he will appear a for the british liaison committee which is made of three chairman of the house of commons select committee. the prime minister reported to the house of commons yesterday about the outcome of the european summit meeting on the crisis. he rejected calls to all the referendum we will have his remarks at 11:00 a.m. eastern here on c- span. we are featuring some o programs on c-span2. tonight a look at the presidency with an inside but it the world's most exclusive club. in his book, as president, they broke out 12 men who have lost a run for presidency but who have had a greater impact on american history.

on c-span3, american history tv with oral history interviews with key congressional staff charge of investigating president nixon starting at 8:00 p.m. eastern. at 10:00 p.m., a senior member of the committee during the investigation. all this week on c-span3. >> the life of a sailor include scrapping the deck in the morning, working on the sales, climbing along. whatever the duties are assigned. by the end of the day, you are ready for the rest. it is four hours long, four hours off. >> the life of an enlisted man aboard the u.s.s. constitution during the war of 1812. >> there's the possibility of

being whipped by a capt. 9 tells. it was always carried by an officer. the thing they never wanted to see was a petty officer getting ready for a flogging. let also this week and, more from this. he ran for president and lost the changed political history. sunday, 1928 presidential candidates house met. -- al smith. >> leon panetta has said the military plans to deploy it army units to strengthen security capabilities with nations around the world. he delivered remarks at the u.s. institute of peace on a new defense strategy that focuses on a greater strategic interest on the capability of others to help meet security challenges

and the future. yes a spoke about the need to invest in future capabilities such as cyber securities. -- he also spoke about the need to address in future capabilities such as a cyber security. >> good afternoon. we are delighted you are with us for a special presentation. i am the president of the institute. to start the evening off -- it is my special pleasure to welcome the chairman of the board of the institute of peace, robin west. [applause] >> thank you, dick. i am robin west, chairman of the board of directors for the institute of peace. good evening, and welcome to the acheson lecture. this is the fifth lecture. we welcome you to the george shultz great hall of the headquarters of the u.s. institute of peace. this building symbolizes our

belief that peace is restoring hope of humanity. it is located on the national mall. it is a statement of how we want to see ourselves in the world and the world to see us. this building was achieved through a public-private partnership. congress was supportive, as was the private sector. one of the first and most generous was lockheed martin. sector. one of the first and most generous was lockheed martin. it has helped support the lectures as well. private citizens also contributed. tonight's speaker was a leader, a tireless leader, in the effort to honor madeleine albright in all right wing. we are deeply grateful for this assistance. the lecture was established by the board of the institute of

peace to recognize a great figure in the nduct of america's relations with world. he was athe creation of a new national security structure to confront the rising threat of communism as well as one of the most enlightened adn effective policies ever created, the marshall plan for the rig construction of europe. in 2012, the old world is over. we confront different challenges than we did in acheson's day. it's a religious and ethics disputes -- better religious and ethnic disputes. the institute of peace represents an idea of profound importance that this country must find non-violent ways to prent and manage international conflict and develop the

abilities to stable in reconstruct nations after war. we help find practical solutions for dangerous world. this is what we are doing with our partners in the military and diplomatic community as well as non-government organizations. on any day, an average of one- third of u.s. ip's professional priest builders are deployed around the world in challenging places such as afghanistan, a rock, yemen, libya, sudan an. peace is tough business in for a places. the contributions of these people should be acknowledged. in an era of lowered resources and batter-- petit, -- battled i wanto salute the men

and women of the united states initute of peace who go in harm's way for safer, more peaceful world. the lecture seeks to recognize not only those new solutions but also the men and women responsible for implementing the solutions of protecting this country. they have come from both sides of the aisle, both sides of the potomac, and both ends of pennsylvania avenue. there are weight bearing people. they have no choice but to decide and act. they bear tremendous responsibilities. tonight's speaker continues the tradition. i will turn the program over to dick solomon. he will introduce our speaker. [applause] >> it is a special honor to have

secretary panetta with us this evening. he is a unique and distinguished american, who gives webster to the lecture series. he is an exceptional public servant and a longtime supporter ofhe institute of peace and a secretary of defense and x official member of our board of directors. he is a private citizen and a supporter of our permanent headquarters project. this facility is a monument to our national commitment to build a more peaceful world. burton as we have been this past decade by the wars, it important to remember that the proportion -- t promotion of peace is our purpose with the

world. peace building requires well- trained professionals. it demands a dedication and risky work. it requires partnerships. it requires t work of the institute of peace. before introducing secretary panetta, let me say a few things about our origins. the national need for a proper piece establishments was envisioned by our first president, george washingn, as early as 1783. however, it took two centuries of and the trauma of the vietnam war to the congress to embody washington's vision in the patient -- institute of peace, which was legislated into life in 1984. one of the unanticipated aspects of the growth of the institute

is the active contribution that we now make to our country's national security. our work today with the military spans the whole spectrum of what we do here usip, from practical training and the skills of conflict management to collaboration between civilians and military professionals as they prepare for their deployment aboard to be on the ground stabilization and reconstruction programs in zones of conflict around the world. the institute's activities on the ground over the past decade have enabled us to build strong partnerships throughout the military. with the vision, brigade and command staff and with leaders such .

senior administration officials and members of congress and others make special request of the institute, taking advantage of ourtanding as an independent bipartisan natural organization, a center of innovation in matters of conflict managent. we undertake important policy assessments. the iraq study group was another notable project. citizen panetta was a distinguished member of the group before he returned to public service. one of our more recent contributions has been collaborating with the u.s. army's peacekeeping and stability keeping institute. it has published the first ever

army field manual on stabilization and reconstruction work, which is a how-to guide for the military and civilians who are rebuilding countries that have been ravaged by war. the worl of the 21st century prevent dramatically new challenges to our national security, certainly when we compare them with the challenges we face in the violent century now passed. thats why i believe the most important work of the institute of peace is yet to come. in the 28 years since the creation, our mission has expanded because the role of the unitedtates as a world leader for security and peace has been dramatically transformed. the institute's contributions are more relevant as to partner with asian -- agencies to our conference which the government as well as -- what the

government as well as with the private sector for conflict management. today we still with the world's challenges of nuclear challenges, ethnic and religious conflict, and the instabilities of economic globalization. the series provides a podium for our most important national leaders. let me say a few words about leon panetta. there are few officials in public service today who have secretary panetta's exceptional range of experiences. in 16 years in congress were followed by service in the executive branch as director of the office of the budget, president clinton's chief of staff and president obama is director of the cia and now

secretary of defen. secretary panetta's public contributions extend well beyond the halls of government. before he arrived at the sea -- cia, he and his wife directed the panetta institute for public policy based at california state university. it is a non partisan, not for profit center that seeks to instill the virtues and the values of public service. of all of his public service, i would suspect too much to say that the highlights of his career have been his contributions to the iraq study group and his support for the construction of this permanent headquarters for the institute of peace. every day as i come to work, i see from my office window the halled ground of the national cemetery. i see the root of the pentagon

-- the roof of the pentagon and a blanket is watching us from his memial close by the korean war and the vietnam veterans memorial. this dramatic building and its special location makes us aware of the challenges and opportunities for and responsibility for uso better fulfil our congressional mandate of making the united states a world leader in peacemaking. with those words of welcome, secretary panetta, thank you very much for giving us your time and your wisdom. please join me in welcoming the 23rd secretary of defense. [applause]

>> thank you. thank you, for that kind introduction. thank you for the invitation. to deliver the fifth dean acheson lecture. dick, let me start by commending you on two decades of leadership at the u.s. institute of peace. i also want to wish to be very best as she prepared to step down after a long and distinguished tenure here. do not get too comfortable in retirement, comes from someone who knows what i am talking about. i am proud to have served in the house when we passed the bill that established this institute back in 1984. under your leadership, this institute has changed itself

from a research center into an organization that provides invaluable expertise to prevent, to mitigate, to manage conflict throughout the world. depling staff to iraq, to afghanistan's, to libya and other conflict sounds. -- zoens thanes. that is what was envisioned. to have a facility that would actively engage in the effort to preserve peace. i did have the honor of serving as a member of the iraq study group, which was suppoed and staffed by the institute. it washaired by former secretary of state jim baker and former congressman lee hamilton.

i i believe that the report of the iraq study group made an important contribution to the debate into the strategy that alternately brought that were to a responsible and. the institute's work has saved lives. it has enhanced our national security. in doing so, it has stayed true to the spirit of e man whose legacy we celebrate tonight. , dean acheson. one historian once observed that in a city of gray and anonymous men, dean acheson stood out. like a noble monument from

another and more vivid era. 60 years after serving as secretary of state, and more than four years after his ofth, acheson's unique blend strategic brilliance and rememberein thise well town. having just enjoyed the hospitality of your car to a reception, use a reminded of t time when a newly elected president kennedy paid a call on the acheson at his georgetown home. acheson offered him a martini, but kennedy declined and asked for tea instead. that deeply offended acheson. after all, according to a

friend, he never trusted a man who would not have a stiff drink with him. i know i would have been his very dear friend. [applause] in fact, i learned that acheson and i share more than a love of stiff drinks, we both rose to prominence in the executive branch when we were both and we wereyoung, adn we we both fired from our jobs. acheson was fired from treasury by fdr in 1933. i was fired from the office of civil rights by president nixon in 1970. in both of our cases, we first heard about it from the press. acheson was eventually rehired by roosevelt at the beginning of

his third term. i was never in danger of being rehired by president nixon. [applause] i made the wise decision to g backo california. the nation is in the very fortunate to have had the service of dean acheson. there is perhapso span of time in american history when the country faced more international turmoil, uncertainty, and conflict than the decade during which dean acheson served at the state department. it began just months after pearl harbor in 1941, and extended to the truman administration. despite our victory in wwii,

dean acheson became secretary of state in 1949. the global security landscape was ominous. was at the height of its powers, and uruguay in ruins, adn we face a -- western europe was in ruins and we face a crisis of berlin. the soviet union would test its first atomic bomb within months. north korea would invade the south. in the face of these challenges, and others, dean acheson help guide the truman administration to take some bold actions. from the marshall plan and the berlin airlift, to the koreaention in corv

thatelped lay the grodwork for an ultimate victory in the cold war. dean acheson was a leading proponent for asserting america's military might. dean acheson also strongly believed that erica should not seek to shoulder the burden and costs for global security alone. instead he understood that a key part of a song defense was to build the security capacity of our allies and our partners. that legacy is deeply relevant to the argument that i like to make tonight. in order to advance the security and prosperity in the 21st century, we must maintain

and enhance our military strength, but i also believe that the united states must place even greater strategic emphasis on building the security capabilities of others. we must be bold enough to adopt a more collaborative approach to serity. both with in the united states government and among allies, partners, and multilateral organizations. from western europe and nato, to south korea, from the truman doctrine, to the nixon doctrine, working with key allies and regional partners to build their military and security forces became a major component of u.s. national security

strategy after wwii. this approach has endured long beyond the cold war, andor the united states military, it has gained new and appropriate important as a mission in the decades since 911. in 2006, the same year as the barack study group convened, -- the iraq study convene,, they recognize the critical portance of having the authorities and resources to perform what it called building partnership capacity. since then, as the united states helped turn the tide in iraq and afghanistan, confronted terrorism in yemen, the philippines, the form of africa,

and participated in the nato theation in libya tha, approach of working with and through otrs has only grown in importance to our mission of defending our country. particular, the task of training, advising, adn partnering has moved from the periphery to become a critical skill set ross our armed forces. it is in many ways the approache that this institute hs promotedor nearly three decades. standing of the iraqi security forces was central to our ability to bring the wall -- were to a responsible conclusion lastecember.

achieving our goal in afghanistan summer rally depends on building and afghanistan that can secure and cover itself. the reality that is now guiding the strategy that general allen is implemented on the ground as commander of the nato effort. as the war in afghanistan begins to wind down, the united states has an opportunity to begin to focus on other challenges and opportunities for the future. as we do so, the united states is grappling with the deficit and the debt problem that has led congress to require us to achieve significant savings, nearly a half a trillion dollars in savings over the next decade. unlike past defense situations,

we have experienced those two of today week stilltime confront many challenges in many threats, the continuing threat of violent extremism, even though we have done damage to al-qaida in pakistan, we continue to have terrorism in yemen, somalia, north africa. we confront the threat of weapons proliferation. we confront the threat of cyber intrusions. we continue to experience cyber attacks every day. it is without question the

battlefields of the future. we continue to see be destabilizing behavior of nations like iran and north korea, the rise of new powers acss asia, adn the drama -- and the dramatic changes that we have seen and fold across the middle east and north africa. these challenges, coupled with a new fiscal reality, led us to reshape our priorities with a new defense strategy for the 21st century. it is a strategy that places a greater emphasis on building the capabilities of others. to help meet the security challenges of the future. and to sustain a peaceful and

cooperative international order. the strategy is built on five key elements. first, we know we are going to be smaller in -- and leaner. that is a reality. we must remain agile, flexible, quickly deployable, and on the cutting edge of technology. second, we must remain strong enough to confront aggression and defeat more than one enemy at a time. we face the threat of a land war in korea. we have to be able to deal with that at the same time the possibility of closure of the straits of hormuz. we have maintaed that capability. third, we will also continue to invest. in the capabilities of the

future. yes, we have to meet our responsibility with regards to reducing the deficit burden, but at the same time, we also need to invest in cyber, unmaed systems, , invest in, special forces operations, and the ability to quickly mobilize in the event of crisis, adn also importance of maintaining our industrial base. fourth, our new strategy prioritizes the asia-pacific priotizesnad these are the areas with the most significant security challenges. in those regions, we will retain and eveenhance our military presence, to ensure that we can project power and deter aggression.

but we are also going to help more nations share the responsibilities and costs of providing security by investing in alliances and partnerships, as i explained at the shangri- la dialogue earlier this month. and lastly, we will maintain a presence elsewhere in the world, particularly in regions like europe, africa and latin america. we must use our best skills and our assistance to build new alliances, new partnerships throughout the world by engaging in exercises, in training, in assistance and in innovative rotational deployments. the benefits of this emphasis on a partnered approach to security were apparent to me

during a trip that i took to colombia in april. there, the united states has spent years training and equipping the military to take on the farc, a narco- trafficking terrorist organization. not only has colombia made significant gains over the past few years against the farc, it is stepping up to help combat illicit trafficking in central america. colombia is now one of fourteen countries working cooperatively to disrupt narco-traffickers in central america. i also visited brazil and chile, and saw impressive demonstrations of their growing

military capabilities -- capabilities that are enablg them to contribute to security in central america, africa and across the globe. what i saw in these countries reinforced a new reality. in the past, the uted states often assumed the primary re of defending others. we built permanent bases. we deployed large forces across the globe to fixed positions. we often assumed that others were not willing or capable of defending themselves. our new strategy recognizes that this is not the world we live in anymore. but implementing this new strategy will demand adjustments across the entire

national security apparatus. tonight, let me outline a department-wide initiative -- "building partnerships in the 21st century." its fundamental purpose is to improve our security cooperation across three broad areas, first, by taking a strategic approach to security cooperation and making sure that we have comprehensive and integrated capabilities in key regions in order to confront critical security challenges, second, ensuring the defense department continues to enhance the skill sets and capabilities that are needed to build and sustain rtnerships, third, streamlining the

department's internal processes to speed up and improve security cooperation programs -- and working with the department of state and congress to do the same. let me talk about the first point, which is a comprehensive and strategic approacho security cooperation i have urged the department to develop innovative approaches to meeting future security challenges, approaches that take better advantage of the opportunities for partnership and help us to more effectively advance a common security vision for the future. to that end, i've directed all of the geographic combatant commanders to think and plan strategically when it comes to security cooperation, including all their regional activities --

from joint exercises, exchanges, and operations to more traditional forms of security assistance. during the cold war, u.s. partnership efforts were principally directedt countering a single adversary, the soviet union. in the 21st century, we must build partnerships that enable us to better meet a wider range of challenges. to that end, i see us building networks that leverage our unique capabilities -- and the unique strengths of our allies and partners that share common interests -- to confront the critical challges of the future. that means continuing to work with nations in the horn of africa, the middle east and asia to counter violent extremism. it means working withartners

in the persian gulf to strengthen their ability to counter iran's destabilizing activities, and it means advancing collaborative efforts with israel to deploy systems like iron dome, which protects israeli citizens against the threat of rockets. it means investing in new capabilities with allies in northeast asia, such as missile defense, to counter north korea. we will also work to strengthen the maritime security and humanitarian assistance capabilities of key partners in the indian ocean and in southeast asia. we will work with partner nations in the western hemisphere to tackle the challenge of illicit trafficking and response to natural disasters. and we will strengthen nato's capabilities in missile defense, meet our article 5 commitments, and ensure that we

can conduct expeditionary operations with our european allies. and we must ensure that they can assume a greater burden of the responsibility when we do engage. these networks will be supported by innovative, small-footprint deployments of u.s. forces and capabilities to key strategic locations around the globe -- from northern australia to singapore, from djibouti to rota. combined with our traditional forward presence and other capabilities, these deployments will enhance our ability to train and to operate with partners, and to respond to future crises. to succeed in the efforts, we

have to coordinate even more closely with the department of state. my goal is for the department of state to have a leading role in crafting and conducting u.s. foreign policy, so that we can reaffirm and strengthen our strategic approach to defense partnerships. but it is also clear that building partnership capacity is a key military mission for the future. a second area is to enhan dod's capabilities in this area. building strong partnerships around the world will require us to sustain and enhance american military strength. but all of the military services, and the department as

a whole, also must adapt as partnering with foreign militaries becomes even more o a mainstay of the u.s. defense strategy. we have got to develop a "partnering culture." to that end, those security cooperation capabilities and skill sets once considered the exclusive province of the special operations community will need to be built up and retained across the force and among civilians. in particular, it is critical that we invest in language training and in cultural expertise throughout the department. building the capacity of defense ministries and other institutions, which have not been a main focus of efforts, must become more prominent.

we need to work collaboratively with state, usaid and non- governmental organizations to help partner countries so that they can modernize and reform in a way that contributes to regional security. the u.s. army's plan to align a brigade combat team with each regional combatant command -- which will be rolled out next year with africa command -- is one example of the kind of approach that will boost our partnership capabilities and regional expertise. and more broadly, i want to see the military retain the hard-won capability to train and advise foreign security forces in support of stability operaons like in iraq and afghanistan.

but i also want us to become better at working with more capable security partners on our shared security interests particularly rising powers like brazil and india [that] can make significant and positive contributions to global security and prosperity. and lastly, streamlining processes. to better partner with our more capable friends and allies requires that we make our security cooperation processes more efficient and more agile. as part of this effort, we are working with the state partment to ensure that our new and most flexible security cooperation tools -- particularly the new global security contingency fund -- are used to their maximum

advantage. these "dual key" programs -- which require approval by me and by secretary clinton -- have been a big step forward to create incentives for collaboration. but our security cooperation programs still rely on a patchwork of different authorities, different funding, different rules governing defensexports depend on processes that are truly cumbersome and were built during the cold war. i strongly support efforts to achieve comprehensive reform in these areas through legislation. but i have also directed the department of defense's senior leadership team to streamline and strengthen those security cooperation procedures that are under our control, and that

maximize our use of the highest priority and most effective programs. we have also made substantial progress in falitating defense trade with a broad range of allies and partners -- an area i believe of critical importance to both our national security and the global economy. as one indication, annual u.s. government foreign military sales have grown from an average of about $12 billion at the beginning of the last decade to an average of roughly $38 billion over the last three years. there has also been a tremendous growth in cooperave acquisition efforts with allies and partners, including the joint strike fighter and the nato alliance ground surveillance programs, and in u.s. industry's direct commercial sales of defense equipment and services abroad.

defense trade is a promising avenue for deepening security cooperation with our most capable partner nations. our on-going work in reforming our export control system is a critical part of fostering that cooperation. each transaction creates new opportunities for training, for exercises, for relationship building. it also supports our industrial base, with roughly one third of defense industry output supported by defense exports. this is important for arican jobs and for our ability to invest in new defense capabilities for the future. india is one such country that would benefit from changes to our system. while in new delhi earlier this month i announced that my deputy, ash carter, will work

with iian counterparts to streamline our respective bureaucratic processes to better enable defense trade. it is clear to me that there is more that can be done to facilitate defense cooperation, with our traditional allies and our new partners alike. we are working to make u.s. government decision-making simpler, faster and more predictable for our partners. this means better anticipating their needs ahead of time, fast-tracking priority sales, and incorporating u.s. exportability requirements up front in the development process.

a new special defense acquisition fund is allowing us to begin procuring long-lead, high demand items in anticipation of our partner requests. and we've also built exditionary requirements generation teams that send acquisitions experts abroad to help our allies better define and better streamline their requests. and a proposed defense coalition repair fund will allow us to repair equipment in anticipation of partner requests. all these efforts are a priority for me, and for the department of state. and i firmly believe that judicious sales or transfers of capabilities to responsible governments are vital in maintaining peace and deterring would-be aggressors. the security challenges of the future require us to partner,

and the plan of action i've outlined will allow us to do so prudently -- by protecting the "crown jewels" of u.s. technology while puttingn place the programs and capabilities and processes to build partnership in the 21st century. but only some of this is within the control of the executive branch. congress too must also take action -- and we will work with them to do so. speaking of congress, the strategy i have outlined cannot succeed without their stable and consistent support. one of the greatest dangers to national security today is the partisan gridlock that too often fails to addrs the problems facing this nation.

i came to washington over 40 years ago and in part of a different generation. when i first went to the senate as a legislative assistant, there were bold leaders like senators mansfield, aiken, russell, javits, jackson, fulbright, dirksen and others. republicans and democrats who were willing to work together to meet our domestic and foreign challenges. even when i was a member of congress, i saw speaker tip o'neill and congressman bob michel work with senators bob

dole and george mitchell to address budget, social security and foreign crises together. too often today, the nation's problems are held hostage to the unwillingness to find consensus and compromise. and in the face of that gridlock, artificial devices like sequest are resorted to in order to force action. but in the absence of action -- in the absence of action sequester could very well

threaten the very programs critical to our national security -- both defense and domestic. any new defense strategy is dependent on new and innovative deployments, on diplomacy and on assistance, and it must rest on a reliable political system prepared to make decisions on behalf of our national security. that is a critical ingredient to the success of the partnership strategy i just outlined. it is clear that even as we turn the page on a decade of war, the international security environment will remain complex and threatening. but as we look at each challenge we face, it is clear

that wehave many allies and partners who share an interest in helping advance a common security vision, and that we are more secure when they are more capable of helping us. nearly fifty years ago, and more than a decade after he left government, dean acheson wrote an ticle called, and i quote, "the practice of partnership." in the aftermath of the cuban missile crisis, acheson argued for a revitalized militar strategy to counter soviet expansionism. a key part of acheson's vision was for european allies to build up their conventional military forces, complemented by a strong u.s. force posture and nuclear deterrent.

he saw a strengthened network of alliances as the key to security and prosperity in his time. what i described tonight are some of the broad outlines for what ie called building partnership in the 21st century. we must continue to map out a new path to build up the strength of our allies and partners around the globe, using both old and new tools. we must, and we will, remain the strongest military power on the face of the earthbut more than ever -- more than ever -- our strength depends on our ability to govern and to lead, and it depends on capable allies

and partners willing to help shoulder the burden of global security. that is the key to preserving and protecting not just our national security but our democracy. thank you again for having me. god bless you and god bless the united states of america. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] secretary, thank you for your vision and our support of what the institute is all about.

we like to show you the earlier of lectures. please join me. of the earlier atchison features. [applause] join me here. we have another unexpected presentation debate. this is a special day for the secretary of defense. we are extmely pleased to wish him a happy birthday and all of you as you leave will have a taste of this a very attractive cake to take wh you. happy birthday to you

happy birthday to you happy birthday dear mr. secretary happy birthday to you ♪ [applause] >> thanks a hell of a lot. >> a dimon put all the candles-- we didn't put all the candles we could have. >> what do we do? [applause]

>> coming up in a couple of minutes we will take you live to london where david cameron will take questions on the impact of the european debt crisis and the british economy. he is appearing before the

british liaison committee. he will comment on the resignation of robert diamomon, resigning after they agreed to pay for under $50 million to settle accusations that he tried -- 450 million to settle accusations that he tried appeared >> we must take responsibilities. on the banking scandal here in the u.k. we need to take action across the board. introducing the most transparent rules and any major financial center and the world, increasing the taxes and ensuring criminal penalties for those who break the law. clearing up the regulatory failure. >> the british people want to see two things.

they want to know we will learn the broader lessons of what happens. the serious office is looking at whether there are any criminal prosecutions that can be on the second, i want to establish a full parliamentary committee inquiry involving both houses, -- >> part of the questions from yesterday's comments before the house of commons. all of that available in our video library. now we take you to london where the prime minister is testifying before the british liaison committee. >> i will have to reclaim some time from you at the end. the two subjects today, the impact of the euro zone crisis on u.k. public policy. the second, the civil service reform.

we said yesterday we recognize the single currency and means the euro zone may need a closer integration. >> they are certainly planning for it. there was a set of short-term measures that the euro zone countries agreed to, which would allow recapitalizing spanish banks directly, using a mechanism to buy off bonds in countries with high interest rates. then there's the four president's report. the european union could have four presidents. and the four president's report goes into some logic of banking

union, greater fiscal union and political union. if you want a single currency and doing well, you need to do at least some of these things. if you would like remorseless democratic logic, it's very difficult to do these things. >> should it be the british assumption that that is how things will go and we should be planning what we do not under the assumption that it's going in that direction? apparently, yes, because you can see the moves toward remorseless logic and towards banking union and moved towards some fiscal union. it is difficult to know exactly the direction the euro zone will go. that's why i said yesterday we have to show a strategic and tactical patients about this because momentous things are happening in the european union.

countries have to make difficult decisions. it's not entirely certain to be sure how they will go. i assume they will take further steps. you could think of it in three different ways at. you have the first option, very rapid move to integrated euro zone, to clear a long-term uncertainties. the third option is they cannot agree anything and the project goes off the rails. the second option in the middle, they make some progress, short-term measures. and some progress on integration measures, but can being kicked down the road. a lot of people see option two is quite likely. >> yesterday you said with regard to the european union, "i don't believe the status quo is

acceptable." i said the status quo is untenable. that was september. >> we should leave it there then. >> but there are serious questions regarding the framework of the existing treaties which you will have to answer. not only from my taxi driver but from the whole country, judging from the recent opinion polls. it appears the european union council as a whole as well as certain euro zone member states have proposed a banking or

fiscal union by the end of 2012. don't you accept that the change in the status would be a fundamental change in our relationship with your opinion? >> somewhat. the point i was making yesterday on the status quo is not acceptable, what i was saying is that the exact status quo that britain has in your opinion is not acceptable. i would like to see a better balance of powers between britain and brussels and i would like to see some powers returned. the manifesto that you and i stood on. that's why i said the status quo was not acceptable. i think you are saying the current status quo is not sustainable. i don't think it is sustainable, because euro zone countries will have to integrate. about banking union, this particular one will depend on how it's done. if the 17 countries of the euro zone bring about a banking union for themselves, which i think

they need to do in a single currency, you need to stand behind each other's banks in some way, if we can get proper safeguards in place, then that would not be a fundamental change for us, because our banks, which will be regulated by the banks of england, are taxpayers would be standing behind british banks and by european banks. so i don't think that would trigger a massive change for us in europe. >> you are distinguishing between the status quo for us and the status quo for the european union? >> yesterday i met specifically for us, my view as the leader of the conservative party with the manifesto. the status quo that we have in europe, we would like to see some powers returned. i think there will be opportunities in the future for that to happen, which is what we discussed yesterday. i think the point you're making is that the status quo within

the european union is not sustainable, because change is needed to make sense of a single currency. i think you go on to say that that change will change britain britain's relationship with your opinion. i think we can make sure 17 countries of the euro zone are affected and not us. >> that is very hopeful. what will be the effect of the union on democracy? >> that's >> that's a decision for those countries. we are able to have an independent monetary policy. our democracy is a lot less constrained than those countries inside the euro zone. i think the european union countries will have to make very

difficult decisions about keeping up sovereignty and restrict the elements of their democracy. inside a single currency, if you have mechanisms where the stronger countries have to support the weaker countries, you are going to have more control on what you can spend and tax and the rest of it. and has implications for their democracy. that is a decision for them and not for us. we have made our decision not joining a single currency, because we did not want to give up sovereignty. those countries inside the euro zone will have to make difficult decisions. >> 0 they would be less democratic as a result, so that could have an obligation for us as well. >> if the spanish decide to restrict what they can do in terms of tax and spending, if they restrict the level of budget deficit if they're able to have, if they enter inter

agreements with other european countries about the death issue, yes, that restrict their freedom. but that is something that affects them. that is not something, as long as we stay out of the euro zone, will affect us. >> if they don't do those things, we will be affected by the continuing crisis. >> that is correct. we need the euro zone prices to be resolved. when i gave out my three potential options, for the state of the british economy, the option which would be best forced us his early short term action to deal with the problems in the markets and some moves toward fiscal and other forms of union for the yeaeuro zone countries and that would give a calming affect the long term to the markets and that would help us. it has big implications for

them. that's why it's very difficult for this to happen. it would be the best outcome for the british economy. >> what changes in the european union need to be made which would not only impact euro zone members but on those outside like the united kingdom? >> this is a much more difficult question, because you can see the sorts of choice is the euro zone countries need to matke. how those choices are made, is it a series of one large european tree or a series of small trees some members of the european union can go ahead and do things under the existing treaty -- i don't know the answer to that question. i don't think anybody does. which is the reason for fashioning a new settlement between britain and the european union. we should show strategic and tactical patientce.

we cannot tell how fast the process will go or what it will involve exactly. we know that big change is happening and even bigger changes coming. >> winston churchill said that we should be associated but not absorbed. >> william hague said "in europe, not run by europe." if the euro zone is going to survive, it will have to make moves toward a more integrated state. we will not be part of that. you can choose your phrase accordingly. >> they will not call for convention. they would decide what each member state wants. >> that's a reasonable suggestion. i think that's what's happening in the moment is serious and

proper conversations within european countries and between european countries about what needs to be done. i think we are only at the beginning of those conversations. how fast will the euro zone move to integrate? what will the relationship be with those countries outside the euro zone to those countries inside? you have countries like britain and denmark who don't want to join the euro zone. and you have poland who would like to join. there's a lot of work and thinking to be done and conversations to be had before we get to any convention. >> prime minister, there seems to be unanimity between you and the gentleman over the future. how are we going to get their is the question. at the december 2011 council we

spoke of a number of safeguards that we requested. if there is a request for a change, would you put forward those safeguards against as a basic requirement or have we moved on from there? >> i think it is going to depend on where the next move comes from. what happened in december is that the euro zone countries wanted to have a fiscal compaq. they wanted to have a deeper integration. i said if you want to more deeply integrate the euro zone, that will have an effect on the single market, so there should be more safeguards. i cannot secure that. they did a tree outside the european union, outside architecture of the european union, because they cannot get what they wanted and i cannot get what i wanted. if you look at future treaty

changes, you might find that what the euro zone countries want to do can only be done by amending the existing treat it. the option of going outside the treaty will not be there. we cannot know exactly what the move will be made next. all we know is that the process of integration of the euro zone will move for a. but those safeguards would be included. it's they are very sensible safeguards. >> some people might get lost in all this institutional detail. the point i make is britain has 40% of europe's financial services industry. it is a vital business for britain but also for all of europe. -- 14%. so it is important. if you are going to see the euro

zone integrated and see those 17 countries start doing more things together, we have to think, are we adequately protected from those 17 caucusing together and legislating in a way that could damage a vital industry for britain and one where we have a significant relationship with other countries? when you look at the safeguards, we were seeking safeguards for the single market in general but also for financial services industry and how it is regulated with a concern that the euro zone integration could mean caucusing. i think it was a reasonable set of things to ask for. i'm sorry we did not get them. i vetoed the treaty was the result and they had to do a tree outside the euro zone. if the same sorts of issues raised their heads, we would have to look at those safeguards in the future. i'm only doing my job of protecting the british national interest.

correct the government is engaged in a balanced of competency review. that is powers that we want back from the european union. there have been press reports that the work has been done, but there's disagreement within the coalition and that is delaying publication. you said to the house this would be launched shortly. >> preliminary work has been done, but there needs to be proper coalition before the full ahead. in mides we need to describe a balance of competence in. it will look at competency is currently held by the european union and currently held by nation states. it will include facts and figures and costs and benefits than i hope will be able to

inform the debate, whatever position you take. there will be evidence produced that it should go back to nation states or the other way. but the report should provide the facts, figures, and arguments on which the vital national debate it can run. i hope that we will be able to start the process before the summer, but we need to have. agreement to have. >> thank you. >> are other moments when you think idealogical you don't want things to be on the table because it might involve something we have chosen not to take part in? >> we made a decision as a country not to join the single currency, so we cannot expect to sit around a table every time the single currency countries are discussing the inner workings of that currency.

that seems to me and to be perfectly reasonable for them to meet separately to discuss those things. so, i have always believed that you can have a europe of different memberships, different groupings. france was not in the political center of nato for a long time. if you want to be in the room having that discussion, you need to be a member of the single currency. that is too big a price to pay. if the banking union goes ahead of 17, we may need. to think need. what happens when those 17 countries are discussing banking and financial services issues? soon those 17 countries will have a qualified majority. as a member of the 27 at, does that mean we need safeguards? i think, yes, we do.

that is what i was aiming for in december. in many ways because the treaty last december was about fiscal union and i was arguing about financial services. people did not see the connection. i think the connection will be even clearer in the future because of the dangers i pointed to will be even more apparent. i am an optimist. i believe britain has a perfect right to make these arguments. i think they are quite understood by the commission and others. they don't always agree, but they do see we have legitimate interest. our membership is worth just as much as anyone else. we are big contributor, a big player. we have a large chunk of industry and we have legitimate issues that we should raise. we should not have any compunction in. raising in >> there are a range of policies being advocated in many different your opinion and courses which may be contrary to

u.k. interest. things such as the financial transaction tax, the consolidated corp. tax, the european union budget, and banking supervision. i assume you would probably want to oppose all of these proposals. how confident would you be that the u.k.'s able to stop them, given the growing strength of the euro zone countries? >> the list of things you have read, we will not take part in the financial transaction tax. if you look at the language, it's as work and discussions should be carried forward, it does not say there is agreement. we don't support that. if the key thing is making your case and defending your interest, but also about those it in your life.

we would build a strong alliances with like-minded countries. for instance, making sure the banking and goes ahead with 17 other than 27. the swedes want to regulate their own banks outside the euro zone. on other occasions, you have countries that share our market views like italy and spain, center-right government. sometimes you are on your own and you have to hang tough. >> you have 17 strong and common agenda. it can be far more difficult to form alliances. >> you should always assume the 17 in the euro zone have the same interests. they have vigorous debates and arguments.

second, then you have a choice. do you want to be in the single currency and so you are part of that block? i think that you have to seek safeguards and some of those are about the single market. i would argue the single market is one of europe's greatest successes. britain should be just as keen on try to defend the integrity of the single market. it's possible to do that. >> on the uk's negotiating position with the european union with regard multi-annual 2014 framework, will our ability to negotiate on these things be more difficult? >> is always difficult to negotiate on money spent.

you have the great budget disciplinarians like the dutch and the fins and the french and germans who are with us on wanting to have tough standards. they would like to seeing a big expansion of the structural funds. the euro zone will act as a block on vacation. when it comes to the budget, you have big contributing countries. they will not necessarily be on the same side as other countries. >> i asked a senior ambassador of your opinion in what his reaction would be if we wanted to renegotiate with the european and in and he rolled his eyes and said we have quite enough on

our plate -- that he has quite enough on his plate already. >> first, we should not underestimate the extent to which the euro zone in particular but the european union in general is usually focused on fire fighting the euro zone crisis. we have had -- i've lost count of how many emergency european councils we have had, but that is the focus. people are not focused much on other things besides that. there's a growing realization that there are big changes taking place. when i became prime minister and, the assumption of around europe was there would not be another treaty change. i think we have already had two already. and so, there's an understanding that change is coming, changes going to need to accommodate different needs.

i think is britain put its case responsibly and reasonably and explain that we would like to remain powerful in the single market and your opinion, but we do have [unintelligible] and there should be possibilities for new settlements for other countries. that's reasonable. it's never going to be easing. none of these things are easy. one positive development is the fact that we got out of the bailout fund. that was returning to power from brussels to britain. i would like more on that front as a conservative leader. the focus at the moment is firefighting. the changes are coming. >> it was said yesterday it may result in a number of small trees. would that mean we would have a number of referendums?

>> what triggers a referendum in different countries valerie's hugely. varies hugely. the test for britain is we would automatically have a referendum. we don't know what is coming next. small tree or big treaty, time of reflection, a convention? i wish i could be more clear. >> we may have a treaty without a referendum? >> we already have the treaty that in the house, the esm tree, an amendment to the european trading. it is part of the deal that gets them out of the bailout fund, because it does not pass any powers from brussels.

>> the final decision on the bill will determine how much money is available to move forward. at the same time we will move forward with the cohesion fund and structural fund. by britain being excluded, those countries will be looking to do deals that made disadvantage the british farmers and fishermen? >> i don't think so. when the euro zone countries get together, all the discussion is about the financial framework, it the cap, the structural fund. we have discussions about the

future budgets at the council. it's not as if the euro zone countries agree with each other about budgets. if your argument is we should not be excluded from the 17 when they meet, the only way to stop that happening is to join the euro zone. i don't think there's a problem on. that on >> you and i know the negotiations often take place after dinner. the fact that we are not there, our friends and allies are in the minority. i'm not advocating membership in the euro zone. >> i know. the point about the framework negotiations is that it is conducted by unanimity. you'll have all sorts of caucuses. holland,ritain,

finland, denmark, they will be caucusing to make sure the budget does not increase. so we have their common interest as net contributors. with a largeries amount of farmers will caucus to try to caucusthe cap being reduced. britain oppose interest is to try to restrict the level of spending. the focus of spending there is some positive pro-growth things like research, which we do quite well. we should be arguing that the cap should go down. your opinionew% of in gdp. we have our own argument, our own allies, our own caucuses. in the end, our priorities should be to protect the rebate and focused the european union budget on promoting growth rather than spending.

>> [unintelligible] >> the countries that receive them will caucus together. because not stop that. >> they will have access to other euro zone countries over which they will have influence at a time we are not present. >> the only way you can always be in the room is to be a member of everything. we're not a member. you could argue, give up on our borders and to join so we could have more coffee and cognac with our partners. i don't think that's a good answer. i think we should be frightened of a variable country with variable members involved in variable projects.

our interest is not being in a single currency. i think we have to be a a bit more relaxed bita europe of different types of memberships. of thought we had agreed on .hat -- i thought >> [unintelligible] would you make money available so resources could be made to the farmers to make up the shortfall in direct payments? >> my understanding of what happens is in order to deal with the impact of devaluation, depreciation of the euro, on the pay that farmers get, they try

to smooth this out. that the level at which we should try to do with that issue. we are aiming to try to reduce the pay cuts under tier 1. >> do know what the cost of hedging is in that way? >> i don't. on the point you just made it, i think that there is a european- wide interest to try to reduce direct production linked to subsidies -- not a british interest. everyone's farmers suffer as you do that, but it's the right thing to do for long-term hel alth. >> prime minister, even before the euro zone crisis there were

problems with banks' lending to businesses. since then, there's been a further deterioration in business confidence as well as bank lending. the chancellor has announced the wish to "deploy new firepower to improve the flow of lending to businesses from banks." the government has introduced the funding for lending scheme as the result of that. could you tell me how much extra landing you expect to get for businesses and whether this will be next? >> three stages. the first thing the government did was the mervyn agreement, which was to say to the banks, withn't hit oyou additional taxes over and above the bank lending if you can guarantee certain gross lending targets.

in 2011, total lending went up by 13%. while they missed their missed on s & e lending.d gross lending, it if you simply a public debt net lending targets, banks find it easier to meet those by not calling in loans in a way that they otherwise would. you probably need to measure both. you need to know the gross amount of money the banks are putting out. we have at the national loan

guarantee scheme, which is the thing the chancellor introduced. we're looking at around 20 billion of lending has gone out under that. the funding for lending is a bank of england scheme that the bank announced in those speeches that the governor and the chancellor may it months ago. that will basically be to support banks that do the right thing and increase their lending to more businesses. but the bank of england still needs to do more work on the details of those. you have bank lending which has been a problem for lots of reasons. there's impairment in our banks and confidence and other things. that's a big focus. for the focus >> in funding for lending, some banks expanded their lending ro uk non-

financial sector during this time -- to uk-nonfinancial sector. how can you be sure you are meeting the requirements? >> you are right that it is designed to improve the transition mechanism. what has happened is the bank of england has cut interest rates, but businesses are not able to get hold of those business rates. the mechanism between it the bank of england monetary policy decisions and the individual bank decisions not getting through. the governor has said the scheme will be linked expanding lending. the details will be announced. how they choose to measure net or gross is a very good point. they need to make sure it's actually making a difference. they need to design it in a way that the action of the finance

they're putting in is encouraging them to do something different than they otherwise would have done. >> given the fact the banks tell us companies with money will not invest because of the uncertainty and that leaves the lending markets focused on those companies desperate for money and therefore likely to be higher loans. if there's a higher default level on these loans -- >> it's not treasury guaranteeing the bank of england. national loan guarantee scheme, yes, the treasury and in that case is standing behind the guarantees that come through.

they are giving guarantees. the bank of england scheme has not fully published its details. >> is the bank of england going to be prepared to underwrite loans that normally would be considered too risky? >> i don't think so. national loan guarantee scheme is allowing banks to issue unsecured funding. so it has a government guarantee. the funding for lending scheme is allowing banks to do more to lend money, but it is secured lending. in order to get hold of the money, the banks have to provide assets to the bank of england, as i understand it it. >> it is supposed to be high- risk lending. >> yes, but they will only be able to take part in it if they are taking part in this lending. they are expanding their balance sheets. they basically have to do a deal with the bank of england to get hold of the funding, to make it available to a wider range of

non-financial businesses. obviously, as they expand, they're more likely to look at companies with risky prospects. they are focusing very much on safer lending right now rather than marginal cases. the treasury and the bank of england have something in common, which is you are trying to encourage banks to do more lending than they otherwise would. that implies you will be lending to slightly riskier prospects than otherwise done. >> do you think that [unintelligible] in order to secure? higher secure >> w -- in order to secure higher lending? >> we have an independent bank of england. the exact risked between the bank and treasury --

>> it's a good idea there should be contact. would you be prepared to send the committee a list of the meetings you have? >> yes, and i have done so over the whole two years. all my meetings with external body is and xstrata businesses. so you can see in my disclosure. but i will check. there are the meetings with all the banks and businesses and other bodies i have met with, listed. when i think of my single group of the advisers, it does include some people in finance. there's a pretty good range of businesses it. i agree with you, when you have

a bank lending problem, you need to be talking to these people to understand what's going on. >> the chancellor said british voters want british authorities to be in charge of supervising our banks. the truth is they're not really in charge. charge that the european regulatory authorities are taking over. >> the european authorities have a role. but if you think about the big questions of bank regulation, who is responsible for regulating our banks in terms of lending policy, that the bank of england. who is responsible for conduct? that is the financial conduct a board. what happens if a bank falls over and needs to go into a special procedure? that is done by british authorities.

i think we should do this on a nationwide -- national basis as a country of our. own. >> i agree, but the emergency situation procedure laid down and the european systemic risk board, they can take out the current rules and say we are going to run the regulation of your banks. this is something you had in mind when you decided to go for those safeguards. >> it was not that specific. what i was thinking was when you have the 17 getting more deeply integrated, you have a risk of the single market can be changed in ways that might be disadvantageous to you. the safeguards i was thinking or

more about how regulation would be done. >> a few weeks ago we had a virtual policy committee bank of england report which recommended reduce theirspond exposure to the euro zone. that was by 2/3 thirds majority. i would be grateful but if you would comment. >> that is a specific example of a wider issue. where you have some people deeply embedded in the currency and others who are not, who wield the power in terms of regulation? the more integrated than get, the more safeguards you may need

to consider, because otherwise you could be put at a disadvantage. the sort of thing i was thinking is the dispute we have had with a european bank as to whether you are able to clear your reuros in london. it's a single market. that's what i was thinking of when speaking of safeguards. be preparedu to look at these emergency situations? >> certainly. i just want to make this point as we are looking at some of the preparatory work that we should be considering in the case of further instability in the euro zone, some of these questions are quite large. >> how many allies do we have

now to protect us? corrected depends on the question. >> supporters for obtaining safeguards? >> on banking union, which is how the banking union proceeds, which went in the right direction, the swedes and the dutch backed some of the policies we made and the danes. >> are we trying to collect a few more? >> of course. in december we were presented with a treaty change so i thought it was necessary to come forward with safeguards. the history is well known. the safeguards were not

accepted. so i said we cannot have a new treaty. they went off and did the treaty anyway. you have to be ready for anything. >> the home secretary told the daily telegraph that there were contingency plans being looked at in case of the euro zone crisis and the possibility of more people coming from the european union in the united kingdom. the deputy prime minister said that you are just monitoring the patterns of immigration. are there at the moment under way discussions as to how we can restrict your opinion citizens coming into our country, in case the crisis gets worse?/ >> we obviously have contingency plans for all sorts of different eventualities. we don't discuss all these

publicly, for obvious reasons. the legal position is that if there are extraordinary stresses and strains, it is possible to take action to restrict migratory flows. but we hope that does not happen. >> would you be prepared to do that? but i would be prepared to do whatever it takes to keep our country safe, to keep our banking system strong, to keep our economy robust. that is my first and foremost duty as prime minister. >> that would include greeks citizens exercising rights coming to the u.k. and? >> i would not agree to that. i understand legal powers are available if there are particular stresses and strains. you have to plan and have contingencies. you have to be ready for anything with so much uncertainty in the world. i hope those things don't become necessary. >> i think you are proposing an

interesting sequence of events. general election, mandate for negotiations in, leading to a referendum to address the status quo issue. matt test my understanding? the lack of safeguards, is that an example of the unsatisfactory status quo? >> the lack of safeguards is a permanent battle we have with the commissioner about single market regulation. so far the treasury has done an excellent job of defending british interests. what i -- if another tree becomes for, that specifically concerns us, and the need for safeguards gets greater. >> as the euro zone accelerate

the dynamic of integration, that makes the status quo more difficult for the united kingdom. >> if you take the banking, i spent a lot of time on this, if the banking union is done in a particular way through the european central bank rather than the european -- eba, and if there are -- as it goes under enhanced corp., there are single market safeguards, that is less worrisome. so you have to see what instruments are brought forward, what the risks are, and make our views accordingly. >> are you talking about taking back certain competencies' and policies here and there or is it

a more fundamental change in our relationship with the european union or is this something you have not been able to decide if moment? >> i have always felt that the powers at the home office, legislation, those are areas i think the opinion and should not have gotten into. britain should not have gotten into it with the european union. those are the ones i would highlight it. there's an opportunity -- and it's not just our party, other parties will want to have their own debate. as the euro zone into great, what is the right answer for britain? i hope we will be able to come up with some common answers in our party. i think this is a big debate all of you should have. >> i have a question which

brings me back to earlier. tell us what your view is as to whether the use of your opinion institutions and treaties is desirable in britain those interests to deal with matters in which britain is not participating, because we are more likely to have influence on the outcome sectors if it's done through the institutions? but that can be the case. good question. there are safeguards within -- the lisbon trading. there are safeguards by using institutional structure. as i argued in december, if they come forth with a treaty change that is not balanced, that does not safeguard the single market, that's why i said i need the safeguards or the treaty cannot go ahead.

so you have to always think about the consequences of the path they are going down. >> the question of democratic consent, if each of the member states has its own democracy, moving into position where they will seek to have democratic control over their decisions, i don't see how you can argue that does not affect us. >> they have to make these decisions. the fiscal compaq that they will sign will restrict their ability to spend and borrow and do many things democratic politicians choose to do. they made that decision. it affects them. i don't think the fact that spain will be limited to a structural deficit will affect us. we're not in the fiscal compact.

i don't think it affects us in and of itself. >> prime minister, members of the public administration select committee [unintelligible] that asked about the genesis of this plan? there seems to have been an atmosphere around the generation at this time and an argument as whether it was what some ministers really wanted,

and some complaints about your comments. "treat the civil service as a populist punches that." do you agree with that sentiment and do you agree with lord butler? >> i think we need a proper balance. i absolutely believe this, the british civil service is impartial, professional. it is an institution we should be very proud of. the people do an excellent job. that needs to be put on the record. at the same time, reform is needed. we need the civil service to be less hierarchical, to be swifter, flatter, to

improve its efficiency and abilities. i put two highly talented ministers into the office, to drive the policy agenda and to be in the cabinet office with responsibility for ucivil responsibility concerns. >> you can see earlier portion in our schedule later on. also in our video library. news from london today that the chief executive and chief operating officer is of barclay's bank have resigned in light of an interest rate rigging scandal. robert diamond said he was stepping down because the external pressure off on the bank had a risk of "damaging the franchise." he will appear at a treasury commission meeting in london

tomorrow. c-span will have that for you in our program scheduled to. coming up tomorrow, it's the fourth of july. our schedule will begin at 10:00 eastern with the congressional gold medal ceremony for a group of about 19,000 african-american marine in world war ii. 1942-1949 there were stationed of the segregated camp adjacent to camp lejeune in north carolina. house and senate leaders take part in a ceremony. tomorrow evening, the history of the statue of liberty. if an author talks about the beginnings, controversies, and changing meanings of the american symbol. it's hosted by the museum of jewish heritage at 8:00 p.m. eastern, also on c-span. >> an adviser to the mitt romney campaign said yesterday that the former governor if is committed to repealing the 2010 health care law using the budget mechanism known as reconciliation, if necessary. they said the governor's plan

would remove special tax status for employers who pay into insur -- who pay for insurance. this discussion is an hour-and- a-half and was hosted by the cato institute. >> welcome back. i'm delighted so many folks have stayed for part two of our discussion on obamacare in the wake of the supreme court decision. i hope it is because of the great quality of the panel that you will have right here and not just because we are one of the few places in town that has air- conditioning. [laughter] you are going to see a great panel today and a discussion of policies. what we now know is that obamacare is constitutional, or at least the supreme court says it is. but we also know that other than that, nothing about it has changed. the fact is, this is still a health care bill or law under

which you can not necessarily keep your current insurance even if you are happy with it. it is a health care law that will cost billions if not trillions more in new spending and new debt and new taxes. it is a health care law that puts in place the structures that down the road will ultimately lead to the rationing of care. it is a law under which we could actually end up with few or insured people than we have today. so there's a lot of reasons to wonder about the policy is going for worked. what should be done about this? what can be done? people talk about repeal and replace. what do we mean when we say replace? and why should be repeal? we have a panel today that will be talking a lot about that. first up is grace mary turner -- .

she and i go back a long way. she has been working on health care in the hillary clinton health care days when she created a consensus group which was a wide range of think tanks across the political spectrum that came up with ideas for market-based health care reform. then she went ono found the gan institute, which is probably one of the premier organizations promoting market- based health care reform. she is tied into pretty much everyone and everything in washington and has been all the while i have known her. so she is certainly someone who knows what is going on in this town. with that i will turn it over to you. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> thank you, michael. thank you for all that you and cato do to keep the conversation

going about free-market ideas and health care reform and for your diligence on these issues. nancy pelosi said that we have to pass the bill to find out what is in it. now we all have to find out what is in its. now we all have to find out what is in it. i think we thought we had to be rescued by the supreme court, strike it down, we do not have to learn what is in it. now, we have to learn what is in it and the president heads to spend the next four months of defending a law he has basically stopped talking about it. every time he talked about it, his poll numbers went down, so he stopped talking about it. now, he has to defend the law, and it has a sign around its

neck calling it a tax. if they say it is not a tax, they are in validating the supreme court's justification. it is also important to recognize the supreme court did not uphold obama-care. two specific issues were under question -- the individual mandate and the medicaid expansion. if either one of them had been stricken, then the entire law could have come down, but there are many other challenges to many other provisions that are making their way through the courts. we will talk about those in a minute. instead of upholding obama- care, the accord reached a very

narrow decision. the individual mandate is a valid as a tax, chief roberts said, and otherwise free citizens will be required to spend personnel, after-tax money to purchase a private product or a a tax. the states can now tell the federal government -- the federal government can tell the states to dramatically expand the medicare program, but there is no consequence if they do not. we need to be ready for the debate. seven in 10 americans wanted the supreme court to take down all or part of a lock. since it did not do that, we must be armed with the fact to help people understand what is in the law.

over the next several months the president will talk almost exclusively about 26 year olds on their parents' policy, pre- existing conditions, and the refund extracted from insurance companies because they could not jump through the latest hoop from kathleen sebelius. that is maybe a few thousand pages in the law. it is incumbent upon us to understand what is in the other 27,000 pages. we need to be informed about what this means for our economy, our health sector and the future of freedom. the 10 worst parts of obama-care that are not the individual mandate -- the employer mandate,

number one. this is the deterrent to job creation. employers will be required to provide and pay certain percentages for health insurance policies for their employees or pay a penalty. that was not questioned by the court -- whether the employer mandated the penalty or the tax. it would be wise to anticipate court challenges to the employer mandate. michael cannon has done a terrific work on how states can protect themselves. number two, the hhs mandate. this was not actually in the legislation the legislation said preventive care would be covered at no cost to policy holders.

secretary kathleen sebelius, in consultation with the institute of medicine and others decided that that would include free abortion drugs, sterilization and contraception. the catholic bishops are wisely, i believe, challenging this in court as a tremendous affront to their religious liberty. number 3, new and higher taxes. the law contains at least 20, now 21, totaling half of 1 trillion debt will impact even the sale of your home. the americans for tax reform have a good list on their website of the many taxes in this law in addition to the tax

for not paying for health insurance. there is a surtax on investment income. $86 million in the medicare payroll tax. taxes on health insurance, which will increase premiums and the fees we will pay if we do not purchase health insurance. number four, the independent advisory board, a board of unelected, appointed bureaucrats with virtually no need to respond to the voters, the electorate's -- the electorate that has huge power over spending in medicare. the goldwater institute in arizona is challenging this as an unconstitutional use of allowing these on elected

officials to have tremendous say over medicare spending. state exchanges, 5, states can be compelled to set up these bureaucracies to check into our finances, our family size, our health habits, in some cases, so they can hand out generous tax payer subsidies for health insurance of our choice for families making up to $90,000 a year. that number will continue to go up. number six, medicare payment cuts. the medicare program is a td bank to pay for the law. -- piggy bank to pay for ala. we can talk about the specifics that will hit medicare advantage plan.

these are unrealistic cuts, yet they do pay for the law. higher health costs -- the kaiser family foundation says the average price of a family policy has risen $2,200 since president obama took office. he promised the average price would be reduced by $2,500 by the end of his first term. i do not know about you, but that is a pretty big market to miss when you are talking about the average family budget and the average family that has already banned hit hard in the recession. number eight, government- controlled over the value systems -- at least half of doctors are considering leaving the practice of medicine rather than practice "mother may i"

madison with these rules that will dictate what they are able to provide. number nine, huge deficits. the cbo has raised the price to $1 -- $1.7 trillion, which is more than originally planned. they watched the final vote that fateful saturday night as the members of congress were talking about the wonders of this law, reducing the budget deficit, getting universal coverage, and by the way, we missed that mark by 25 million people. the deficits will go on and on. douglas holtz-eakin estimates as many as 35 million additional

people will have subsidized coverage through the exchanges because of perverse incentives, increasing the cost by another $1 trillion. number 10, at least 159 new boards, agencies, commissions, programs, that will have huge control over virtually every aspect of how one sixth of our economy, our health sector, works. even if the individual mandate and the employer mandate had been stricken, i believe the authority in this law to create these boards and commissions could easily move us towards government-run, single-payer systems. the miracle is this is three

months, four months before a presidential election. the american people will have their say. i think it is important that they learned that obama-care is a lot more than 26 year-old on their parents' policy, which insurance companies said they would do voluntarily, and smaller provisions. republicans are talking about what they would do to help people with pre-existing conditions. it is now of to us to be informed and to help people understand what is in the law. several of my colleagues and i wrote a book called "why obama- care is wrong for america" to help people understand the impact on families, businesses, taxpayers and freedom-loving citizens.

i think it is our duty as citizens to learn. thank you very much. [applause] >> thank you, grace-marie. next is michael cannon, the director of health care policy studies here at the cato institute, which means he is in charge of health care work at the institute and is the co- author of a book called "healthy competition, what is holding back health care and how to free it." he is actually the principal author and has also worked with me on a new book called "going forward -- health care reform under obama-care." so, i am delighted to turn it

over to michael cannon. [applause] >> thank you. thank you for coming today. i am going to talk about how the obama health law is weaker, and how the path to repeal is more clear than it was one week ago. i want to talk about the day of the ruling. i spoke to a number of reporters. i did a radio program opposite a former obama administration health policy adviser. the host of the radio program asked her she could think of anyone that would be harmed by the supreme court's decision, by the law remaining in place, and she said she could not. think about that. this is a law that is spending two dollars trillion over the

next 10 years. it is going to be compelling states, individuals -- , maybe less so states than before -- to be spending further, and this obama adviser could not think of a single person that would be hurt by having the government spend all of that money, much less taking it away from those that earned it in the first place. there was not enough air time to talk about the ways this law is already hurting and will hurt americans in the future. grace-marie mentioned some of them, like the mandates are discouraging employers from hiring, how the medical device tax will limit jobs in that industry. the robert wood johnson foundation estimated this law

will cost 150,000 americans with higher-cost conditions, very sick americans, to lose their health insurance. some premiums have risen by 20%, 30%, and that was almost immediately. supporters of the law acknowledge that it will cost some premiums to double. the law will and pose explicit marginal tax rates, in excess of 100% on low and middle-income americans. this effectively threatens insurance carriers with bankruptcy for the crime of telling their subscribers how much this law was increasing premiums. there is also how the law threatens religious liberty for -- by forcing them to pay for

things they considered immoral. the exchanges to create a race to the bottom by literally forcing insurance companies to provide lousy coverage to the sick and deny care to the sick. supporters say this is a matter of life and death. i do not think they have any idea how right they are. it is not just the obama administration that is oblivious. after the ruling i spoke to a reporter who has followed american health care debates for decades and i told him repealing the lot is health-care reform because it is hurting so many people, especially the popular parts. the supposedly popular dependent coverage mandate, offering it up to dependants' up to the age of 26. that provision through 6000 spouses and children out of

their health-insurance coverage, leaving them with nothing. he said he never heard about that happening. the supposedly popular pre- existing condition inclusion, that has cost 39 carriers to flee the market, and have caused the markets to collapse in 17 states, leaving parents who do not get dependent coverage at work with nowhere to go for health insurance coverage for their children. we clearly have a lot of vegetation to do but the polling -- education to do, but the polling has been consistent. the public has opposed the law since it was introduced. a recent "new york times" poll found 70% of people wanted the supreme court to strike down all

or some of the slot if we keep hearing that is only because people can do not understand the law. i think the people that do not understand a lot is geographically concentrated here, in washington, d.c., and we were planning this forum before the supreme court handed down the ruling. we did not know what we would be saying when we got here. i was hoping that i would be able to go from talking about all of the ways this lot is already hurting people and will hurt in the future, to talking about the health care reforms that would actually make health care more affordable, that would bring it within reach of low- income people that cannot afford it right now. i did not get my wish, but i am glad that i can talk about how the supreme court made the obama health care law significantly weaker, and

cleared the path for retailing it. it is now clear that the supreme court severely hobbled law. block already give states the ability to block about which the law already gave states the ability to blocked half of its spending. the court's ruling gave states the power the chance to block the rest of the entitlement spending. state officials have it within their power to reduce the federal deficit over the next 10 years by $1.6 trillion, and all they have to do is sit on their hands, and say we are not going to implement this law. the law requires states to implement the exchanges, and the extension of the medicaid program. the exchanges will channel about $800 billion to private insurance companies.

the medicaid expansion will spend $900 billion over the next 10 years, much of that going to private health insurance companies. states, contrary to popular myth, which has been advanced by a lot of supporters, are under no obligation to do either of these things. they were never under any obligation to create a health insurance exchange, and they should refuse to do either. it is a myth that it states create a health insurance exchange they will have greater flexibility or more control over how the obama held for law takes effect in their state. while it is true the federal government can create a health insurance exchange in the state that does not create one itself, it is not certain because the law does not appropriate funds for them to do that, and republicans in

congress are not likely to give them the money to do that. the law also requires state-run exchanges to be approved by the secretary of health and human services, and forces the secretary to do everything and anything she would get done through a federal exchange, and for the privilege of having the secretary dictate how states run their own exchanges, states would have to pay $10 million- to-$100 million in operating costs, and here are the estimates we have been able to collect for individual states. this is the first year that states have to pay. now, more important, but due to the interlocking nature of the many features, in particular the changes to the employer mandate which taxes and players up to

$3,000 per worker, states will be creating exchanges and needlessly exposing workers to that mandate and that tax. why is that? the law is clear on this point. it is only enforceable in a state that creates its own health-care exchange because what triggers the tax is if a worker goes into an exchange and receives a subsidy and those tax credits and subsidies are available only through state-run exchanges. they are not available through exchanges created by the federal government. the law is clear about this, restricting subsidies to exchanges created by states. states that refuse to create an exchange can therefore block the subsidies and exempt employers from the tax, lowering jobs away

-- taking jobs away from other states. the court did hand a lot a serious defeat by striking down its medicaid mandate. federal medicaid grants comprise an average of 12% of state revenues right now. the law basically said either you expand your medicaid program the way we want you to, incur significant new cost, or you are losing 12% of your revenue. 26 states led by florida challenge the mandate and a one. the court ruled the federal government cannot do that. now, states can refuse to expand their programs without fear of reprisal, and they should. medicaid is ripe with fraud and abuse, and some states put fraud

and abuse at 30% of expenditures. my colleague estimates that this medicaid expansion would cost states like florida, kansas, illinois and texas roughly $23 billion each in its first 10 years, and states like new york would pay more, $35,000,000,000.50 $3 billion. california mix out like bandits. -- $35 billion and $53 billion. california would make out like a bandit. just as this is money that states do not have, the federal government with its current year deficit and debt cannot afford to spend another $900 billion it does not have, and states, and this includes california, can expect that whatever these projections say right now, costs

will exceed initial projections. the moment the u.s. credit rating suffers another downgrade, congress will shift more costs to states, predatory federalism. congress gets the state out on this low introductory rate, and the soonest they are up, they change the rates -- as soon as they are hooked, they change their rates. that is essential to repealing this law. before that even happened, governors were expressing their refusal to do so. governor rick scott in florida was the first one to refuse to exchange -- create health insurance exchange after the ruling came out. governor bobby jindal in louisiana has said the same. governor scott walker in wisconsin has said the same. other governors are making

similar noise. 26 of them sued the federal government because the cost of the expansion was burdensome. you could get some of those, if not all of them will refuse to take on those costs. it is not that you need a governor to do this for you. remember, we are talking about states passing laws to implement a federal law. all that it takes to be read all these new federal entitlements is one committee -- de read all -- derail these federal entitlements is a state legislature, or a veto, and you begin to see just how vulnerable law is right now in the wake of the supreme court ruling. i think the public is likely to

reward officials that do block the fomentation of this law. before the ruling, 70% of independents one of part or all of the law struck down. given that the courts invented slippery rationale and i will not say for upholding, they did not uphold the law, but declined to strike it down. because there was slippery rationale for leaving the slot on the books, i think a backlash against obama-care is likely to grow. as i said, the obama health law is weaker and the path to retail is more clear than it was last weekend even though i am disappointed in the court's decision, like the set, the path ahead is clear. thank you. [applause] >> last up is avik roy, a senior

fellow from the manhattan institute. he is one person why make sure i read every day -- who i make sure i read every day because it is really boring and in depth into the law. i have read all 2500 pages. if you have not read all 2500 pages, you will get something out of the digging in on that. he is also an adviser to the romney campaign on health care, and god knows he can use all the advice he can get. [laughter] we are happy to have him with the. and i will turn it over to your. >> -- turn it over to you. [applause] >> he mentoring in terms of

drilling down thank you for having me here. i should expose i am adviser to the mitt romney campaign. i do not speak for the campaign. having said that, i am very glad to be here. the cato institute has been at the forefront of opposing the individual mandate from its earliest days, not too far from here in washington, and it is an appropriate to have an event like this. i am here to let you in on a secret. the individual mandate is too weak, requiring that every american with some exceptions buys health insurance, or pays a fine. i did not subscribe to the idea

that it is a sex. it is a fine that max's out -- is a tax. 2% of yourout to adjusted gross income. remember, the average health- insurance policy for a family in america in the private market costs $15,000 a year. thanks to obama-care now, as the president reminded us last week, you do not have to have insurance to get care because if you get sick you now have a pre- existing condition, you can go to the hospital, buy insurance that day, and the insurance company has to except you. so, if you have a choice between spending $15,000 on health insurance plan, or $695 to get the same care, which will you choose? i think the choices clear.

this gets to the heart of what obama-care is, and because of the constitutional challenges and the controversy to the related aspects of the law, it has been completely missed that this law will massively drive up the cost of health insurance in the private market, effectively destroying the private health insurance market and less significant reform or repeal takes place what -- takes place. what it comes down to is obama- care inverting the laws of health economics, and the key principle to understand here is adverse selection. what happens in insurance it is -- let's take the example of homeowners insurance let's say you have two people that own homes of relatively equal value. one person lives in a neighborhood where a lot of

arson attacks take place, and another person lives next to a fire station in a town with low crime. the houses are of the same value, but one is at lower risk to burn down. should they pay the same for homeowners insurance? classical economic theory should be that they should not. the person that lives in the higher risk area should pay more for the person -- than the person who lives closer to the fire station. it is a matter of economics. if i lived in the home next to the fire station, and you told me i have to pay the same, i would say that is not a good deal. i will pay more for my insurance than the actual risk my home is going to burn down.

i am not going dubai that insurance plan, and that creates adverse sellout -- i am not going to buy the insurance plan and that creates adverse selection. the average claim as been much higher, and the cost of insurance goes up because insurance averages of the overall expenditures for the group and insurance continues to get progressively expensive. people vary in progressively safer but moderately riskier areas opt out, and the insurance market goes away. that is exactly what obama-care will do in the private insurance market because the americans who will be forced to pay this mandate find no it is a better deal for them to pay the fine than to buy insurance. that is not the only aspect that it celebrates the problem the law does something called community rating, which forces

young people to pay as much as 75% more for their insurance so that older people will pay slightly less. the law has coverage mandates. it must cover contraceptives, drug abuse. it has all of these things they you may not need, but you will have to pay for. it is like going to the restaurant and being told you have to have a seven-course meal even if you only wanted four and do not light seafood. those are the economics we are talking about 10 every one of those requirements, those mandates drives up the cost of insurance. everything that makes insurance more expensive makes it a raw deal for the young people that are not insured today. that is the key thing about the uninsured population. the uninsured population is

predominantly young. 55% of people without insurance are under the age of 35. 72% are under the age of 45. they do not buy insurance because government regulation makes it too expensive for them. the congressional budget office did a study asking why people are not insured. 71% said it is because of high costs of insurance. 76% said their employer did not offer it or they are unemployed. only 4% said they were getting rejected because of health status. the best majority of uninsured people are not on insured because of pre-existing conditions. insurance is too expensive, and it is too expensive because of government policies. obama-care is exhibit a. it does everything precisely almost as if it were pre-

designed to destroy the private insurance market. so, that is the first problem you have to understand about obama-care. the preservation of this week individual mandate and all of the other aspects of the law, the insurance regulations the president touted, those things sound nice in theory for the people that benefit, but the 99% of the people that do not benefit, they will have insurance go up, and insurance is not cheap today. the average income is $51,000. the average insurance plan is 15% -- $15,000. that is 29% of income. in the last year, health insurance went up because of obama's regulations. think if your tax burden went up 9% every year for the next 10

year. what would you say? it is forced allation of you own money to insurance and health care, and out of the medicaid expansion of a lot. by this keystrokes, he may have expanded the federal deficit by $500 billion over the next 10 years and expanded unfunded liabilities by trillions. the reason for this is lot expands coverage in two ways. one is by expanding medicaid for the poor, and also by creating the subsidized exchanges, but the eligibility for these programs elapse. the exchanges are much more

generous. they spend a lot more per person than medicaid does. it is all federal dollars which is all federal dollars. states -- is all federal dollars. states have the incentive to pare those programs back, and put people on exchanges. douglas holtz-eakin, a former director of the cbo, who was brought earlier, has estimated that this could cost as much as $1 trillion over the next 10 years, but a more realistic scenario is $500 billion over the next 10 years. john roberts did not just reinvented definition of taxation. he also added $500 billion to the deficit last week. finally, i would ask to talk about what are the real solutions that governor mitt romney is promoting, and proposing, and why should those

that believe the market- oriented solutions seek to achieve? the most important first principle to understand is there is a lot of misunderstanding about american health care. we hear rhetoric that american healthcare is the best in the world and there was nothing wrong before obama-care. it is true that american healthcare is good in many ways, but many things were wrong with it before obama-care. before obama-care, governments spend half of expenditures in america. before obama-care, governments spend more per capita and health-care than all but two other countries in the world, luxembourg and norway. we spend more than france, the united kingdom, germany. their governments spend less per capita than the united states this is not a system that is

sustainable. it requires real change. the principal theme of governor romney's proposal says put individuals and localities in charge of their own health dollars again. with medicare, but seniors in charge let them choose a plan that is right for them. with medicaid, let states and individuals control their own medicaid dollars, and with the private insurance market, we need to move to a system where people own their own plan, instead of having them determined for you in terms of where you work. individuals on their own plans, you can keep it when you lose your job, shop for the plan that is right for you instead of applying the plan that was chosen for you, and in that way we can move to bring the cost of insurance down. if you bring the cost of

insurance down, you make insurance more affordable and more people could afford to have insurance and you reduce the problem the right way. with that, i will yield to questions. [applause] >> thank you very much. as you were talking about homeowners fire insurance and adverse selection, i am reminded that the insurance toll was by benjamin franklin in philadelphia, and the charge people in brick houses lower than those living in wooden houses because the risk was lower. with that, we will open it up to the floor for questions. we have a bunch of them. i will ask until you are called on and the microphone comes to you so that the folks on c-span and those listening to this in

light streaming can hear you. identify yourself and your organization you are with, and ask a question, do not give a speech. i will start this way, and then i will move to that said. let's start right there. yellow shirt. >> thank you. annabel fisher, a licensed independent clinical psychotherapist, so i would like each of you to outline an insurance health care plan that would be acceptable to all of you, because if we are all going to pick our own, and doctors are not going to except medicare and medicaid, what health insurance plan would each of you design that will not cost a lot of money for the patients and their families? >> i do not know how did this sign health insurance anymore than i know how to design a suit or my car. i can tell you what i've value, but that is not of general

interest dared -- what i value, but that is not of general interest. if your question is what kind of health-care reform do we like to see, and how will we manage people to the health plans that they like, i think the answer is simple. let people control earnings and remove barriers to competition among insurance companies and health-care providers so they can offer different plans, different benefit structures and ways to deliver health care. most of the innovations we hear people talking about in washington, d.c., trying to get the government to impose or subsidize already exists in the market in the united states today. they are stifled by regulations that prevent them from spreading. where we have given market forces to create -- room to breathe, we have seen remarkable

innovation, and my preferred health care plan is not available in the region i live because of those regulations. >> one of the things we would say is there is no one-size- fits-all plan. michael and i might have different desires. i would like a plan that has a high deductible for catastrophic illness. somebody might be risk-averse and do not want to take a chance. some people might want to cover more preventive care. other people do not believe it in that stuff. we should be designing for ourselves. >> i would hold-hardly agree with what michael tanner just said. healthcare is personal. we all have different risk and different needs. maybe people in our family have conditions that require more comprehensive insurance.

you do not want the government dictating that. that is the first point. in america in general, we do have the problem of over- insurgence. to many people have benefits they do not need a imagine a world in which we went out to eat every day instead of cooking for ourselves and going to the grocery store? obviously, if we did that come our food consumption would be more expensive but not with more nutritional value. that is true with health insurance as well. we buy these expensive plans that are more expensive than we need. most people would agree that more people than are currently should be on high-deductible plans. we should encourage people to save money for their health care because that creates a virtuous cycle where you get rid of the moral hazard. you have an incentive to practice healthy habits. it would be great symbols to a

system that encourages more people to get on those types of plants. >> in a country of 310 million americans, there is absolutely no way that government could come up with a plan that is going to work for everybody, and that is the difference between our perspective and the perspective of the drafters of this law that have come up with gold, silver, platinum, bronze plans. they think they know better than we do what we need, and the problem we have in this country is too few people have an opportunity to choose the kind of health plan that best suits their needs and the needs of their family. most of us talk about changing the incentives and the financial arrangements so that people have more control over their choices, forcing the market to offer them more choices, moving to a

defined system of subsidies for people at the lower-end of the income scale, and giving the market an incentive to respond. i think there are probably thousands of more options than a lot of us fought. when walmart decided it would give employees a choice, they had something like 25 different plans, and they made easy to make decisions because they went down a decision tree. the most important thing is to transparency, so people understand the cost of their choices, which they do not now, and then they begin to make more sensible choices about the kind of trade-offs, making sure they are covered when they get sick, but do they want all of the bells and whistles? they need to know they're going to pay for that.

[unintelligible] >> with regard to increasing costs and try to reduce costs, one thing i never hear people talk about, which i think would be dramatic in terms of reducing costs if we could -- would be if we could give rate of licensing rules for doctors and prescriptions with the idea that you could decide which of devise a computer program -- with the idea that you could devise a computer program that would self-diagnosed yourself, and if you are not comfortable with that, you could hire someone knowledgeable in the program without hiring a doctor. how come that is never brought up? >> that is a fantastic illustration in the differences

between obama-care and markets. obama-care tries to reduce the cost by subsidizing, and they're not reducing them, they are shifting it, hiding the premium. when you shift costs, and that does not reduce costs, it increases costs because it encourages -- it discourages responsibility. most people will tell you they support licensing of doctors, the research has shown that licensing does not increase the quality of care. it might increase the quality of care for some individuals. broadly speaking it reduces competition in the market for clinicians, not just doctors, but also nurse practitioners and other mid-level conditions, and it restricts what they are able

to do. and their competitors bofa our competitors with doctors for certain services -- and they are competitors with doctors for certain services. these increased the cost of health insurance by forcing a low-income people to pay more than they need to because nurse practitioners are more -- are competent to do more things than the licensing regime will let them do. the way the markets make things more affordable, bring within the reach of low-income people come up items that were out of their reach yesterday, is tall clay christiansen, a harvard professor and some of his colleagues explained, is allowing people with less training to do what only people with higher training and who cost more could do previously. so, what you are talking about

has been advanced by a lot of people. instead of having doctors provide all of these services, why could nurse practitioners not make more diagnoses? it is not they would get it right all the time, but they would probably get it right as often or even more than doctors. this type of experimentation and cost-saying and a date -- cost- saving innovations is bottled up by laws like this. obama-care is only going to lead to higher cost, as opposed to the promise of making health care more affordable for low- income people. >> in the back. white shirt. [captions copyright national cable satellite corp. 2012] [captioning performed by national captioning institute] >> thank you. i am ryn -- ryan.

i believe when he said shifting to a value-based system is one of the problems, where doctors are paid for the quality of their care, those things are causing a 50% of the doctors out of the workforce. i would like to know how that figures in and why a value-based system is not as beneficial as a fee-for-service system. >> we might have some debate on that subject. grace-marie? >> of course we won a value- based system, but the way we structured this is a with basically a new name for hmo's in which doctors and other health-care providers are incentivized to provide less

care in order to increase their profits. it is not transparent. oftentimes, seniors will not know they are being enrolled in plans in which doctors have those perverse incentives. doctors do not want to be in that compromised position. of course we want value-based payment systems, but we do not want them as they are defined in this orwellian term in this house law because it will give doctors an incentive to say let's put this off. that might be fine, except the doctor can still get sued if the patient thinks they needed that service. we are not making fundamental changes in the system that would change the transparency and engage patients as partners in getting the best value for their health care. instead, we are going to try to do this with more rules and regulations and bureaucracy, which is not going to work.

>> i think the answer to your question is who defines what value is? is it going to be you or the government? there are different ways to define value and quality. some people like to be able to choose their doctor. that is one dimension of quality. others want to e-mail their doctor. that is more important. some people value getting all the medical care that could help them. some people are more worried about avoiding medical care that is not necessary. there are trade-offs. who will make them for you? if you are a senior citizen right now, medicare is making those decisions for you, and day care on the side of keeping you lots of doctors the day care on the side of giving you -- day care on the side of giving you as much care as they can.

it is the government making those decisions under medicare, and under the value-based purchasing programs in the obama health-care laws, the government will be making those decisions for more than just seniors. if you want to know how good of a job the government is quite to do, let them medical errors we have seen, the research that shows that one-third of expenditures are wasteful. we are exposing seniors to medical care that is not helping them at all. do you want the government making that decision for you? if you get to make those the choices, then i get to have the health care that i want, and the competition forces others to improve on areas where they are weak. >> i could just add one sentence. if you are controlling your own health dollars, these patients-

at centered systems will leave all that happened organically the government has proven they are incapable of making this work. we would all agree the fee-for- service over-incentivizes the fee-for-service. if you pay for input, they will give you a lot of input. on the other hand, the hmo model, it incentivizes under- treatment because the doctor will get the same amount of matter how much is provided for you and there is no incentive to do the extra thing. what you want is both in the marketplace competing with each other, not imposing one model. blue shirt in the middle.

>> i have no defoliation. -- in affiliation. it has been pointed out how states can refuse to set up the exchanges, but the insurance regulation parts, the individual mandate, it will not be stopped by debt. . is there any realistic way to stop that, and assuming obama gets reelected, under that assumption, and perhaps republicans keep control of the house, take over the senate, but not with veto-proof majorities,

if repeal is not an option, is there a realistic way? >> it is a good question and a great concern. remember, the health insurance price controls in the obama health law, what we call the pre-existing conditions, those conditions caused the markets to collapse in 17 states and they are causing the markets in another 18 states to collect slowly. so -- collapse slowly. so, that is the potential of what could happen on the entire market in 2014. the case is made that we will see a lot of adverse selection even within the individual mandate in place that is designed to force good risks to pay the inflated premiums that those price controls forced upon them. i have done research with a

taliban has found in the region with a colleague that has found -- with a colleague that has found that if people pay the penalty, they can save up to $3,000 if they are an individual. even with those penalties in place, it still makes sense for healthy people to opt out of the market. so, it states block the exchanges, and there are not those tax credits available, could that lead to adverse selection? yes. actually, no. it is the health insurance price controls that are leading to adverse selection. when the tax credits and subsidies, if available, mitigate those, perhaps not, but even with those tax credits in place, i