certainly does not make it so. >> three days after september 11, i stood where americans died, in the ruins of the twin towers. workers in hard hats were shocking to me, "whatever it takes." a fellow grabbed me by the arm, and he said, "do not let me down." i wake up every morning thinking how to better protect our country. i will never relent in defending america, what ever it takes. >> c-span has aired every minute of every major party conventions since 1984. our countdown continues, with a week to go until our live coverage of the democratic and republican national conventions, on c-span, c-span radio, and c- span.org. it starts monday with

republican governor chris christie and the keynote address. democratic convention speakers include san antonio mayor castro delivering the keynote address. >> calvin coolidge was president from 1923 through 1929, during a time of relative economic prosperity. the panel discussed what advice he might offer to the candidates now running for president. this is sponsored by the calvin coolidge memorial foundation and the dartmouth business school. it is an hour and 35 minutes. >> thank you for coming. we were going to call this panel what mr. coolidge would tell mr. obama, but it struck us that mr. coolidge was singularly short on his wds.

a report to camp of to him and said, "i made a bet that i can make you say three words." mr. coolidge said, "you lose." if we had them talk, the president would go into a big explanation of why he was doing what he was doing, and mr. coolidge might just say, "not." they are not as experts in the field. they have played a role in public policy. they know what it takes to make

public policy. that is what will make this panel so exciting. i wanted to tell you that if you went about an hour from here, you would come to the village of plymouth notch, where calvin coolidge was going -- born. if you went there on the fourth of july, you would find a crowd gathering by the general store, in a village surrounded by hills, that looks as if it was 100 years ago. visitors and tourists would be gathering at the store run by president coolidge's father. you might notice a small group from the vermont national guard, carrying a wreath at the white house sent. calvin coolidge was the only president born on the fourth of july. after a while, the color guard

leaves this group across the road to the cemetery, where there is in line of tombstones. you would be hard-pressed to know which belongs to calvin coolidge. the analysis of the wreath from the white house. -- unless you saw the wreath frmo the white house. the bugler plays "taps." it is moving. his father swore him in with a kerosene lamp, after the former president died. there was no internet. there was no radio. there were no interstates at that point. calvin coolidge had to send the marines to nicaragua, and he had to use second hand german planes to provide air support.

it was a very different time. the tools he had to work with work rudimentary. coast-to-coast radio was a novelty. of the country had come out of a war and a recession. what amounted to tell you was that during the coolidge years, he turned and economy around that had started to grow. real wages growing significantly. nationally, unemployment peaked at 25% and came down to 4%. the national tax rate was hammered down to 24%. how can anyone work without facebook and twitter? let me take you forward to today. we have again a situation where

the economy seems to be in a bull durham. now, the world is interconnected. 7 billion people. nothing can happen anywhere without something happening elsewhere. we have all the tools of instant communication, right? the tools that calvin coolidge used were prehistoric, compared to the tools we use today. why is it, then, that that president was able to do these things, and we are struggling? this is the question the foundation thought we would try to answer. that is the question we post to the panel that i am about to introduce you to today. that is just to frame the topic of the panel. i am going to introduce this

panel from my far right, down. we start with professor matthew slaughter. he is associate dean of the n.b.a. program and a professor of management. he is also currently a research associate at the national bureau of economic research, the senior fellow at the council of foreign relations, a member of the advisory board of the international tax policy forum, a member of the u.s. department advisory body on international tax policy. he served as a member on the national council of economic and visors, in the executive office of the president, affiliated with the federal reserve board, the world bank, the national academy of sciences. he received his degree from the

university of notre dom -- dame, and his doctorate from the massachusetts institute of technology. governor howard dean, who i am sure you know, was at six term governor of vermont, the second longest term and the governor has served in vermont. he currently works as a part- time independent consultant, focusing on health care, early childhood development, alternative energy, and the expansion of grass-roots politics around the world. he is a former dnc chairman. he is founder of democracy for america. he serves on the board of the national democratic institute, where he focuses on southeast europe and china. he created and implemented the

50 state strategy, and is credited with helping democrats make historic gains. he pioneered use of the internet in campaigning. he graduated from yale with a b.a. in political science. he has a medical degree. he practiced internal medicine in vermont. mr. roger brenner is partner and chief economist of the parthenon group, a global business strategy consulting firm headquartered in boston, with offices in san francisco, london, and bombay. he is an articulate economist with many long-term relationships with former clients on issues related to their strategies, market growth, pricing, and equity valuation. experience includes senior positions at business and

government and academic institutions. he received a b.a. in economics from kalamazoo college, and a ph.d. in economics from harvard. professor douglas bourbon is the robert maxwell professor of arts and sciences in the department of economics at dartmouth college. he is an eminent economic historian. is the author of a book particularly pertinent to the topic today, and other books that followed. he is also working on a history of u.s. trade policy, from colonial days to the present. he is an associate of the bureau of national economic research, also served on the council of economic advisers, and on the

board of the federal reserve. what we have asked these gentlemen to do is take a few minutes and give us some opening remarks, at the end of which, we may engage in discussion among ourselves, or may open up to questions from you. if you would come to the podium, it would make it easier for c- span. [applause] >> good afternoon. my role is to set the stage for the panel that will follow, and talk a little bit of the economy of the united states of the 1920's, the role of president coolidge, and perhaps raise analogies with what we have today. you might have heard of the phrase "the roaring 20's." that is largely true. it is untrue with respect to one

important sector i will come to in a moment. economic growth was strong in the 1920's, about 4%. there was a major recession in 1921, but for the rest, fairly smooth sailing. there was also an lot of technological and structural change, a lot of technologies that were invented in recent decades that came on line and became imprinted on the u.s. market. for example, the number of houses that had electricity rose from 35% to 70%. the number of cars rose from 6 million to about 23 million by the end of the decade. radio was introduced and became widespread in american households. this was thought to be the death of newspapers, something we hear about today. president coolidge presided over this economy, which is not to

say he was responsible for it. he did little to interfere with economic growth, but there were a few blips in the road. we had a mild recession in 1927. one of the reasons was that henry ford decided to shut down all of the ford plant for six months during that year to retool them to transition from the model t to the model a. what would happen today if a major u.s. corporation said, "we are shutting down for six months." would the president be as laconic? slient ca -- silent cal was asked, "how do you deal with the pressures of the office? you cannot do it all. how you cope with all these demands? "

he said, "i listen, i do not say anything, and eventually, it becomes so uncomfortable, they leave." i have often thought, when students come in to ask for a re-grade, i should invoke this strategy. as far as i know, the decision by ford was on remarked by the -- unremarked by the white house. ford was not steve jobs. he resisted model changes. he was forced by the market. but people were so excited in anticipation that supposedly a million people turned out at ford headquarters in new york to get a glimpse of the new model. i do not know if it is an exaggeration. when i think of people waiting

overnight to an exaggeration. of course, that was not the only sector. a major, not to this view -- a major, yet -- a major caveat is that one area was not doing well. during world war one, there was tremendous demand for crops. farmers respond to these higher prices by buying more fly and land and machinery and equipment, trying to expand output, as they naturally would. prices did not collapse at the end of the war. that kept this been going on. what happened is in 1920, 1921, farm prices collapsed by 50%, and they did not come back.

it was a permanent fall, so what happened is bombers being very much in debt, they went through the entire deck in dealing with massive foreclosures on some of their property, second mortgages, and high rates of indebtedness that they just could not deal with and tremendous political pressure to do something to help out farmers during this period. some of you may have seen the ken burns documentary which has aired at dartmouth. the 1920 pastas was a great period for the sector. it was not a great period for agriculture during this period. it was very hard hit. of course, if you have 20% of the labor force being hit by prices that did not come back, what do you expect them to do? ask the federal government for existence -- said -- assistance, which is exactly what they did.

congress passed price supports. this was tried to target prices back to the pre-war level. now, what do you think silent cal fought about this? well, and he was giving the silent treatment because he did not think this was warranted. but it was a bipartisan effort. it was not just midwestern republicans, this southerns that wanted this, too. calvin coolidge twice vetoed this legislation. what is ironic is that in vetoing this, they actually laid the groundwork for the tariff of 1930, because the farmers, they thought they probably would not get anywhere with president hoover. so instead of asking for price supports, they would ask for higher other things. they laid the seeds for what was

the trade war. there is a lesson there of unintended consequences. it could be detrimental to the article overall. that is just a very brief sketch of what was going on in the 1920's. let me talk about two analogies. what could we possibly learn. the first thing to do with this agriculture, because as we speak, congress is still debating trying to pass a new farm bill, watch -- which they have to do every five years. even though the former scott the tariff, which was repudiating, saying they did not give enough to the farm sector, it could help exporters as well. what we got with the new deal with president roosevelt was price supports and acreage

reductions. one-third of a cop -- cotton crop was pulled up in this notion that we somehow reduced supply, that would reduce costs. it was viewed as if they are overproduction. this is sort of the legacy today. this is what calvin coolidge had to say about price supports. no justice and no and. it is an economic folly from which this country has every right to be scared. well, no justice. in the 1920's's an 1930's, the farm sector was basically poor. they said they were redistributing from rich to the port. -- to the port.

-- poor. this is one thing i hope congress keeps in mind. ethanol policy is one of the most egregious examples, one of many i could go through. but most presidential candidates have to go through all iowa. facing all of the corn farmers. yes, i support the ethanol program, even though it does not make sense. a $6 billion tax subsidy to refiners and blenders. we have massive tariffs on sugar eaten all, -- sugar ethanol. and the other point that coolidge said is that there would be no end. if you know anything about

commodity prices what this means is that the prices fall, as they probably will at some point, guess who is on the hook? everyone in this room. coolidge was precious when thinking of that. -- prescient when thinking of that. dealing with change. most of the structural change was between agriculture and shrinking the agriculture sector and moving things into the manufacturing sector. coolidge had it easy. the economy was growing. when you are growing and creating jobs, you can facilitate that transaction -- transition, as difficult as it

may be. the agricultural sector is very small, as is the manufacturing sector. this has dealt with high productivity. we are producing more manufactured goods than we ever have before. we do not need to get people to do it because we have advanced technology and capital-intensive methods. changes taking place within the service sector, where jobs are being made obsolete, because of the atm machines, where the waiters because of the kiosks that may be on your table where you would tell a screen rather than a person what you want. this will be very difficult. i think this is much more difficult than the one faced by calvin coolidge in the 1920's, and on that rather somber note,

i will turn it over to the next panelist. [applause] >> that was pretty somber. i also did a little research, identified as a small government conservative. keeping spending fairly flat, in the actually reduce spending by one quarter. our next president is likely to preside over a time when the debt rises by 40%, and that is even with what congress is currently envisioning. as everyone but washington knows, this is unsustainable, and we do not seem to find a bipartisan middle to tackle it. commission after commission that is bipartisan. some of it gets torpedoed by both parties.

and they are acting on the basis of candidates. there are things they believe that just simply are not true. i have two daughters. they have a science background. one is a pediatrician, and the other is a ph.d./organic chemistry and if you search for roger brinner, what you find is a quote, and i said it off of the cubs sometime in the early 1980's. i just made it up. let me bash some populist myth said that are not based on fact. certainly class warfare. the end of the american dream. there is a feeling, the

assertion, that middle-class incomes are shrinking and that the middle class is doing far worse than they have in the past. that is an absolute falsehood. not a shred of evidence in washington. they just make it up in the media, and then they follow it. reagan, clinton, and bush. benefited the rich at the expense of the lower class and other income groups. nothing could be further from the truth. i will share with you some thoughts on that. but first of all, let's talk about this pour middle class. it turns out that if you divide the u.s. into five quintiles from top to bottom, from business cycle peak to business cycle peak over the last 40 years, it has been almost

identical. compound annual growth. no deviation. regardless of who is in power. this translates into higher pay and higher entrepreneurialism, , hire other types of income, and the middle class is doing just fine. those numbers i cited are for the second, third, and fourth quintiles. what about the bottom quintile? it is still positive. the growth of the last business cycle is about the same as the previous. they have only had their incomes rise by half a 1%. as always, it is right at about 4% per year. so the gap is getting bigger. the pie is being sliced in

similar proportions, and is growing. this notion that the president talked about is something about growth. this is a notion that the middle class is suffering and that the rich are the beneficiaries. part of that is the story about personal income taxation. it turns out if you do the bush and reagan tax cuts with some small changes in the middle by president clinton, what you find is the bottom two quintiles of the population, the people with the low was 40% of taxable income actually removed from being taxpayers to net recipients of the earned income tax credit, both quintiles, not just the total, both the bottom and the second from the bottom quintile went from being taxpayers to check recipients.

they get a check back net from the government. what about the middle class? it actually had its tax burden cut by 40% to 50% sen. what about the top two quintiles? they were almost unchanged in total. what was done first by reagan and then amplified by bush is to have these brackets, because taxable income, it is not taxable until you get to a certain level, and then a smart piece of bipartisan policy, instead of raising the minimum wage, they created an earned income tax credit. it says that the market is not really working to generate a living wage at the bottom and. rather than raising the minimum wage, creating automated teller machines, and you dispense your own soda at the convenience

store or at the fast-food restaurant, if you are working hard enough and are trying, and you have got a low-wage, we will match part of it. that is what the earned income tax credit is. a smart piece of bipartisan legislation. that is what is reduced in taking it, so now, something like 2010, of a 45% of households pay zero federal income tax. they actually got a check back. before the reagan years, it was 19. at the end of the reagan years, it was 25%. and then the bush tax cuts, it went up to 40%, so it would be useful with these debates in washington if they looked at a fact just now and then for variety's sake. how could i have been told so

many lives for so many years by reputable newspaper of -- newspapers? damned if i know. the federal budget and the deficit. we have got some potential even three gdp growth, which is the topic pay -- toughest pace to reduce the deficit slowly over the next couple of years, and we certainly do not want to do this stupid european model of draconian, immediate fiscal constraint. that is why europe is now in a recession. they screwed up their fiscal policies and their monetary policies. they did not come to the aid in a prompt basis. it is affecting us. so when i talk about the need for a move to budget balance, what i have indeed our gradual adjustments coupled with long-

term fixes and entitlements. we are going to have to realize that the current promises we made cannot be kept. there was a coalition started by two in different parties. this does not make sense. finally, we got to surpluses again. and by the way, this membership is highly concentrated in what age group? senior citizens. why? we are saying to cut social security, fix medicare, do things like that. the senior citizens say, "my grandchildren are at risk. it is the only responsible thing

to do." so we do need to adjust that. the major federal health-care programs in 1972 were one percentage point of gdp, of our total national income. we have got to have some incentives that are put in place. douglas was referring to the collidge philosophy. i have a quote that was from this period. he said business must stand, ", on an independent basis, because, quote, government control cannot be divorced from political control. talking about agriculture. this is rather than regulating credit -- prices. this is something to do with health care.

when you look at the national health spending, these go up in the functions. the federal government decides to get more generous, and there was a step function up, and guess what? we are going to go along with it. let's do these five tests. but let's do things that are not really necessary. we need to, as they say, then the cost curve. be smart about what medical tools and services we use an pay with them to an extent that is affordable out of our own pockets. those are the kinds of things

that we have thought about in today's environment. thank you very much. [applause] >> well, thank you. roger left us lots to disagree with. i do want to say a couple of things. it is very interesting that i was introduced as the second longest-serving governor of vermont, which is actually true. most people make the mistake of introducing the as the second- longest serving governor in the history of vermont. that is not true. i served 12 years. it was independent four years before it joined the nation.

during much of that time, new hampshire claimed the other half of it. we put twice our capital in what is now new hampshire, thinking that if we put that capital in new hampshire, and when we got to charlestown, i forgot what the other one was. they served eight in the republican nine governors. just a piece of vermont history. this was some passion for calvin coolidge. this is beautiful down in plymouth, which i have been to a couple of times.

it is not such a progressive point of view as you might suspect. it is true that he was absolutely a free-market kind of guy. he said a lot of those things. there are a lot of things about him that he did not know. he had a political career as a very straightforward person. this got him in a national ticket. reagan actually quoted him when they broke the union in 1981. what is not known about collidge is we must humanize industry or the system will break down. when he was president of the state senate, they were looking to mediate the famous and bread and roses strike, and he did so, and both sides agree to the

proposal that he championed as chairman of the committee, which was a substantial wage increase for the workers. he was extremely pro civil rights, called for catholics, jews, and african-americans, all of whom were persecuted at that time. that was a time in america where the kkk was very powerful. many think that ku klux klan was designed for others. it was to persecute africans and then jews, and then others. and it played a big, a significant role in politics in the united states, and people were thinking that they were very clear about the rights of minorities. one thing they did in 1984 was

giving them full citizenship rights, which does not seem like a lot today, but given what we did to the american indians, that was a big step forward. he was also a very big supporter of women's suffrage, which was quite an issue of that time, as well. this was exactly the opposite of calvin coolidge. he was outgoing and the life of the party. i suspect she had a fair amount to do with that. how many of you are from vermont? about half. this is really part of the vermont character. people do not understand much about vermont. we did not have they governor for 109 consecutive years. i do not think we have changed that much. what we are is libertarian with a strong feeling of what sounds like a contradiction in terms.

we are. you have to live there. even today, you see that, where people are arguing for three hours in a town meeting whether they should share with the next town over. we are used to making our own decisions. we are not used to having government tell us what to do, but we are very used to doing it together. we could never have recovered from what had happened to us with irene if it had not been with the libertarian streak, and that is what made calvin coolidge what he was. if calvin coolidge had anything to say what the president and his opponent, i think he would say, "get with the program. he was an extremely non divisive person. basically said when you get into politics, people will call you a demagogue. do not pay any attention. they will call you an ideologue. do not be afraid.

basically, his tenure was marked by the willingness of what he thought was right without the of the office, without fear or favor of anyone. that is the kind of person he was. we are going to be coming up fairly soon on this 100th anniversary of service. he was an extraordinary guy, and he was a son of vermont. and i quoted this, and i urge you to go and look at the quote on the net about vermont and the extraordinary courage of the people there, and it is a wonderful quote. if you go home, i wish you would global calvin coolidge in vermont. he said what i think is one of the truest things with the

exception of the brothers who were very colorful. i am would to hear from all of the allen brothers. this is on c-span, right? and last comment before i submit it to roger just ever so gently to be conversation going. there is a wonderful professor here name frank smallwood, who wrote a biography. it should be mandatory reading for anybody interested, not only in vermont but in the american revolution. and he had an eighth-grade education. many people wanted to see -- things are getting high in connecticut. like many people with an eighth-

grade education, he was very, very crafty and very, very smart. and the governor of new hampshire, i am sure this is typical, and there are two grants for each piece of land so they could double up on the money. so when the new hampshire legislature and the new york legislature began to exercise their claims, he would send a few of his buddies to go drinking in montreal and make sure that the revolutionaries guys found out. this would split new england off from the rest of the colony's, which is what the saratoga and other it ballot campaigns were all about, so he and his

drinking buddies were up in montreal. quickly, they would go to albany to look at the land claims in vermont. if they make a deal with the canadians, the country is in big trouble, and they did. what they basically did was carefully maneuvered these two much more important ones. much more important states on either side of us, so they would eventually give up their claims in the interest of greater unity for the united states. it was really an extraordinary thing. it is a wonderful thing to look at what washington and the other players were doing through the eyes of a very small state and with a group of very determined people, so let me just conclude, since we have to kick this off with a good controversy, i

disagree with roger. it is true that he did not make up and the statistics. it is also true that the secretary of warren buffett pays a higher percentage of taxes than he does, because of payroll taxes, and they do not go down, because of the $40 every two weeks. if you include payroll taxes in that, that equation, in fact, lower-income people still pay a higher percentage of their income, certainly not more taxes. and many of the thing, i took a bunch of quick notes, it -- the earned income tax credit, which completely agree with roger on, it makes a lot of sense. it was started by a day -- a guy who would be a conservative democrat, and his name was richard nixon.

he had an able aid. two more things. i do agree with the notion that we have to be careful. i am also very much a hawk on the deficit. those of you from vermont when i served will remember dick mccormick, the senator, he was once quoted in the paper where he said, "why do we need a republican governor? we have got dean." but i am a deficit hawk. i think we ought to go over the fiscal clip, and it horrifies almost everyone in washington, but i will tell you why. we need to go back to the clinton tax rates. secondly, there is no chance we are going to cut the defense budget unless we do that, in we have to cut the defense budget. has not been cut in 30 years.

there are non-partisan people in the country, as far as i can tell, who look at the budget, with a decline in consecutive quarters, and then an increase over the year. it is a very tough price, but there is going to be no agreement in washington. i also agree with roger that these people are completely out to lunch. we cannot go on with the type of deficits we have. and people laugh and saying this a long time ago with the deficits, with the exception of the clinton and al gore regime. the reason we got so many in the, all of the school changes and all of these things, the land deal, it was because we had a stable budget, and these things were not treated as one-

time expenses that are going to go away magically. we cut expenses. and we also laid the framework for a gradual expansion, which i thought needed to be done. you cannot do that if you do not care where the money comes from and if you are fiscally irresponsible. you can only do that if you have a basic responsibility to pay attention so when you do these things that the programs are sustainable. a big we cannot continue to run these kinds of deficits, and i do not think anything is going to be done without harmonious agreement. i do not blame the democrats for this. they are not going to continue the millionaire's tax breaks while we are cutting social security and medicare. i think you can get reduction, but you're going to do it by a significant increases as well as cut. that is the only fair way to do it. i think they are perfectly happy to go over the fiscal >> . that will not be cut because the

defense contractors are very smart, and out of many of the congressional districts, they have plants. we have got to deal with all of the problems we have in the budget. social security, not that big of a problem, but medicare is a big problem. the last thing i want to say is this. we wanted to talk a bit about health care, and i could go over that all night, and i am not going to, but if he could only make one change in health care, and you wanted to control costs, the biggest driver in all of health care is the fact that you pay me to do as much stock as ikea, whether you like it or not. if you continue to have a fee for system service, you are never going to get health care. republicans are all about market forces. there are no market forces. market forces drive costs up, because we get money by doing as much stuff as we can. the more we do, and more often we do it, the more we get rewarded.

instead of all of the incentives, spending more and more money. the way to deal with this is to get paid by the patient and not by the procedure. and that the health-care system decide. it is happening, oddly enough, because mitt romney pioneered obamacare in massachusetts, and that is true, and five years down the line, massachusetts is doing very interesting things, including insurance companies by hospitals and hospitals by insurance companies. and once you have a payment by the patient, and you have actuarial coming from the insurance company, you now have them paid by the number of patients they have, not by the number of procedures they do. the entire system changes by rewarding the entire system for wellness rather than illness,

and that is the only way we are going to bring this under control. [applause] >> so i had the pleasure of listening to my three distinguished panelists, and i wanted it to the conversation. and i appreciate that the collidge foundation has invited us. i have spent time looking at the economic performance of the united states at the time of president coolidge, tried to connect that with where we are today. and there was a warning -- roaring period. and today in the united states, we have about 23 million underemployed and unemployed americans.

this is the same number of private-sector jobs we had years ago. no net growth in jobs, and the labour force has grown by about 15 million, and we today are sitting in the wake of a dramatic world financial crisis, and we are still struggling with how to figure out how to stabilize the u.s. economy, and we do that while we cast our eye across the atlantic ocean to see what is happening with the debt markets and banks in greece and in portugal and goodness knows what other countries tomorrow. with where we are today, contrasting that with the period of calvin coolidge, if we can magically bring him to earth and ask what is this for the challenges the united states faces, i came on one word, which is humility, and humility in two dimensions that i want us to

think about, ok? in terms of the broad issues. the labels change. someone like president coolidge and which parties, it is quite unclear. so the word of humility that i choose is for democrats or independents all republicans, people across the aisle, both at the federal level and the state and local level. i will explain this with a quote. we have heard some quotes about calvin coolidge. the quote was the following. the second half of which at a lot of people are familiar with, and he said the following. this maintains an intimate touch with the business currents of the nation. it is likely to be more reliable than if it were a stranger to these influences.

after all, the chief business of the american people is business. they are connected by, summit, and prospering in the world. this last part is what i want to come button for a few moments. the state of those words coming from a background that had very little to do with business. he studied kind of -- he was an undergraduate at elmhurst, a fine school not to of far from dartmouth. he studied philosophy and economics. after that, he went into the practice of law and spent a lot of his time in public service. he is not someone who gets spent a great deal of time directly in the private sector, and yet, i think that quote of the chief business of american people is business is actually very profound for this notion of humility that i think he brought to his office, in terms of thinking about his stewardship. i think of humility first of all

in terms of what drives economic growth. this is as roger and others have pointed out. this continues with virtually no sustainable job growth. and other sec pointed out, you look at the 1920's, what was happening in the real economy is and how new products and industries work. we did not have twitter and the internet before. there were the high-tech industries then, things like electricity, automobiles. remember, air travel was becoming more of a viable thing. and the 1920's was an astonishingly important economic period. and, granted, he was an iconic person. laying claim to that innovation,

laying claim to the economic activity. the macroeconomic activities were good in a lot of the ways we care about. gdp was about 4% per year. the unemployment rate had fallen to about 5%. there was a regional variation, but for the overall economy, things were going quite well. when economies grow quickly, thanks to innovation, we tend to get surges in income and tax revenue. part of the reasons tax cuts were able to be made during that period was that they were in surplus for most of the period. it is kind of easy to do that when you have got surges in tax revenues. if you look at the late 1990's, the last few years of the clinton administration, part of that had to do with republicans and congress. and an awful lot of that had to

do with the unexpected surge in productivity in the united states, and therefore in, that had to do with other issues. and there was an initial public offering, and the second half was a pleasantly unexpected period, where productivity growth, income growth, tax revenue surge, and that is a big piece about the fiscal surplus for a few years, so the first thing that i want us to think about humility is there are awful lot of politicians on both sides of the aisle that they claim to a lot of economic activity that happens during their period in office, and i suggest that one thing we do not know about is how they sustain economic growth. but as scholars and practitioners have tried to unbundle, it has something to do with the basic federal government support for research

and education and infrastructure, absolutely, but it has an awful lot to do with the incentives given and the private sector for small businesses and others. when you look at the united states in recent years, one of the sobering things is about the new business start-ups and america. there is an increase in the global economy with a lot of global corporations. more and more, they have a choice of where they are going to hire people. it is not just what we are doing in america. is in the bric and beyond countries -- it is in them. we are killing tourists -- kidding ourselves and the united states if we think we abbey's ordain rights to good jobs at good wages. there is one that won us to think about. and the second is a little more speculative. this speaks to the financial crisis that came shortly after

president coolidge, and which we are living in the aftermath of today. the american people, they are profoundly connected with buying, selling, and prospering in the world. one of the dimensions of that is what happens in asset markets, and i think one of the lessons i take from the time of president coolidge, the u.s. stock market, the dow jones industrial average and other measures rose dramatically, and he left office kind of on black monday and the crash, and that is what contributed partly to the calamity and the damage and we have come to know today as the great depression. we have had financial crises for centuries. and we will probably continue to have financial crises for a long period after that.

and this is not to say that we have not found aggressive regulation of capital markets, but when i hear a lot of the policy conversations today, it starts from a couple of places that i do not think are quite accurate. one is that the people in finance are evil, and there are not that there are not scofflaws. and there is a sense today that a lot of people and think when they approach capital markets, they speak as though all things can be done away with if the regulators are smart enough, and i think one message i take away from the time the president coolidge, and i do not know if you would agree with this today if he were to materialize, but to have a little humility. these are hard things to predict.

and a hard thing is how we can try to reduce the risk of those things, reduce the damage that they create in the broader economy. it is a fundamentally different way to regulate capital markets. there are evil people, and if we just do this the right way, we will do away with it forever. that is the second thing about humility i want us to think about, that our country may struggle with the aftermath of yet another crisis. i do not like this fact of the way the capital markets were. we had a crasser -- a crashed shortly after coolidge. in the future, we will probably have more crises. of the, we will not have another one, but humility in terms of what drives economic growth and about what regulates capital markets, those are two things that i think is part of what i see during the presidency of calvin coolidge and how this

deals with things we face today. >> well, thank you very much, all of you. i have one question, and then prerogative, i think, and that is that the u.s., we are the most productive country on earth, from what i understand, and that basically means we do more for less. and there is a criticism that companies are making all of this profit, but they are not hiring anybody. well, maybe do not need all of those people. can you sort this out for me? are we going to have to go through a whole generation before people start getting wealthy again, and everyone is productive, and can you help me out? >> i can be much more simplistic than that.

productivity growth since 1900 in the u.s. has averaged 2% per year. take any span. we have a surge to around 4% per year during the information technology revolution that matt was talking about. they are actually reliable back to about 1870. and we managed to dig in higher- income, more productive per person, and buy more. and by buying more, we create more demand. it is not just a notion of a fixed level of demand and that more people are going to be unemployed. demand keeps rising. we sell not only to one another but all around the world. if you had told people that 20 years ago, looking ahead 20 years, manufacturing jobs would

be reduced by 60%, they would have said that would of been a gross recession in the u.s., but, in fact, the unemployment rates still average about 5%. they managed to find new things to do productively, and as you look around the world to try to understand, like some nations are high growth, some nations are low growth, over the 20 to 25-year spans, what you find is a distinguishing characteristic of bottoms versus top quartile countries, and if you invested people with more primary, or secondary, more tertiary, research and development, better tools, there is a perfect correlation between their level

of investment in people and machines and knowledge and the growth rate of a country. so the growth does not destroy jobs. it just creates rising incomes. and how you manage to get out of the current problem? that is a tough one. bear is this european environment of recession that there is a drag on us. i disagree on how rapidly we can take this to work. if we have a percentage of gdp, we are talking about a fiscal cliff. if we took that out and left it out, we would have not a recession, not a great session, we would have an even greater recession than we have now. europe has tried that experiment. they have cut this by about 1.5%

of gdp. it is a crazy situation. >> let me give governor dean a chance. >> i rest my case on the fiscal cliff because of cbo. and 1.3% drop for two quarters, and we have to deal with this, so i would stick to my guns. there are two things we have not talked about. one is good in the long run, though it has been very painful. my friends in the labor union hate free trade. free trade is a very good thing for the world. when george w. bush was first elected, people had forgotten, a very short time before, spying on the chinese coast and the chinese claiming it was dealing

with their airspace, and airplane was disabled. in 10 days, not just the crew came home, but the plane was dismantled and sent home. that would never happen 20 doinh business with us that they can afford to provoke a major international incident and they will be much more careful than they would have been before. so i think international trade is a very good thing but it spread -- been very painful to manufacturing the manufacturing countries of the world. the adjustment will continue. i think we are beginning to see that you can get through that and develop different kinds of jobs in high-end jobs and i totally agree that education and so forth will be part of that. so i do think this. i think this is a very, very good thing. it has been painful for the manufacturing companies of the world. the adjustment will continue. you can develop different kinds of jobs and high-and jobs.

end jobs. it will continue to be tougher. the other thing is i believe our systems are not working, and i believe that is because of the size of the banks. there is one person that has talked about capitalism as failure. well, if you cannot fail, you can imagine these. we need to bail them out when they are too big. why do i say this? it is not just their bad behavior investing in credit default swaps and all of the other. just gambling chips. reasonable hedges. i do some work for the biotech industry. we cannot get people to invest in the industry. it is high risk and long term.

we need to change the tax code for long-term investment to really have the advantage. i am probably the only democrat in america who believes we should get rid of the taxes on all of these and have no capital gains whatsoever for investments less than five years. all of this is about investing in longer-term as opposed to the issue of creating jobs for those who want to sit around and smoke cigars. this reminds me of the 1920's, and we can do better. [applause] >> ok. i am anxious to start taking questions. again, the rules are, if you are comfortable, please stand. in any case, please and identify yourself and keep your questions short -- please identify yourself and keep your

questions shorts and do not direct them all towards governor dean. >> hello, i am from new hampshire. i constantly hear the term "entitlement programs," and social security is one i would like to take an example of. it is not an entitlement. we earned it. we paid into it all our working lives, and so did our employers, and everybody is worried about the future of social security for our children and grandchildren. it would be solved and forever. why does not anybody consider just lifting the cap on it? >> good question. so, roger, do you want to have a quick shot at it? >> i guess there are two answers. there are some who did not pay enough to afford the benefits on an actuarial basis.

it passed congress. they grossly increase them and promised more and more than the tax revenues could ever justify. finally, in 1987, there was a greenspan commission, bipartisan, that postpone the retirement ages, but it still did not do enough, so the next question you raised is why not just raise the cap? well, social security is uniquely among plants, partially designed for what you did with some relevance, and it is true that the lower-income groups in a positive rate of return on that and the higher-income groups get a negative return on that, so what you are proposing about raising the cap would just be having a tax on higher-income groups to provide some other benefits, but let's face it.

it is just a tax to finance something that we have not paid for. it is a tax. >> that is the price of democracy. a fair share. >> let me move on, and the speakers will be here for awhile longer, so you can take it up. but let me hear a question from this man. >> i am from the government. i want to say this has been a terrific presentation. i want to make one comment in reference to something professor slaughter said, which is very important, which is the role of technology. one of the huge drivers of economic growth is new technology. i want to know how many members of the panel know that every automobile maker in europe is introducing hydrogen-powered cars.

hydrogen has no pollution, no co2. you make it by splitting water. it is in the united states that we developed the technology of using solar panels and a cobalt catalyst to split water, to use solar energy to split water, store the energy in a hydrogen fuel cell, and drive a car. and that can be done anywhere. there is no huge cost of shipping oil all over the place, and we are not spending one- quarter of our fuel to buy gasoline or oil from people who hate us, which is sort of a stupid thing to do. >> so, matt, do you want to -- my answer is we are using so much gas in washington that we do not have any left, but go ahead. >> that innovation is one of the

myriad of ones. if you're going to say, boy, tell me, matt, which of the technologies we should ban on to create jobs in the next 10 years, the honest answer is i have no idea, and i think this story is true. a lot of microsoft officials around the time netscape was created, or this thing called the internet, will this change the way we do what we do at microsoft, in the answer was, no, we do not think it does. i am not smart enough to predict what is on to be the next technology, but governor dean, one of the things we have heard it is things that matter for growth in ways that are difficult to quantify and predict are can we set up a capital-market system so there are a lot taking in the clean

technology and solar and wind and technologies that i do not even know will exist tomorrow. i feel better for the prospects for the future if i saw a lot of things happening in washington to support that kind of dynamism, because the statistics are great, but my one friendly amendment is there is nothing that says what the growth rate will be in the future. i was born in 1969. the high school graduation rate has not budged at all. in sharp contrast to the 20th- century of the united states, where the graduation rate was about 5%. today, we are still at about 75%. it is the subtle things that i think really matter for creating these types of opportunities. >> they are spending. >> go ahead. >> can we just wait for the mic?

>> it is happening now. >> [laughter] >> i had forgotten how old the technology is. island and vermont. -- i live in vermont. 20 years ago, 25 years ago, i asked a stockbroker to get me some stock. maybe one or two companies. his reply was, you do not want to buy that. there is nothing there for years

and years ahead. i wish our stocks programs were a little more industrious, a little more reputable. it is not just a laboratory. it is where the money comes from. >> is there a question? >> pardon me. >> we need to get to a question. >> can i say one anecdotal thing? correlating the financial industry to the bloodsucking squid or whatever.

i am a mother of two boys in their 20s, one just graduated from college. both of them have no interest in voting or getting involved in the political system. i live in vermont. i ask many dartmouth students, what is going on? i get a blank responses. what would you tell the youth of america? everywhere i go, i find them absent. i am 57 years old, my goal is to reinvent biggest bank of america. -- reinvent the youth of america. i see an incredible decline. >> involvement of young people. >> what would you tell young

people? what would you say, what are the reasons for the voting and for getting involved in the political system? i see a complete lack of, a complete this association. >> got it. >> i have very high hopes for this generation. there are circumventing the political process. they are redesigning the way everything is done. the attack on bank of america, at the attack on the horizon -- verizon. they also elected obama. i am not worried about young people. i do think they ought to vote. i tell them, politicians cannot

help you much, but they can hurt you. that is the price of being a citizen is voting, paying taxes and voting. i would not give them a long the song and dance. i do not blame people for being disgusted, but if you do not vote, democracy is the worst form of government, except for every other. they have to vote, that is part of their duty. to reorganize a whole lot of things. not to worry about the institutional failures of wall street and the media. >> professor, do you have

something to add? >> i have a lot of students to save these sorts of things. they voice a lot of concerns. the opportunity for you to make a difference could be greater because the world is desperate for leaders. if you have an aspiration to become a leader who can change the world, being in this environment offers a tremendous opportunity. >> by the way, i would ask them to recall counting chad's. remember that in florida? >> i do not live in vermont, but i eat a lot of find organic vermont cheese. [applause] i have a question for everyone.

my question relates to the fiscal policy in the u.s. it is not enough that you succeed, your friends must fail as well. our situation could be much worse would not be for the -- were it not for the crisis in europe. if you project a few years forward, people who are typically buying treasuries, a lot of those folks try up, how would you think of the fiscal situation in that context, especially because i believe that a lot of metrics used to judge how the middle class is fairing is somewhat flawed. it does not take a lot of key ingredients into account. i can look at the price of education or the price of organic cheese. i would love to get all of your takes on this. >> we are benefiting from

europe's problems because the dollar is a safe haven. it is useful for people to live in vermont and new hampshire. two people the mets a bear in the was, and they said, this is horrible because we cannot outrun the bear. i do not have to outrun the bear, i just have to outrun you. [laughter] we have an exorbitant privilege because the dollar is the world's reserve currency. . the only country -- we are the only country in the history of financial crises who have a financial crisis and the dollar appreciates. people buy more of our currency. if you go to latin america, asia, europe, people want to sell your currency. we can get away with these

deficits. how to deal with that, that does not change overnight. people do not trust the euro anymore. the japanese yen does not seem used around the world. people do not trust china in terms of their capital market and investment. we can afford to pay for our debt at a fairly low interest- rate. that is why i was interested to. governor dean said that we need this fiscal cliff. it is a whole separate issue. >> it is now 6:36, we were going to finish at 6:30. i would like to go to 6:45, is that ok with you?

let's take a couple of questions. led the have a question from here and perhaps a question from back there? if that is ok with the panel. >> you just brought up part of my question. we have been talking about this cliff but what happens if congress does not do anything? what if we do not try to shut it off of a cliff? what is the worst in happens if -- stays levels days wettes where it is. >> if congress does nothing, you go off the cliff. >> if congress does just enough to not go off a cliff, but not enough to slash it down --

>> let's take another question. i have a health insurance customers. it frustrates me when i see -- i do not think business has taken the opportunity under the affordable care at, and states to do not want to put up these insurance exchanges, it would seem to me that business has missed a great opportunity to say, we want to be out of the health insurance business. it would appear to me that with the start of the health insurance exchanges, the health insurance exchange could be a great way for business to say, make a defined contribution, give employees the dollars, and get themselves out of the business. it would allow the ability --

its business thought about it, they would be pushing parts of our political system to back this type ofroac >> can i ask you to handle the first one? >> two fiscal cliffs -- world war i and world war ii. the recession was relatively mild. if we get the underlying fundamentals, we can survive a fiscal cliff without the major recession. >> people could not buy cars,

they could not buy clothing. there was all this pent-up demand. that does not exist today and we would be raising taxes by about 3%. you of this the 2% payroll tax cut and you would have a 2% increase in average income tax. as the government goes down, there is no consumer to take up the slack. the fed has run out of ammunition to buffer of the fiscal cliff. cut the federal service is not out of ammunition.

-- >> the federal service is not out of commission -- out of ammunition. >> that leads to another hour. >> what is going to happen, which is a good thing, is exactly what you described. the employment connected system is a mistake. it is an historical accident. it makes small businesses and competitive. it starts from a lower base. every time the germans spend 3.5% more on health care, that it spread over the entire community.

what is going to happen because small businesses always struggle with these questions. they're going to pay a fine, which is not very big. if you are a restaurant and you happen to be doing health insurance, they will get a necessity for the federal government. i think it is a very good thing because it will start rationalizing the purchase of health insurance. >> should we take a couple more questions. this gentleman right here in the blue sweater.

>> i am a former practitioner of international corporate finance. how much concern you have about a possible resurgence of protectionism against the background of the global economic difficulties. >> i work here. dartmouth help connect is a new system. if that is the sort of system you're talking about. it is a patient based system. >> i do not know anything about it.

>> cold line. thank you. >> i would like to come back to the region a comparison between obama and calvin coolidge. i'm reminded of the 2008 book which claimed the american people want to contract three things. they want to give those national leaders more and more things to do. that seems to me to be a fundamental difference between calvin coolidge. how did you return to a state of affairs and way to the people want more responsibility for

their own affairs and they give responsibility to the federal government and washington? >> let's start with the resurgence of protectionism. anyone want to take a shot at that. >> i have a couple of thoughts. >> i was not worried about it for many quarters of the financial crisis. there are some worrisome signs that other countries are starting to intervene. our exports have been keeping the economy going. we always hear about imports and the trade deficit. to the extent other countries restrict trade, there are restricting our exports. that puts a further dent into the u.s. economy.

>> i.m. very worried about the rise in protectionism. part of what i worry about is we do not have enough leaders telling americans a lot of value gets out of the economic troubles very end is by building more jobs in america better connected to the world. imports, exports, there are a lot of industries could be realized, but cannot interested in moving in the other direction.

the united states and china are falling over each other to do more to protect through terrorist barriers and clean tech innovations. i am not spread to figure out. >> we are moving in slightly the opposite direction. >> anything on the wellness? >> i cannot do the wellness because i am not familiar with the darkness plan. they want to fix the school. they have given up on the political system. it is an incredible generation. a huge percentage of kids are going all over the world. one of my students and teacher at yale, they decide to start a

company and now they're selling solar chargers for cell phones in places with no electricity. the next step says it will sell chargers so they can charge light so the kids can read. this is unbelievable. a 22-year-old woman graduate from the university of vermont, starts her own foreign-aid project. these kids are unbelievable. these are not every single kid, but there is an enormous -- it is not just people from yale and dartmouth. i think these kids are determined to remake the world no matter what. >> i have one additional thought

on the help the exchanges. it does make sense to have people they will be a little bit of a guardian. if we have gone differentiated premiums that do not reflect whether you are engaging in risky behavior in terms the evening drinking a smoking, you name it, we are not doing enough to bend the cost curve. the private sector has learned that when they put in incentives, positive health behavior, better behavior happens and total cost goes down. we need to have differentiated premiums based on personal behavior. >> a good moderator never offers an opinion. i will break that rule.

we had an extraordinary panel and i would like you to join me in thanking them. we have a small gift for each of you. thank you again. come back and see yes. [applause] >> we talked with a roll-call reporter on "washington journal today about the medicare issue in the 2012 presidential campaign.

by having has -- he started off with his arm around his mom, who i believe is 78. she is on medicare. she says to the audience, mostly seniors, he is there to protect the medicare and protect her grandkids. i think he did a pretty effective job. it was as good as an event as they could expected. -- to help pay

for the obamacare. they think that is going to be an effective attack the will help inoculate them against the concerns that ryan pulse medicare plan will dramatically alter it. >> is this a debate that republicans want heading into their convention? is this something that democrats are vowing to continue to push. >> the republicans said they want the debate. want the debate.