularly for the wealthy -- cut polluters, and withdraw and hope for the best, i think for going to get the same result we got in 2008 and over the last decade. that has failed. >> let's talk about you. you're a veteran of the news business here in chicago. when did you move into politics? when did you first meet barack obama? how is this campaign different from four years ago? >> i went to college at the university of chicago. at the tribune, i was a political writer. i covered elections for two and half years, which is a great experience for any journalist. then i cover politics at the

bureau chief. i covered a couple of national campaigns. and then paul simon, who was a congressman running for the u.s. senate in 1984, he asked me to come work with him. i thought he was an exemplary guy. i was concerned about what i thought were the trends of the news business, the corporateization of the news business. and i thought in the long term i would be happy with that. so, i went to work for paul. i've been involved in politics ever since. and opened up a consulting firm after that. then in 1992, a friend of mine

here in chicago called me and said "i just met the most remarkable young man. i think you ought to meet him. his name is barack obama." i said, wow. what do you want me to meet him -- why do you want me to meet him? she said, he just came back from harvard law school. she said "i think this guy could be president of the united states son the." -- someday." she knows how to spot winners. >> did you know that? >> no, i knew he was a real bright, motivated by. that did strike me right away. but i did not think immediately this man could be president of united states. the likelihood of a man named barack obama being elected president in 1992 seemed a somewhat remote prospect. but in the legislature he worked on very difficult issues -- death penalty reform, racial profiling, a series of health care issues. it was clear that he had

something special. in 2002, he called me and told me he was going to run for the united states senate. there were other candidates asking for my help, but i really felt like if i could help barack get elected to the senate, that is something i would be proud of for my whole life. he started off well behind. and closed very fast. there were seven candidates. we ended up getting 63% in winning in places you would never imagine. barack obama from the south side of chicago. from that point on, the great convention speech and on, it has been an extraordinary journey. >> house is different from four years ago?

>> i think it's different because no one could have anticipated even at this time in 2008 exactly what he, and more importantly the country, would face in the coming months. no one could have anticipated that lehman brothers would collapse or wall street would collapse or the economy would collapse, and from the day he walked in the door we would be losing 800,000 jobs a month. we knew the economy had challenges. we knew there was the long-term challenge, which is how do you build an economy that works for the middle-class tax -- middle- class tax -- middle-class? on the night of the inauguration, we could not anticipate that republican leaders would be meeting. we had this notion that in the midst of a national emergency we could forge a bipartisan effort to heal the nation for all problems, and they had other ideas.

senator mcconnell and others have spoken that they would not give him any bipartisan support on any issue, because that would certify he was able to do that. he subsequently said that was an admission of defeat to the president. that has colored much of the last three and a half years. is a difficult environment. so, we had all the winds at our back in 2000 a. i must say in retrospect, it was a lot smoother sailing than those very same pundits who are writing about us now in less than flattering terms had written about that race as well. we have some experience with this. but there is no doubt that was a once-in-a-lifetime journey. and this is a harder scrap. but in some ways is more important because we are at such a critical juncture as a

country. now is not the time to go back to doing what we have to do. we have to push forward, build the economy in which the middle class has a shot. we are only going to do that by reducing our deficit. that has to be a key element of it. there also has to be investment in education, energy, clean energy technology, the future to create jobs and help break free from the grip of foreign oil. you know, there are so many things that we need to do to move this economy forward. we can be passive. i feel a strong sense of urgency about the selection. >> you have been inside the white house. if the president is reelected, will things be different? will the political environment

be different? will be congress be able to work together on the major factors affecting this country? >> snee know what? this is what i believe. i believe there are republicans in washington who would like to work with us and they have indicated that. i have been there for three years. i know several people who would really like to work with the president to solve problems, but the strategy of the republican party is this kind of rain of terror. any effort towards cooperation is considered a betrayal. people have been throttled and there desires to work together. my belief is when the president wins in november, we're going to liberate these republicans, if you will. it will blink in the light of our brand new day.

they will say "you know what? we did it your way, and that was a failure for the country and for the republican party. and now we're going to work together. there may be issues on which we will fight, but where we can agree, we're going to find common ground." i think that is the message his reelection will send. >> but the follow-up on a few points. first of all, the media. how would you size up the state of the media today? >> there is an element of fanaticism -- freneticism that wasn't there when i worked in the media. the speed of communication. but these things run in episodes. i could have told you at the end of this year -- here is how we are going to run the field. the republicans would look enfeebled.

there would be a nominee, and the republicans would rally around that nominee, and the true nature of the race is revealed. and i would have told you that the media would keep that up, and romney is surging, obama is flagging, this is our race. the next phase is going to be -- the media is going to become more alert to the fact that governor romney has been completely evasive about his positions, has been all over, and has tried to play a game of hide and seek with the american people. i think he will be -- it will be a challenge to challenge him to be more forthcoming. than the story will be back for a while. this is the nature of this

business. you just have to run through the spaces. ultimately, the american people's genuine analysis of who these men are and where they want to leave the country is the issue. >> finally, will there be three presidential debates? what is your approach? >> i think we will announce each one shortly. the tradition has been 3. and one vice-presidential debate. my expectation is that is what will happen. but no one can sign on the dotted line no. -- bottom-line yet. this is ultimately such an important decision for the american people. to see them on the platform actually talking substantively about where they want to leave the country. it certainly will be a contest of innovation. these are two different views about how we want to move forward. i would argue one is about moving forward and the other is

about moving back. so, that is a debate worthy of having and we should have it. >> is this your last campaign? >> you know, i know my wife is a c-span watcher, so i have to say yes, this is my last campaign. i have gone on to the university of chicago. my hope is to encourage young people to go into this arena, either as a strategist let myself or candidate and policymaker, a journalist. we need people to be part of the process. i tell them all -- you may have reservations, but the answer is not to steer away, but rather to change it. the decisions made in washington

and in state capitols and city halls all over this country are going to impact on things you care about. either you participate or you have to accept the verdict. that is my mission after the selection. >> david axelrod, thank you for your time. >> officials met the association with ithem. >> later, a hearing on the satellite program. live coverage gets started at 2:00 p.m. eastern. >> senate shared john mccain along with other republican

senators held a briefing on security leaks that occurred during the obama administration. he called for an independent investigation. this is 30 minutes. >> good morning. i am joined by my colleagues, the ranking republican on the intelligence committee, senator john cornin, and senator wicker is also a member of the armed services committee. senator gramm was an able to join us. it is important for us to recognize the seriousness of this issue. according to senator feinstein, the chair person, "these disclosures had seriously interfered with ongoing programs and have put at

jeopardy our intelligence capability to act and the future. each disclosure put american lives at risk, makes it difficult to recruit assets, and threatened imminent damage to our national security in the face of urgent and rapidly adapting threats worldwide." that is the words of the chair person. that is an indication of how serious this issue is. i understand that the immigration and health care and other issues are getting the american people's attention. these leaks go on and on. in the new york times he says almost every single member of the president's national security team was generous enough to sit down and talk through their experiences more than once. he said some of these seven play refuse to be identified because what they were talking about -- specifically brief used to be added the five because what they were talking about was ongoing programs.

when i " key characters, i do so only if it was relayed to me by a source of purslane heard it. the notion that my white house would purposely released classified national security information is a thin said. -- is offensive. let's see how the people all around him approach the office. according to david, almost every single member of the president's national security time was generous enough to sit down and talk through their experiences more than once.

most were willing to place at least some comments on the record. as an example of how incredible, how bizarre this entire situation is is one antidote i would like to quote. he depicts a curious meeting as often happens when the president travels, there were a number of other reporters and several political aides including david axelrod. just as copy was being served, a senior official tapped me on the shoulder. he said i should take the

elevator to the floor of the hotel with the president had his talk about iran. obama was not baffle me gathered. most of the rest of the staff was present and armed with the intelligence that have been collected about the secret site. they have mapped construction of the building. it was clear that the united states had interviewed scientists who had been inside the facility. maybe the president was not present at his own suite when this is offensive. it is contradicted by the facts. to think that the people appointed as prosecutors from mr. holder's office is also offensive. we need a special counsel. we need someone who the american council can trust.

we need to stop the leaks that are in danger in the lives of those men and women who are serving our country with valor and courage. they deserve a lot better. throughout these books and other information, saying that the cia was a betting weapons may go into syria, will always have one purpose. for one at that. that is to make the president of the united states look like a brave and strong leader. this was taking place. i've never seen anything like it in the many years i have been here. i have seen leaks. i have seen things happen that endangered our national security. it put american lives at risk.

>> thank you for continuing to lead this effort. i have been involved in the intelligence community for 10 years. i have dealt with leaders who are partners of the united states in every part of the world.

i can tell you that our partners are very concerned about what is happening in washington right now with respect to these leaks and the reaction of the administration. even though this town is known for having leaks from time to time, we never seen the number coming out. nor have we seen the level of the leaks that are now being reported in virtually every paper. for the president to come out and say that it is offensive to him to think that his white house would intentionally leak classified information offends me to no end. what the president ought to be saying is that this is damaging to the country. we will do everything we can do to get to the bottom of it whether it involves my white house or wherever.

for him to be politically offended by this makes no sense. let me say some of the statements that have been said publicly. president obama is quoted from inside the situation room. it is located in the white house. you do not go in the situation room unless you have the highest classified rating. someone with in that situation room who is associated with the national security council obviously is quoting the president. they quoted what happened. senior officials were quoted time and again. the security adviser is quoted as having a covert action

program. we cannot even confirm whether these exist. you have the national security adviser talking about a covert program. three dozen current and former administration officials were interviewed. david axelrod who's not part of the national security team was apparently in the situation room on a number of locations. this is a political adviser to the president. lastly, at the deputy national security advisor goes on "good morning america" and says "we had the device under control." this is all classified information.

yet we have both in the white house going on television and talking about it. while these are part of news stories, and these are direct accutions toward the white house with respect toward the source of the leaks. these are news reporters just like you in this room. they are professional that out to get a story that is quoting white house officials on information. i have no question about the competence or capability of the two u.s. attorneys who have been nominated now by the attorney general to investigate. this is important. there are other additions to this. you notice what he said

yesterday is that he has asked his ig to investigate those scenarios and weeks that the attorney general is not investigating. do we really think that when you have someone who is appointed by the it administration are they really going to be unbiased in the administration that appointed them? one of these individuals worked with the obama and campaign. he was not just a casual volunteer in the campaign. he was obviously an important member of the campaign team. i was told by attorney general holder when he called me friday

to say he is going to name them to do the investigation that if during the course of this is accomplished developed then he would consider the appointment of a special counsel. guess what? the more we find out about the folks who were doing the investigation, the more common sense determination is. there is a conflict of interest today. because that exists a special counsel should be appointed. >> i agree with center mccain that the council should be appointed because the administration cannot be trusted to appoint itself. when the independent counsel statute expired, the special provision has been created. unfortunately the special counsel, political appointees of the obama administration, our

task to with the a demonstration and reporting to eric holder who has not demonstrated any independence on this as a chief law enforcement officer. i will not go into the let me. let me just call to your attention the double standard under which our democratic friends operated during the time that pregnant bush was in the white house. patrick fitzgerald insisted upon a letter from james delegating all the investigative authority of the department of justice to the special counsel. he declined to exercise any kind of supervisory control over mr. fitzgerald.

that was an independent investigation. this is not. if in fact attorney general holder continue to promote this pretense of an independent investigation, my hope is that congress will take up their responsibility to do what is obligated to do, investigate this matter ourselves. i have talked specifically to sinister collins and senator lieberman of the governmental affairs committee. my hope is that we will have a truly independent investigation. you cannot investigate yourself in claiming have no conflict of interest. >> where is the outrage in this administration? where is there any indication that with in the obama

administration officials are outraged with the criminal leaks of classified information. here is what has been disclosed by members of the administration. classified details to kill osama bin laden, issues in pakistan, a double agent has been out it and is of no use to us in the future.

the predator drone protocols. the cyber war involving iraq and overt operations in africa. all of these sensitive pieces of administration have been spread out in a book. we have yet to hear any outrage and the president of the united states. any other administration in my memory would have been apoplectic looking for the culprits trying to find out who were the people who had actually committed these criminal leaks. instead the president is offended that someone would

suggest such a thing. frankly, members of the administration are smugly happy that information has come forward that appears to make the president seemed tough. national security does not exist to help president won elections. it is not a tool to advance one's process. this administration is more interested in advancing the prospect of the president's reelection and the outraged about criminal weeks. this is a bipartisan concern at least in the senate. senator mccain quote chairman feinstein. she says "this has to stop. when people say they do not want to work with the united states because they cannot trust us to keep a secret, that is serious."

she said her heart stopped reading the book. she said you learn more from the book than i did as chairman of the intelligence committee. that is very disturbing. to quote the chair. this is not going to be adequately investigated and must have an independent special counsel. -- unless we have an independent special counsel. there's a lot going on. we had immigration decision yesterday. we have a reaction by the administration. we have health care within 48 hours. it tried to wrap up for the fourth of july. there are a number of things we

need to get -- trying to wrap up for the fourth of july. there are a number of things that we need to get through. we are here today to say that it will not go away. we continue to press for a sensible and adequate investigation. we hope that by partisanship will prevail and a special counsel will be appointed. >> there was a mention of what they announced yesterday. do you think the steps were sufficient? >> the professionals in the intelligence committee, not the political appointees, are beside themselves. they are distraught because of the the trail of things like the inside informants in the latest underwork bomber. the doctor that obviously has been in pakistan sentenced to 33 years. the information about seal team

6 and other methodology that compromises their ability to carry out future missions. professionals are outraged. i know that the director of national intelligence believes that within his realm of authority this is the best and most that he can do. we need to have an independent counsel to look and how all this happens. >> this would make the move more quickly. instead of the outside counsel. is that reasonable?

>> if you believe that an independent counsel -- if you believe a prosecutor who was an interval part of the obama campaign has credibility with the american people. then i guess so.

. .

>> so that's already a big chunk. then there's sort of an annual term of a $50 million term. the $480 billion divided by 10. how much of that can you live with or is it not so much the numbers as it is the time sequencing or the blind way that they apply to all accounts. at what point would you, if you

could rewrite se quest vacation, would you? >> the two points i started with. there's an assumption that less money being spent on defense implies less capability and diminished industrial base. certainly if we were doing what we were doing now and spent less money on it, it reasonably follows that we would have less capability. but the point i've tried to consistently make and the point i made yesterday or a day or two ago is there's less opportunity to look at less noun create a different pattern of spending, the same way i often get chided by my peers in the valley that somehow we are living in this capitalism

exclusion bubble. if there's less money to spend that doesn't mean that we live in an excollusionary -- that doesn't make sense to me to spend less to get less. more opportunities to look for ways, for example, to open up public programs of record, to disrupt innovation from other areas of the market. certainly just recently with our friend elon and spacex this works with areas where we thought space launch? that's nothing that only the defense base can do. maybe, but the market will find a way. that's the kind of capability from the -- what will the impact on the industrial base be? again, if you believe that the total defense is being

allocated across the market, certainly spending less will give you less capability across that base. certainly i don't think it's a contentious point make that there are allocations in the defense, whether you can cut that fat without cutting into the muscle is perhaps where the debate is occurring but for the last seven years drying to bring disruption into the government it's possible to do more with less and not where the government is traditionally chided for doing less for more or the same mariano rivera. >> you made a punchy, pithy eloquent remark but where they are a little less -- they may

not prefer it, but they can livewith it. what botters you most about sequest vacation? if you could rewrite sequest ration, how much would you mitigate to have a good bill? >> it sounds like a chicken answer, but i think we all know from ron over to here that the defense budget is suffering from the same thing the federal budget is suffering from. payments for personnel. payments for -- retire rees and where we spend 4% of the budget as a percentage of g.d.p. on defense, it's irreally inventory as i, because before

1995 we didn't have an all-volunteer army and didn't have to increase benefits to entice enrollment. to say i have a 100% disabled brother from the war and 100% disabled step father. so i'm not speaking -- i'm speaking from -- our family's always been in the military. so i asked my step father, would you be willing to pay $20 more for care for life? >> he said sure. for life. we're talking about that kind of thing. we're having a federal budget that's being eaten up by medicare and other programs. this is what we spend for personnel and everything else, they are about ready to cross. we are going to spend more money for personnel and benefits than on all the rest of the stuff we doing including

the stuff we spend overseas and war. that's the problem that people don't want to wrestle with. when we started this thing, general chuck wall said you know they are going to burn this building down? that's the building where we are. i said who? he stayed d.f.w. any minute. but those are the people that are going to be upset, the people that get the benefits now and were promised benefits forever and oppose any benefit change. 10eu think you really have to look at the budget in discreet pieces and say what are you going to do about the hollowing out that's already occurring because of all the money we have to spend on benefits. so i really think it's a little more complicated subject. and i don't think it's one sequester is going to solve. i think it's one that's going to take a couple of years to

solve until people like walls and jones stand up and say, hey, we're spending too much money on benefits. >> mike, let me make a point here. why are we here and have sequest vacation? i mean, think of the logic of it. xxx 40 years ago we spent splike -- on appropriation. now we're down to something like 35%. so there's been huge shifts in spending to entitlements. we're not willing to do anything about entitlements. so what do we do? we come one some idiot thing like sequest vacation. the focus on this one area, because politicians are reluctant to really tack the heart of the problem, it just doesn't make sense. one thing about the psychology of this that we ought to ponder is meetings like this and

comments the senator made, he says, wow. if we do this, we could be jeopardizing our security. the defense -- that's exactly what steve wanted to happen when he invented se quest ration. to put enough pain on people because unless you do, they won't do the right thing. so we can get a deal that will relieve the pressure from this 35% of the budget that we're now trying to balance the budget on that share of our total spenting, which makes no sense. >> so the last clarifying question, steve, if i understood you right, you were saying that you might or might not be able to live with the $0 million a year in defense cuts as long as you could have some control over where they were applied and over what period of

time that they were phased in. is that a fair summary? >> it is. as i say, you go down one level, and you see where the money is really being spent. and this is not a call for the draft. please, no one take this as a call for the reinstatement of the draft. you take a look at where the money is being spent. someone is in for 20 years and out at 39 and lives to 79, so he's worked 20 and gets 40 years. that's care for life. you have to ask yourself what very many communities are asking themselves. can we afford, even for good work. policemen, fair tomen. those kind of -- firearm -- fair tomen.

firemen. >> i'm going to make one comment myself as i get token hawk on the panel. >> we have a panel here. i am just going to make one comment. there's been a lot of rich and provocative statements. we are going to live to do one of the three. my own assessment is that there's not enoughization, even in the ideas you're talking about to get additional money in se quest ration out of the federal budget. it will make it unrealistic that we could do that and stay

strong overseas. even if we do that, probably because the obama administration is hoping for efficiencies and reform that may or may not generate the savings, even to add another $100 billion, sequest ration would add se quest ration would add another dr. 5 billion. we'll start with harlan in the back. identify yourself and pose a question. if you could choose to whom you're directing your question. >> first, thank you to the panel, because it's a very stimulating and provocative session, but i think you guys are wildly optimistic. because i think it's going to be a much worse case. if the euro collapses the pressure put on us is going to

be huge. off political system that is broke than unless one party wins both ends of pennsylvania avenue, i think there's very little chance of anything rationally getting done and no matter who wins the election, you're probably going to have a real change in the leadership of all the departments, so it will be five months or more for people to be in position to actually talk about reprogramming and the like. i think you're absolutely right that we're going to make far greater cuts to our overall spending and there's probably not going to be any differences between taxation and spending. so how do we deal with this when we have to deal with cutting in trillions of dollars and mr. obama is not going to do that unless he is elected

and maybe not then and mr. romney is not going to do that unless he is elected, and maybe not then. >> this is a background. in this room, five or six years ago, another sitting where you are stood up and said during a debate like this, that we that he was afraid we would not solve this crisis until there was a financial crisis of some sort. and i think that's still a realistic possibility. we're going to have to have some kind of disaster even worse than our financial disaster before politicians will face what they have to face. having said that, i think the revenue side ironically is the easiest in many ways because our tax code is so bad, and i

can tell you how you can get republicans to do it. our tax code is so bad that everybody thinks you ought to broad at any base and truce rates. you should have a broad base and the lowest base possible. you can get do that by getting rid of a lot of loopholes. you can't just do it for a few people. the way you do it is in a way that might be revenue neutral and be able to score it that way so republicans can say, oh, yes, we've fixed the tax code but not raising rates then put a provision in there just like we do for premium report where if you don't get that you have something else to raise the revenue. it's doable and give the republicans cover and i think eventually we will do something like that. on the spending side, there's

spending that would be a lot safer than defense spending. we spend a lot of federal dollars in education. i can't see that it's done a lot of good. we could save $20 billion-$30 billion on education spending. so you get to several places like that,, and i think it adds up. alison and i wrote the chapter where we proposed several cuts like that, which added up to a lot of money on the spending side. i think it could be done in a way that would do the least damage to the country. but we're always going to face the risk that the less government money you spend, it could have an impact on the economy and increase unemployment. it's inevitable. but let's do this so we can self-for two years and then things will return to normal. >> i'm glad you asked that question. i am surprised to be characterized as an optimistic

perspective. i certainly never catch it that way when i'm back in the valley. when i look at the data, and the data shows an median household income is stagnant and the means may be rising slowly but largely because of the top end. my concern, and i mentioned this at the start is we have an economic growth problem. when that happens, we try figure out which paul we're going to rob to pay which peter. that's not an encouraging conversation for anybody to be involved in. i think. in the valley, it's thought that there's a component on this we need to focus on. we have perhaps been blinded by the computer age and high finance and thought we're living through an age of tech in a logical innovation.

if you thought for a few minutes about other sectors, perhaps transportation where arguably we're moving slower today than we did 30 years ago or energy where we're still burning oil, are we innovating? do we have economic growth? but we have an ever-decreasing pie. i think this is relevant for this group because the department of defense has a robust history of helping this tech in a logical innovation in this country. unfortunately it's an aged pedigree in this country. there's no reason that necessarily has to be true. again in mckenzie's article yesterday proposed any number of areas where if they set their mind to it, they could fire up tech in a logical innovation in this country which i argue is the root cause of this conversation.

root growth is zero and everybody's unhappy. so i do think there's a way out of this. but it is going to be hard. >> let me speak briefly about something extremely complicated. but which i've been speaking about on the hill for the last two or three weeks. can we avoid as much damage as possible in the lame duck session? i'm not talking about big, huge things. i'm talking about one, specific thing. how do we pass a continuing resolution by october 1, get through the elections and then minimize the damage the lame duck will do while maximizing the opportunity in the 113th congress that we actually might be able to go towards the big deal that ron has mentioned? believe it or not, there is a way to do that. as someone i briefed on it

agreed, that's rem vent, like a mechanical engineer, but you don't have any votes for it. because we're not rational up here. this is a person that's been up there for 20 years and she is a very smart person. there's a way to compel behavior short of se quest ration. because we have so many members of congress that are new, to be blunt with you, it is going to be very difficult to tell them how the do this without having them say, oh, my goodness more washington d.c. gobbledygook. but using the power washington has and long along the line of enhanced reconciliation, i hate to say that again but that's where i come from, i think there's a way to get us into next year with minimal damage and the best chance to get the big deal, which is taxes and entitlements.

so i know there's some senators in congress thinking about it now. they don't dare before the elections say it out loud, and i don't blame them. but there are some people thinking about it. and there are some very good members on both sides of the aisle. they were briefed by mr. dudley, who is the chairman of the federal reserve bank of new york and other people over the last two weeks who understand what's coming and are thinking very actively about minimize the damage, get a big deal. even with this congress. after the lame duck. so i'm a doer, scott, but still for this one time i'm going to think about a happy outcome. >> we'll come back to it. i will take two questions before we go to the panel, so both these gentlemen. >> steve, i don't talked about se questering.

congressman adam smith, he's made the point that by jaw boning this whole thing, don't worry. we don't have to worry about the initial intent, and senator graham, i don't need to worry about it. he said his biggest supporter of the military as he is, fort lewis and his district. he goes back to his district, they are not interested about worrying about the defense budget. they are worried about what's happening to their retirement incomes and what's happening to their medical coverage. when the senator was talking, the issue she brought up about the guard, the chief of staff, the air force, the secretary of the air force made difficult decisions on cuts and active constitute doo it. both the house and senate, you can't touch the international guard. again, everything is going to have to be put on the table. how do you convince the american people how serious

this is? >> hello. i'm ed keen from the observe tori group. this is the question for steve bell. let's supposed for the sake of argument that an agreement is not possible during the lame duck session on the se quest ration to avoid the automatic cuts. to what extent does the administration have discretion in terms of the timing of how soon it implements the cuts, because i read they may have some discretion in terms of the -- how much they appropriate to the various agencies. and also you may flush out this idea you have to avoid i it. >> there are two acts -- two ethics you have to keep in mind. one, the n.i. deficiency act and one is something called the impoundment control act. between those two things which says you can't spend money you

don't have appropriated to you is a felony. and you cannot impound money except through certain preff as is, most agencies are going to have to spend some money in the first quarter of this upcoming fiscal year. it sounds very arcain but it's important. some say there will be no allocations in the first quarter of this fiscal year. that seems mildly impossible. the question is how much will be spent? our estimate is 22%. not 25%. how many gains can be playground by o.m.d. within that -- plagued by o.m.d. within that? >> in 2013 almost none. why? because this is a program project activity level. a very granular cut. you are going to have to reach

it if you're the department of treasury and make hard decisions since you don't make anything. you've got 5% contracting out for such things and 95% of your people. and this week we're going to turn over $150 billion worth of national debt run by 0 or 15 people in the basement of the treasury. they are going to have to at some point lay off people. that's where it's going to come down either through attrition, furlough, which is a real pain to do or worse, try to lay off people permanently. so there are not as many gains as -- games to be played and republicans think they will be played in non-defense. how can we stop these games? i said really o.m.d. is going to make the final calculation. if they do what they did in

1995, they are going to go down to the lowest level enumerated specifically in an appropriation bill or a report. a report accompanying that appropriation bill, which means fuel purchases. air force fuel -- i mean, you know the categories better than anybody. and at some point, 15% of an m-16 magazine is not a great thing to have if you need full mag. >> rodney, you want to accident in >> i would say my response would be the article in "the new york times" this morning, once people see what the cuts are going to be down to the granular level, all hell's going to break loose and congress will have an opportunity to mess around, and i don't think they have an opportunity to not coming close to $1.2 trillion because the tea party would revolt and there would be a huge problem and people would lose their election. but almost any way would be

rational more rational than across the board cuts. and people haven't seen them yet. there's a huge problem of ignorance. at least they are speculating. maybe 20,000 teachers. maybe that's true, but we need to see the o.m.d. and really see who is going to get gored, and they are going to be mad, and they are going to do something. >> the military base in washington state -- i guarantee you, my brother used to live right outside of there. i guarantee you when those folks see what the impacts are going to be on small businesses, to personnel on that base and housing, to all of that, at some point, and i think it's going to be in september, after the august recess, they will start caring about something other than just their four, four,. they are going to -- their

four,. their 401-ks. i can quote steven from lockheed-martin. they have already started to zhrow down what they are doing. so they will go back to their banks where they have had lines of credits and he is going to say i'm going to reup my line of credit and the bank is going to say, you have that contract signed? >> we've had it for 20 years. why don't we wait? because he has everybody looking over his shoulder. why don't we wait until you get the contract signed? that's not an exaggeration. it's starting now. it's not something the defense industry made up and not something secretary pennetta made up. if you go out to new mexico where defense spending is really, really important,

you're starting to see the slowdown there. it's not because we're laying off 400 you know what i mean loss al most. it's bit-by-bit you're seeing people scared and -- you're not worried just about your 401-ks. you're also worried when your wife or husband loses his or her job. >> we will have one final before our break. could i ask is this more right or wrong? i understand se quest ration is varied. does the following statement at least is it at least mostly right that next year the typical federal agency, if se quest ration occurs is going to have to find 15% reduction in its workforce expenditure which means you usually aren't going fire people. >> you can't. >> and since you can only slow hiring, this means up to two months of furlough.

is that one way to understand the likelihood of that? >> yes. and you can't reduce people's pay in the federal government. that's law. so if you're a gs-14, that's where you stay, and at some point you're the magazine of an agency and you're going to say, look, i don't know how long we're going to be able to keep doing this. i saved money but you all have to know when jeannie leaves we're not going to hire a replacement and i need three more of you. where the economy is weak and people are slowing up their retirement, this is not good tidings, i don't think. >> two more questions and then a final response. we'll go here, and where else did i have a hand? we want to make you famous, so

wait for the mike. >> jeff bagley. i have no dog in this fight. but i have not heard yet about the discussion of a government shutdown. what do you think of the possibility of a government shutdown during the clinton administration that forced people to act. >> over here >> is this question is for mostly david. there's two things going on right now, one geared by them, one geared by the government, that are supposed to help them survive these budget cuts. the government with export control reform, trying to move stuff from state to commerce, so that the defense industrial base can have this idea that defense contractors are trying to transition from manufacturing to services stuff, services things, because as i think the center even says, services don't get cut as

hard when the defense budget, the hammer comes down. could you speak to how the defense industry is thinking about these things and whether or not, you know, these transitions are actually going to help them stay afloat? >> you want to start? >> sure, i can try. i think the theme of just listening to ron talk and trying to answer this question is the depth to which you two have probed kind of the insanity of a lot of this, something that i can't come close to touching. this is something that even as a smaller business has benefited us tremendously. i know for larger companies, that will hold true as well. the transition from service to manufacturing, i think i mirror a lot of the commercial industry in harboring some deep skepticism about sort of the cost-plus model ininherited and

the incentives that that generates. so i don't know that i'm as bullish but when it applies to the government meeting industry, i don't know i'm as bullish about that particular aspect as i am about the export reform. >> steve, any final comments? >> no, i hope that everybody -- they talk about contacting your congressman and senator. this decision is going to be made by about six or seven people. it's going to be made at the leadership level in the house and senate, and it's going to be, i think, very, very difficult. will we have a government shutdown? i was involved in the last one. when i was told by a very smart republican leader don't worry, clinton will get the blame, and i was very lucky, because in 1997 january, i got to stand out in frozen west front

watching mr. clinton be reinaugurated as president of the united states. my sense is the house republican leadership almost anything more in the world hopes they can avoid even a hint of a government shutdown in the october continuing resolution period. because they're not suicidal. they want to stay in the majority. i don't know whether they have the votes to do a c.r. i just don't know, and i don't think anybody knows. but when we get to the debt ceiling, which is not a government shutdown, which is much more interesting if you can look at it from far away, like if you lived in china and you could look and see us want pay our debts, for example, i think that's going to come the moment of real truth. if we go through what we did last august, acting literally

like we were children and did not understand that we were dealing with the global financial infrastructure, at some point, friends of mine that used to work with me in the bond market, especially equity market, are going to run. they panicked, by the way. one of my best friends said, oh, don't worry, if the panic starts, i'll be the first out the door. >> i would ask you one final question before we go to ron for the ultimate wrapup here for the panel, because i want to make sure that, again, with your expertise on the hill, steve, that we get people as clear a sense of what really is at issue here. we talked a bit about furloughs and the possibility of that as one necessary response because of the way in which the sequestration language has been written, that it has to apply in all these different accounts. let me just imagine a big ship being built by one of our friends in industry for the u.s. navy, and let's say it's a ship that takes four, five years to build, and it's already one or two years into

construction. obviously congress has the right every year to look at that ship building process, decide if it's going well, decide if we still need the ship, but usually congress is going to keep funding it, because there are huge indeficiencies where you decide you don't need it anymore. what's going to happen to that ship? because the company building it is presumably going to have, let's say, 80% of funds that they would have needed to do the construction at the pace that was intended. does that mean they go at that pace and they fire 20% of their workforce and maybe drive up the unit cost of the ship because of the inefficiency they've introduced, or is there some other mechanism? >> well, i don't know if there are any contractors here. i hope there are, because what will probably happen is the government will say termination at the convenience of the government. that's in every contract clause, and they will go and say, remember, we told you, subject to appropriations. we don't have it. and then the contractor, let's

say general dynamics, will say, well, you know, we have a contract here that says if you do this to us halfway through this year was a billion two in damages. how much are we going to pay in damages because of the contract? we're trying to do some of that now. it's extremely complicated, but the fact of the matter is to find $500 billion in defense spending over the next several years, beyond where we are, you're going to have to cut more than $500. there's no doubt about that, because you are going to pay substantial penalties for weapons systems that are halfway through or 2/3 of the way through. plus the unit cost is really kind of silly. >> ron, anything that's on your mind about the shutdown question or anything else you'd like to finish. >> well, i agree with steve that the government is not going to shut down. if i didn't agree, i would not say so out loud. but i would add a different reason to it. , i too, went through two

government shutdowns that they perpetrated back in 1995 and 1996, and they did say, or the country will blame clinton for it, but the other thing they said -- and this comes straight out of the republican philosophy is, no one cares. they're not even going to notice. so, i would say within about eight nanoseconds of the government shutdown, "the washington post" featured stories about government employees who work so hard all year long and now they're not going to get their check, they can't buy presents for their kids at christmas. they had great stories about families that drove all the way across the country. they had their dog and everything, and they couldn't get in a national park. that's what's going to happen, ok? you're right, boehner remembers that and so does other republicans. they're not going let that happen. they'll do everything they can to keep it from happening. but it might be a good thing. i thought about this several times during this conversation. we need an outraged public that we've got to do something about

our situation. this is only like a footnote to what's coming if we don't address our problem. the polls show the americans say that they understand that we have to do something about the deficit. the final thing i would say is sequester is a horrible idea. you called it stupid. at least different ways it's stupid. i completely agree. but it's better than nothing. >> fascinating. i don't want my wrap-up thoughts to be about export control. can i just say one thing? not that they're not wonderful. you know, i am constant until these conversations reminded of the great quote that people see change only in necessity, and necessity only in crisis. i would feel bad if i walked out of this room without saying we are clearly the most innovative country in the world still, and if we're not seeing this as an opportunity as this debt crisis is an opportunity, as this deleveraging crisis as an opportunity to think about how we as a nation are thinking about these bigger-picture

items, instead of thinking how we efficiently cancel programs, we're missing a real opportunity. we have to refocus on growing this pie. that's the solution. that's the solution. >> ok, go ahead. >> i got to add one thing to that. i agree. philosophically, you're right. but in order to see those opportunities and make them work, you need leadership, and that's the main ingredient that we lack right now. we do not have great leaders, either in the administration or on the hill. >> so we'll take now about a 10-minute break and then reconvene. please join me in thanking the panel. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> on today's "washington journal" -- we'll continue the conversation on the supreme

court's ruling on arizona's immigration law. democratic congressman raul grijalva of arizona will join us. then republican congressman mike pompeo will weigh in on the healthcare law. later, former merrill lynch and bank of america executive sally krawcheck joins us. "washington journal" each morning at 7:00 eastern on c-span. >> sunday, award-winning author and historian is our guest on book tv's "in depth." his passion for u.s. presidents and the great american pastime, baseball, has resulted in a dozen books, including 1920: the year of the six presidents. 1960, l.b.j. versus j.f.k. versus nixon. and about the fixing of the 1919 world series.

join us live with your calls, emails and tweets for david pietrusza sunday at noon eastern on c-span2. now, attorney general eric holder talks to the boys and girls clubs of america about his mentoring programs. his remarks are about 20 minutes. >> good afternoon. wait a minute. we got some work to do. now, you all had a chance to eat lunch, so you got to be through with your morning tiredness and doldrums, and it is time for a great afternoon. so, let's try one more time, a giant good afternoon to get

everybody stimulated. one, two, three -- good afternoon. i definitely want the after lunch spot going forward. this is the right one. well, welcome. welcome to all of you on behalf of boys and girls clubs of america. i'm jim clark, the president and c.e.o., and it is great to see all of you here today. i had a chance to spends time with you this morning, and hopefully you all had a great morning as well in the various sessions that you were able to attend. and i know you had a great time yesterday, because i still was hearing about it at 1:30, 2:00 this morning in the hotel. so, it must have been a great day. it's really a privilege to be here and to be partnered with closeup in this great, great program. and after our speaker this afternoon, i'll have a chance to talk more about the partnership and how important it is to us. but i really want to get to the program, and i want to

introduce to you a very special person to all of us at boys and girls clubs of america and one of you, one of our many members of boys and girls clubs. we serve almost four million kids across the country and around the globe and, of course, on 400 military bases as well. and each year we have a youth of the year competition across the nation and around the globe, and there is one that we select as our national youth of the year, to represent all of you and all kids at boys and girls clubs of america. and it is my pleasure to introduce him to you to say a few words and also to introduce our speaker. our national youth of the year this year is nicholas foley, and he comes from the sarah hines house, boys and girls club in pittsburgh, pennsylvania. nick will tell you his story a little bit later this afternoon, but let me introduce and bring up nick right now to introduce our guest this afternoon. nick? [applause]

>> thank you, everyone. i'm really excited to be here, and i'm glad i get this opportunity to introduce our speaker for this afternoon. eric h. golder jr. was sworn in as the 82nd attorney general of the united states on february 3, 2009, by vice president joe biden. president barack obama announced his intention to do this on december 1, 2008. in 1997, mr. holder was named by president clinton to be the deputy attorney general, the first african-american to be appointed to this post. prior to that, he served as u.s. attorney for the district of columbia. in 1988, mr. holder was nominated by president reagan to become an associate judge of the superior court of the district of columbia. mr. holder, a native of new york city, attended public schools there, graduating from stuyvesant high school, where he earned the regent

scholarship. he attended columbia college, where he majored in american history and graduated in 1973. he graduated from columbia law school in 1976. while in law school, he clerked at the naacp department of justice criminal defense. upon graduating, he moved to washington and joined the department of justice as part of the attorney general's honors program. he was assigned the newly formed public integrity section in 1976 and was tasked to investigate and prosecute official corruption on the local, state, and federal levels. prior to becoming attorney general, mr. holder was a litigation partner at covington & burling. he lives in washington with his wife and their three children. please give a warm welcome to our attorney general this afternoon, mr. eric holder.

awe awe thank you. good afternoon. i heard a much better good afternoon when i was bang stage. what's up? >> what's up? >> there you go, something like that, you know? oh, i don't believe he said that, ok. i want to thank you, nick, for that kind introduction, and also congratulate you for being named the youth of the year. it's a special privilege to share a stage with such an extraordinary young man this afternoon and an honor to welcome and you so many other aspiring leaders, determined advocates, and distinguished guests here to our nation's capital. just as you all understand, everybody here is out of school for the summer? i got bad news. this is something that actually you're going to be tested on, the speech that i'm about to give. so, i would expect you all to

be taking notes, paying attention, and i hope you do well on the test. this will affect your grades in your first semester next year, ok? you think i'm kidding. this is serious, all right. i am kidding. i know that you have had a remarkable and a very busy week so far, and i'd like to thank the boys and girls clubs of america, particularly james clark and chairman along with the president and c.e.o. of the closeup foundation and the board chair for organizing what is a really unique program, working to educate young people about the importance of civic participation and helping inspire generations of children to pursue their dreams and to reach their full potential. now, through initiatives like keystone, torch club, and project learn, and as a result of this organization's partnerships with americorps and the u.s. military, boys and girls clubs nationwide have worked for more than a century

and a half to instill positive values, to encourage a passion for lifelong learning, and to set high expectations for the future leaders who, before you know it, will take the reins of government and the private sector. get that phone. now, over the years, you've grown from a small group of concerned, but hopeful activists into a national organization. it boasts nearly 4,000 clubs that serve more than four million kids across the country. now, along the way, you've engaged thousands of mentors and community leaders in fostering creativity, inclusiveness, and the drive to succeed among countless children, particularly those who are at risk and those in need. today as i look out at the bright faces in this crowd, it's easy to see this work is really having a tremendous impact. no one understands this better than nick and his peers. as members of military-connected families, each of these young men and

women has been asked to make really great sacrifices. in many cases, you had to contend with long deployments, frequent moves to new cities throughout the country, even around the world, and all of the other stresses and difficulties that come with having a parent or a relative serving in uniform, on whichtimes in harm's way. yet every one of you has responded to these challenges with maturity, with courage, and with tremendous strength. you've earned the respect of your mentors, the admiration of your peers, and the sincere thanks of a grateful nation. and in the community of friends and allies who are here with you today, you found a strong and vibrant network of supporters, all of whom are ready and eager to stand with you no matter what. now, as nick said, upon receiving the youth of the year award, and i quote, "the boys and girls club is responsible for some of the greatest lessons and inspirations of my life." well, thanks to your exemplary work and the generous contributions of thousands of

adults who have committed to donating their time and giving of their talents, this organization has become a powerful force for change and for progress. so, as we gather in washington this afternoon at a time when so many of america's youth face significant obstacles and unprecedented barriers to success, i believe the need for positive and effective mentors like so many people in this room could hardly be more clear, and the opportunity to make a difference in the lives of our kids could not be greater. each year, more than a million students drop out of high schools across the country. far too many start down the wrong path, turning to violence, criminal behavior, or substance abuse, and just over two million are arrested. more than 15 million kids are left unsupervised between the hours of 3:00 and 7:00 p.m., when juvenile crime is at its peak. a third of all children and half of all low-income youth

fail to graduate from high school on time. and fully one in four violent crime victims known to law enforcement are children. now, of course, many of you are here today because you understand these problems. you've heard the alarming statistics, and you're familiar with the heartbreaking stories. and many of you have witnessed this harsh reality firsthand in your own neighborhoods and in your own schools. most importantly, you understand that each of us has a responsibility to confront these challenges, which, in many places, have reached crisis proportions. now, you are leading the way in responding not with despair, but with resolve. by serving as advocates and role models, the mentors and far beyond this room have helped to teach invaluable lessons to assist young people in developing the skills they need for future success and to instill a sense of self-worth and self-respect.

they led by example, guiding and reinforcing our children as they boost their confidence, rewarding good behave, and encouraging academic excellence. and they've had a lasting impact that will continue to guide the actions and shape the path our children take for years to come. now, in all of this work, boys and girls clubs have sent a powerful message, that in this country, we will never waiver in our determination to ensure that our kids have the tools and the resources that they need to shape a positive future. we will empower them in every way that we can. we will challenge them to make good decisions, and we will work to inspire each of them in turn to live out these values and take up these essential efforts in the lives they will lead and in the careers that they will build. the importance of this work is difficult to overstate. studies have consistently shown that through stable and

personal engagement, mentored children are more likely to grow and mature into confident and responsible young adults. in fact, the harris survey found that 90% of boys and girls club alumni graduated from high school. more than half of those interviewed even said that the clubs saved their lives. and as i'm sure all of us can say from personal experience, perhaps the strongest argument for mentoring and its greatest joy is that the benefits run both ways. during my tenure as attorney general for the district of columbia, my staff and i adopted an elementary school in a predominantly african-american part of the city. i was thrilled to have the chance to work with these students on a regular basis getting to know them, becoming vested in their futures. my colleagues and i found a really remarkable and rewarding sense of purpose in e relationships that we developed. i'm proud to say i know well and have seen firsthand that mentoring changes lives.

but not just for our young people. and that's one of the many reasons that i've been honoring to join president obama, the first lady, and others throughout this administration in strongly supporting mentoring programs. i'm proud of the great strides that we've taken in bringing a diverse group of stakeholders, including federal officials, state and local partners, community organizations, and leaders by boys and girls club members, all bringing them together to discuss how mentors can improve educational opportunities and outcomes and reduce juvenile delinquency, and i believe there's good reason to be optimistic about the continued progress that we'll achieve through the work of this organization and others, through initiatives like the first lady's corporate mentoring challenge and the important, ongoing work that's become and will remain a justice department priority. now, over the last three years, my colleagues and i have advanced strong, in some cases, historic efforts to increase federal assistance for

mentoring initiatives and exploring elved-based strategies for reducing children's exposure to violence in our communities. since 1994, the department's office of juvenile justice and delinquency prevention has awarded more than $480 million to support mentoring programs that reduce delinquency, deter violent gang participation, and lower school dropout rates. in 2010, we launched the landmark defending childhood initiative to complement this work and help leverage precious resources in order to better understand and ultimately to eradicate youth violence. we are now partnering with a wide range of allies across the federal government and far beyond to expand the national forum on youth violence prevention from six to 10 cities across the country. and in march, we introduced the new $20 million grant solicitation for research proposals that can give us a better sense of which programs are most effective. last october, we also announced a series of grants totalling

$15 pillion for national organizations, including the boys and girls clubs of america that offer mentoring programs specifically for young people, like many of you, who have a parent in the armed forces. these funds help support programs like the one that brought you to washington this week. and this administration's dedication to standing shoulder to shoulder with service members and their families, especial until times of need. so, as we look toward the future, i'm confident that this assistant will continue to help kids and military service members develop resiliency, become team leaders, and connect with other military families. it will help us to make good on our commitment to stand with those who have served and who are still serving our nation in uniform. and it will offer a chance to strengthen the blue star families that have sacrificed, sacrificed so much to keep this country safe. and at the same time, there can be little doubt that the hardest work is far from over.

for each of the remarkable, accomplished, and engaged people today, there are far too many others in big cities and small towns across the country who are in help. they will demand we summon our best efforts, that we marshal every resource, and that we react with optimism and without delay to engage even new partners and supporters in the service of this cause. now, i recognize that this will not be and has never been easy. but as i look out over this crowd of kids and passionate advocates alike, all of whom understand exactly what we're up against and have proven their dedication to seizing the opportunities before us, i can't help but feel confident about our capacity to build on the momentum that you all have helped to create. and i'm eager to see where each of you will help to lead us from here.

so as you continue this work, know you will always have a strong supporter and a good friend in this attorney general, as well as this president, as well as the first lady. on behalf of them and the rest of our colleagues, i want you to know that we are proud of you. we are fortunate to count each one of you as a partner. i want you all to keep up the great work, and i want to thank you all and wish you all the best of luck. thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> we a few questions that our teens helped develop for you. first is you talked a lot about mentoring in your remarks today. do you have any key points of advice to remind us of how to choose a good mentor, and who were your mentors? >> well, you know, i think that

finding -- i'm not sure there's a formula for finding a good mentor. there's almost a chemical thing, i think, that happens. you certainly want to look for somebody who is doing the kinds of things you think that you are interested in doing, somebody who's doing well at that thing in which you are interested, and somebody who you think will have an interest in you. you don't necessarily want to force somebody, you know, to become a mentor. you want to, i think, find somebody who you think has a natural interest in you. i mean, the people who are mentors in my life, certainly my father was one, the person who was his lawyer, mr. archer, was a mentor of mine, and he raised in me the possibility that i might become a lawyer. i was the first person in my family to go to college. my father didn't finish high school, and so mr. archer, my father's lawyer, helped me understaha