on to defend liberty here at home. testing the limits of a free press during his tenure as executive editor of "the washington post," he oversaw coverage of the watergate scandal and successfully challenged the federal government over the right to publish the pentagon papers. his passion for accuracy and unyielding pursuit of truth continue to set the standard for journalism. [applause] [applause] the honorable william j clinton.

[applause] among the finest public servants of our time, president william j clinton argued cases for the people of arkansas, served his state in the governor's mansion and guided our nation into a new century. as the 42nd president of the united states, bill clinton oversaw an era of challenge and change, prosperity and progress. his work after leaving public office continues to reflect his passionate unending commitment to improving the lives and livelihoods of people around the world, and responding to needs both at home and abroad and as founder of the clinton foundation. he has shown that through creative cooperation, we can solve even the most intractable problems. [applause]

irene hirano inouye accepting on behalf of her husband, the honorable daniel k inouye. [applause] a true patriot and dedicated public servant, daniel k inouye understood the power of leaders when united in common purpose to protect and promote the tenants we cherish as americans. as a member of the revered 442nd regimental combat team, daniel inouye helped for europe from the grasp of tyranny during world war ii for which he

received the medal of honor. representing the people of hawaii from the moment the island joined the union, he never lost sight of the ideals that bind us across the 50 states. senator inouye's reason and resolve helped make our country what it is today. for that, we honor him. [applause] dr. daniel kahneman. [applause] daniel kahneman's groundbreaking work earned him a nobel prize in economic sciences for his research developing. after escaping from not the occupied france as a young boy

and later joining the israel defense forces, dr. kahneman grew interested in understanding the origins of people's beliefs, combining psychology and economic analysis and working alongside dr. gursky, dr. kahneman used simple experiments to demonstrate how people make decisions under uncertainty circumstances. he forever changed the way to weave your human judgment. [applause] the honorable richard g lugar. [applause] representing the state of indiana for over three decades, richard g lugar put country

above party himself to forge bipartisan consensus throughout his time in the senate. he offered effective solutions to our national and international problems, advocating for the control of nuclear arms and other weapons of mass destruction, working with senator sam nunn, he established the nunn-lugar program, one of our most successful national security initiatives helping to engage leadership after decades of conversation. he remains a strong voice on foreign-policy issues and his informed perspective will have broad influence for years to come. [applause]

loretta lynn. [applause] born a coal miner's daughter, loretta lynn has followed a bold path to become a legend in country music. a singer, songwriter and author, she has written dozens of chart topping songs, released scores of albums and won numerous accolades. breaking records, she opened doors for women not only by winning tremendous achievements, but also by raising issues few dared to discuss, fearlessly telling her own stories with candor and humor. loretta lynn has brought a strong female voice to mainstream music, captured the emotions of women and men i like and revealed the common truths about life. [applause]

dr. mario molina. [applause] the curiosity and creativity that inspired mario molina to convert his family's bathroom into a laboratory as a child has driven him from decades of scientific research. born in mexico, dr. melina's passion for chemistry brought him to the united states where his investigations of fluorocarbon's lead to breakthroughs in our understanding of how they deplete the ozone layer. the impact of his discoveries extends far beyond his field affecting environmental policy

and fostering international awareness as well as earning him the 1995 nobel prize in chemistry. today, dr. molina remains a global leader, continuing to study our quality, climate change and the environment that connects us all. [applause] tam o'shaughnessy accepting on behalf of her life partner, dr. sally k ride. 30 years ago, dr. sally k ride soared into space as the youngest american and first

woman to wear the stars and stripes above earth's atmosphere. as an astronaut, she sought to keep america at the forefront of space exploration. as a role model, she fought tirelessly to inspire young people, especially girls, to become scientifically literate and pursue careers in science, technology and engineering and math. at the end of her life, she became an inspiration for those meddling pancreatic cancer and for the lesbian/gay/bisexual and transgender community. the tale of a quiet hero, sally ride's story demonstrates that the sky is no limit for those who dream of reaching for the stars. [applause] walter nagel accepting on behalf

of his partner, bayard rustin. [applause] bayard rustin was a giant in the american civil rights movement, openly gay at a time when many had to hide who they loved. his unwavering belief that we are all equal members of a single human family took him from his first freedom ride to the lesbian/gay/bisexual and transgender rights movement. thanks to his unparalleled skills as an organizer, progress that once seemed impossible appears in retrospect to have been inevitable. 50 years after the march on washington, he organized, america honors bayard rustin as one of the greatest architects for social change and a fearless advocate for the most vulnerable citizens. [applause]

arturo sandoval. [applause] arturo sandoval is one of the world's finest jazz musicians. or into poverty in cuba, held back by his government, he risked everything to share his gift with the world. eventually, defecting with help from dizzy gillespie, his mentor and friend. in the decades since, this astonishing trumpeter, pianist and composer has inspired audiences in every corner of the world and awakened a new generation of great performers. he remains one of the best ever to play. [applause]

linnea smith accepting on behalf of her husband, dean e smith. [applause] dean e smith spent 36 seasons taking college basketball to new heights. as head coach at the university of north carolina at chapel hill, he led his team to 11 final fours, two national titles and 879 victories, retiring as the winningest men's college basketball coach in history. dean smith brought the same commitment to supporting his players off the court.

he helped more than 96% of his lettermen graduate and in an era of deep division, he taught players to overcome bigotry with courage and compassion. he will forever stand as one of the greatest coaches in college basketball history. [applause] gloria steinem. [applause] a trailblazing writer and feminist organizer, gloria steinem has been at the forefront of the fight for equality and social justice for more than four decades. instrumental to a broad range of initiatives and issues from establishing ms. magazine and

take our daughters to work day, to pushing for women's self empowerment an end to women's sexual trafficking. she has shaped the base on the intersection of sex and race, brought critical problems to national attention and forged new opportunities for women in media. gloria steinem continues to move us all to take up the calls of reaching for a more just tomorrow. [applause] reverend c.t. vivian.

[applause] equipped only with courage and an overwhelming commitment to social justice, the reverend c.t. vivian was a stalwart activist on the march toward racial equality. whether at a lunch counter on a freedom ride or behind the bars of a prison cell, he was unafraid to take bold action in the face of fierce resistance. by pushing change through nonviolent demonstration, c.t. vivian established and led numerous organizations to support individuals and communities. his legacy of combating injustice will shine as an example for generations to come. [applause]

patricia wald. [applause] patricia wald made history as the first woman appointed to the united states court of appeals for the district of columbia circuit, rising to chief judge of the court. she always strove to better understand the law and fairly apply it. after leaving federal service, judge wald helped institute standards for justice and the rule of law at the international criminal tribunal. hailed as a model judge, she laid a foundation for countless women within the legal

profession and helped unveil the humanity within the law. [applause] oprah g. winfrey. [applause] oprah winfrey is a global media icon. when she launched the oprah winfrey show in 1986, there were few women and even fewer women of color with a national platform to discuss the issues and events shaping our time.

over the 25 years that followed, oprah winfrey's innateness for tapping into our most fervent hopes and deepest fears drew millions of viewers across every background, making her show the highest rated talk show in television history. oprah winfrey has used her influence to support underserved communities and lift up the lives of young people, especially young women around the world. in her story, we are reminded that no dream can be deferred when we refuse to let life's obstacles keep us down. [applause] >> the medal of freedom honorees, please.

[applause] all right, that concludes the formal part of today's ceremony. i want to thank all of you for being here. obviously, we are deeply indebted to those who we honor here today. we're going to take some pictures with them and their family members. the rest of you, i understand the food here is pretty good.

[laughter] so i hope you enjoy the reception and i hope we carry away from this a reminder of what jfk understood to be the essence of the american spirit, that it is represented here and that some of us may be less talented, but we all had the opportunity to serve and open people's hearts and minds in our smaller orbits. i hope everybody has been inspired as i have been in participating and being with these people here today. thank you very much, everybody. [applause] [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] ♪

>> next, a discussion on the global economy. university dean. this is half an hour. [applause] >> so good morning. i was asked whether the ceo's would actually show up for a panel at 8:15 and we all agreed yes. so thank you for letting me look like i know what i am talking about. we have jim kim, the president of the world bank, and fisher, who accuse me of labeling print as venerable, which tells you what it's like to be a reporter,

and glenn hubbard, the dean of the columbia business school and was an advisor to george w. bush. i want to talk about the world economy and i want to start with the emerging markets. a couple of years ago, i think one would have said that the developed world was faltering and thank god for the emerging markets, china, india and the best of them, who were providing global demand. in countries like the u.s. and europe better get used to this because we will be less and less relevant in the future with emerging markets. and i would say that coming the last x months, maybe there has been some rethinking about that. so my question to you is is the golden age of emerging markets behind us? what are the chances were the

factors that the next decade will be so pleasant for emerging markets as the last 20-30 years have been? >> even africa had 5% growth rates. there has been a slowdown. if you look at some of the biggest countries, it looks like i will have a good third quarter. china came in at an annualized rate of 9.3% in the third quarter. there are all kinds of downside risks, the biggest one being what will happen here in this country when february rolls around. but over the next year, growth in the emerging markets will be over 5% and we think that will continue. so you won't see -- i don't think the 10% plus growth rate they use our prior to 2008. but a lot of the fundamentals in these countries are in much better shape than we even knew.

in 2008, we thought that africa would go off the deep end with the financial crisis. but they have kept a 5% plus growth rate all the way through. i just came back from a long trip there. the leaders, i was impressed with their understanding of the importance of their own management in macroeconomics, managing your debt, you know, watching their current account deficits, and also, every single one of them tells me every time i talk to them that we have to figure out a way to track more capital. something happened over the last 10-15 years and i think that emerging markets understand that they have to be competitive here and they have to create is this environments that will attract all of you. -- have to be creative -- and they have to create attractive environments that will attract

all of you. there is so much infrastructure need an investment needs in these countries and they all know that they need to attract private capital. the opportunity may be much greater than you think standing from the outside looking at places like the has -- like the sahara. >> stan fisher, what do you think? >> hi think they did very well for a decade, a decade of easy money and access to finance. but if you look at the brics, the bric is china and the others have not yet built a framework that will be very stable. the chinese have produced a plan

that's nobody understood in the beginning. but now that time has gone by, it looks better and better, including radical changes, including the one child family gradually. china just outstripped korea, which to that point had been the fastest for the longest. the rule of 70 says -- the fausto's for the longest. the rule of 70 says that that period increased 30% which is unprecedented in history. and it looks like they got most of what they should do, including structural changes, in place. that is good news. whether they will be able to do it and whether in the end they will be driven back to bank financing under orders of the government, we don't know.

that probably could happen. for the others, they have to improve their policies. this is a sad story of life that, if you have all of the prerequisites in place but use it -- but you pursue policies that get worse and worse, you get into trouble. there is a phrase called the fragile five, which consists of india, south africa, turkey, and russia and brazil. >> i thought you're going to put the united states on that. thanks you -- thank you. >> the fact is that every one of them was either a bric or, shortly after inventing the brics, jim o'neal invented something called the mists which

were 10 countries for whom the leaders were mexico doing well, indonesia doing reasonably, south korea doing well, and turkey not clear. and you can't stay on top if you can't -- if you don't keep adjusting your policies and they haven't. they have begun to pay the price. will they learn the lesson? at some point they will. the sooner the better can we don't know about that. -- the sooner the better. we don't know about that. in africa, they say it is largely based on its waiting resources, but it is more than that. south america is divided into countries doing the right things, to countries not doing the right things. the ones not doing the right things don't look especially

good right now. that is venezuela in particular. so even there we see the same fact they you better get your policies strain out and -- policies strain out and we hope they do it. >> cautiously optimistic. stan fisher? >> cautious as well. easy credit has been largely responsible for the market boom as is china's own development. i think stan is absolutely right. there is so much attention now paid to tapering and said hello see spilling over to -- and fed policy spilling over to the emerging market. it's like blaming it on the bossa nova. it is saying that the fed is not responsible for structural problems in emerging economies. if you take china for example, some of the recent economic to balance having good that it is

economic developments are good. still he financial sector whose policies don't work. structural reforms are needed likewise in india. around the world, rather than looking at big monetary or macro factors, these are individual policy factors. africa remains really an exciting bright spot particularly for the climate in entrepreneurship. in my own school, we have been on the ground for a decade training people who train entrepreneurs. really exciting. >> let's talk about a couple of developed countries. let's talk about your. -- about europe.

>> they are trying to create something that took the united states 100 years to create, which is a more or less unified sensor-based on -- unified center based on european money. the banking union is moving much faster than anybody thought they could. but take note. the united states sixes banks by 2009 basically -- the united states fixes banks by 2009 basically. the european bank, they will not be fixed until 2014 at the earliest. and it can be done, but they have to get the work done.

that means they are behind. this waiting 17 countries that 17 countries that they want to be in a banking union and have the supervision by another group rather than their own regulators is not easy. then they will move on at some point to the fiscal side. everybody thinks you have to move the media lead to the american centralized government which is larger and more important in the national government and they don't have to -- government. they don't have to do that. there's a step to have a reasonable amount of money at the disposition of the central authority so it can move funds around. that is a different proposition. they will be able to do that if the political will remain some that will be very tough. i would just say think about two years ago. everyone was sure that the euro wouldn't survive the year. now no one is even talking about its disappearance.

they have a habit of overcoming difficulties despite everything. so i am moderately optimistic it will happen. >> what about japan? they are rolling the dice on policy. do you think this has a good chance of success? >> if you look at the various arrows come i think you will see a range of chances. .the change of monetary policy has been welcome. japan has deflation they can be arrested. central banks are powerless here. the government, i am a little more skeptical. certainly, the talk from the incoming administration was very promising in the beginning and continues to be. but the real issue inside japan marsh structural reforms that it that have the devil to the japanese economy for -- that

have bedeviled the japanese economy for decades. so i don't see a whole lot of discussion being made there. >> dr. kim, what do you hear from people around the world about the united states in 2013? i we seen as a place to envy and admire because we have all of this entrepreneurial fervor or are we seen as the laughingstock because we can't even figure out how to keep our government open? >> if you just look back at what happened in august 2011, the last time we had a near miss, we followed the numbers very carefully. stock markets in developing markets to pay 15% hit. whatever happens here has a direct impact on what happens in the developing world. but i think there is still tremendous admiration for the ability of the u.s. to innovate.

every single country in the world is thinking about what they need to do to build an innovative new generation coming up. my experience in running the university is that it has, with they are saying what do we need to do to become more competitive? what do we need to do at the primary, secondary and especially at the tertiary level? that at the heart, the united states remains very strong. china has done so well to process improvement. but the real innovation is still a bit out of reach in those -- at a reach and those countries want that. and we know we have that here in the united states. >> i wondered if you could -- there is beginning to be some criticism that the central bank have done too much, that they have taken too much of the responsibility for getting

growth going, part tequila lee -- particularly in the u.s., maybe in japan. under the circumstances, do you think that the central banks, he said in particular, doing too much or is this what the doctor ordered? >> without the fed, we would've had a deeper recession. the economy would be in much worse shape today and we need to remember that. precisely had to get out of it and at what speed is a much harder thing to measure and to calculate. it has this problem of not quite understanding what happened to the participation rate of the employment force. there are far fewer americans working today.

as a central bank governor, we had to reduce our rates in israel because the united states rates were so low that, if we kept them where they should have been, 4%, say, we would have had an inflow of funds that would have created a lot of damage. so we cut the rate. housing prices have taken off. you have seen them take off in the united states. but these are things which you can watch closely. everybody knows now about exit prices. -- about asset prices. presumably, we will take that into account and moderate policy accordingly. so yes, it is dangerous. >> but it was necessary. >> but it was necessary. there is another line which is you shouldn't help the governments not face the development -- not face the dilemma they should be facing. leave the job to them. as a central bank governor, i thought that was very nice but it was not our job to figure out how to teach the government to behave better.

we had certain tools at our disposal. this was -- this was what was good to happen and we use them. that is the only way you can behave. the own -- the moment you begin thinking you are disciplining government, i think you are in deep waters. >> there is no western that we are asking too much of the -- i think there is no question that we are asking too much of the federal reserve and that the federal reserve is in dangerous territory. it didn't start out with extraordinarily positive responses. without the federal reserve's response, we could well have had a depression. but it is worth knowing that the early actions and things like the mortgage-backed security markets aimed at structural issues in the financial system unless persuaded that some of the other measures, long duration treasuries, variety of quantitative easing measures that had much of an effect on the real economy and run the

risk of miss allocating capital in the economy. if you look back, what we needed was posted to negative interest rates that we could not engineer. the textbook answer for that would have been a big fiscal policy changes, massive investment incentives and things like that that would mimic exactly the kind of interest rate movement. the government sat on its hands. so the problem has not been the federal reserve. the problem has been a government. i agree that it is not the for german space to give lectures to government officials were the chairman to give lectures to the government officials. nor should we believe that the unemploymenteer rate of six percent simply on impulse. >> i want to ask you about climate change. to what extent do you think the

global governments are doing enough to prepare for the risk that we will really have a problem? >> first, let's start with the science. this is something that i dug into deeply when i came on board. first of all, the evidence is very clear that there is the phenomenon of man-made, change. -- man-made climate change. the other thing is what do we do? there are governments and corporations that we can do better and that is something that we all agree on. 70% of greenhouse yeses come from cities. so is it possible to -- greenhouse gases come from cities. so is it possible to create more efficient cities. new york has shown us that you can make a big difference. carbon reduce the footprint by 2020. they will be there by 2017. we are actually working on that with china. china has completely changed its

approach on global warming and climate change because they have had to close down their cities because of pollution and they are losing people every year. cleaner cities . >> in general, are they doing enough? >> not yet. but there is smart things we can do. form of agriculture that can produce better yields and put carbon into the ground. we have to try to reach a political solution globally. but in the meantime, there are some he things we can do that is good for people, good for business and good for the environment. >> if you have a question, raise your hand and somebody will bring you a microphone. otherwise, i will keep talking because you know i can do that. there's one in the back. just speak loudly. tell us what you're. >> [indiscernible]

i have a question to the panel about china. a hugely been important consumer. we have experienced two decades of overinvestment booms all over the world, housing in the united states, technology in emerging markets. i would like each of you to put odds on the probability that china is experiencing an overinvestment boom that is going badly. >> let's take the second question first. >> 100%. china has been massively over investing. it has invested in large numbers of net present value. -- negative net present value.

not because they're leaders don't understand economics. it is a bet on generating employment. i think it is a bad bet. it is the one that leaves financial problems down the road. but absolutely there's massive overinvestment. >> if you go back 10, 15, 20 years, china was investing 28% of gdp. now it is 45% of gdp. we have never seen that kind of level of investment in the world before. the chinese know they have to unwind. they say they are very serious about moving from investment to growth model, one more focused on consumption. i have met with them. i have talked with all of the leaders there. they understand what they're doing. and this group of leaders is much more savvy around economics than previous groups of leaders. but it will be tough because the unwinding has to happen gradually that they know they have to do it. >> which will be the stars and which are the duds?

>> so of the 15 emerging markets, which will be the stars in which will be the duds? don't all answer at once. >> my guess is that china will turn out more positive than expected. it will be about 8% growth. remember that, when china grows and 8% after 10 years of growth that 10%, it is adding far more to global gdp at 8% growth this year than he added at 10% 10 years ago because the economy is to have times larger than it was previously. duds? there are a lot of candidates. i'm not sure that i want to sort them out, but there is a chance that were politics -- and

india's a great disappointment. i don't know if you want to call it a dud. india had it right and now government is doing a lot of things that do not make sense economically and they have an election coming up. when an election is coming up, it is worth considering what they will do up to the election and how long it will take them to undo it. one last saying -- we used to have a saying in the imf. it takes 10 years to build up countries, its framework. and it takes on election to destroy it. it happens time and time again and it is very -- it is a very sad phenomenon. >> a ringing endorsement of democracy. brazil? more likely to be a star or a dud? >> somewhere in the middle. it goes back to the policy mix discussion in the panel. argentina continues its century- long obsession with terrible public policy.

>> although they cleared their rears with us here i. >> you want to nominate a star and a dud? >> let me tell you a couple of places where i am hopeful. again, let's go back to africa. almost half of our business now is private sector. so our job is to help to find ways of de-risking investments, if you will. they have great leadership during the private sector has been growing. the leadership is totally omitted to building a better business environment and they pay $.75 per kilowatt hour of electricity which is seven times what we pay here in washington, d.c. if we can find long-term ways of finding capital for them to

invest in energy at a much lower rate, those countries will grow. they are educating their people much more. it is a totally different scene now. i would just say once again that, if every -- if anyone is interested, please talk to us because our role is to find ways of making the inmate attractiveness of investing in inatet aking the attractiveness and the investing in africa apparent to people like yourself. i think you will be surprised at how much we know about individual economies, their governments, and the policy environment. you may think differently about the possibilities. another place i hope grows quickly where we are doing everything we can is myanmar. it has a huge potential upside. they have made some very courageous decisions. and we come as a global community, has to show that there is a democracy dividend. so we are moving like crazy to build the energy and for structure. and if we do, they could be very strong. >> what about russia? >> russia is not going to do

well. under the current policies they are implementing -- in brazil, there will be one party that believes and what i think of as good policies in one party that has implemented what i think of as not to policies. -- not good policies. so that is a very uncertain outcome. >> anybody else? oh, come on. all right, let me ask you this. do you think that we have a chance, dr. kim, in eradicating global poverty, extreme got poverty, those who live on a dollar and a quarter or less in our lifetime? >> china lifted more than 600 million people out of poverty in the last 20 years.

we have a chance to do it. our research shows that about two thirds of the poverty alleviation comes from growth and about a third comes from various properly -- various policies that support directly. the thing that is encouraging to me is that there's not a single country that i have visited that doesn't understand the importance of private sector growth as a part of their overall economic strategy. india has a $1 trillion infrastructure deficit over the next five years. the government has said to all of us that more than half of that has to come from the private sector. so we want to learn how to help the private sector do better. they have a long way to go. but i have to tell you that they are committed to it. they at least clearly understand that private sector is critical. >> i guess 5% growth or 8% growth is interesting in brics.

i do a lot of business in brazil and in india. 20% currency exchange just ate it all up. the risk of foreign exchange investment is much higher than the growth of gdp. any comments on how you see foreign exchange develop? most of us we report in euro dollars. that is how it has to be measured. >> the most honest thing that any economist can say is that currencies fluctuate. i don't think that we have deep insight. the question you raise is two things. one, at a micro level, whatever hedging is responsible for your business. the other thing is that there are predictable movements based on policy differences that you

can look at. but hedging comes to mind. >> in your mind, is there any reason why europe would stop growing in the next two or three years? >> start growing, yes. but at 5%? >> 2% would be good. >> the rationale is that everybody says that there is no judgment in the periphery countries. but there is policy happening. the cap -- the countries that are in programs have significantly reduce their costs relative to others. so they can start coming out of it. we also have the ecb coming back to life, which will give a partial push to growth for some time. and there is a dynamic that will

take place in the global economy. there is a chance it will work out. you have to realize how quickly views change. britain was the sixth -- was the sick man of europe up until three months ago. all of a sudden, it is the star. it has grown for three quarters. that sort of thing changes moods and investment rates a lot. whether it be growing at 3%, i doubt it. will it have grown consistently for several quarters? quite possible. >> i am told that it is time to move to the next panel. please join me in thanking our guests. [applause] >> also from the council, secretary jack lew. he spoke for about 25 minutes.

[applause] >> good morning, secretary, thank you for joining us. you just got back from an interesting trip to asia. i want to come to the domestic story in a minute. you were actually in china. can you give us a sense of what you think how serious the reforms that were announced and whether this will represent a radical change in china's economic structure? >> whatever issue we were discussing, they knew what they needed to do. moving to market allocation of resources, moving to a market- determine exchange rate, opening markets. what i did not get a sense of the sequence. i suspect they are looking at several years of change. obviously, it makes a big

difference what order they take things in. i think they know that they have to get more market signals in their economy in order to get the growth rates they need. obviously, the global economy needs them to do that as well. i definitely got the sense that they are serious about economic reforms. >> ceo's from a lot of companies in the world, what is your sense of what it will mean for global business for american business in particular. is this the kind of opening that they are involved in? will that really open up their markets? >> take the shanghai free-trade zone. it is one of the initiatives they announced a few months ago after the economic and strategic dialogue here in washington. they have not yet determined all the details of what that will entail. if it opens up their financial services markets, that is a big deal.

if it opens up a number of their markets to international competition. they made the decision to reverse from presuming their markets are close, presuming they are open. they still have a lot of work to do. they had a big announcement on the shanghai free-trade zone. that is an early indicator of where they are heading. they have domestic needs. they know that inventory buildup in the state-owned enterprises is a signal that the market is not working, that resource allocation is not working. they know that to maintain a growth rate that is in the sevens will require reform. i suspect that they will be making good the sequence of change in the timing of change to get their economy moving and do it in a way to a smooth transition because there will be a disruption when state decisions are making more of the determinations.

they also seem to understand that they need to stimulate demand. their economy has really been driven by heavy investment for export. in order to have a good sustainable growth rate going forward, they need to have a more consumer demand. he also needed to satisfy the needs of the population at the same time. one of the things that they are talking about is taking some of the profits from the state-owned enterprises and pumping it back into the economy, both by putting money into the government to spend and evidence to shareholders. i didn't -- and dividends to shareholders. i don't want to suggest that they must from now they will -- i don't want to suggest that a month from now they will turn around and it will be transformed.

but they have certainly chartered a direction that is consistent with the things that we have very much encouraged them to think about. i suspect that we will still be pressing them to move faster and probably, when we see the sequence, we may make different choices and we will just have to continue to work with them. one thing that really impressed me was how important the u.s. relationship is to them. i met with the president just a few days after he took over in march and i was there just a couple of days after the thing. it was very important to them to have these kinds of conversations. >> you have been pressing china to open its markets. in the last few months, the last couple of years, we have seen a reversal to some extent in that relationship. china has been -- has said some pretty critical things of how the u.s. has been running things, in particular the fiscal issues in the last few months. did you get much from them on that? >> not really. i think that they understand

that we went to a noisy clinical process. but in the end, we did work that we told them we would do and that is to stand by the full faith and credit of the united states. i think they are very much curious on how they process unfolded and asked questions about how we saw things unfolding. >> they are our first creditor, after all. >> it was not with anxiety or a high degree of pressure. it was a small part of the conversation and it was more informational. i was reassuring. if you look at the political debate here, leaders on both sides had said that we need to extend the debt limit. we can't know through the kind of process that created so much anxiety in september and october. i would say, if congress could do it sooner rather than later, it would be better for the u.s. senate global economy.

>> what will we do on the day that congress has successfully kicked the road -- kick the can down the road for several months. there are and more deadlines in january and february. >> i think that, if you look at the things republicans leaders have said since october, it's clear that this was not a good experience either for the country or for them politically. i know the right answer. the right answer is they should just extend the debt limit way in advance and not have any sense of crisis at all. i hope that will happen. they said february 7 is the day when the debt limit expires. we do have extraordinary measures that will last about a month after that. they have some time. i hope when they resolve the budget, when they start moving forward, they just do the debt limit in a businesslike way and kind of give some certainty to

the u.s. and global economy that would be the right thing to do. >> everybody is looking for some kind of longer term, sustainable budget arrangement. we'll hear from paul ryan later this afternoon. what would be the right way to go forward in your view? there's talk of trading off the sequester for changes to entitlements, entitlement reforms. what would be -- what's your position? what's the best outcome here? what can we expect in the next couple of months? >> i guess if you ask me the view of the best option it may not be the same as what the most likely outcome is. i think the president's budget lays out a clear path with both tax reform and entitlement reform and replacing the sequester and i actually think the president's budget is a blueprint that were we to follow it would give the economy the kind of certainty and tail wind it needs to grow. you know, i don't want to get aed of the budget conferees, since the resolution of the debt limit in october, they've been meeting, senator murray and congressman ryan have been meeting.

there is any number of possibilities that they could come out with, any number of sizes. it could be small, medium or large. i think that anything they do that shows that they can kind of work together to kind of chip away would be a kind of -- instill some confidence both in the process and in the substance. i don't want to jump ahead of where they are. the challenge on doing something really big is that both sides have to do something really hard. we've made clear that in order to do the kinds of entitlement reforms that are in the president's budget, it would require moving on tax reforl and raising some additional revenue.

if that's not a possibility, for the republicans, then something large is not likely. but there's other ways to -- for these conferees to work things out. i really would leave it to them. >> as you say it didn't work out well for the republicans as has been noted. but there was a sense that the administration wasn't getting involved, so tom -- to some extent it looked like the scradmrg was sitting back and letting republicans dig their own hole. you say you'll leave it to the budget conferees on the hill are you going to be more proactively involved this time? >> just to be clear, we said in october that congress needed to extend the debt limit. we kept them very closely informed of where we were, literally every week and there was not a negotiation over the

debt limit. so it was a question of congress figuring out how it was going to deal with the thing they had to deal with. that is protecting the full faith and credit of the united states. the budget conference is an intrinsically congressional process. it's one of the few things that doesn't come to the president to be signed. the house and senate agree on a budget resolution and sets their internal governance of how they'll handle appropriations and budgetary matters.

our -- you know, our budget experts consult with the people on the hill and answer questions but it's intrinsically a congressional process. our view as to what the right solution is is quite clear. the president's budget is what he strikes by. it represent what is he offered the speaker at the end of last year. it is, i think, the right solution. but we've got to see where this conference goes. >> let me ask you one specific issue on appropriations. i think today, actually, max baucus, the chairman of the finance committee, is going to present a plan which he's been working on, i think with dave camp in the house, on corporate tax reform. of greast interest here to our audience and the taxation of overseas earnings. there's a lot of, as you know you hear frit c.e.o.'s and others a lot of concern about this issue. i don't know how much you've had a chance to see this late proast posal. do you think what this proposal or something else in the course of the budget negotiation this may be an opportunity to deal with this issue which worries a lot of business people.

>> i talked to senator baucus. i think it's a constructive step he's putting forward a draft. i look forward to studying the details. from what i understand it shares some significant characteristics with the president's framework which i actually think has a certain amount of convergence between democrats and republicans. i thope hope that republicans engage with him on it. i hope that democrats engage with him on it. what we saw in the middle of october is when you let a majority of congress work they do the right thing. if you let the majority work on tax reform, what the president outlined in july is a plausible path. if you can't do everything, do business tax reform, have our statutory rate not be something that drives business out but atrabts business to the united states. deal with disparity between u.s. and international tax rates. eliminate some tax provisions that skew investment decisions and there's the benefit in business tax reform, in fax

reform in general that there is some one-time revenue that comes in. the president said in july, we ought to use that to kind of jump start our investment and infrastructure. you can't use toyota lower tax rates forever because it wouldn't pay forever. it's one-time savings that we think would be an enormous shot in the arm to the economy and it would build the foundation for a strong growth and job creation economy going forward if we put it into infrastructure. i'm hoping that this conversation still can move forward. you know, there's an awful lot of issues moving thru congress now where i actually do think that there's the potential of consensus. i think if you look at tax reform, imgation reform, the farm bill, i hope that october represented something of a threshold that would we crossed over and if we can see processes where ideas are put forward, where it's about trying to see is if there's common ground, you know, it would be a good thing for the country. >> where do you see the u.s. economy right now? i think you were saying fairly bullish things last week but we still, we've had a couple of months of better employment

growth but unemployment is still high, real unemployment rate if you like is measured by, if you take account of the people who dropped out of the work force is still very, very high by historic standards. growth is still soft. what's your expectation going forward? are we still going to be stuck in this rut of 2%, just over 2% growth and still high unemployment? >> i think if you look at the economic data from the last few months, there are a lot of encouraging signs. we're seeing the housing sector doing much better, we're seeing manufacturing doing better. private sector jobs. the jobs numbers that came out just a lit overall a week ago went back and corrected the numbers for the previous couple of months showing we have had roughly 200,000 jobs a month which was higher than the original numbers. not enough. we need to do better. but it's showing, you know, a significant trend in the right direction. i think if you look at what's been going on the last year, we've had an enormous amount of fiscal drag. some of it was intentional. the phasing out of payroll tax holiday, the imposition of lower

spending levels. some of it is unintentional. sequestration kicking in because congress was unable to agree on a balanced set of medium and long-term alternatives that fiscal drag runs its course. there are various estimate bus it's well over 1.5% of g.d.p., fiscal drag this year. if we're ending the year with a just over 2% g.d.p., it gives me reasonable optimism that going into next year it will be better than that. look at the jobs numbers from last month, we've actually seen state and local employment making up for the de-clines in federal employment. during the kept of the recession it was the other way around. state and local government was shrinking. if the head winds from federal contradiction abate, which they will, and the rest of the economy from housing to manufacturing to state and local government are doing better, those are all indications that we ought to go into next year stronger. >> we had our strongest employment growth in october for quite a while despite the government shutdown, led some to suggest we should shut the government down more often.

>> i hope nobody learns the wrong lesson from the numbers. the economy would have done even better for we had had -- if we had not had that debate here in washington. the truth is, in 2011 and 2013, we hadn't seen government debate policy uncertainty, putting a kind of pall on investment activity, we might be seing the kind of recovery we all want. i'm curious what the views in this room are in terms of marginal investment decisions and how the debate in washington affects the decisions that people in real businesses are making. from the conversations that i've had with c.e.o.'s, i think it's substantial. >> i want to come to a couple of questions from the audience in a minute. but first financial reform. we've had dodd-frank. we've got this issue a numb of issues still related to that and other issues too. one particular thing i want to ask you about, the volcker rule this issue of financial institutions using their own money, proprietary trading. i think you've said you want outlines from the regulate yorns

this by the end of the year. >> i don't want outlines, i want the rule. >> what's your expectation now by the end of the year? is there clarity? >> i'm optimist exwe'll see a rule by the end of the year. i've met on a regular basis with regulators. five different agencies have to come to the same place. it's a complicated process. but it has to come to closure. it was an important part of dodd-frank. i think it's important in terms of financial regulatory policy. i think it's important in terms of confidence and government. these processes can't go on forever. if you look at the period of time from dodd-frank being enacted until now, there were a couple of years where every effort to delay the implementation of dodd-frank was used from slowing down funding

the agencies to urging congress to repeal dodd-frank. for the last year, we've seen a different environment. we've seen an environment where the need for certainty and the acceptance of dodd frank as the law of the land seems to have replaced that effort to delay and perhaps repeal it. frankly when i became secretary and moved in on that opportunity and i pulled the regulators together and i said, you need to figure out what it is that are the difference tweens the agencies and we have to come together every few weeks to talk through the issues, you need to make decisions. i think that the major issues are resolved. they're figuring out, it's a complicated piece of business because on one hand, they have to preserve the ability to have firms to make markets and on the other hand, because of the policies, stopping proprietary trading needing to shut down the kind of risky positions firms were holding on their own account. i'm optimistic they're getting there. >> but you expect there to be, the rule will be agreed and

published by the end of the year? >> that's what i've urged them to do last week the president reiterated it. >> final question on the financial shrble. it looks like a hostile environment for financial issues. looking at what's going on at j.p. morgan, you look at the way this administration is pursuing all kinds of financial regulatory issues with financial institutions. there's some concern, a lot of concern on wall street as you know, maybe this is going too far. the environment you're creating is actually crushing the opportunity for -- and the incentive for companies to take risks. and that's going to jeopardize the economy in the long run. >> we have the deepest and most liquid financial markets in the world. it's an important part of the vitality of the american economy. we also have come out of the worst economic rye sis since the great depression, it was an economic crisis brought on by practices that should have been better regulated. in my view going into this has been consistent.

we have to try to figure out the right thing. this is not a question of do everything you can or do as little as you can. it's a question of trying to get that balance and do it right. i have said that on that line where you're not sure, given the cry soifs 2008-2009, you can err on doing a little more and correcting it if you've gone too far. others could make the counterargument and say, do a little less, come back, toughen it up. i think the american people are still recovering from the economic crisis and we have to be table assure them that there won't be another financial crisis any time soon. >> we're going to hand it over to questioners in -- from the audience. >> we have a few minutes for questions. yes, please. let's get a microphone.

>> if you could identify yourself. >> name, rank, serial number. [inaudible] >> earlier in the conversation you made comments about the debt ceiling. could you give me a sense for how you think about the debt ceiling. is there a scenario or metric you look at that says it's long call to raise it now? what would be the scenario and what would be the indicator you're not in that position? >> the important thing to remember about the debt ceiling is it is at the very end of all the decisions that have been made. congress has appropriated money, entitlement programs have been established, revenue rules have been set. in the end, the debt limit comes after all ethe policy has been made. so there really is no alternative but to raise the debt limit when you need to borrow in order to pay the bills. there can be a full throated

debate about what our policy should be on any of those other areas but there cannot be a question, once we've made commitments as a government, that we keep our commitments. it can't be that we have contractors who have done work and then we say we won't pay them. it can't be that we have people who have benefits that they're entitled to but don't get paid. the full faith and credit of the united states, whether it's bonds or contracts or benefits has to be honored. and i think that the whole idea of debt limit reform is something we should probably think about because the kind of brinksmanship we saw in 2011 and 2013, i think really did harm the economy. it did hurt confidence. it did reduce investment activity and hiring activity. and it doesn't serve a useful purpose because it doesn't really affect the policy. and you know, if there's debate

about what we should do in tax reform in terms of how much revenue and how much entitlement reform to do, that's a different matter. the president put a plan on the table, we've been ready on multiple occasions to reach an agreement on a bipartisan basis. it cannot be that you get to the end of all of the taxing and spending decisions and say the government can't pay its bills. so i do believe congress just has to do it. if you look at the comments made by congressional leaders, republicans and democrats, i don't think october was something they want to repeat. i'm quite hopeful that they'll do it in a businesslike way ahead of the scheduled expiration of the debt limet and certainly without creating the kind of brinksmanship we saw a few weeks ago. >> i'm nick from snapon tools. we've come through a difficult time in terms of economy and you mentioned the marginal decisions on investment. yet i would say if you polled the businessmen they would say

they have a particular lack of influence on policy today. in other words, the view of industry and commerce are not really reflected in policies coming out of washington and so on, otherwise things like conflict minerals wouldn't be in dodd-frank. i wonder if you have any view about why that is. >> i'm not sure i agree with the premise. i know i speak with c.e.o.'s on a regular basis. the policies we design, we design them with the real intention of trying to meet the needs of businesses that want to invest and expand and grow the economy. our tax reform principles reflect much discussion with the private sector. i think that there's been a bit of an evolution of the parties in this country and i think that some of the kind of traditional support in the republican party for larger businesses and financial enterprises has

changed a little bit. i think that may be what you're referring to. i think businesses thought we were listening to them in september and october. what i heard them saying was we go to the hill and we don't think people are listening to us there. i think a lot of people on the hill were listening. if there are 50 or 100 people who have a different or nontraditional view, it doesn't mean no one is listening. i urge people not to just focus on 50 or 100 who may have a more radical idea of what to do but focus on kind of the core of members who, when it came to a vote on october 16, overwhelming majority did what business thought made sense. you know, that kind of effort is brought to bear on things like tax reform and infrastructure investment, i think you could find a bipartisan majority that would do the right thing. >> secretary lew, we know you have a hard break at 9:30, the stock market is about to open, you've got to get to your day job, so thank you for joining us.

>> thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] >> the associated press reporting secret talks between the u.s. and iran helped to set the stage for the deal that was announced last night. the deal temporarily freezes the iranian nuclear program in exchange for limited and gradual release from sanctions, about 4.2act as to billion dollars in oil sales. analysis by the ap says that the deal leaves very few options for israel other than accepting the agreement. that is again from the associated press. secretary kerry this morning talking about the deal on cnn.

this based ondo somebody's statements, do you? you do it based on actions that can be verified and, moreover, we have kept the basic sanctionsre of the staying in place. there was very little relief and we are convinced that over the next few months we will really be able to put to the test what the iranian intentions are. >> at this point you trust the to be ablent in iran to follow through? are you convinced he has the power to do so? you know that the hardliners are singing a different tune than has been sung at the negotiating table. >> absolutely. absolutely. we are well aware of that.

to you is thater none of this is based on trust. it is not a question of trust. it is a question of having the verification and intrusive inspections and the insights into the program and the commitments that can be held accountable so that you are in fact gating a failsafe mechanism through ritual are making your judgments. none of this -- when you are dealing with nuclear weapons, it is not an issue of trust. as the old saying goes, trust but verify. the key.ion is president obama and i have said from the beginning that we will not just trust and verify, we will verify and verify. we have to know to a certainty ,o that israel and gulf states know when can be deceived by what is taking place.

>> the chair of the house intelligence committee had his own reaction to the iran deal. >> we have just rewarded very bad and dangerous behavior. does.about what this it says that you can continue to enrich and they have made no changes, no changes in the development of their nuclear weapon program. i can tell you that with a high degree of certainty. here is the leading nation state of terror who try to commit a political assassination right here in washington, d.c., they believe it contributed to the deaths of hundreds of u.s. soldiers in iraq and afghanistan who continue to be the main driver between the incredible brutality happening in syria, very active around the world, with other assassination attempts, what have we done? we have given them just enough

breathing room that brought them to the table. our arab league partners do not like to deal, israel does not like to deal, and we may have just encourage more violence in the future. that is why i hope we reconsider where we are at. >> we will have much more tomorrow on iran with wells journal." "washington and then the future of the affordable care act as the november 30 deadline approaches to get healthcare.gov working, we will talk about the progress. and we will discuss spending practices at the pentagon with reuters. is all live tomorrow morning, 7 a.m. eastern right here on c-span. back to the ceo council on "the wall street journal."

>> it is my great honor and privilege to be here with larry summers. when he was two years old his parents took him to his pediatrician who happened to be my father. according to larry's father, a story he told, his parents expressed concern that larry was not talking much at two years old. supposedly my father's response was i would not worry about it once he starts. he will never stop. so with that. >> moving right along. asked if we had been able to post questions i would have asked you but i will ask for a show of hands. if you had to pick the top priority, the single top economic rarity for the u.s. government right now and they give you a choice between

reducing the long-term deficit and doing something to spur growth in the short-term and the long-term, deficit or growth, you only get one vote. how many people would choose the deficit over growth? how many people would choose rose over the deficit? i have been here watching for 30 years. for much of that time we have been obsessed with reducing the deficit. that has been true in the last few years. you think that is a dumb idea and so do a lot of people here.

why? >> guys are right. -- you guys are right. they are wrong. you guys are not getting your way. we have had 10 bipartisan budget processes, we have zero bipartisan growth processes. we have had budget some is -- summits up the union. we have -- somehow, the business immunity was complicit because they have been substantial financial supporters and encouragers of it. we have gotten the idea that addressing the deficit is the defining challenge facing the country. there are three relevant realities. on the current forecast the debt to gdp ratio will improve of the -- over the next decade. the debt forecast online with the way they looked in terms of decline after the 1993 budget deal. for 10 years this problem is at hand. second, basing policies on these forecasts is longer than that is kind of a crazy thing to do.

if you take the confidence interval around the deficit forecast, not 20 years out, not a 95% confidence interval but five years out, a 90% confidence interval, that confidence interval is 10%. it is plus or minus 5%. if the geomet climate change people were telling us it was negative three degrees to plus 6 degrees we would not be acting on the problem and we do not know what the long room -- run deficit will be. the most important thing is if you take the longest run deficit , you take the official forecast of it, if we increase the growth rate by point two of 1%, point two of 1% to my you solve the entire identified fiscal gap problem. i'm here to tell you that in a country that is stifling entrepreneurship in a variety of ways to my in a country that is star for public investment that lets canidae airport languish the way we do, in a country that is missing a huge opportunity on immigration reform, and a country that is maintaining a regulatory and tax environment that does not recognize the confidence is -- that confidence is the cheapest form of stimulus, increasing the growth rate is easily attainable. the truth is that if we get past

our current perhaps protracted bout with secular stagnation and get the growth rate up, that it -- the debt bubble will stay in control. and if we continue to the a country that does not increase the fraction of adults that are working mother does not catch up with its gdp potential, that grows at two percent or less what we can have all the entitlement summits in the world and we are gradually going to accumulate debt and have a serious debt problem and so we just have gotten our focus to the wrong thing. we should be focusing on growth.

growth creates a virtual circle which creates more growth. employers work harder to train the next generation of workers. in a growing economy, there are more ladders for kids to get on which puts them in a better position to lead 10 years down the road. there is more profit that can be reinvested in r&d and long-term capacity. the growing u.s. capacity, there is a stronger world economy which is ugly to be a successful world. -- world economy. this is where our priorities should be and we have just in my view, it is sad to say, lost track of it as a country. >> why is it wrong to say that we know we have an aging society, we know we have some benefit promises that are going to be expensive to keep, and what he not be prudent to do something about growth and package that with things that we know take a long time to save

money and do it now rather than bequeathing the problem? >> there were some real problems in the kitchen on the titanic. there were. they were the wrong problems to be working on given the challenges the titanic faced and given that management had only some much attention that he could vote itself to.

it is the same thing. it would be better to be thinking about a range of long- term adjustments about 2035. it would be. we really cannot do very much. we had difficulty passing any legislation. in that context the right focus is on what is most important. things that contribute to growth. what is surely necessary is things that contribute to growth. i think that the odds are we're going to need to make entitlement adjustments at given the uncertainties in the forecast, these forecasts are wrong by five percent of gdp all the time. they were wrong on the high

side. the forecasts were to pessimistic in the 1990s, they were wrong on the low side, they were too optimistic in this period. when people are talking about entitlement reform, they are talking big numbers. they're talking about one percent of gdp. 1.5% of gdp. it is the right thing to be thinking about. one thing a group like this camera member. it is the right thing to be doing. if you contribute the absolute maximum you are legally allowed to every year from the time your 19 to the time you are 65, your social security benefit is less than $40,000. and so there may be a case that we need to adjust the formula in various ways. how excited can you really be about the central national project being adding this benefits for the best of the social security recipients from 38,000 dollars to $36,000 rather than figuring out a way to grow the economy faster so there can be more benefits for everybody? the right debate to be having is

not the debate about containing the budget. it is about how best to spur growth. >> used rather frightening phrase about secular stagnation. do you mean that we are at substantial risk of having an economy that perks along at two percent growth and has one in six men between 25 and 54 on the sidelines of the labor market for years to come? >> i am not predicting it. i do not see how you can look at the data and not say that debt -- and that is a substantial risk. there are two points. four years ago right now, financial repair had happened. the tarp money had been repaid. credit spreads had largely

normalized. there was no panic in the air. with respect to thinking institutions. it has been for years. we have not grown the share of adults who are working in the united states all since that time. we have not gained at all on the potential of the economy. and so the growth machine we predicted, the forecasters have been consistent. absolutely consistent. a return to accelerated rate of growth nine months from now.

there has been the forecast for the last four years and he has always been wrong. it might be right this time. we studio to be right but i do not see how you could be certain that it is right. and if you look at, there is a troubling feature it seems to me , the experience before this crisis and that is what has caused me to be more alarmed. think about the years between 2004 in 2007. we had what consensus opinions think were excessive budget deficits. we had what consensus opinion now thinks were excessively easy monetary policies. we had what universally is regarded as having been a massive commit him prudent, and excessive credit expansion. we had what is regarded as having been an inordinate housing bubble which created a false impression of wealth and created vast and excessive construction. you might think that with all those things going we would have an economy that would be overheated. but if you look at the unemployment statistics, if you look at the inflation statistics, if you look at the growth statistics, the economy

was bubbling. there were bubbles, all right but the underlying real economy with a huge support to demand for all of that was not overheating. by any stretch of the imagination. and so it has now been a decade since we have grown at a rapid rate in a remotely healthy and sustainable way. and that commit seems to me, has to be the deep concern as you look to the next decade. things happen. when i came into the clinton administration in 1993, we did a comprehensive exercise and the treasury was part of it, the fed was part of it, the imf was part of it. we asked all the outside forecasters. looking to the long run, there was a debate. there were pessimists who thought japan would grow by

three percent a year -- 3% a year over the eight years and they were optimists who thought it would grow by 4% a year over the succeeding 20 years. it has grown by about .6% a year. over the succeeding 23 years and so gdp is only slightly more than half today of what we universally believed then because permanent stagnation was kind of inconceivable. in japan, what happened was growth was very slow and growth was slow and after a while, everyone got used to it and they stopped calling it a demand cap and they started saying it was all that could be done and to some extent, that became true because after all those years, the companies do not reinvest month the company's lost the mojo, they were not in the

position to compete so at a certain point, supply came down to demand. and he got used to the idea that japan was a different kind of growing country. i am not saying we would have a gap but we are already defining our aspirations as measured by potential gdp way down. so if you ask is there a risk of this emma absolutely. does the risk, does the prospect seem as likely or more likely, then the high optimism scenario where we go back to an era of 4% growth? between the pessimistic scenario and the hyper- optimistic scenario, i would choose the pessimistic scenario. things have a way of working out. my guess is it will be better than that. the thing that policymakers should be accessing about is the risk of this secular stagnation thing. that is a much more urgent threat to every american interest than anything about social security benefits in 2035.

that is a much greater risk to american interests than anything about the emergence of hyper- inflation coming from monetary policies. that is where the concern not to be. the gap between winners and losers in our society is wide by historical measures and has been widening. should we worry about that and if so, what should we do about it? >> we should be worrying about it. if the only thing that was happening was that, i would argue that we should be worrying about it but i would understand why other people would feel that is what the market was doing and you should not make that either preoccupation. but here is what is really scary. for 240 years since george washington, and has always been

true that we became a country with more equal opportunity every generation. that is no longer true. in the united states. the gap in life prospects between the children of the rich and the children of the poor has widened over the last 40 years. the gap in the college attendance rates between the children of the rich and the children of the poor has widened over the last 40 years. it is not that we do not know how to make progress. if you look at the achievement gap between black and white students, that achievement gap in 1970 was twice as large as the gap tween the children of the rich and the children of the poor. you look today, the achievement

gap between the children of the rich and the children of the poor was twice the gap between lex and whites. so we know how to make problems. with 40 years of effort we have a long way to go. we have made enormous progress. with respect to civil rights. if the problem is the color line in the 20th century, the home of the 21st century is the class divide and what it means for opportunity. and so widening income distribution combined with more and more ways in which the fortunate can advantage their children, i think is profoundly corrosive. what is it that should be done? we need to find ways to ensure that the educational opportunities open to every kid are like the educational

opportunities open to the kids of the people in this room and we are not close to that as a country. we need to make sure that we're there are slots to be given, whether it is the government giving rights to spectrum or mining rights are whatever it is, that had those processes are open and inclusive and open to everyone and are not processes that reward the fortunate, i have written a lot of papers about the important incentive effect of taxation. i believe that we cannot punitively taxing we cannot go back to the kind of tax rates the country had in the 1950's in the 1960's and the 1970's. i am here to tell you that there are a substantial set of

loopholes, special interest privileges, and the like that distort the allocation of resources, make the economy function less well and also act to reify and reinforce any -- inequality and that serious tax reform that went after those inequities could both make a fairer economy and make an economy -- >> corporate taxes are something people care about. what would you do if you could write the corporate tax thing, how would you handle the question of overseas earnings, what is the right way to do this for the economy and the social good? >> and d me and him -- indulge me if you will in an analogy. you have a library in the library has a lot of overdue books. you could have an amnesty where people got to bring back their books and they did not have to pay the fine. that would make sense. another thing you could do is you could say, we're never going to have an amnesty. you had better bring back your books because no matter how long you keep your books you're not going to get an amnesty.

that would be kind of harsher but that would make sense, too. a really idiotic thing to do would be to put a sign on the door of the library saying, no amnesty now but stay tuned come a there might be one next month. that would be the dumbest imaginable thing to do. what has been the u.s. corporate tax debate for the last five years? it has been exactly that. no break on repatriation now. the constant hope that there may be a break on repatriation in the not too feet -- distant future and so why would anyone ring back their money in the face of that? what should we do? i think the principle is clear. you could call it territorial with a minimum. a lot of different things you could call it. we should eliminate the distinction between repatriated

profits and non-repatriated profits. we should establish in a balanced budget way a minimum tax on global income. and so whether the rate would be in the neighborhood of 15%, you pay that, if you brought your money back, you would pay that, if you left your money in ireland, and there would be no longer an incentive to keep money offshore. if you did it right, there would no longer be -- there would not be any revenue loss to the government. but look, there are things we need to fix to stimulate investment in the country. but i do not know that much

about multinational business but here is something i think i do know. if you measured it right, the places abroad where the american companies make the most profits would be places like china, japan, terminate, and france. that have -- germany, and france that have a good economies. if you look at their tax returns, the places to show up having the largest profits are places like the netherlands, and ireland, in case you're not getting it, the kaylynn -- the cayman islands. it really should not be that way. it does not need to be that way and it is not really making the country more competitive or creating jobs to have it be that way. so, the principle is, do not try to raise more money, but try to

raise money in a better way and do not keep a set of uncertainties that all but forces everybody to leave their money abroad. >> i could keep going but if you have a question. ok. healthcare.gov is a disaster. how much damage has that done to trust in the government to do anything? >> we will see. it cannot be good. [laughter] look, this is an unhappy tale. many of you know from your own experiences that the right general rule on large i.t.

projects is, take what they say, double it, and then move to the next higher unit of time. so days become weeks and weeks become months. i could continue the sequence. that is true when it is done in the private sector. and there is no organized constituency for failure. and when it was done in the public sector there was a massive organized constituency for failure that organized as best it could to ring about failure by starving the funds and objecting to the procedures and so on. it was next-door nearly difficult task -- extraordinarily difficult task that was massively underestimated and i do not think there is any legitimate excuse for how badly it was underestimated. i think you have to say, if you look at the capacity of government to do things, you have to be less optimistic about that than you were today. and i think it is a huge imperative to do something that

will give confidence and as i wrote a few days ago, the great danger at a moment like this: the great wager for a football team that is down by two touchdowns -- and danger for a football team that is down by two touchdowns in the third quarter is that they will abandon their playbook and start throwing hail marys in every direction. the great danger at a moment like this a -- is you will have promise that she will promise days when you have great results and make confident claims about what will happen next, you will try to jury rig something rather than recognizing that given the that of the hole you're in, it will be difficult. this is going to take -- as difficult as this was to do it right in the first place, it is going to be more difficult to

fix. but i think it is hugely important that it be fixed. at the same time, i do think that we do need a kind of compact in this country where we debate things a wee debate things and we debate things, and when we come to a conclusion, everyone tries to make them work, and if they do not work, at a certain point, we draw lessons from that. those who try to bring about failure and then say we saw failure, therefore we cannot rely on government, i do not think they are performing in a way that they should be proud of either. i do not think there is anybody in washington who is emerging as a winner from how this appears. i do think that if i may say so, those of you, who i suspect is majority of people in this room, are of a more conservative and

then i, -- bent than i, recognize that of the strategies that could happen pursuit that would result in universal health care, the one that was pursued was the one that was most respectful of the traditional market, that went with a grain of the current system, was the one that was closest to what had been proposed by republican think tanks like the heritage foundation and implement it -- implemented by conservative state administrations. and so if it does not -- if this kind of commendation -- combination of government operating at the edge rather than taking over the whole system is too difficult to make work, that -- there are conclusions from that could -- that could be drawn in both directions, but my hope and my expectation would be that this will, over time, be fixed and

made right. and i think it is worth remembering, just as a general matter, having lived around washington things for quite some time. it was only two months ago, less than two months ago that the budget deal and the budget and the fact that the republicans were face down on the debt issues meant that they could have been seen as being in deep n-terminal difficulties and that now is completely out of everyone's mind and no one remembers that as an important event all of six weeks later. and so it is a great mistake to think that whatever the mood is right now, that that is the mood three months are now, let alone three years from now. there is a larger universe of possibility. ask you mentioned japan, slow growth, more than a decade, two decades. abe comes in with an approach of

three arrows. we see one of the aeros fired, maybe the second one is in the quiver, the third is not out of the talking shop yet. i wonder what your evaluation of that economic policy is and the likelihood of success. >> it is a little bit like pulling your goalie and a hockey game. it is not that great a strategy. it is just if you do not pulled the goalie out and the clock

runs out, then you lose for sure. and the -- so you have to try something new. so the basic thrust of a substantial commitment to expansion was the right one. i think there have been some encouraging signs so far in increasing growth expectations, and the reduction and deflation and expectations. the prospects for japan looked considerably better than they did a year ago. that is a tribute to the policies. i do not think we will now -- know until nine months from now. they will put the value added tax in and either the economy will have weathered that and the growing -- continue to be growing in a reasonable way, or

as it happened in the past, there will be a run-up of gross until they do that, and then there will be an air pocket of spending afterwards and they will be back in the soup and i cannot confidently predict between those two possibilities. both i think are real possibilities. >> a question from one of the ceo's here. >> you talked about the secular challenges to long-term growth. could you talk about the role of labor in society? it feels like the combination of globalization, automation, we had a wonderful discussion at lunch that said even at the university level there will be increasing pressures on traditional jobs, maybe not at

the top universities but at many others. it seems that if you are at the top, today's world offers more opportunity to contribute globally and if you're not, the pressures for middle-class jobs and other things are just enormous. do you see an underlying trend here and what do you think it means in terms of long-term growth and the inequities in society that you described? >> if the issues that i called secular stagnation around lack of demand and all that are the issue for the next decade, the issue for the next half-century is the issue that you raised. there were some guys who wrote a book nine years ago about technology and its impact on employment. one of the most striking passages was they said, computers can do some things, but computers are not going to be able to do other things. their example, something that computers would not be able to

do was make a left turn against ongoing traffic. google nailed that one within less than a decade. if you -- one of the things i have done since leaving government was spend a bunch of time out in silicon valley. and the set of things for which they are developing capacities to do is mind-boggling. it has always been true before that people, jobs were eliminated in one sector by productivity increase and they went to somewhere else. and the people thought he could not happen. that is true with respect to agriculture, that is true to -- with respect to the luddites, it has always been true before. the fact that it has been true before does not mean it was always true before. house prices in america always wind up. it has always been true before is not a conclusive argument. i think our chances are

maximized if our educational system is repairing as many people as possible to be as creative and flexible as possible. i think we are going to have to recognize that in a world where the potential rewards and leverage to the most creative are larger, that we are going to have to find ways of having some redistribution from the most creative to everyone else. the example i like to give is george eastman had fantastic ideas about photography. he was very successful. the cityh his success, of rochester supported a thriving middle class for two generations. it equally

fundamental innovations produced even greater success for him and for his shareholders. comparableas no large-scale middle-class job creation. that is what we are going to have to work through. to require us to be much more imaginative thinking about various kinds of service work and thinking about the quality of jobs and the dignity of jobs associated with the service sector. i am all for doing everything we can. there is a lot we can do that is still undone to bring about a renaissance of american manufacturing. but china has gained competitiveness, share,