we have to look at. i have great hopes that it will, but the problem about the future is that it is all prediction. the point here is that i think the opening of the door is that every responsible reason to make sure on both sides that we conduct ourselves and run the activities so that at the end of the day, the door is leading a somewhere. from that particular point, we can pick up and do other things. -- even though both sides have given priority to the nuclear agenda. believeobably hard to that given the number of contact, a of not talked about other questions. -- they have not talked about other questions. do you agree with ambassador

pickering that this is a breakthrough moment? i wonder if you could comment on the domestic pressures facing the foreign minister and president rouhani. i was struck by the contradictory reactions. iranians wentthe back home and were greeted by protests. >> for the first time, we have had direct talks between two foreign ministers. for the first time, we had a phone conversation between two presidents.

two presidents have nominated the foreign ministers. five, 6, 7 rounds of direct negotiations before the deal and the talks are continuing. -- this iser had clear. , we havetic situation the same domestic situation that you have in the u.s. deal. are supporting the some politicians are opposing the deal. some politicians are silent. almost everything is the same at the same level. there is a big difference.

inre is foreign intervention the u.s. decision. the israelis are interfering and -- in thedecision -- u.s. decision. -- this is the big difference between our domestic situations. that this istom the beginning. this is a breakthrough, but this is the beginning. is left for a comprehensive package to be agreed. >> are you confident the interim agreement is going to be executed? andran already has agreed

signed with the iaea the framework of cooperation. this is one of the most difficult parts of the interim agreement. is the number one issue. iaea have hadhe many meetings. they have agreed on the facts and it is ready to go. accesss have given before the implementation of the interim agreement. iraniansiance -- the gave access to the iaea to some very sensitive nuclear facilities.

both parties are serious. >> you are working on laying the groundwork for this agreement. it does seem to be exquisitely balanced. you worked hard on getting the balance right. side isgree on how each under parallel pressure? do you think one side or the other may be facing greater domestic opposition? there is great symmetry, great balance. this was a major accomplishment. in a relatively short. of time. -- short period of time. it is only one step in what is

going to be a long journey. the obstacles ahead are huge. the mistrust on both sides is tremendous. the issues they have to tackle, the interim agreement, the issues are small in comparison to the big issues of what has to be resolved in a final deal. and then you have the domestic criticism. we have the u.s. congress, very skeptical, the american public is skeptical. it has been 34 years of estrangement. a lot of ill will, mistrust. the american public does not trust any deal with iran. i am confident that this interim deal, besides will comply with it. on the iranian side, there is

skepticism. this could open the door, if , the is a final agreement obstacles are huge. it can be achieved, it can open the door to cooperation in some other areas. but it will be hard. where there can be cooperation -- think of areas in the world where there can be cooperation. afghanistan, perhaps. in terms of the conditions for stopping the civil war in syria, there are differences. it is a very impressive initial

step, but it is only an initial step. you have a situation, 50-50, according to the president. the clock is ticking. the congress has been clear that six months means six months. what would you do right now to start to beat the clock? >> i did not think the clock is running. the first thing i would do is get the clock running. i would start yesterday in beginning to scope out the effort that has to be made, the strategy, the focus, the ideas that have to go into the comprehensive agreement. i would try to pick up

, perhaps beginning in bilateral contacts, despite the fact that the bilateral contacts have tended to produce two negotiations. it is not easy to go from a bilateral deal to a multilateral deal seamlessly. that fromn very clear the moment the u.s. asked for bilaterals and the moment in which iran accepted it, the key was in the locked ready to be turned to open the door. that is very important. on what basiss should we make an agreement with respect to continuing enrichment

in iran, which is inevitable. should it be related to a program? you cannot just pull figures out of the air. that has to be tuned with how does that help prevent rapid breakout. what to do about the future of the iraq reactor? should it be converted to low enrichment? should we find a way to produce the result? those are all very important questions. i am sure bob could give you 100 others. i think we need to work on the congress. d a catastrophe.

despite the fact that it was explained in the basis of their uncertainties and mistrust of iran. >> recognizing the right to enrichment, the opponents of the agreement were saying it is impossible. iraq would have to be closed. is there a creative way around that? >> of course there is. the creative way is to restrict enrichment to levels that are related to a peaceful nuclear program. iraq has nopect, use for low enriched uranium. [laughter] they will have to figure out what it is they want to do.

let me also say, i think we are making progress with the congress. the congress has come to understand that -- how will they take enrichment knowledge out of the hands of iranian scientists? you have conquered that particular technical problem and zero enrichment may give you some time, but in the end, it does not undo the notion we've already have been able to develop it as a scientific reality. me respond to your point about enrichment. what is it like inside of iran right now? is he under pressure as well? and how much time pressure is he under? president obama has decided to deliver sanctions, how much time

will he get from those forces? >> with all respect, with the , i believeof uranium that americans do not need 10,000 nuclear bombs. but the iranians, whether they have enrichment or not. time pressure, george, this is for they important future of iran and u.s. thetions to understand threats and sanctions that have brought iran to the negotiating table. i am talking about the future.

if americans come to the conclusion because of sanctions and threats and pressures, they need iran to come to the negotiating table. that is an article of faith for most americans in congress. sanctions definitely harmed iran. no one can dispute this, even domestically. but looked to the package or postal that we gave in 2005. they were members of a nuclear negotiation team. it was a time to did not refer to the united nations security council. multilateral sanctions before un and look at

november 24 or 25. you would see that the elements are exactly the same. the major elements of the is exactly the same as the elements. they proposed not to have reprocessing. they propose to enrich below five percent. they proposed to limited the stockpile. that would give the state big interest for leverage. result. at the

what is the main objective of beforections jacko sanctions have 13,000, after sanctions, 13,000. iran was really -- reaching below five percent. iranians have been harmed, but on the issue that they really increased the level and capacity of the nuclear order. americans -- i am sure you have been at tables where you have heard a narrative like that. what would you say?

cracks come on, hussein. everybody knows why iran has made these concessions. the sanctions became very effective. and true they were resisted the program continued, but after the oil sanctions were put in place and revenues dropped, inflation went up to 40%. the sanctions became hard to tolerate. before the june elections were in a state of denial. they thought we could weather the sanctions and get around them. >> what is the difference between the proposal in 2005? >> i don't want to go there. after the june election, a group of leaders came to power and looked at the situation and

decided this is intolerable. going down the drain and we have to do something about this. a majority of the iranian public said, enough. we need to rejoin the world and need to get rid of these sanctions. there is no question in my mind that the sanctions are what brought iraq to the table now. thinkg forward, i sanctions can be counterproductive. if subsections are good, it is a mistake to think that more would be better. incentiveplenty of and the easing is modest. tohow do you make that case mccain and schumer?

the u.s. objective is to get the best possible deal that keeps iran away from a nuclear weapon and doesn't take us into war. the alternatives to me seemed to be very stark. issue here is, continuing to keep sanctions on iran when they can be useful getting the nuclear weapon by taking a nuclear deal. it means you have created a double duty operation. them back on again and we have held the trigger very tightly in terms of the by taking offion what are the symptoms of sanctions as opposed to the sanctions themselves.

but to get a cooperative agreement, we will have to go further. the alternative, in my view, it is kind of lunatic. holding out for a deal that doesn't accomplish a great deal more on the basis that it has to extrad for in all of that coin to do it when it doesn't demonstrably change the situation is one of those risk- that logicalses people can come out in a very that the kind of deal we are moving toward is a good deal and a helpful deal. if we don't keep the pressure on, the entire section? has not been proven, in

my view, to be effective. i don't think that is right. >> what does the president have to show to the supreme leader and others in the power structure of iran and the iranian people to be able to complete a deal? >> of course, a better economic situation would be the most import and issue. has a relation with two issues. andis domestic management one is sanctions. i think they are in much better

situations under domestic management. they are much more functional. and the process of sanction lifting also continues a lot. i sincerely believe the major issue makes it feel possible, a change in u.s. position. you are the first in the state andrtment to recognize that restaurants should be somehow accepted. the reason these efforts faded is because the u.s. deadline was no enrichment. we cannot do anything.

the red line was no nuclear bomb. these made the deal possible. if the u.s. was supposed to continue sanctions for another , it would never be able to get it. well because of the interviewing the secretary the morning after the deal. they say the deal clearly includes the right to enrichment and he was adamantly denying it to my direct question. it might get you through an interim agreement, but how do you square that? as far as i understand, the u.s. has not officially publicly recognized rights of enrichment

for any country. including germany, argentina, brazil, japan. but practically, has tolerated. when kerry or obama are talking about we're not going to recognize the rights of enrichment, they have not recognized the rights of brazil,nt for japan, argentina, germany, but they this is what. they're going to do about iraq. >> it is clear that the present deal doesn't get zero there is inherent language that zero enrichment may not be forcibly on the table considering the follow-on deal.

it it doesn't say that necessarily can't be considered. there is a kind of politics to this rather than legality. don't think anybody can believe that enrichment was ruled out, nor was it specifically provided for. >> there is no recognition of the legal right. we don't believe iran is going to accept the deal without enrichment. there has not yet been accepted by the u.s.. agreementitional upon andmitations on stockpiles acceptance of monetary measures that would make the enrichment program acceptable in terms of

the moving concerns of the potential misuse of the program for nuclear weapons. hussein'sccept gratitude for recognizing early, at the moment, they have very different conceptions of what an acceptable enrichment row graham would be. they talked about a mutually defined enrichment program based on practical needs. are iran's practical needs for enrichment. research reactor supplied by the united states.

it already has enough fuel for decades. the russians are supplying the enriched uranium fuel for it. they have plans for for small research reactors and that is fine. iran can produce enriched so at theel for that. moment, the practical needs are relatively small. my guess is the u.s. and its artners are going to suggest very constrained and small it won'tt program. look at current practical needs, it will look at plants that i

think are wildly unrealistic. the u.s. will not agree to to fuelnt program sized a very large fantasy program. >> po that israel is looking at agreement. what about russia and china? what do you see the role they are playing? are they hostile to a real deal? i think they are in the same range for a deal. there might be some variations but i don't think it would be much more since they have been around.

there are clear differences on the table here with russia and china. they have put forward ideas for it deal never two different from where we have come out. i think that the chinese are happy to follow in the wake of the russians on this one. not to get out ahead, in front, or behind on the kind of question that has been very comfortable for them. we had the extraordinary and maybe excruciating time of french resistance. i think had its own peculiar dynamic that we are now over. we had deep concern in the gulf states of israel.

ambassador in israel and the prime minister of israel through an absolutely magnificent set of foresight and criticized the deal that he did not know the terms and conditions of and it turned out not to be the deal that was the deal. you an indication that it was at least some political imperative at work here. it was interesting to me that the week after the deal, the israeli approach shifted. it was come to the united states to try to find a comprehensive deal. and that produced, on the hill, a set of reactions of tightening sanctions.

some left to find the parameters of the deal. that isn't the deal. the two sides can agree to additional. i think it would be hard sledding right now and that is why when you asked me the first question i said we really have to put a maximum effort into getting a comprehensive deal or something very close to it. do you think the maximum effort is being made? >> yes, except for imposing new sanctions. otherwise, the effort has been really positive. but the u.s. has played and would play a very critical role.

what type of deal the u.s. would look for a comprehensive package. netanyahu oratisfy a deal to satisfy nonproliferation. i believe he would never be satisfied because everybody would ask about the peace process. he would be afraid to continue the iranian nuclear issue. u.s. is going to reach a comprehensive deal with iran to nonproliferation, we have three major arrangements.

one is additional protocol, and another is code 3.1. maximumthe international community that they can expect from iran based on mpg. gary told the public that the withwould go to negotiate iraq, 3000 or 4000 centrifuges. these limitations are all beyond. if you nonproliferation treaty is the base, you have to stick

to npt. 3.1, there is nothing to be done internationally. but if you're going to put , this is another issue. that you cannot find any type of limits. have one enrichment site or 10 enrichment sites. no one can impose on the members any limits. >> it is certainly not true. it has one magnificent qualifier. peaceful. aregs that are not peaceful

not permitted even though we have had long disputes and arguments about this. the last screw turn on a bomb, it is peaceful until then. i don't accept that view. in the joint agreement, iran has agreed to put inspection of certain items, otherfuges, and installations up for inspection that are not readily changeable to the additional safeguards. is an example for the whole world that you're doing it. i would like to see that improved. we have a particularly difficult problem. sensitive activities that can be converted and moved into a weapons area.

it is up to the international community not to be static as the fundamental designer of move ahead but to and try to find ways to improve capacity. a suggestion was made by a number of us that we should internationalize these beilities and there would openness in what the facility was doing. and i think, iran has come back with that suggestion quietly and in a number of areas. way, i would've started with the u.s. to take in the enrichment facilities and put them under international ownership. the others that are nuclear , it would be purely a

civilian effort. but it would be no guarantee. >> he mentioned before that there were recently imposed sanctions and that this was a problem. they said the u.s. will not impose new sanctions. is that theres may be particular enforcement and this was explained to the iranian side in great detail. entities, but there will be no new sanctions. it was explained and understood. i happen to know that at lunch side gave a heads

up and advance notice that these designations were coming. as ae the world knew, courtesy, we let them know. it is recognized. even if these actions were consistent with the interim agreement, they were inappropriate and unconstructive. everyone knew that they were not inconsistent. they were expected. history and given mistrust and the actions that we ,onsidered iran's file asians they have to do more than just satisfy minimum requirements. officials have said that our job is to resolve the concern of the international community. we are prepared to go to great need to do that. it will

certainly, temporarily. what should our objectives be? constraining what is called breakout capability. and when a country decides to get nuclear weapons, it abandons constraints and uses existing facilities very quickly to produce enough bomb grade andium for a single weapon. to do that quickly enough for the international community can intervene. but you have to lengthen that breakout timeline, the time it would take to enrich enough uranium for a bomb.

in our view, it is possible to constrain the size of the program while at the same time meeting iran's legitimate needs for enriched uranium to fuel its nuclear energy program which, for the time being, is very modest. it is possible to square the circle, but it will involve bridging a gap that is very wide. the problem with the interim agreement is that it attracts fire and criticism. it is natural for leaders to wanted to get a little bit. >> he said you can't have a deal

that satisfies prime minister netanyahu. if that is true, can there be a deal? >> i agree that it should not be the standard. i don't know why he has taken a very maximalist send all enriched uranium out of the country, shut down this reactor, i don't think that is achievable. and it is not necessary. have a good agreement without meeting those criteria. harm in going for it? the worst they can do is say no. there is worse than they're saying no. if we put a position on the table that the world considers elementwe lose a vital

in negotiations, this very strong sanctions coalition. when i went around the world speaking to governments, the best argument i had is that we need your help strengthening the sanctions in order to increase the chance of successful negotiations. only through pressure are we going to get a good deal. we are responsible for the impasse. >> that is how it unravels. >> they agree on no nuclear weapons in iran. as bob said before.

that hussein is ready to say that the iranians will agree. much of that time as we need and as much transparency so we know what we are losing that. as an arrangement out there on the table, do we want to give that away in hopes of getting something that is slightly better, but not worth the price of admission? us to a well lead military conflict.

>> he is the expert. iranian hardliners have benefited from sanctions. will they support a comprehensive agreement? >> no one has benefited from sanctions in iran. i have been at iranian administration at the time the nuclear crisis came up. i never had radicals.

this is a very religious thing. iran has issued a religious fatwa. imagine the two followers of the leader that would go against the factions. npt,e base is going to be for confidence measures, it

would be acceptable because it is iranians that proposed from 2003 two 2005 confidence building measures like enrichment below five percent. these confidence building measures in order to remove it from national concern. the reason i am really surprised impactt is the amount of is because he is challenging officially the u.s. president. it is shocking. and second, when you hear a congressman say that i trust more israel he is, can you

imagine a u.s. congressman tells the foreign secretary i trust israelis more than you? this is really something that we cannot imagine. >> can you tell us more about the secret u.s. iran nuclear agreement? >> tom was behind. the person that masterminded these. >> i can shed more light on it but inyone else here it am restricted in what i really can say. there have been reports of a bilateral channel going back

before the election on that. and it is clear that president said ias personally would like to have bilateral u.s. iranian talks. we need to restore dialogue. the administration has been for that for quite some time. at the un general assembly, you had a foreign ministers meeting they met for 30 minutes afterwards. all of that was very good. the bilateral dialogue continued after that. it has been revealed since then that there had been a lot of side discussions.

and in that crucial second what happened, was the document that was handed, she called document, but it was largely under rainy and and american document. resolved, butly ofwas largely the work bilateral discussions working very efficiently together. my own view is that the u.s. might have done a better job at consulting its partners, but we were honoring the request that we keep this confidential. it is very difficult to negotiate in public.

even if we said this is strictly get out in thed newspaper and make things very andicult. we kept it quiet it caused some resentment. the public reaction was i think a function of his feeling a bit left out. it was resolved within 24 hours and was a consensus that we moved forward with. a complicated factor going forward because i that iferyone knows there is going to be a deal, there has to be a meeting of the minds. those are the critical protagonists. i don't want to diminish the

, but the u.s.ou and iran will be critical. even though they will be the central talks, i think they will have to be supplemented with bilateral discussions. you are professionals of a hard grinding work. president richard nixon's historic visit was a pivotal moment in u.s. foreign policy. is president obama on the verge of something similar? is there any world where it would be more helpful to try something dramatic like that?

>> we have yet to see what we -- beyond what we already have. disparaged. to be at not like be look the visit to china but the visit to china was prepared over the course of a year. and to be able to get that thing moving for the reason it was just explained. both sides had a feeling that they could prosper if it took place outside of the glare of the lights and outside the influence of other players. other players were brought in at various times. but my feeling was it was a necessary risk to take.

they were so significantly larger than the momentary hiccups that we had to go through despite the fact that they got a lot of publicity. i think the challenge is how bilateral context can be syncopated a little bit better. the fact doesn't have to be hidden any more. reports as to exactly who said what. i think there will have to be some thought given to it. did exactlyat they the right things and managed it as best they could.

>> would've more dramatic move like that be helpful? >> of course. that theyrecognize would have never reached a deal otherwise. and that progress with direct talks, again, it would fail. limitr, we should not talks to nuclear. we need to enter a broader dialogue. u.s. is a big player in iran is a big player. iraq, thecrisis in u.s. is a big player. to it is really interesting remember that we are supporting

the same government. and the u.s. allies are proposing this to the government. the major threat is terrorism spilling over from syria. they can play a big role controlling extremes and terrorism. it was really great that the countries cooperated. this background can be used for current problems. i know the nuclear talks would be followed.

we would need u.s. dialogue. not just on nuclear, but broader issues. it does not mean it can only be resolved -- we need to engage we need to engage russia and egypt. the presence of iran and the u.s., none of these issues are off? of donaldrse one rumsfeld's rules, if a problem is too large to solve? i don't think that is right right now. there are those that believe this is not just nuclear.

there are great hopes for that in the long run. there is an interesting symmetry in the short term. there are domestic political reasons on both sides. the name of the game is getting the sanctions lifted and getting the economy back on track. that byt do complicating the problem and delaying a deal. there are still those the call the united states the great satan.

there are still concerns among u.s. partners in the region. they think the u.s. is going to cut a deal that says, in exchange for iran's nuclear concessions, the united states is going to give iran a free hand in the middle east. to happen, butng it is a concern. the iranian leadership wants to confine this to nuclear. if there is compliance and people are comfortable with it, it can open doors to do more things. starting off with areas of obvious common interest, broadening from there.

>> i think that we have both committed to do the nuclear deals as rapidly as we can. sequence before we try to solidify other deals. i think there is no question in doors, that in some core in some discussions, other issues come up. it is more important to have the iranians know what we think about these questions then to have them presume the worst in terms of how we go ahead. it is important to talk to the saudis about these questions. with respect to syria, it is a

hard case. participation has to involve at least some knowledge of some commitment. i think we are seeing potential to move serious ahead. >> with assad earlier this year, would there be an interim agreement in iraq?

>> let me talk about the overture on syria. >> the only positive development since the beginning of the syrian crisis. the syrian crisis, even the last two years, this is the only serious positive. cooperation due to between russia and the united states. therefore, there is already one big step for syria to take.

to engage and push aside to give politicald to give up weapons. >> that is not the solution. that is the entry point to getting to the solution. no one, i think, at least not in a public way. it does not establish the basis for trying to move ahead with an approach to resolving syria. they are reluctant to agree to .omething

that is the only point i was making. they had a particular step that opened the door to these other questions. stopping this location that is taking place in the region. certainly jordan and lebanon. they feel the effects, to say horror.of the i think it will take time. i would warmly welcome them into the steps if they agreed it was a common basis. >> there is another step already underway. there is multilateral how many examples do you want?

>> another basis. we will need a cease-fire for that. >> no extremism and terrorism. iran would fall prey to both. if we agree that syria has no , if we agreetion for a transitional period, if we agree to pave the ground to decide about the next president , you would have them indefinitely. >> we need them backing a cease- fire. we have to get chemical weapons out. that is a precondition.

>> it will not be a cease-fire. as long as they are not ahead of syria. >> having a pre-commitment to get rid of it. only the truism. it has to be clear that the transitional machine can evolve the current head. it makes sense to recognize that it seems to me a necessary -- >> you said that the negotiations have to be isolated.

>> iran wanted separate. if you make concessions, we will cut you some slack in syria. i think there is a relationship in the sense that if this is , it is going to facilitate cooperation on syria. they will be more supportive on engagement in syria. responding to some of your questions, a person says i think his position is based on survival of their country. do you think the position changes?

>> i believe the public opinion for eight years. they never said israel should wipe them off the map. >> ahmadinejad never said that? >> never said that. it, you would see the deputy prime minister of israel. this is online. you can find it. it was misinterpretation. said israel should be wiped off the map. it was a misinterpretation recognized by officials.

and the holocaust. the foreign minister congratulated jews for the new year. >> what about the rabid dog rhetoric? >> my point, bob, is this. rhetoricnot had any from the new administration. >> the good news is that ahmadinejad is not around anymore. [talking over each other] >> if an administration questions the holocaust or this administration condemns the holocaust, the netanyahu opposition is the same. it doesn't make a difference --

>> can the president say clearly that israel has the right to exist? >> the problem is not with iran. we have 57 muslim countries. many of them do not recognize israel. [indiscernible] all of your allies, a majority of your allies do not recognize israel. israel's problem is not with iran. the peace process is with netanyahu. everybody knows who has blocked a solution. this is not iran. netanyahu.t [applause] >> gentlemen, this was fascinating.

i think you gave a lot of insight into the deal withhat could come next some moderate reasons for hope. thank you very much.

...

mic priorities for congress, the third way think tank hosted this with bill schneider moderating.

>> welcome. we are happy to have jason with us so let's start with it and then we will turn it over to you. do you think that the budget deal that has been passed by the senate can be passed today? that represents anything bigger than republicans to talk about another shutdown? >> i cannot tell you what it represents for the republicans. but what it does for the economy, it is more certainty and more ability to fund things like infrastructure and education and research and less of a fiscal drag. and i can tell you that when people were dark about the possibility of this agreement, i was always optimistic because i thought is something we would like, more deficit reduction and to do a little bit more now, and

someone care about infrastructure. but the basic trade was a clear win-win. and we will win out over all the inertia in washington. >> go ahead. >> ronald reagan, bill clinton, barack obama, they all got elected because of dismal economies. and so where's where is the obama second term boom? that is the question. >> you know, if they put the economy in context, we went through incredibly deep financial context we will not

have consumer borrowing leading out of the way. and if you look at these countries that went through these 2007 in 2008, only two of them have re-attained the gdp per worker that they had before the crisis in the united states and germany. so if you look in a global context, we are way ahead of the pack and we need to be doing a lot better. but if you look at the last two quarters, it has grown an annual rate of 3% and you're seeing some of that going into next year and he will have less of a fiscal headwind and that will further aid the growth for next year. but it's tough since the great depression to get yourself out of this and it takes time and we are continuing to dig ourselves out. >> immigration reform is part of the second term agenda.

and what is the economic argument for immigration reform? >> economist recoil at this and we just love to borrow people with trade-offs and downsides and negatives. and it's as close to a win situation in public policy as we have. the budget office says that it will add $1.4 trillion to the economy and that's not just the extra workers than it brings in, but what it is is expanding what economists thought were factors of productivity and innovation and ideas and bringing in talented entrepreneurs that will create jobs and who will invent things and it brings down the budget deficit by over $100 billion. over the next decade and it is part of this as a country.

>> is a cost because they use services, public health, public education. and how do you counter that argument? >> i counter with the facts. there's no better referee in the congressional budget office. and they said it would cut the deficit to $160 billion over the next decade. and a lot of these people here are not necessarily paying taxes, strengthening the economy, all of this stuff, all that is good for the budget deficit. >> recently the president has been addressing the inequality issue and what specific policies flow from that concern? tax reform? anything else? >> if you look at the speech, the first thing they said was economic growth and we need to go this and it's a much better position to address with these problems if we have a larger

economy. but it's not a guarantee that the benefits flow to the typical family and that's something where the minimum wage comes in and to a degree we have in this includes some households. >> what you pay attention to the most every month for a data point, and how the country is doing? >> the one i pay attention to is the median household income and we only have that every year. but i will answer your monthly question.

and that is the timely measure of the economy and there's a good reason that others pay attention to it as well. >> right now the affordable care act looks like a political obstacle for democrats and will there be an economic upside and will we see a? >> we are seeing it with the underappreciated things in the economy. real per capita health costs are at the last 50 years and a decade ago, there was a lot of lamenting and competitiveness of businesses with rapidly rising premiums and that is helping our business is in this includes strong job growth. and i includes the health benefits. and part of it is the economy and i think that that is an

important factor. it started about six or seven years ago and the health system. and partly the affordable care act. and it builds they built on those trends and did some important things. for example, cutting down the hospital readmissions. >> what would this mean to the american economy? >> what this would mean is that our businesses would have a greater scale and now it is a quarter of the world economy and they live outside of our borders. and it's a very open country. and these are adventitious to everyone, especially to the united states in the trade agreements that are in part of

this in europe, some of the most promising things in terms of expanding the that are businesses can operate with and high-paying jobs as well. >> okay, so what is the biggest source of frustration? >> is that the business community? >> and you know, there are so many things to me it seems so obvious. one is that we should be doing less to/spending up front and more to cut our deficit over the medium term and long term and the right thing is part of this and this includes a reasonably similar vision in the upper

20s to pay for that and this includes a more competitive tax code. and i think that integration is another situation in some of these things seem like they should have a lot of agreement in congress. >> okay. >> we have a lot of information with its instructional research. and what do you expect to get in those areas? >> we are not getting the president's major infrastructure with that. we are not getting this proposal is part of that. but we are going to not have the same cut so we might have might've had to be improvement program for two head start. and so they are now writing appropriations bills.

>> so you are avoiding cuts. and does this give you more ability? >> yes, by buying back 60% of the domestic sequester. we are going to be able to spend and invest more %we are going td and invest more in areas like head start and the airport improvement program and all the things that are in that. >> it's a big investment in that area. >> he proposed a grand bargain on jobs, infrastructure, dealing with a together. this is not a grand bargain. this is not the major investments that we wanted to make. that will mean more in all the areas that are keyed up. >> michael? >> yes, asking about inequality in the tax code. and i'm sure that you know and i

have not read it in french, but i do have to say that he says that we can't really address the inequality without the tax code to do so. and he talks about this in the area, something near 70%. so not every dollar earned, but i don't expect you to enforce that. but how do you tackle this without using the tax code to do so? >> well, let me give you an example. in the president pushed for higher rates and high income households. and this is deciding to apply

for this, they have a tax benefit for that that might be two or three times as large as what a middle-class family would get. and we have a proposal that limits this, instead of the 39.6 now. and that is why you can think that progressive taxation is, you know, it is part of the solution. and we have done us and what we are looking at now is reforming the tax code. it also makes it more efficient when you have those types of subsidies. and it's actually an efficient way and some have called it spending through the tax code

there is an important conversation as far as how we reform our were former tax code and how we deal with this challenge. and taxes are part of the conversation. and we can do this through cutting tax expenditures. >> perceptions of the economy continue and i'm wondering if there is a way for the administration to make that case to convince americans that the economy is improving, and is the state of the union an opportunity to do that? >> yes, we did see consumer confidence rising pretty strongly of through september. and we saw the government shutdown, and that was a big blow to consumer confidence. if i were watching what was going on, i would have been a

lot less confident as well. and so you did see it. you saw it and some people are more willing to believe the strength of the economy. but i don't think this will depend on president obama, but the monthly jobs number and it will just depend on when families are seeing it. in wages, you look at wages and it has been increasing recently and inflation has been following. as we have seen that strengthen and that is after a time when they have been stagnant. it has come down by six tens in the last 10 months. and so i certainly believe that all of that is real and that it is translated into public perception we will continue to do so.

>> as you said, the economy has seen more to do with this. and many people are still looking for jobs. >> it is true. >> when you are in politics, and economics, you have to understand that things are obligated and i don't think it's that hard to understand. we went through a very deep scarring thing. and as we get further away, it's harder to remember. and the typical time it takes you to get your economy back to the same level that it was at, before the crisis, it is a decade and four and a quarter years. and usually it's a decade. but it has a serious effect.

and we are still digging out of it. >> you can say that it is morning in america. >> yes. >> there was an astonishing transformation and it's now back up what it was. we have massive deleveraging, and this includes private sector jobs or the profits that are at corporate level cash holdings, financial failure is way down. and yet the administration owns that record. but it doesn't seem to be a part of this. but the question is there have been positive things that have happened with the auto industry and good things at a record level and a lot of positive

things that are real and not false. so the question is why is it a failure of this construction on the part of the president or the fact that the lack of wage growth and income kind of trumps all of that. >> you certainly hear us talking about it. there is no shortage of these private-sector job growth. in the united states starts unwinding and we are fully out of that and everything president obama invested at the previous investment as well.

and senator jack reed has a proposal to do a clean three-month extension of it, which would prevent the 1.3 million people from being cut off. the president strongly supports that unemployment insurance as one of the highest priorities and most immediate things that we can do to help the economy out. and the reason we support that is we have created really strong job growth and we have broke the unemployment rate down a lot. and this includes insurance benefits to lapse. and that is just one example and it is one of the things that we

need to do to build on that record and strengthen it. >> so the federal reserve going forward, impacting the economy. and secondly, how do you see the role of president obama would regard to executive orders so what is most frustrating with my current job is that one of the most interesting topics is always the federal reserve and one of the topics of the federal reserve, we have always thought that this would be in better shape without executive branch officials. and obviously in broad terms and

i think that she will be doing this from me or anyone else or any of my colleagues. and do things like the deals that the president would like to do it b-schools, infrastructure, and there is -- we are going to be doing everything that we possibly can. and one thing is this long-term unemployment issue that i mentioned before and we need legislation and there's a lot to

do administratively on that. and this is part of the regulatory agenda as well. >> so inequality. the president was talking about the defining challenge of our time and how does that link to job creation? so this is unemployment and long-term unemployment. >> i think that unemployment is

part of this and if we get it down from 7% where it is now to where was in the 1990s, you would see personal people's earnings go from zero who are unemployed up to 30 or 40 or 50 or 60 for a job. and so moving this, getting the unemployment down, part of what the president is saying is that we have had several decades and we would still need to worry about that in the deep deeper forces and most of them find

that it's very close to zero. and that is because the benefits of reduced turnover increase motivation, better productivity and it offsets the extra cost associated. >> let me follow that again. can you really promote inequality without redistribution? >> what is most troubling is how highly correlated it is with the lack of mobility. and so if you could have a really unequal society and people were likely to move out and have a prominent situation on it, you'd worry a lot less about inequality. but it's an empirical fact when you look across the country is, the countries that are more unequal are also those that are

less mobile and ultimately, i think everyone in our society subscribes to the quality of opportunity. you can't be serious if you don't have a high-quality preschool if you don't have a middle class family having a same shot at saving for their retirement and there are a lot of elements of a quality that show up in the income distribution as well. and it's expanding and making sure that everyone has enough. >> for what you are saying, it sounds like the inequality framework, it is a broad framework for presenting the agenda and understanding what the agenda actually is.

and i'm wondering if that is new inequality things that we haven't heard about that you can tell us about and that was a good description of it last week. and that was not a speech where he was -- they have all been motivated by this, and it's also the freedom that we are using as we think about policy proposals going forward and you always see new policy proposals.

>> with the labor market, the participation rate has declined fairly sharply. and there is a debate among economists as to how much is structural with things that would happen anyway and how much it is perhaps temporary, people just discourage about getting work. and is there an estimate as to how much you would allocate to each cause? and do you have an expectation assuming the economy strengthens that there will be a flow back into the labor market and they stopped looking for jobs? >> okay, we spent a lot of time looking at that. and people should understand the participation rate falling at this point in our countries history. or something that was very much predictable or predicted. the economic report of the president put president put down by the council of economic advisers in 2004 in this

includes a decline after 2008. the cbo was projecting this after 2008. and that's because the first baby boomers turn 62 years old and became eligible for social security benefits and the labor force participation rate goes down. so we always expect this. the question is the magnitude. and we have seen since the end of 2007 the participation rate falling by 2.7 percentage points and we think that it explains about half of them. ..

as the economy continues to heal, demography is still going to be bringing out the participaparticipa tion rate down. that cyclical component will go in the other direction and will start raising the participation rate and i think it's reasonable to think that this will roughly offset each other. i would not roughly expect the participation rate is going to rise over the next couple of years and it back over the next decade and it's likely the participation rate will fall but

the demography is going to be with us for a long time. spews the participation rate reported as a percentage of all americans are working age americans? >> its american 16 and older. if you are 100 not working that counts as a nonparticipant. >> well yeah and people are living a much longer time which may be built into it. i always thought of the first -- participation rate as the americans working. speak at the prime age so 25 to 54. that has also come down for the cyclical reasons we were talking about but it hasn't come down nearly as much as if you look at 16 through 120 or whatever age it is americans can work until. >> the things the president can actually do to get at inequality to get through congress.

where does making sure the affordable care act survives and thrives fit into that? is that the most reasonable thing that he can get done to get to inequality with the last three years he has got? he has a lot of special things happening in this town were nothing special has happened for a while so the affordable care act and making sure it works the greatest thing he can do on the inequality front that he has actual control over? >> like a lot of people that know a lot of bout politics at this table that can predict the future better than i can but the affordable care act as an really important part of that and that is why we have been working so hard to get the web site working to make sure it's implemented effectively. i think -- i don't think he's just going to sit there for the next three years just trying to take the web site veteran better and better. raising the minimum wage.

the last time we raised the minimum wage and with signs of two law was president bush in the time before that it was best a speaker gingrich and signed into law by the resin and clinton. there's no reason why we shouldn't be able to do something like that. infrastructure and the highway reauthorization expires at the end of september. we are going to need highway legislation by the end of september. we could extend for a month and extend for another month and extend for another month or we could do what the chairman of the transportation committee and the house wants to do. the chairman and the people with transportation the president what to do which is something bigger and something longer-lasting, something that gives us more of an investment going forward. preschool, we talked to business leaders all the time and economists who think that's an important ingredient to our growth. there are a whole lot of things we have been able to do in the

past that they are forcing events around doing now or a bipartisan support we should be able to get done all of which matter for inequalitinequalit y and the economy more broadly. >> i want to ask a question related to the kerfuffle and the way it found itself. even with the implementation of dodd-frank and the publication of the volcker rule there seems to be this unresolved anger directed towards banks and financial systems on congress. and maybe more the democratic party. is that fair to you think that anger is still there and that the community seems to be feeling the community at price per pound of flesh still needs to be gotten from the banks for what happened in 2007 in 2008 and how are the bank stating today affecting the pace of the economic recovery, bank lending?

is it a drag on the recovery at all? >> so, banks play a really important role in our financial system. they help allocate capital. they help revive liquidity when they function as they should. they also help better allocate risk but when you have poor regulations and when you have poor decisions banks can do the opposite of all of that. they can miss allocate capital and put it in the wrong places that hurts our economy. they can freeze up with the ability to have liquidity and rather than diversifying if they can concentrate it and expand that risk and hurt the economy. and you know a lot of that depends on the regulatory incentives that those half if

you tell a large financial institution that heads they win and tails the taxpayer loses, that means a perfectly rational and agile institution is going to end up making decisions that are contrary to the public interest and contrary to the economic interests. we have had a lot of that else into our system leading into the the financial crisis in 2007 and 2008. a lot of this is about changing the incentives that you have. even with the right incentives, banks are like anyone. they are going to make mistakes. a lot of businesses to make mistakes might go out of business. it's a very localized thing. we can prevent that. that's going to happen and things are going to succeed and we will thrive in move up and down. banks tend to create a lot more damage to the economy as a whole when they run into problems and

that is why it's very appropriate to have a set of rules on banks above and beyond the set of rules we have on our corner dry cleaner. none of those rules are saying, no one is nationalizing banks are saying we shouldn't have banks. we are saying they need rules of the road and they created a lot of a lot of damage direct economy and we want to make sure that doesn't happen again. i think this is very forward looking and motivated by the economy. >> in terms of the behavior now how are they right now? >> i think this is the saying that larry summers likes to repeat which is the paradox of the financial crisis is one of the things that causes them is too much lending into much blacks lending and then you want to get out of them by having more lending and having more blacks lending. certainly chairman bernanke has talked about how credit standards on home mortgages for example are too tight now.

they are much tighter than they were in 2003 before the run-up in credit at a time when most of the loans we were making were perfectly good loans that were repaid terry at so you know a credit to small businesses. still remains relatively tight so there are a lot of ways in which we like to see the flow of credit expanded and more certainly trying to work on the parts that we can do. a lot of that is decisions by and dependent regulators and by the banks are its speediest oracle folk note i wrote about constitutions than 100 some years ago when we were much more agrarian society banks were the most aided institution in america. banks and railroads. there was a huge crusade against banks. the progresses in teddy roosevelt and woodrow wilson. banks were evil institutions when many americans were farmers. that transformed. after world war ii suddenly

found tanks were among the most respected institutions in the united states and the most highly-regarded. i don't know if that transformation has really changed. >> with the budget. >> we can't hear you. stay with the budget deal expected to pass now, what do you see as the biggest risk to the outlook and specifically how concerned are you about the expectation that interest rates are headed higher next year? >> i think the most immediate risk is that we don't extend unemployment insurance benefits. we estimated that that is the difference between 240,000 jobs and the purchasing power associated with those unemployment insurance benefits. that's similar to the estimates from cbo jpmorgan and others in similar order of magnitude so i think that's the single most most -- policy challenge in the policy challenge to those 1.3 million workers that would

be cut off. i think it's also a challenge to our overall macroeconomy. beyond that, i take senators like mcconnell at their word that they are going to raise the debt limit and we are not going to see another round of rings winship but if you went down to the wire on the debt limit and if you went down the wire on the debt limit that would be a major threat to the economy. there is no reason that should happen and i'm confident congress will not want to put our economy through that. beyond that, i don't want to talk about and forecast the future of interest rates but if you step back and look at the fundamentals of the housing market i think there is still a lot of room for growth. we are building 900,000 houses a year. we add about 1 million households a