gentlewoman from florida, ms. >> "washington journal"

continues. joining us from

pennsylvania this morning, mark zandi, chief economist from moody's analytics. let's begin with the big picture. you have called 2014 a breakout year. why? --guest: iwe will think we will get more growth, jobs, and unemployment. there are multiple sources of growth, but one key -- one key factor is the fiscal drag that was part of the sequester last year, it will not be playing as much of a role in 2014. the fact that fiscal policy will not be a drag on the economy to the degree that it has been is a plus. it means more growth and more jobs. there are other reasons, but that is a key one. host: what is the growth prediction? guest: if we look at the growth valuables that we produce, that has been growing

roughly two percent every year since the economic recovery began. in 2013.wo percent i expect growth this year of culture to three percent, that is again with gdp, and again in 2015 with four percent growth. it is good enough that i think we should all in general feel much better about things a year or two down the road. >> what does that -- host: what does that mean, then, for jobs? what type of jobs will see growth? will mean more jobs, to give you a context, in 2014 we created 2.2 million jobs. that is what we created in 2012 as well. expect 2.2 5 million jobs. a lot of the additional job growth, i think, will come from

another additional source of growth that is gathering momentum, which is the housing market. it has been in recovery for almost two years and i think we ,ill see a lot more activity with more construction going into the middle of the decade. to the very important job market. every single family home that we construct produces or jobs over the. of the year. everything from the obvious construction jobs in manufacturing jobs. thinking about the lumber and the appliances that go into a the, transportation to move materials around, home retail group and improvement jobs, landscaping, the market runs very deep in. just in one part of the country, it is almost everywhere. i think that that is going to be an important source of new job creation over the next few years. host: what industries are going to see growth? will tell you,

interestingly enough, we are seeing job growth almost across- the-board right now. very few industries are not adding. until recently it had been the case that state and local governments were laying off workers, but that is not true anymore. federal government is still downsizing. other than that we are seeing industry. in every but one important source, and this will matter over a longer. of time rather than in a given year, but jobs in high-end services. i mean things like accounting, legal, management consulting, architectural services. economic consulting, like what i do, for example. ofre is going to be a lot demand for those services coming from the rest of the world. they are going to demand those services and to be competitive

in producing those services. of course, those jobs require lots of skill and a higher level we will have to work hard to train our workforce to fill those jobs. they will be available in the future. host: the pew charitable trusts put together a map based on the numbers from moody's. which states will generate jobs in 2014? which states will see the most job growth? guest: well, the good news is we will see job growth from coast- to-coast. across the economy country should experience job growth, which is a positive development. but the strongest job growth should remain in the center of the country, particularly places like texas. the texas economy has done quite well throughout these tough economic times. in other partsle

of the country who have lost their jobs and decided to move to texas to look for work has helped to support further growth in the texas economy. a lot of support in the energy producing areas of the country, the upper midwest, around north dakota, western pennsylvania, new york. we should see a lot of growth in the technology industry, it is doing well and producing a lot of jobs in california, the bay area, los angeles, texas, the carolinas. one other source of job growth? the vehicle industry. the vehicle industry is doing quite well. auto sales are up, which is producing a lot of jobs in the greenville,ces like south carolina, atlanta, georgia, and through the midwest into ohio and michigan. we are going to see better

conditions across the country. host: we will be talking about the auto industry tomorrow in " -- on "washington journal." these jobs, are they going to be high paying jobs? low-paying jobs? what will be the average? good question. to date, so far in this economic recovery, as i pointed out earlier, most of the job growth -- the predominant amount of job growth has been in lower paying jobs. if you think about the occupations and rank them by , much of the job growth has been in the bottom third. that is going to change. we are starting to see much more job growth in the top one third, the high-end, also experiencing much better job creation.

i also think that in 2014, if i am right about the broader economy, we will see job growth across all pay skills. if housing is really kicking in with a lot of instruction and manufacturing, those are middle income paying jobs. if i am right, we will start seeing more jobs and stable government -- k-12 teachers, emergency responders, police. the recovery, so far, has been mostly lower paying jobs. we have been seeing more higher- paying jobs, but i think that going forward we should see job growth across all the pay scales. host: we are talking with mark zandi, of moody's analytics, about where the jobs will be in 2014. you can start calling in, and we will take your tweets and e- mails as well. what is your prediction for

many things.: of course, most immediately, congress and the administration have had to come together and add legislation to increase the treasury debt limit. the debt limit will become a problem in a few weeks. according to the treasury secretary, if we do not have a piece of legislation by late february, early march, we will have a problem. that would be a significant threat to my optimism. another potential threat is interest rates. the reserve board is now trying to wind down there very aggressive monetary policies, keeping interest rates at zero for a number of years, they have been buying bonds through several quantitative easing programs. with a better economy and better to market, they are trying exit out from those extraordinary interventions, which will be tricky to do without long-term interest rates

rising quickly. if they rise to quickly, it could undermine the housing market. every jew not get the growth i am anticipating, we will not get the jobs. my optimism will then not come to pass. there are others overseas that we can go to, but those are the key risks at this point. host: carol, minnesota. caller: where were you employed before you were at moody's? guest: i started my own company back in the early 1990s. it evolved into a company called economy.com, an economic consulting firm that i sold along with my colleagues to moody's six or seven years ago. i was a startup, i have been a small business person, and am now part of the establishment.

i have seen it from lots of different angles. host: why do you ask? caller: i do not understand why you have this person on. you have had him on seven -- several times, but this is one of the key people in the ratings area of those mortgages that were all junk that he rated high . he should be in jail. i do not understand why you keep having him on. he was doing high ratings for junk mortgages so the banks could make money for several years. host: let's get a response. mark zandi? in the ratings agency. the moody's corporation has two independent subsidiaries. one is the ratings agency with mortgage securities, with moody's analytics. i have nothing to do with the ratings side of moody's.

that is not what i do, i have nothing to do with it. have written fairly extensively on the crisis and the cause, having talked quite a bit about the many factors thriving the crisis, including the ratings agencies. i know it is shameless to plug one of my books, but you might want to go read "financial shock." that will help you to understand where i come from and how i think about the crisis. host: since we are going down this road, in 2008 you were the economic adviser to john mccain. what was your role? an honest role, i was part of the team of economists providing help and support. my specific job was to monitor the daily economic information and data and relay that back to the team, so that that could help to inform the process.

i was doing what i do for my day job, watching the economy on a daily basis, trying to make sense out of it, and based on that understand where the economy is headed. next, froms jacksonville, arkansas. where are the jobs going to be in 2013? go ahead. caller: he needs to wake up. there ain't no jobs. we will not have these jobs until we get rid of the crooks in washington. host: mark zandi? well, you know, i do rely on data and the key part of the data is the bureau of labor statistics. i realize that one is a survey of companies across the country. the survey covers roughly one third of the job base.

every year that survey benchmarks the employment count, so we have a very good accounting of almost all the jobs in this country once he year. in fact, we will get that data next month. producing morere jobs. as i mentioned, earlier, in 2014 we created 2 million jobs. jobs perbout 200,000 month. in normal times, if unemployment were lower, that would be considered to be very good. that is incredibly strong job growth. it is, of course, quite disappointing in the current context. unemployment is still very high. it undercuts the trust out there, you have a lot of underemployed and discouraged were -- discouraged workers. we are creating jobs. the job market is picking up.

having said that, it is not the case for everyone. it is not the case for every community across the country or every industry. i missed where the caller was are some verye hard-pressed regions of the country. detroit, michigan. west virginia, kentucky, mississippi, alabama. areas where unemployment is still incredibly high, too high. better, in ais broad sense, but it is not better for everyone and, of course, until everyone is feeling better about things, we have a lot of work to do. i sympathize with the caller's perspective, but things have improved and are getting better. joseph, hollis town, pennsylvania. republican caller. you.r: thank

the inner-city people, they have turningbut other than and selling drugs. we need congress to come out with a manufacturing program across the united states. to let people start a manufacturing. if they see it, they can build it. we need to get this country up and rolling. manufacturing was the backbone of america. we need to get action going in america. we need to put in flux taxes on incoming products that are built in other countries. we need to put america first and foremost. we need to put on this manufacturing rally. let's have mark zandi

respond. joseph was from pennsylvania, by the way. joseph, for you, the question. let me say a few things. first, i agree with you that manufacturing is very important to our economic future. it is a key source of middle income jobs. important to the psychological change in innovation that was key to our longer-term growth. so, i agree with you. and i do think that the future of manufacturing is quite right in the united states. if you are a manufacturer who survived the recession, you must be doing something very well, you must have a competitive and low cost structure. selling something that people in the rest of the world want, you are primed for growth. --. manufacturer crossed cost structures today are in the same place they were 25 years the so quite competitive.

other thing, of course, at the back of it, u.s. manufacturers in the energy sector, they are the ample suppliers of natural gas and oil. that is bringing down the cost of energy to these manufacturers. that is a huge plus and i think it will provide a key source of manufacturing, going forward. first i would say that i agree with you, manufacturing is very important to our economic future . i think that will become more evident in the coming years. the second thing i would say, in response to your question, i think we need to be a little bit careful about trying to set manufacturing to locate within urban areas. not be the appropriate place for manufacturing to set up shop. , perhaps,facturing but usually to be competitive they have to have scale, big --

be big, they need land, which meet -- which makes it difficult to set up manufacturing in an urban center. which is not to say that we cannot manufacture in locations nearby urban centers. but i think that is a heavy lift. the final thing i will say, the sentiment that you just expressed is increasingly the consensus amongst policymakers in washington. ideashard to come up with to promote manufacturing ideas. it may reap manufacturing benefits down the road. i am just a little bit cautious about saying the solution for the problems in the urban

willrs -- i think that have to be addressed through other means, not necessarily through manufacturing. one other thing i will say about that, manufacturing, even when it is growing quickly and there ,s a lot of increase production it doesn't generate a lot of jobs, so we cannot look to manufacturing to be a source of a lot of job creation just because it is so productive. >> the report this morning from "the washington post --host: report this morning from "the washington post," a plan to create a federal fund to leverage private investments on transportation and other infrastructure. the money comes from bond companies earning cash abroad, bringing it back to the united states. this tweet --

guest: i think that the , thestructure efforts promotion of more infrastructure, i think this is fantastic and key to long-term economic growth. everything from road system to rail to seaports. this is important to keeping the cost of doing business down. that willdo that, promote economic growth and development. an infrastructure bank is a good idea to help facilitate more infrastructure developments. has beenidea that kicking around for some time and

it would be great if we could bring that to fruition. regarding how many jobs it will create, i do not have the numbers for you. it is an important source of job creation in construction and manufacturing, but a lot of it depends on how much additional infrastructure occurs. but i am quite confident that if ouran approve -- improve infrastructure and make it more efficient for our businesses, it will be a boon to us, long run. i think that most of us agree that our infrastructure is lacking. just driving anywhere in america , you run through potholes, the bridges, we have all kinds of in our seaports and rail systems.

if we cannot address the infrastructure now, the 10 year treasury bond is going to three percent. we have an unemployment rate that is 6.7%. they would come back and work on the infrastructure projects. if we cannot get it together now and promote infrastructure development, that would be quite disconcerting. this is really the time to do it. all the pieces for making this work are in place. "the washington post," calls this an attempt to fund transportation through additional sources. "the federal gas tax, 18.4 cents per gallon -- monique, in detroit, michigan, democratic caller.

hi, there. i am calling about the unemployment. i live in michigan. unemployment rates are skyrocketing here. i just got laid off of my job after 10 years. i could not get an unemployment extension. if there are no jobs and no unemployment -- i am not one of those people looking to work the system for unemployment, i want a job, but i cannot find a job here. i cannot get additional unemployment. what does the government expect us to do? he have to live. very good point. you may know that there has been, since the recession four or five years ago, something called the emergency unemployment insurance program, providing an insurance benefits to folks like you, who run out of their state unemployment

insurance benefits for extended. of time. particularly in states like michigan. back at the peak of the program, a worker could, potentially, get unemployment insurance for as many as 99 weeks. that program expired at the end of 2013. congress has been debating whether to extend it. they have not come to an agreement. at this point it looks less and less likely that they will. my view that is a mistake. i think that extending the program, particularly in the context of very high unemployment, would be appropriate. just to give you a statistic, for every open position, there are still three unemployed workers. it is much better than it was. if you go back to the beginning of the recession, it was six unemployed workers for everyone

unemployed person, so that is a significant improvement, but in a normal time, it should be one for one. it is still very pointed, still very difficult. even if you are working hard, working at it every day, to find a job in these hard-pressed regions of the country. , it would be appropriate and desirable for congress to extend it, but unfortunately that is not the case. this has put a lot of hardship on people, like the caller. there are other social conservatives -- of course, no one really wants to avail themselves of it, but they are there if you need them. i sympathize with your situation and it is unfortunate that congress could not get it together to extend the program. texas.et's go to

surely, independent caller. where are you calling from? caller: [indiscernible] outside bull worth. host: ok. is -- how doestion we get our states to modernize the education systems? we need the skills and the education to reach these jobs like the technical robotics, the computer related, the medical field. that arehese areas getting a lot more jobs. about theworried current job market, people graduating from college with --rees and cannot get a job something is wrong with the education system. they need to be trained so that they can get those jobs. that is all i had to say. guest: i think you have it exactly right. i think you have hit it right on

the head. if we are going to succeed, as a nation, if the economy is going to succeed going forward, we need highly skilled and educated workforces. that is the key to long-term economic growth. falling short in that regard across the spectrum. k-12, centers of higher education. we need to invest more in educating and retraining our workforce so that they can compete in the workforce going forward. of course, it is a difficult and pernicious problem. in part the cause a lot of our k-12 is financed through property taxes, and depending on where you live and how well your community is doing, that is attached to your ability to finance that funding.

a significant issue. the federal government actually plays a relatively small role in educationlot of the that goes on in our country. the ability of the federal government to play a role here is quite limited. there are some things that we can do. one thing that i would argue that would be quite helpful in terms of raising the education of the population and the skill advantage of the skills we have, is immigration and 4 -- immigration reform. , if we allowight the kids coming from overseas to our universities to stay more easily in the united states, that will be a fountain of growth and jobs. by definition they are very entrepreneurial, risk-taking, starting companies, creating jobs. it would be important to keep that talent here. they will be

the job creators of the future. but creating those jobs here in the united states, rather than taking them home. however, the path to citizenship is very important to unlocking the skills of many immigrants in our country. they may be illegal immigrants, stuck in jobs, in many cases, that do not take advantage of the talent. a clearlyas not defined, reasonable path to citizenship, i think we would see those skills unleashed and unlocked, to the benefit of everyone. it goes to raising the educational attainment and skill level of our population. the second thing that you said, you are exactly right.

we need to invest much more in raising the educational attainment of the skill level of the country or we will be left behind. zandi, reporting on states leading the way in immigration boosts. in new jersey they joined 18 other states with policies youngstersdocumented to pay in-state college tuition rather than the higher out-of- state rates. governor chris christie and other republican said that this would maximize the investment that the state made in undocumented students whose k-12 schooling is financed by taxpayers. that makes sense to me. that is quite a bit in the education of these kids. it is quite an investment and these kids will be important to the growth of the economy. why not make it easier for them to stay in those states and

produce more? i think that is a reasonable thing to do and makes sense to me. host: this tweet from twitter -- good point. absolutely right. the bad job market has been tough on everyone, all ages, all regions of the country, all occupations. it has been a tough time, but it has been especially hard on folks in their 50's and 60's. it is going to be incredibly -- i really worry about this group, it will be incredibly difficult for them to get back to work and back into the labor force. hopefully we get some infrastructure development and

housing. will thensome of them come back. my sense is that some of those workers in the construction trade were in some housing related activities prior to the recession. and talentse skills necessary to work on those kinds of jobs. it housing comes back, some of those people will get work. unless they decide they are going to move to other parts of the country, where more jobs are , or go back and try to reeducate, gain, or phone the skill, they will have a very difficult time in this economy and in getting back into the workforce and back to a job that pays anything close to what they were paying before. thatf the various groups got nailed in this recession, that is the one group i worry about the most.

obviously they do not have a lot of time in terms of retirement. every day you are out of work, the more difficult it will be. the higher the burden will be on taxpayers. there will be higher financial pressures on government security, medicare, medicaid. is one of the most serious, damaging results of the recession, what it did to folks in their 50's and early 60's. host: colleen, joining us next, democratic caller. is -- you question said that of the probable of the trans pacific i've yieldership, that they are just as bad as nafta. like ross perot said, you will

hear a big sucking sound with jobs leaving the country. they said that there were provisions in there that would andride our sovereign laws that corporations are pushing to make cheap labor universal around the world. i don't agree with that perspective. tpp, tradethat the agreements in general, are going to be a plus for our economy. there are winners and losers in any trade agreement. that is clear. but on net trade agreements like nafta, it will be a significant plus for our economy going forward.

i do think that nafta and other trade agreements that were put ago,place 10, 15, 20 years were less of a plus for the economy. partially because it opened up the global economy and competition for the low-paying which really did hurt to a significant degree the low- paid workers in the united states who lost their jobs. very devastating. many of them lost manufacturing jobs because of these trade agreements. at this point in time, we are now on the cusp -- the united oftes is on the cusp enjoying in enormous benefit from those agreements. those emerging economies and the rest of the world, like china, are now developing their middle- class. they are starting to want the

kinds of things that we produce here in the united states. sophisticated aerospace, sophisticated instrumentation. materials. other services that i mentioned earlier. accounting, architectural services, advertising, media. all of these things that we do well in the united states, which produce a lot of jobs, we will now be able to sell those things developed, developing, increasingly developed emerging economies. the trade agreements have been a net plus all along. clearly much less so when nafta was in a slamdunk policy. there were a lot of losers in nafta. but going forward i think that anything that opens up global trade will be a huge boon to the united states, the economy, and producing more jobs. the tpp is part of that.

work hard toould get that passed, i think we should work hard to get china involved in the process. if we can open up those emerging economies, it will just make those markets bigger, more

. .

as general tilelli says, we have historically been doing that for 60 years now. think that strength, that understanding that having the same basic core values between our two countries enables us to work through some of the difficult issues that face us now and will face us in the future, continue to face us in the future. the biggest one is how to maintain stability with kim jong-un and north korea and what he has been doing and his father before him. i am very confident that this alliance will continue to work together to maintain that strength that is needed for

anything that comes in the future. thanks, and first off, it is an honor for me to be here. dr. hicks and dr. -- i would tell you the alliance is very strong. i am probably three months removed. i had never served in korea. it was the best military partnership i was ever part of. about thelking contributions to us in a rock -- in iraq. the chairman ended up being my deputy. he and i were in iraq at the same time. ie strength of that alliance believe is built not only from the blood and sacrifice of the korean war, but on the mutual

,rust that you see every day particularly inside a combative forces domain. i believe that is one of the key linchpins of the alliance. spent the majority of my time with combined forces committee. with both general officers here about their perspectives. i think the budgetary constraints that we see out there today can cause some issues. alliance doese two things. it provides strong deterrence assurance, provides not only to the region but to the rock public. i think that is very important.

coursehat i saw over the of the last few months. thank you. >> let's talk a little bit about the north korean threat. , you haveody but j.d. dealt with a prior leader. you now have kim jong-un in place. we have had if you will, the cycle of provocation that we are used to repeated under him. including the nuclear test last year. let me start if i may with j.d. how do you talk to people in washington when you came back here -- or people across the country -- about the north korean threat? what is it americans most need to understand that maybe they don't about that threat? >> thank you very much. over, kimr i took jong-il was in charge.

we talked a lot about what is going to happen when this guy dies. by coincidence, we did a rehearsal. what are we going to do when kim jong-il dies? it turns out that he dies on the 2011 and wember of find out on the 17th that he is dead. then, kim jong-un is going to be the successor. i was a bit hopeful that things may change. again, i have not been there so i had an open mind about what i was seeing. he had been educated in the western world. i was a bit hopeful. timei watched happen over ining my time is, we role

with the quiet period, the morning period after the death of the leader and the new leader starting to get on board. 29 february 2012 week year -- leap year where we are not going to do any testing for exchange in subsistence. and as a result, north koreans say they are going to do a peaceful satellite launch. changeed seeing things and so i was becoming convinced that things were not probably going to be as good as what i was optimistic about. that i served over there was one failed missile launch, a successful missile launch where they put a 8atellite in orbit, the kno

,ppears, the missile portfolio the use of asymmetric type threats -- i have followed general sharp. we have the sinking which occurred in march where we lost 46 sailors. shelling.ve the there was another loss of life. this and then all we have the nuclear test. one, what i tried to do is not overstate the problem to washington dc, but to give my honest assessment as the commander of what i was seeing from an asymmetric point of view.

i think that is probably our greatest threat over there today. i was not much worried about north korean ground forces. they have large forces but i think they're ground capability has atrophied. the missile portfolio that they continue to develop and with a long-range missile, they put a satellite in orbit which could be at some point in icbm, i think it is a real threat. real mobile capability is hard to find on the battlefield. that we havehing to pay attention to. my emphasis during that period of time as i talked to washington was on what i was seeing from an asymmetric portfolio. onlymd portfolio not missiles and the nuclear piece, but also chemical.

they have large chemical stockpiles up there. .hey also have cyber capability that is what i think we have to worry about for the future. you're talking to washington dc, it is important not to overstate the problem. that is what i tried to do because we felt -- dealt with many challenges. it is very easy to get things excited and do the wrong thing. i went back to two things. one, i had to maintain armistice. i had to prevent war and preserve options. that is how i looked at my job every day. thank you. message tomy washington and the people of the united states would be twofold. number one, kim jong-un only cares about one thing and that is survival. period. and a statement. he will do anything necessary to maintain the regime and i think he has proven that over the last

-- since he has been in power and his father before him. secondly, as people talk about the status quo, the recurring cycles of provocation, my message has always been you have to think about that not as status quo meaning a straight even line, but as a line that is becoming increasingly more dangerous because of the increased capability that north korea is gaining with that time to build a nuclear capability and ballistic missile capability. i believe that we in washington and the republic of korea also need to think about the threat of north korea along those two different axes and be prepared to defend south korea. be prepared for instability within north korea. i do not believe that kim jong- un and the regime will change and open up, period.

tilelli, you have the longest perspective on north korea. what are your views? >> the first thing i will say, when dealing with north korea, hope is not a method. hope for manyd on years and north korea will change and they have not. you can look at the various sine curves on what we have tried to cease anduade them to learize and at the same time stop their missile programs. general sharp is exactly right. when you look at the regime, job one is to keep the regime in power. of the the very danger entire situation there. the asymmetric piece of nuclear s, ciber, other weapons

of mass destruction, operational forces, pose a very serious threat. in a very real sense, when you think about the peninsula forlf, it really is a hub stability within northeast asia. what happens there really has a affectrious or positive throughout the region. general thurman is exactly right. the responsibility of the command there is to keep the armistice, maintain peace and stability on the peninsula, and be prepared with our allies to defend the republic of korea if necessary. i do not see, even though we perceive right now that there is a great initiative going on by perceiveun, i do not

that as anything different than has been done in the past. we have seen it before. hand and at one point they get what they want and go back to being the same as usual. -- as general thurman said, i think you have to be calm when you analyze it. you have to look at it over the long period of time. you have to understand what is happening and you don't want anyone in washington dc to set their hair on fire. iscalculation potentially the greatest danger. miscalculation is a great danger. >> i want to come back to that thefirst, let me ask about

stability of the north korean regime. korea watchers often talk about collapse being a potential scenario for instability as much as aggression might a. i open that up to whoever might like to go first. what are your thoughts on how stable the regime is and what the prospect are for a collapse scenario? >> i think that kim jong-un and what he just did in killing jang song thaek is an example of concern in north korea about how stable his regime could be and it has proved that he will go to any means to try to main stain -- maintain that stability. i think more and more information is slowly starting to get into north korea and the north korean people are very slowly starting to understand how their government now and in the past has robbed them of the human rights that they deserve, the freedoms that they deserve.

economy isthat, the in such bad shape. i think if you look internally from a north korean perspective, kim jong-un is understandably concerned where this is going in the future if his number one concern is how does his regime survive. i think we have to be prepared for possible instability in the future. >> i would agree with skip. the fact of the matter is, i think kim jong-un will take whatever steps necessary to keep the regime in power. with some of the events that have occurred in purging leadership within the regime shows that there is some inconsistency in ideology within the regime on directly where they should go. i think he has it under control. i think he has it under good

control. it is easy to control folks with a gun to their head. in my minds eye, when you think of the regime and you think about some of the things that rememberrred, i can just before i took command that i got word from every smart person i could think of about north korea. general sharp was my executive officer. everyone was predicting collapse within my tenure in korea. at that point, we developed a plan. are, many years later, still talking about collapse. think even though the people have been deprived, there are prison counselor the country,

the economy has been on a downturn where you count it positive if it becomes a half a percent off the negative. you look at the military, you look at where the investment is going, it is going to nuclear missiles and ciber and all of those things. think we must focus on the main responsibilities and that is to maintain peace and stability on the peninsula, maintain the armistice and be prepared for any contends and she -- contingency that might occur. whether that is a hostile provocation or instability between the rock and the u.s. alliance, i think we are strong enough to cope with any of those contingencies. off, with thest

recent death of jang song thaek, i was not surprised. i really wasn't. he continues to urge leaders. he has replaced more of his commanders than both kim il-sung and kim jong-il. when a person is doing that, that tells me that he is kind of worried about the folks around him and he wants to continue to further consolidate power. i do think you have to be ready for collapse. contingencies in the military plans. that is what we do. you have to have good plans. you have to have good common sharing of intelligence. you have got to protect that information. that is very important. it doesn't need to be debated out in the open public. future,ink for the

--in, it is very important first off, i don't trust the north koreans. after my time over, i don't trust what they say and i worry when we are in a period of charm offensive because if you go back through history, that is when things can potentially occur. , one, we have to remain absolutely vigilant. we have to question all the things we see everyday. that is why the day-to-day interface that you find on the penance alone with the military is so important. itself a strong deterrent. i think kim jong-un will continue some of his behavior. their road to eventual collapse is going to be the economic situation.

if you look at what is occurring over there today, they are spending a lot of resources on tourism. political -- people and political prison camps and people starving to death. you have also in the stand aged, everybody has a cell phone. they have got some device and i think access to the western world at some point could be something that could cause a fracture through social media and that sort of business. i don't think we should ever underestimate the impact that regime has had on its people for the many years that we have been dealing with this problem. there is a human dimension to this thing. i think when we start trying to predict that, we will probably get it wrong. >> if i could just add on very briefly, one of the things that

kim jong-un and his father did and i think continue to do is try to convince the people of north korea that they have an inmy, a very strong enemy the republic of korea and the united states. they have to be prepared for that enemy and that is why the military first policy is absolutely needed and why they are sacrifices are needed. we have seen in the past and i believe we will see again in the future the way that he reinforces that is to be able to do attacks, provocations against south korea, and, less is military and his people --, less military and his people to be prepared to do anything we do to defend north korea. following what general thurman said about the importance of the alliance and the combined nature of it. we all worry very much about, how do you control escalation so

it does not spin out of control very quickly? the way you do it is to make sure you are of one voice, one mind, not just during the time of conflict but all thread your training, throughout armistice period in order to be able to do that. thatis why i am confident we will be able to handle the situations in the future as they become more difficult. >> you just started to enter the next question i was going to ask. let me first talk about the frontline piece that aired regionally -- recently featuring victor cha and others on the state of north korea. on calculation and miscalculation, that is clearly for any alliance a significant issue. for the u.s.-rock alliance, we have just gone through this where you have a

sovereign nation that feels it has been attacked. we operate together. i would like to hear a little bit about how you walk through with an ally that dynamic to make sure that we are calculating together in a way that doesn't worsen a situation and in fact improved the situation. any lessons learned either from those incidents that i just relate or others that you had where you feel that the alliance was able to reassure the rok public and improve the situation maybe by not escalating as skipped just relate. one of the things that i wasrited from general sharp the counter provocation plan. march of 13, we signed that.

a lot of great work and it. was anle purpose of that alliance mechanism to solve problems for the alliance to control escalation and respond to it provocation. examplethat is a great of an alliance working together on some very tough issues. people get killed, people get emotional. what is important about all of the constantis assessment of wood is actually going on. throughout the whole process, this is not denying anybody the right of self-defense. that is an inherent right. in any type of military

operation, before you take the first couple of steps, you better know where you're going to end up and how you want this to end. forefrontlways at the of what i was dealing with on a day-to-day basis. one, you got to be ready. two, you respond to protect people. but if you are not careful, you can allow that to get out of control. i think that is a good example of one of the things that is good for the alliance. again, it is a deterrent. north but against the it also assures people that you have two very close allies working together. i think that is important. every situation is different. you better take time to think through a situation before you react. if you do it through pure emotion, you are going to get it

wrong. that is what i have learned. i learned that on the battlefield. >> general tilelli. thoughts on how to the reassuring. >> i think the reassurance is exactly as general thurman described. we have a strong alliance, a counter provocation plan. we have a modality or methodology through which when it provocation occurs, together -- again going back to the first rule of self-defense, always preeminent, going back to the role of provocation, together you are working to solve the provocation issues. is, ict of the matter believe that the statements made by president lee and president

-- have been a deterrent. the north koreans know now that the rok armed forces and government are not going to sit back and take these terrible shots from north korea without some sort of action to those provocations. i think jd has it exactly right. there was a plan. the plan is to work together. there is a command and control methodology in place. provocation and not react months later but react quickly enough so that it is tied to the provocation rather than tied to some study of a provocation. >> i would agree with both. isgree that kim jong-un clearly understanding that if he does another attack like his 2010, the response

coming back not just from south korea but from the alliance -- it is going to be very strong and very precise against north korea. i think strength and the willingness to use that strength is the strongest way to deter someone from acting. i believe the statements that have been made, the counter provocation plan that was continued and signed is a fair signal to north korea and kim jong-un that he better not do that again. things will not be like they were back in 2010. >> i promise we are going to conclude my portion of this on rob regional issues but i'm going to spend a little time grittyn the nitty- military issues in the u.s.-rok relationships. i think as begin with issues surrounding rok military

modernization. general sharp, you have written a piece which makes you the victim to begin this conversation. talk a little bit about how you think the rok is doing in terms of maintaining or upgrading, modernizing its forces and what implications that has for transitioning the operational control forces. >> i think what they have in this year's budget is a very good indication that the republic of korea is committed to getting the capabilities they need to defend their public with the u.s. as a strong alliance. three, the at pack continuing discussions about the next jet fighter, i think they are clearly demonstrating that it has to be followed through. it is is not a one year shot.

the indications that some of the capabilities that we have talked about, they need to could to develop,continue there are good indications they are moving across those lines. i would like to make three points on transition. itst off, if you look at the republic of korea being professional enough to control the fight, in my view, they are absolutely. the not question professionalism and capability of the leadership of the republic of korea to leave the war fight, any type of war fight or instability that we would have. we have been with them for six years -- 60 years. we have seen them in action, not just in exercises. i am absolutely confident in that leadership. that is point number one. , i reallyer two is

believe that we have got to look at what is the appropriate command and control relationship from maybe two different dimensions. first off, i do believe that a combined demand center -- command center should say. -- it ought to be some kind of combined structure. that needs to be thought of in two dimensions. first off, from armistice through conflict, the whole dimension of today and what happens through the future. the second dimension is the dimension of provocations that are getting more and more and anus, instability all-out war fight attack. if you look at those six different blocks, what is the best command and control structure to be able to do what maybe the most likely or most

dangerous scenarios? i think that is exactly what led by the minister of defense and secretary of defense are taking a look at. one of the conditions that need to be in place? that commandshould and control structure take a look at? the last point and i think general tilelli will say more about this, you need to look at it from a regional perspective, not just a perspective on the korean peninsula, but what is best for security and stability in northeast asia with all the different things going on. i am confident that the work that is going on now to determine where should this command and control relationship go and how should it evolve, will look at all those different factors for the right answer. because the alliance has been so strong and we are willing and able to sit down and talk to each other and say, here is what

we think across-the-board. ,he final point i will make is this is like a marriage. it is a good marriage. [laughter] we are not fighting like we want a divorce. we are trying to figure out how to strengthen and both sides if there ise on going to be a change or not. >> first off, i agree with what general sharp has talked about. time inpent a lot of this tough subject of transitions. folks said, ", you can't talk about that. that is the heart of the matter. have been part i of, it boils down to command and control. first off, i agree completely on the professionalism of the leadership.

i have great confidence in them. that is the first thing. when you start bringing joint capabilities in to put together a joint command and control, you better have a failsafe system of command and control. i think that needs to be talked about. it needs to be conditions-based. one, you must stay in a combined arrangement. in an operation that could potentially occur on the peninsula -- it could happen very fast. you do not have time to start trying to go from armistice into crisis and start talking about how you are going to command and control. it won't work. i have been part of these operations where you go in and throw together a sea to apparatus and borrow people and all of that. today, you have people that are training together everyday for a

common purpose. i think as you go through and evaluate r.o.k. capabilities, joint capabilities, then that needs to be a determining factor. the number one factor has to be the architecture. that is how you rapidly bring joint capabilities together. anything that happens on the peninsula is going to end up fight ifoint type war we get back into that situation. completely about the fact that you have to plan that from armistice through the whole spectrum of potential conflict. i would agree, this year's defense budget has got a good mix of capabilities and their and you have to follow through. you don't build that in one year. it takes time to do that. , think over a period of time

the cost and the valuation of where the rok military is at and across his whole joint capability portfolio is something that needs to be looked at on a recurring basis. say probably about four things and try not to be redundant. i must be redundant on one thing. the rok forces and leadership are well-trained, well disciplined, well led. that is a gift. the second part is, when we think about transfer, the republic of korea has come back to the united states of america and asked the united states government to delay transfer and make it condition-based. be,y minds eye, that has to rokave to abide by what

allies desire. the study should not be a study on dates. as some of you know in this room, i opposed transfer dates from the very beginning where it is condition-based. conditions have to do with the threat. conditions have to do with capability. conditions have to do with the mission. glue thats eye, the defense, the onbility, the relationships the peninsula militarily have been the combined forces command. when you think about condition- based, you not only think about capability and the threat, you have to think about the organizationa itself. some would say it is an issue of

who is in charge. would you work towards a common goal, if the common goal is the same, it doesn't make any difference who is in charge. i don't know who said it, but someone said it. if it is not broke, don't fix it. havend the arrangements we with the combined forces command are not broken. peace --hat is the piece that with a very tenuous such an -- situation in the north, nuclear capability, long- range missile capability, the rok president and minister of national defense saw that the best organizational construct at this particular time with these particular conditions are to keep the cfc transfers condition-based.

should it be studied for the long-term? and when the conditions are right, defining what those conditions are, i agree. agree with should the request by the rok administration to keep it as it is today until the conditions are correct. i am going to let that stand for the q&a. are some interesting differences that we can draw on further if folks are interested. general tilelli, let's talk about china. again, you really have the longest perspective on the peninsula. at least the way i think the united states policymakers have come to see china's role to the peninsular debates has grown. there is a growing sense that china has a major role to play here. what are your thoughts on the

north korea-china relationship and china's potential role in terms ofnegative a potential conflict on the peninsula? >> again, i don't think it has changed much. i think that china's role in north korea has been one of, for lack of a better word, providing those assets, resources necessary to keep the regime in power. that has been done over time. now it is almost like a family have onehip, that you of your family who is dysfunctional, they are still part of the family. north korea is a dysfunctional kid but the fact of the matter is, china is supporting them.

they may not like the activities. they have taken steps to try to stifle some of the activities, nuclear for example, missile test for example. in some cases, they have probably been successful. in most cases, they have not been. china can play a very critical modifying the behavior of north korea. this point, i don't think they have been very successful. time, do i believe that china would like a benign buffer state between china and the republic of korea? yes. the consequence is, i think they play a big role.

they have played a role in party talks. i think they have played a role in modifying the conversation with north korea. i do believe they could do more and i believe that the united states and china have to agree on what that more is. talk the talk, you have to walk the walk and do something about it. , it is a issue becomes very tenuous situation. when you turn the spigot on and off, you have to also understand as jd said, what are the consequences of that occurring? so china is in that role now. they have the spigot. they can turn it on, they can turn it off, they can modulate it. but they must understand the

consequences of everything they do. i think china has a big role. i don't think they have exerted the muscle that they have to modify the behavior of north korea. >> general thurman, thoughts on the role of china? ask i would agree with a lot of the comments that general tilelli spoke of. china is ok with us having a north korean problem for the u.s.. times, i think they're quite satisfied that we are there. arey that because we destabilizing factor. the same time, i think they view us as a threat into the overall region. rolenk china plays a huge in trying to control the

behavior of north korea. i don't know if they are able to do that to the extent that we would like to see them do that. today tot is important have good relations with the chinese and to work close together. i think the economic side of the house drives a lot of things not only from the peninsula but for the whole region. i think as we move to the future , i think one of the key things that we need to be in particular observation of is the whole economic situation. from the international currency and the cost of doing business in that region, i think it is just something that will eventually be a deciding point

from an economic standpoint. think it is important for the chinese to keep a stable peninsula. again, what does north korea do in the future? i would like to see the chinese be more involved in controlling north korean behavior. >> i was just add one thing. china just like any other country will do what is in their national interest. i think that china is starting to concern -- be concerned about their national interest about a -- as a result. i am convinced china does not want proliferation through their borders or near their borders. do i believe they have taken an of steps to prevent that and prevent escalation because of

strong revocations? no, i believe they could do more. i think that we ought to be working very hard and trying to work hard with china, the republic of korea, japan and other parts of the region to determine what the peninsula looks like and how is that increasing the vital national interest of all the countries that are involved. i believe that is the ultimate solution. ofone of the consequences more recent north korean provocations was further u.s. appointment and direct response to that which communicated to -- they were documents that the chinese did not welcome into the region. that brings me to the final piece i wanted to talk about, the rebalance. i would be interested in each of your perspectives on the extent that you think the u.s. is living up to the rebalance

theme, how well you think the scene itself resonates within the region and moving even off, have you think about the u.s. as a stabilizing influence for issues such as the dispute with the chinese or korea-japan relations, what the rebalance may bring or what its limitations may be with regard to stabilizing the region. let me start with jd. >> i think you have got to look all thenly military but diplomatic and economic things that occur inside of rebalance. i think from a military point of view -- i'm going to speak for the peninsula, i was asked to

take a look at capabilities. we did a little capability review so that is why it was clear to me, we need to strengthen some of the ground capabilities. we were able to modernize the u.s. army forces on the ground. strengthene to missile-defense. these are all joint capabilities. not tole purpose was increase capabilities to cause a lot of anxiety. if you look at what we have been able to do, we added helicopters. i asked for a helicopter squadron because one, it is all about mobility on the peninsula. it is a mix of joint capabilities that you have inside. it also gives us more

experiences in that part of the region. of the things we were able to do from the military side were nothing more than strengthening the capabilities inside the 28th -- no. i felt that was needed over there. i think as you go forward and look at the region as a whole, i think a lot of times rebalance notooked at as a threat only to the chinese, but also with the north koreans. they see what we are doing militarily. the greatest threat to rebalance , i believe, is the budget. forces, i think that is one of the things that the defense department has got to do with this globally.

as we look to the future. i have tried to maintain a close relationship with admiral sam locke we're, the commander, as we looked across all of the regional assets available that we could use not only inside but also on the peninsula. this is something that i think continues to develop. you can't do that overnight. particularly when you are involved in afghanistan and trying to reduce the u.s. military. >> i think rebalance unfortunately is not well understood. by people whod point to the u.s. doing something that they think the u.s. shouldn't be doing. when you look at rebalance, it really is about much more than just military. it is about diplomatic with more ties, diplomatically more ties

between the u.s. and the pacific. more visits to make sure we understand each other and are working towards the same goal, more free-trade agreements to make sure that our economies are continuing to improve. militarily, to make sure we are prepared for any sort of instability or conflict within asia. rebalance viewed from the perspective of what we're trying to do is to work in an area that is a vital national interest to the united states to maintain peace, security, prosperity around the world but especially in that region. it is the proper thing to do. in many cases, we are putting our people, our money behind it in order to help do that throughout the region. >> i would agree with skip. the fact is, the united states is a global power. we must look at the globe rather than one area.

elementsnclude all the of national resources as skip and jd subscribed -- the scribe. it includes engagement with all the countries in the pacific. tohad a hard time defining people who would ask what that means. we went from focus to rebalance. in that context, you can see there was a little bit of pivoting. dialogue anded the the narrative so rebalancing is probably the right word at this point. what it includes is relationship building around the pacific. it includes engagement around the pacific. it includes all of the elements as skip and jd pointed out how the diplomatic information for all sorts of reasons. for example, the united states

army pacific commander is conducting many engagement exercises in the pacific right now. which have nothing to do with threat. it has to do with engaging and understanding and cooperation. that is the essence. many people put the trappings of a military wrapper around this rebalancing. it is not -- that is not the wrapper. that is part of the means as you think about engagement in the region. in that context, i think it is the right thing to do. at the same time, we must remain focused globally to ensure that around the world our vital interests are protected and maintained. >> very good. we have covered a lot of ground and yet there are many topics we

did not touch on. i will be interested to hear the questions from the audience. we have microphones that will go around. if you raise your hand and i call on you, give your name and affiliation and we will give you a microphone. >> i have my own microphone. webcast andg live it is also on a live twitter feed. we have some questions that came in from twitter. [laughter] >> they are short. , youe of the questions is have a lot of stars on the stage. i don't know if they mean movie .tars or general stars the question is, for each of them, what was your biggest surprise as commander and what is your fondest memory? >> who wants to begin that?

>> the junior guy. [laughter] >> the biggest surprise i had was the volatility of the media. [laughter] i was not expecting what i found out. i had been the guy that hadn't really done a lot of media engagements. , when i interesting picked up one of the papers, it has got my picture on the front page and it says, general thurman is bullying the media. i hadn't even talked to anybody. this guy apparently wrote an article because he thought i was holding something back but i suddenly realized how sensitive people are. that was one of the surprises i had that i should have prepared myself for.

i get a couple of calls, you get a call about it nine times out of 10. that was one of the things. it was instructive to me because it told me that we had to develop a good outreach campaign. to make sure that we are in line not onlypolicies of the department of defense, but also here in washington. was the closeory friendsship and the that i established. who is aith a general also as i said,

the 60th anniversary of the armistice. i watched people who have gone and look at the look on those korean war veterans. that struck home to me. it also told me the importance thatagain, the alliance was shared in blood and sacrifice. that is probably the greatest memory, best partnership i ever had. >> i think my biggest surprise i had toow hard continue to work to make sure that people in washington and in the united states understand the importance of this alliance and understand the importance of it

in relation to peace and security in northeast asia. how strong this alliance can be in that realm of peace and security. about, of us have talked the u.s. during the time i was onre was primarily focused the middle east, what was going on in iran and afghanistan and that part of the world. to be able to say, look what is happening here and if we want to maintain peace and security, the alliance, what is going on with important not just for the korean public but for the entire peninsula. justtook a lot of work not by me but by kathy stevens and other diplomatic folks that are there. i am convinced that we now completely realize that. we are putting our money where our mouth is that this is an

important region to us. what was the best memory -- very much along the same lines as what jd said. the personal relationships and friendships. general tilelli and myself go back to 1996. i speak for myself but i am sure it is the same for general tilelli. the friends that we still go see on every visit over there. personalo not just the relationships but the professional -- you have established the trust and confidence between our two nations and militaries that you can really sit down face-to-face and talk out, what are the issues and how are we going to resolve this as an alliance? >> general tilelli? >> i think the biggest surprise was, whenonal view

you get a bit of intelligence how theion, interpretation of that information can be so different among two or three different people and two countries. and the consequences of that. issue.ways was an it was always resolved. -- my fondest memories are not memories because they are truly activities right now. one is the combined forces command which is a tremendous headquarters and the relationships in that headquarters which is not just between the rok officers and noncommissioned officers and u.s.

one of my fondest memories is the graciousness of the korean people overall. in my view, they are the most gracious people i have ever dealt with individually and collectively. skip and jd, when i go back to korea, i see friends i have established over a long period of time. and they come here, we get together each and every time and, in the interim, we communicate by e-mail or other means. when you think about the roc alliance, what has the command bread? with bread relationships with stance friction over time. you always come back to those relationships. that is the fondest memories i have. >>