which the hospital bought for two market it up the to eight dollars. i think it is important for the viewers to recognize that those markets are happening not by the device company, but at the hospital. host: mary, in independent. if you are on the air. caller: i think they should get rid of the medical device tax. place ofs the coil in the aneurysm in my brain am i am thankful for it. and minor surgeon. guest: thanks so much for the call. there are millions of patients out there who are seeing the benefits firsthand of medical technology. you're a testament to the wonders that people are literally alive today because of the advances of these physician and mentors entrepreneurs working tirelessly to reduce

costs and improve patient care. i'm a glass half full kind of person i hope we can work constructively, working with republicans and democrats, the administration all to make sure we have the right incentives in place that allows folks like mary to have access to the material they need. we don't need any unnecessary delay to the regulatory process through tax policies that prevent rations from getting access to these therapies. could this next congress in january, when they convene for the 114th, addressed this issue? that: this is an issue leaders of both sides of the aisle have said it's a priority. this tax has been in effect in it with each passing day, more and more money is being siphoned away from investment and job creation and research and development. where hoping it's as soon as possible that congress will act to repeal this tax in this money will be able to immediately go back and it sure that these jobs are not moving offshore and stay

here domestically and companies that had to halt their expansions plans can reignite those. most importantly, these promising projects on research and development, that these projects will be funded against outpatients of access to these therapies. host: daytona beach, democratic color. you are on the air. i could maybe get behind repealing the tax but you know what? how about the industry brings the jobs back from china and mexico and germany? about they start charging the same price for the people here in america? that they do in other countries for the same device? you guys in the pharmaceutical industry, you got a monopoly. know there is a lot that goes into research but why should be all on the american people? why are we asked to pay more than other people?

how is that fair to us? of our companies that we represent our us-based manufacturers. mentionedyberonics that makes a brain stimulator to treat epilepsy. the company has been around for 25 years. on until two years ago, all 600 employees were based in texas. tax, it willis make it difficult for the ceo to make it decision to relocate down to costa rica. whether or not this tax gets up it will have a direct impact on where ultimately the size and scope of this facility will be. he grew up in gary, indiana and is the son of a steelworker. in the off to college late 1970's and came back in the mid-1980's and saw that the airy

was decimated. it was driven by public policy. we have seen great commodities across this country that have thrived because of the great improvements and quality of care and economic impact in the medical device industry. -- therwhelming of our overwhelming majority of our members are domestic-based. he estimated difficult decision so i can guarantee you that if we get the tax repealed, it will make sure these job stay here and expansion will start to accelerate in the u.s.. host: we will have to leave it there. thank you for talking to our viewers. want to bring, we it to the heritage foundation where they are having an event about the 114th congress and a discussion about what that congress can do to promote economic growth. live coverage here on c-span -- [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> our internet viewers are welcome to send questions and comments at any time.

a we will have for questions and answers and we askp that you the convenience of recording. eriod opening our program this money and making a special welcome to our guest at heritage is the current president of the heritage foundation, former senator jim dement. please welcome me and joining him. [applause] >> thank you, john. merry christmas, everyone. merry christmas to all who are tuning in through the heritage network or c-span. this is a great day to come together and talk about the power of ideas. we got a super panel here today. it's our job at heritage to help to shape the debate and build consensus around ideas that will make life better for people across america and all around the world. process is bringing in people from all walks of life, experience in the media and business, the think tank

world v and different ideas and set prioritieset as an organization and is a conservative movement. that's a big part of what we are doing today. i appreciate steve moore leading this. i'm sure larry will completely introduce our panelists. all of you, thank you -- i cannot think of a better panel. guests in the idea to do this around the country and bring america in and help america see those ideas that really will build a stronger country and a brighter future and a better life for all americans. what we want to deliver to members of congress and presidential candidates and to the country as a whole is a conservative policy reform agenda that really focuses on opportunity for all and favoritism for none. that's where the dividing line is in politics. it's the politics of division on to left, breaking people groups and playing one group against another and trying to

get special carveouts whether it's crony capitalism or other versus theveaways idea that we are all americans, we all want opportunity for ourselves, our future. we all want to build a better country. that is an inspiring message that americans want to hear. i do not know of any americans can i'm sure there are some, but most americans don't want to be part of a minority. they want to be americans. and they want to have the same opportunity and they don't like a government, whether it's state or federal, that is picking favorites and picking winners and losers and taking taxpayer money and throwing it one way or another. it's not fair and it's not equitable. focus here.y our what you will hear today i'm sure is a lot of good economic messages and what we can do whether it's with energy or tax code and i cannot think of a better group to talk about that and really dig down into the issues. k larryudlow will facilitate this.

he is one of the brightest minds economic minds in the world. i have told him several times that i love being on his saturday radio show where we can just sit back and dig in for 30 minutes or so and talk about ideas. being herek you for and leading this. i will leave it to you and i hope i can do my next meeting quickly and be right back to listen to what you are saying. [applause] many thanks to senator jim dement who is truly a great american. we are blessed to have him. i am larry kudlow of cnbc. radio and weood have a distinguished panel. essentially, we will try to talk about ideas to promote economic growth, the application of free market principles to promote economic growth. there are a lot of angles to it,

subheadings as well. i would say from my own standpoint, domestically, the greatest challenge to america in the next decade is to restore economic growth and to get us back to the post-world war ii trendline which is about 3.5% per year. we have fallen way behind that trendline. in the last two cycles. as much as $4 trillion behind that, maybe two trillion dollars at the low end. to do that, we need to create jobs. mobility, social families, and it stretches over a number of things, taxes, energy, all deregulation including obamacare, spending limits, the dollar and monetary policy plays an important role and trade plays a very important role. i notice senator elizabeth warren who is one of the

cochairman of the sandinista wing of the democratic party [laughter] has come out today in the newspaper against the trade promotion bill, both the european bill and the pacific bill. ofch is a perfect example congress sending the wrong message and failing to understand what causes growth and what continues growth. that is essentially what we are trying to do. ms. ceft immediately is arly farina, an old friend. i think the greatest part of carly's backdrop as she started as secretary and rose to become the chief executive officer of hewlett-packard. that is most remarkable, the most american thing imaginable. we are fortunate to have her here. we are fortunate to have her pitching in for the principles we believe in. she is also the chairman of opportunity international and

good 360 and chairs the american conservative union. she is the chairman of unlocking potential which is a group that engages women in the political process at the grassroots. i know my bride saw carly speak in new york the other day and was ready to sign up. we will hear from carly in just a moment. is the dewitt wallace fellow at the american enterprise institute. he is a distinguished columnist and contributor to cnbc. arthur laf isf the head of laffer associates. comingve known him for up to 40 years. he fathered supply-side economics and i believe he is one of the most important economic voices in the 20th century. [applause]

finally, as you know, steve moore, another head economist at heritage and an old and dear friend of mine who has held many positions. i won't say most notably but importantly as a member of the editorial board of the "wall street journal" for many years pumping out exactly the kind of onff that we need pumped out the benefits of free market economics. i can only assume that a large percentage of congress does not -- does not have reading skills because of their bad education background and the failure of the merc and system has contributed to their failure to read "the wall street journal" editorials which steve moore road and we would be better if they had. without further i do, i will be the moderator. i will let each of the panelists speak for about five minutes or so and then we will go back and forth. i will ask questions and we will have cross talk, a very low-key

to and relaxed atmosphere and we are friends even where we disagree. let me start with carly. growth, i willf shape this a little bit, on the matter of promoting economic areth, what would you say the three most important ideas in your mind if you are given a magic wand to run the country? >> thank you, larry. it's a pleasure to be with everyone this morning here at heritage. with my distant which panelists as well. athink we have to start with recognition of what the most important resource we have really is. important resource we have, the only limitless resource we have is human potential. this country became the greatest economy on the face of the planet and in all of human history because we created an

economic system that unlocked more human potential. i started out as a secretary. one of the most important things that happened in my young life was when two men in that little nine person business came up to me and said we think you have the potential to do more than type and file. do you want to know what we do? someone took a chance on me. in truth, everyone needs someone to take a chance on them. i happen to chair something called opportunity international, the largest micro-finance organization the world. we lift people, mostly women come out of poverty come out of destitute circumstances. we does so by giving them a starter loan of $150 per it we have lent $6 billion that way. demonstratesce that everyone has potential regardless of their circumstances, that everyone wants to live a life of dignity and purpose and meaning regardless of their circumstances.

this became the greatest country on the face of the earth because our founders knew that. life, liberty, and the pursuit of happiness, what they meant was, everyone should have the opportunity to use their odd given gifts and fulfill their potential. we created a system or more things were more possible for more people. we did that and very large measure because small businesses thrived and entrepreneurship was valued. i started and a little nine person company and most people do. small businesses, not big ofinesses, give 2/3 america's their first job and employ half the people in little businesses innovate at seven times the rate of big businesses. we have to understand that if we want to grow our economy, we have to start focusing on the most important resource we have, itan potential and on lock but we have to understand that a way to do that is to revitalize

mainstreet entrepreneurship. we have to recognize that today, for the first time in u.s. history, we are now destroying more businesses than we are creating. up, big businesses are doing great and the stock market is doing great but small businesses are struggling as they cannot ofdle the crushing load complexity, bureaucratic inertia, and regulatory thicket the government puts on them and it's been going on for 40 years. today in this country, we are wasting potential. one in six people live in poverty and that burden rests most heavily on women and children. income inequality is at its highest level in decades and, by the way, it is highest in places like california where liberal economic policies have been in place for 30 years. our innovation rate is slowing. on economicocus

growth, we must focused first on how we ensure that every single american has a chance to fulfill their potential. that means that every single american has to be given a helping hand, not a way of life called dependence and entitlement. our systems today trap people in a lifetime of dependence. you get a job and you lose something come you get married, you lose something. and unlockrecognize that potential and give people education tools and training and make sure we have jobs for everyone because everyone wants to live a life of dignity and purpose and meaning and we have to revitalize mainstreet. we have to retrain america, i believe, and we must fundamentally, fundamentally reform and simplify government. it is literally crushing the life out of this economy and out of people who are trying to fulfill their potential in this

economy. the final thing i would say before a pass it on -- demint that senator spoke eloquently about what unites americans. aboutke eloquently opportunity for all and favoritism for none. i think one of the things that unites americans is americans believe we are now losing something important. i think what they think we are losing is a sense of limitless possibility. if you look at the polls, you see americans think they do not have limitless possibilities in their lives anymore. their children don't. we used to be a nation where people thought i can do what i want and our nation, if it can be done, our nation will do it. we are losing battle. it is tragic and it has economic consequences and consequences in people's lives. i think what americans think we

are missing his leadership. the leadership that recognizes that everyone has potential and everyone does deserve a chance. we save lives when we provide jobs and training. every wound we have in this nation is self-inflicted. we can solve every problem but we have to recognize the most important resource we have and that is human potential. it is limitless. thanks so much. [applause] >> thanks so much. i want to go out of order for one second. my pal jimmy, following on those remarks, you have written some good stuff on the decline of america's start up rate. ishink that quantitatively the most productive form of job creation, actual startups. why is that? what's going on there question mark >> thanks to the heritage

foundation for inviting me. i appreciate it. , when highthat school students 100 years from now, when they learn about they will i think hear about john maynard keynes and art laffer. is a world historical figure that came on the scene when the united states was on the verge of going into permanent decline. that was a historical moment. i have written a lot about what's going on with startups. -- theyhink it is not wonder if it is that important issue quick pairs . i use google and facebook and twitter and start up cert doing great. -- on startups are doing great. it looks good except when you

look at the numbers where we have seen a steady erosion in the number of new businesses started up over the last 30 years. that in itself may or may not be a bad thing. we have a lot of big box retail stores which have pushed out a lot of mom-and-pop stores which is not so good for the mom-and-pop stores but good for consumers. people working in the big retailers get paid higher wages. and people get less expensive goods, that is great. that may explain part of it. seeing a decline not just an startups over all but also in the high-tech startups fastest-growing, experts might call gazelles, fast-growing firms. that is worrisome because they create a lot of jobs but they create a lot of innovation and the new products and goods and services and a lot of good middle-class jobs.

we have had job polarization over the past 20 years with a lot of jobs at both ends but not in the middle. theddition to supplying innovation, startups serve another important function. they provide competitive intensity with big companies. big companies have a choice -- as a startup, you can try to innovate or you can go out of business. there is a third thing you can you can hire a lobbyist and go to washington, d.c. and try to get a tax break or a regulation to give you some sort of advantage with that startup. i am supposedly writing a book on this. that decline in startups and isrepreneurial extraordinarily important. that is her big advantage. the united states -- we don't want to become like scandinavia, a social democracy. guess what? we are a social democracy with a

welfare state and we hide it with tax subsidies but we have a huge welfare state in the country and are only edge over those countries is our entrepreneurial sector and being innovative. those countries cannot do what they do it not for our innovations which they are able to use in an open economy. looking at the dynamism in the u.s. economy and the decline in dynamism is something -- it's a lens through which i hope congress looks at their possibilities. >> before we get to the growth is there a single overriding wet blanket that is preventing these startups? >> there is a lot of research going on. that we are an older country and we happen to be less dynamic. that may play a role. i think the tax structure and regulation --

we do a ton of work on taxes at the heritage foundation. we have to remember regulation. i cannot say that one particular regulation is killing american dynamism. anytime congress passes a , we should ask if it makes it harder to start a business but also grow that business and does it give an edge to an income company? >> let me go to art laffer. 70%, 70% of small business owners described the federal government as hostile to them. is there one single regulation? no, but have we ever repeal the regulation of 40 years? not that i'm aware of. add that up and that's a heavy burden.

carly, jimmy and mentioned tax reform is one of the issues. i hear a lot of talk about it that i don't see specifics about it. the growth in the 1980's and 1990's had to do it broad-based tax reform, lower rates, broader base. what are you thinking? which direction should we go in what should we be doing? 70%,would like to say that the other 30% are selling to the federal government. [laughter] sorry, i had to add that. that percentage is going up from a smaller base. lots and lots of years of experience in this country. we have 175 other countries for which we have a norm us reservoir of data.

we have 50 states that have been performing experiments over the last 75 years. we've got huge amounts of experiential base on which to look at success and failure in economies. at it, the conclusion comes out that to have success, what you need is a five-point program. number one, a low rate, broad-based tax system where you replace all existing taxes and put them into eight low rate broad-based. i will come back to that i second. you need spending restraints as milton friedman taught us. spending is taxation. the tooth fairy longer works at the u.s. treasury. every dollar they spend, they take from someone else so it is a tax expenditure. low rate, broad-based, flat tax, spending restraint, sound money. there is nothing that can bring an economy to its knees quicker

than an unsound monetary system. mommy came into office on january 20, 1981, the prime interest rate was 21.5%. we had double-digit inflation some those were killers. low rate, broad-based, flat tax, sound money, free trade. there are some things we do better than foreigners. there are some things foreigners do better than we do. we and they would be foolish in the extreme if we did not seldom those products we make better than they do in extent for those products they make better than we do. it's a win-win situation. free trade is essential to economic growth. lastly, minimal regulations -- what you want to make sure you don't do is go beyond the specific purpose and create a system of regulations that has a massive collateral damage for it no one would suggest you should

be able to wake up in the morning and decide which side of the road you will drive on today. you need regulations but they have to be very focused and directed. the low rate, broad-based, flat tax, i want to mix some politics into this -- those are the five things, then the government should get the hell out of the way and let the private sector solve the problems. you should not be picking winners or losers. that is not the government's role. when you look at low rate, did thesed, flat tax, i jerry brown tax when he ran for president in 1992 against bill clinton -- he replaced all federal taxes except for syntax. there were two flat rate taxes, 12.8% tax on personal unadjusted gross income and eight 12.8% flat tax on business net sales

or you may want to call it value added. a flat rate tax across the board on the first dollar to the last dollar. if you did that come he would match all revenues. it would be static revenue neutrality. you would have full employment with a 12 8% flat tax -- can you imagine what would happen at the u.s. if it that is what we had? you would not have to pay taxes, you can get rid of the irs. if you moan your neighbor's lawn for $10, yes, you have to send them 12.8% of that. but it would be amazing. in closest we came was 1980's. i told you about jerry brown. he came in second in the race and we would have taken clinton avenue in the primary. this is a democratic primary, not republican.

we would've taken clinton out except three weeks before the new york primary, jerry brown announced he was going to have jesse jackson as his running mate. our political aspirations evaporated thereafter. jerry brown have the second-most number of delegates in the democratic primary in 1992 on the flat tax. the democrats like it. idea, we cut the highest marginal income tax rate from 50% down to 28%. 50 -- 28%. in case we missed a couple of people, we cut the corporate rate from 46% to 34%. we raised the lowest rate from 12.5% to 15%. we got rid of a lot of deductions and exemptions and exclusions so it was statically revenue neutral. rate,er the highest lowered the highest corporate rate, and we replaced 14 tax

brackets with two tax brackets, 15% and 28%. that's it. the vote in the u.s. senate -- this bill passed. can you imagine that vote today? that bill passed on the boat was 97-3. three democrats voted against it. we got people like alan cranston and metzenbaum and teddy kennedy and bill bradley and dick durbin and harry reid and joe biden. why did they vote for it? they know it's right. if you go back and read their press releases, they said this was the progrowth agenda. that's what we need to do and it can be done. my motto in all of this stuff is don't just stand there, undo something. [laughter] get rid of the damage, the

overhang and that should be our prime agenda on doing stuff and letting this wonderful country that carly talks about solve its own problems. >> why can we get that done now? >> we can and we will. we are right in the middle of 1978. we just won the election massively. to createmmy carter ronald reagan and he honestly did. in the same breath that took jimmy carter to create ronald reagan, you cannot imagine the great president who will follow barack obama. moore, let's talk more about taxes, go right ahead. there are other issues -- it looks to me, judging from the that president obama will come out against the keystone xl pipeline. governor andrew cuomo of new york state and my read this

morning, has now come out against fracking in new york state. recommendations of robert f kennedy junior and yoko ono who have been his energy advisors. [laughter] >> ono enomics. >> people with long-held experience in the energy field. what is going to happen when obama finds a way to knock out the keystone pipeline and what can the republicans do about it? >> energy is the biggest story of the american economy. i want to back up for a minute and get to your point about -- how did we get back on that 4% growth path? we had that throughout most of the 1980's and 1990's. contributions of barack obama is that he has set

up an interesting experiment. government activism as a stimulus and the reagan model of unleashing the supply side of the economy in private business is an important point that we have to hammer home because this -- it has to be learned will neville be learned by academics but the american people are starting to understand where it let me give you an amazing statistic. ronald reagan came in with aperiod of economic crisis. barack obama came into office during great economic crisis, no question. you knowng thing is they used diametrically opposite approaches to dealing with the crisis. as you just said, reagan cut tax rates and deregulated and got government spending under

control and let the private businesses rebuild our economy. an 870 billion dollar stimulus plan with this so-called multiplier effect and we had obamacare and tax increases on the rich. barack obama has party much thrown the entire kenyan playbook-- keynesian at the situation. if you compare the records of these two presidents, this dress people on the left crazy, they hate this comparison but is very apt -- in the five and a half years of the start of the reagan recovery versus the first 5.5 years of the obama recovery, the was economy grew at just over 4% in the first 5.5 years under reagan and it grew just about 2% under obama. that may not seem like a big difference. it is enormous because of the compounding effect of this. the growth deficit and this has

of progrowth republicans as we are now facing an economic growth deficit. that deficit is now $2 trillion. what that number means is that as economy, if it had grown fast and obama's first 5.5 years of recovery as it did under ronald reagan, we would have $2 trillion more gdp. off thehow much better american people would be today if we had $2 trillion more output? if you took that amount and prorated it to every family america, that's $15,000 more income. this came through loud and clear during the midterm elections, the american people are angry. i would say they are filled with anxiety as well. that they are not seeing the kind of middle-class increases not just an jobs but incomes.

here is another statistic -- the average family in america, the median family, since this recovery began, not since the recession, has lost $1600 in income. that is devastating. when barack obama says how wonderful things are, americans don't believe it. energy, if we were sitting here seven years ago and i told you all that america will go through the biggest economic boom in the history list country and we will -- and by the end of the decade we will be energy independent and see oil prices $52, you would've thought i was crazy. as recently as a few years ago, barack obama was running around the country saying america's running out of oil and gas. america is not running out of oil and gas, we are running into it. in a big way.

the growth dividend of this is so enormous. so angry at some of your friends on wall street paddling the story that somehow falling oil prices are bad for the world economy, it's craziness. this is the story that pumps hundreds of billions of dollars of real stimulus into the economy. when commodity prices fall and energy is cheaper, it is good for our manufacturers -- >> wait a minute -- i argue this four days per week. i am told by some of the best portfolio managers and particularly hedge fund managers they missed the stock market rally and got a lot of shorts. the shorts were covered yesterday as the dow went up 300 points. that's another subject. they tell me it's bad. they say it's bad because you cannot make any money at $62 per

barrel. even at the well head, we are producing fracking oil at $30 per barrel plus transportation. they cannot make any money, they are overleveraged, the jump on's collapse on the whole banking system will collapse and this is really 2008. one great use me of not understanding that. these are the people who want oil to go back up to $200 per barrel? >> they are convinced we are now going to have a systemic junk-bond global default. that's how horrible low-energy is. that's great news. you can be on tv more. >> they have been out there.

themey drive cars, i asked and many of the hedge funds do but not all. many of the hedge funds drive cars. i said when you go to the gas see a lot ofou motorists weeping at the new gas prices? come on, larry, you are being silly. >> to argue that oil and gas prices -- low oil and gas prices is bad for the economy is like saying rising life expectancy is a bad thing because it helps -- it hurts people who run funeral parlors. -- some of them are going to struggle and go out of business but every other industry. what is going on in this country is there is a manufacturing

renaissance. we have the lowest energy prices in the world. the shale oil and gas revolution is transforming this country. it is not going away. this is the tip of an iceberg. this gets your point about human ingenuity and innovation. of --hole story has all is all about innovation. >> all about innovators who bucked the system. >> that is such a great point. it was notxxon, mobile. these were small wildcat or's -- >> who were tough as nails and said, we can figure out how to do this. by the way, they did it in texas. point, this ise a huge story. the democrats are on the wrong side of this. here we are in the biggest oil

and gas revolution in the world and the republicans have to drive this message. they have to talk about pipelines, something to talk about, which is overturning the ban on the export of american oil and gas. the radical take on greens in this country better anti-growth, anti-development, and anti-progress. if you do those things, this can drive real expansion. guy who is weeping over the decline in oil prices, who is probably close to a nervous breakdown is vladimir putin. here so scholars correct me if i am wrong, but if vladimir putin goes down, would that not be a good thing for america? i'm very naive about these things. gets $5 million a day

from petrol dollars. we can defund our enemies. >> and iran. i know the saudi's act in self interest. nigeria and other places -- i think the saudi's gave us one on this. i think they do not like putin or iran. that was part of their decision not to meddle with the market. >> i agree with you. understand saudi's that oil and oil prices are a strategic weapon. , i want too ask you come back to regulation and tax. hydraulic fracturing and horizontal drilling our technology breakthroughs. are technology

breakthroughs. aren't these principles going to be applied to other areas of the economy? >> of course. distressingit is so that we are making innovation and entrepreneurship more difficult. it transforms every industry. i mentioned that's small businesses -- small businesses innovated at several times the rate of bigger businesses. i was proud. at hewlett-packard we were generating 11 patents the day. a rapid rate of innovation. imagine the small as mrs. -- the small businesses. it is not by accident. innovation requires risk-taking. risk-taking requires flexibility , creativity. those things are more difficult in big bureaucracies.

they are impossible in big government bureaucracies. they are more difficult in big companies with a lot of rules and procedures. to have the flexibility entrepreneurial ship -- entropy nor ship -- entrepreneurship. when we think about giving , providingchance jobs in opportunity for everyone , economic leadership in the 21st century, we have to be the innovation leader. we have to can in -- we have to continue to be the entrepreneurial leader. we have to lead in industries that defined the century. energy is one. while tech is another. -- i/o tech is another. we need to be landing things on meteorites. all of those industries -- and of course information technology.

those are going to define the century. we have to lead in those. we are beginning to lead in to the obamaanks administration. we continue to lead in information technology. we need to lead in space technology, health tech as well. innovation will transform them all. we are making it more difficult. pipeline, ione xl think president obama and the continued of structure and is him -- obstructionism is example of their hypocrisy. worried aboutly greenhouse gas emissions, what we are doing today that is transporting by rail, that is worse for the environment than

the keystone xl pipeline. never mind, they say. this is the triumph of our ideology over economic growth. of liberal saying we are prepared to sacrifice your livelihood at the altar of our ideology. let's not forget, these poor communities in kentucky and west virginia or drug abuse is at 40%. the community has been destroyed because liberal ideologues have said we do not like how you make a living. innovation can make -- is making call mining safer and cleaner -- coal mining safer and cleaner. the matter how many livelihoods we destroy, the chinese are going to continue to burn coal. hamm told me that if

they went in there and bought of make dirt would farmers a lot of money in fracking. they also gave a lot of jobs to field hands and roustabout's and people who operate these fields. my question to you is, if fracking creates $80,000 year , pretty good money. prior to that, they were unemployed. millionaires, which is greeting more income equality -- inequality. .he rising tide lifts all boats but i am a dinosaur. that was john f. kennedy talk. we are all happier because we

are all working. and left-wing think tanks are telling me that inequality is growing, that is bad. tom and spaghetti wants to tax everyone 80%. what is the answer? i think there is two kinds of inequality. there is a kind we should be -- and a about and us kind we should be less concerned about. if someone is a billionaire and became a billionaire because they thought of a great idea. , thatproduct or service is fantastic. we want those leaner entrepreneurs. -- we want those billionaire entrepreneurs. thoses., we have more of

than any other big economy in the world. at the other end of the spectrum , france. they do not get a lot of billionaire entrepreneurs. switzerland has a lot, so does hong kong. we want policies that can create more billionaire entrepreneurs, not because i care so much that they have a billion dollars, but all the other good affects -- all the other spillover effects. that inequality is because you work in an industry that is protected by government in some way so it can get very big. or somehow you are able to negotiate a great pay package that has no link to your actual performance. that kind of inequality, i am more worried about.

innovation, i know it is a theme. others talk about crony capitalism. reasons for inequality is there is a lot more cronyism in the economy. banks are actually bigger than they were before the financial crisis. if something happens to one of these big banks, despite what is on the books, we will bail these banks out again. that is the history of banking. government always blinks when a big bank is about to go under. inequality kind of and cronyism i am worried about. 12.8% flat tax, i'm going to stay with inequality but i'm going to move it back to the framework of reforms. everybody tax for

would be a substantial cut for the rich. that is the argument. there are people on the left who oppose that. there are even's conservatives -- there are even conservatives. what is your feeling about that? the argument of redistributing .ncome how does that tie into the flat tax? >> let me say that we have tons of data. the irs is competent in finding out where everyone who has any money exists. the first publication in the in which language -- in great .ritain was the doomsday books the clutch in of taxes in great britain for kings so we could find out where everyone had what. we have records on income tax returns starting with the income tax in 1913.

tax to went from a zero a 7% tax on the rich, revenues went up from those people who were rich. i will concede that. just joking. 1919, thecords by highest marginal income tax rate had risen to 77%. -- race in 1920 was between we cut the rate from 77% to 25%. the share of income taxes paid by the top 1% went to the roof during the 1920's. we had a beautiful economy. in the great depression, we went from a 25% tax rate to a 92% tax rate. revenues from the top 1% declined during this period. then, you have the period of

kennedy cutting the highest tax 70%.from 91% to he put in the in desmet tax credit. -- investment tax credit. siding crazylies guy. we had the four stooges, johnson, nick, ford, and carter. bipartisanblance of -- they raise taxes. we had a depression slowdown terrible 16 years. , the skiesthe period open and ronald reagan was elected. everything.ates on

if you look at revenues from the one to -- the top 1%, they went tom 1.5 percent of the gdp 3.7% of gdp. the top 1% paid that with massive reductions. the boom of all booms occurred. that is what i want to see. say, it is not republican or democrat. it is not left-wing or right-wing. it is economics. this stuff is independent of your ideology. economics is about incentives. if you tax people who work and you pay people who do not work, to i need to say the next sentence? people nott a lot of

working. if you tax rich people and give the money to poor people, you will get a lot of poor people and no rich people. if you have two locations and raise taxes in one and lower them in another, reducers and manufacturers will move from one to another. raising tax rates on the wrist cost everyone. lowering tax rates on the rich provide more revenues. we need a flat tax to bring the the mostto providing revenues we need in the least damaging fashion to the economy. hopefully we can spend those moneys in the best way possible to create growth and prosperity rather than paying people not to work and produce. >> you have a different view jim. you want the republicans to avoid tax cuts on the top and rich and you want to focus on

the middle class directly. other conservative reformers do. how do you respond? --zer program more efficient why is your program more efficient? we have gone from a 70% top tax rate. . even now after the obama tax hike, it is at 40%. i am all for dropping the top tax rate. when you look at where taxes were then, where they are now, 45% of fact that americans do not pay personal income taxes and the fact that we are not at 70% anymore and

the growth gains that we get by -- some republicans want to put it backward was in the 1920's. the factors you have to take into account our, most americans are not going to get a tax cut. most americans are not going to get a tax cut. this is going to be a revenue loser. i would not care so much if we were at gdp at 25% as opposed to 75%. you're going to lose revenue. give a goodgoing to chunk of the american people a tax cut. if i was going to come out of the box with a growth plan. the number one thing i come out with would be cutting taxes for wealthy americans who have been doing well. a poll i dug up what you guys were talking. it came out over the summer.

if they prefers economic growth or increasing income equality. people prefer candidates who want economic growth versus less income inequality which i think is a great statistic. 62% to 33% prefer candidates focus on economic growth to provide more opportunities. versus a candidate who wants economic justice. very encouraging. , youasked the same people want economic growth, opportunity, what policy do you think will get you opportunity? the number one policy, produce regulation on business. as we have been talking about. next, increase the minimum wage. that is 58%. guarantee all workers a living wage, 57%. cut taxes of high-end job

creators. i am more interested in the policy and the politics and the messaging. i think given the fact that middle income taxpayers have not had a raise in years. tax codehe corporate is in worse shape than the personal income tax code. i would like to see anyone who wants to bring up the idea come out of the box with a set of policies to address the everyday concerns of middle-class voters. pay,cludes a take-home whether they can send their kids to college without saddling them with enormous debt. ideank -- having your lead be cutting the top personal tax i'm not sure that would be number one on my list. >> i want everyone to react.

$2500so propose a increase in the ch credit. tax cutthe middle class that you think will work? i want to put the politics aside for second. in economic terms -- >> i think it is indisputable that if you let people -- this is a tax credit which we applied against income and payroll taxes. >> is it refundable? >> it is not refundable. you have to make some money. it is indisputable that if you allow people to keep more money, they will have more money. if you let people keep more money, they will have more money. i think that is a good thing. they can spend on childcare or

getting their kid tutoring if one of them has trouble in math or for a college education. it is part of a broader portfolio of a pro-middle-class agenda when combined with the sorts of deregulation i think business tax reform. i think that powerful. it is appealing for politics to middle-class america who is saying republicans have nothing to offer them. care, showedid not no empathy for them. i think, as a propulsion presidential nominee, -- as a potential presidential nominee -- hoping that they will work more and invest more, i think that is a political loser. it is not a top priority on

economic grounds. be the targoing to out of bill clinton by having -- by lowering rates on the highest and raising on the lowest. stand it is fair. when you get into -- you do not have a standard. that is a good standard. it gets rid of all of the bureaucracy. >> why didn't people flock to the robbie tax cut plan? -- the romney tax cut plan? >> romney wanted to do tax cuts for able other than wealthy people. separate positions. it wanted to increase the productivity of the tax code. i did vote for romney but that is not because i thought he was any good. i've quoted for him because i thought obama was worse.

-- i voted for him because i thought obama was worse. bill clinton was one of the best we have ever had. i voted for him twice. >> do you think cutting the current tax rate from where it is currently to calvin coolidge levels -- >> i would cut it to ronald reagan levels. i want to have a flat tax -- >> you think were on the wrong side? >> clearly we are. warren buffett pays 61 hundredths of his income -- six 100th of a percent of his income in taxes. he does not pay taxes. you go to the top 500 people, they all get their income in unrealized capital gains. do is get rid of all of that stuff and have a low rate so it does not matter. we all make choices aced upon what we think is right.

-- based upon what we think is right. if you spend 40% of your money in taxes, you'll spend 40% of your time trying to avoid a. -- trying to avoid them. get it down so people lose interest in their taxes. let them try to make money and grow this economy. voter,ou think telling a i'm going to cut the top tax and by the way, i'm not cutting taxes for you in a some people on the right would do for that 45% who are not paying taxes, you have to contribute. strategy.wonderful >> i think there -- we can argue about the rates. at least half the problem with complexitye is, it's

allows people to game the system . the tax code is used by big companies. the tax code is used to further certain people's interest. .e have to reform the tax code not just in terms of its rates, but in terms of its complexity. i also think we get it wrong when we say that as a requirement for tax reform, my view of tax reform is fundamental, simple dictation of the tax code -- simplification of the tax code. i think we missed something when we say, whatever we put forward should be revenue neutral. le say, this government

takes in too much money. the only way to begin fundamental reform of government , fundamental supplication of government, -- simple dictation of government instead of out-of-control growth, regardless of who is in charge, is to start sending less money to washington. -- i started my career in washington dc working for at&t after i went off and got an mba and i sold to the federal government. anyone who is done business with the government knows in the last six weeks of every this go year, every government agency spends every dime they are entitled to, whether they need to or not. they do so because they want to make sure that the

appropriations process is focused on the rate of increase for the following year. need -- you actually not whether you actually need to spend it. let's start with the principal that we must fundamentally simple if i. -- simplify. let's have a debate over whether it needs to be revenue neutral at all or whether we should start a process of having government spend less. >> we are done polling on the subject. i think you're onto something. .hen we do these polls when you ask people about tax reform, the word that comes shining through his fairness. -- is fairness. we have to decide for people what fairness means.

>> sorry to interrupt you. what most people know in their bones is, if it is so complicated that i cannot understand it, it is not fair. most people know that. if i can understand it, i can figure out whether it is fair or not. somebody elsehink is getting something. >> and they are right. >> these rich people are getting off with not paying a lot. the conclusion that if you are going to do a ,ig change in the tax system you have to do the big bang. system, to blow up the start over. what is interesting about the last presidential election, the thing people remember. the one thing people remember , 999.that field

people want something that is understandable. they think everyone is going to pay their hair share. share.their fair we got an e-mail come in about the fair tax. the income tax credit which i favor, along with the child tax credit, our two of the highest fraud tax parts of the irs system. this surprised me. the child tax credit has definitional problems. people are not sure the definition of children when it comes to things like adoption or abandonment for example. into the breakup of

families. steve, i know in your past you have flirted with the fair tax -- the sales tax. i think you have overcome that but i want to get specificity because we got an e-mail. dave camp is introduced -- he thinks it is a band-aid for tax reform. this person wants us to push the fair tax reform which would be a 130 page bill that has been buried under the table. the irs needs to be abolished and the fair tax, which is this. i always thought the fair tax was the flipside of the near tax or flat tax. i do notlish the irs, think so. so many competitions. you're going to have give ups and carveouts.

are you still on the fair tax thing? >> i like the idea of a national consumption tax. every timewould mean you go you do not have to fill out a 1040 form. you just pay your tax at the cash register. whether that is achievable right now, will he not. i like the idea of a flat tax system. at some point, that might be the stepping stone of moving to a consumption tax. arthur and i have done research on the states. we have an experiment here. on the sales, consumption. states like new york and new jersey. my home state of illinois. they have high income tax rates. we find conclusively that states that tax consumption and do not have high taxes -- when we talk

about the top one or two or 3% -- 1%, or 2%, or 3%, they are the employers in this country. the people who create the jobs. that is an important thing. to sayboss used to say liberals love employers but they hate jobs. -- they love jobs but they hate employers. you cannot have one without the other. i do the problem you have identified as a pretax income problem, not a post income tax problem. problem islass' that there salaries are not rising. >> the tax plans i've heard -- it does not cut their taxes, when you are telling them is that by instituting a tax plan -- which will require blurring up -- blowing up the current system.

i'm going to put in a new plan. in new plan put that will, we hope, increase economic growth so that down the line, you will get a better job and have more income. the economics of that, i think a better code will do that. a consumption tax. will create more economic growth. i think that is true. matter, i think it would be difficult to do that. there is a spectrum of issues. we have talked about taxes. while republicans are talking about tax plans -- i do a lot of blogging. every commentor on my blog has a tax plan. every conservative in america has a tax plan. talking --re >> is all we know.

[laughter] democrats have been working on health care plans, college --ns, regulate the internet regulating the internet. i think it is sucking the intellectual oxygen from the right. we are not focusing on these other things because we are very focused on taxes. is probablyreform more -- business tax reform is probably more pressing. >> i want to stand up for that point. ai showscoming out of the beneficiaries of business tax cuts is the middle class, the workers. as an should be sold income booster for the middle class. it is also go to enhance

incentives for businesses. as long as you stick the pass-throughs in their, you have yourself a hell of a middle-class tax cut. they want to put task cuts in their. -- tax cuts in there. >> what you actually end up with in the piece of legislation is how you go in. i do not think we should negotiate with ourselves beforehand and compromise the plan. you go in what you think is the right plan. of course you are willing to compromise to get a good plan. best beld never let the the enemy of the good. i think the fair tax is a great plan. every day offor it the week and twice on sunday. what i do not want us to do is pre-negotiate with ourselves and

put in all the things and then get in there and find we have nothing. >> you have to hit a certain level of plausibility. i think coming up with a tax the taxyou can question policy center. for any republican to come out with a tax plan -- any of these private models is going to say this thing is going to lose $400 billion a year. i think with most voters, that is not going to pass -- >> with jerry brown, we had a huge revenue increase which was plastered all over the world. that's why jerry brown did very well in the democratic -- , i live in newte york and connecticut. on the way to work, i passed through new jersey. each of those states has a high income tax. each of those states has a high sales tax.

each of those states has a high corporate tax. each of those states is declining and shrinking. that is the problem i had with 999. 999, i heard connecticut, new york, and new jersey. heard 999, i heard connecticut, new york, and new jersey. i do not want to commit the scene that my friend jimmy p is worried about. i think there are other issues to focus on. this?r we going on we will give it a little more. i want to raise a point to carly. the issue that i fret about a lot is the issue of marriage versus family breakups. creating at we are permanent underclass. i worry that the bottom quintile

has lost its social mobility. on these points, i am reading what the left liberals have to say because they are looking at the same data. -- is it bradk wilcox from ai? this guy is doing great work. mary families make -- married families make a lot more income and wealth than unmarried as point number one. point number two, the issue of family breakup seems to be the , ando poverty, inequality .o the closed door the upward path of america. they should throw education in their too ar.

part of it is culture, part of it is economics. it has to be addressed. anyone running for president has to address this. say, on this debate of tax reform, or any of our think, about policies, i sometimes, conservatives start with the policy and try and related to someone's life -- try and relate it to someone's life. i think we need to start with people's lives. principlesout our and policies in relation to their lives. politics matters because it impacts people's lives in real ways. policies matter because the impact people's lives. sometimes, we get very abstract

and we talk about big models and numbers. what people are thinking about is the micro economic reality of their life. they need to understand, how is what you're proposing going to make my life better? which leads me to your point. i think the data is becoming unmistakable. data matters to me. results matter. it does not always matter to politicians by the way. clear,a is crystal already said, about the impact of certain policies on economic growth. in the united states, we have evidence that supports the data. 30 out of 50 states run basically under republican policies and economic growth is better. we're starting to see if rent

show the between a state like -- we are starting to see differential between a state we come to the question of poverty. i think the data is clear. educationhigh school is a determinant to someone's future earning power. if someone does not have an opportunity to get a decent high school education because they have no choices to get a good education or they have no chance to have a real teacher in front of the classroom that cares about them, they are going to be stuck in a life where they cannot fulfill their potential. the data is clear. i think conservatives on that point need to be crystal clear. liberals and demirel --

democrats are on the wrong side of this issue. look at what happened when tilde blah zero said in his -- bill de blasio said that he wants to limit the choices of schools in new york city. who is it who walked across the brooklyn bridge in protest of those policies? it was low income families who thought, you're going to take away the only chance my child has. we know education matters. matters, weiage know that you have a stable family unit, everyone in the family does better. we know that we have almost 40% of children being raised in single-family households. we also know -- i think we need to be careful with this. we know that too many women live in a situation of violence and

abuse. , who hard to tell a woman has perhaps the skate domestic violence, the answer is for you to get married. the point is, we have to be focused on what are the things that make someone's life better? we know what they are. and education. education. stable family environment. we look at entitlement programs. those programs -- and those programs make it more difficult to give a job. when our programs make it difficult to get married because of all the things you are going to give up and the liberals defend those programs, they are the ones destroying people's lives and livelihood. they are the ones people destroying -- they are the ones

destroying people's lives and livelihood. potentialeveryone's to live a life of dignity and purpose and meaning. it is why i am conservative. i know our policies work better to lift people up. we cannot talk about it in abstract. ok too?riage is >> absolutely. remarriage is where you marry the same person a second time. [laughter] >> you can come back. we have done a lot of work on this issue at heritage. i am sure all of us experienced this.

the country club republicans to not want to talk about social issues. that came things through is, these issues are economic issues. said marriage is one of the great economic stimulus plans out there. the job is the ultimate stimulus plan. but we have to do as conservatives is come about these issues in the way that carly talked about. this is somewhat about morality, but that is not the point. this is about behavior virtues that lead to a good life. it is not complicated. it is the old formula. if you want to get out of poverty, do not have kids out of , do not you get married do drugs, graduate from high school. if you do those things, you have a small chance of being in poverty.

we have to talk about social issues in economic terms because these are what lead to success in life. >> it would be a good idea. and isa is there compelling. think you are going to need leadership and have political people talk about our culture. it is not inconsequential. ,he other things you mentioned de blasio. choice int want schools. he does not think we need a police force in new york city. he routinely throws them under the bus and refuses to defend them. i think all these issues are related and they are social issues. i do not see what -- the

democratic party has been socially very conservative. democrats used to have white, working, males and particularly,les manufacturers. they've all left the democratic party because there is no discussion of values which i think matter a lot. they migrated to the republican party. the gop does not talk enough about this either. >> to your point about social andes or economic issues the democratic party does not talk about those issues anymore. let's talk about life. want to-life but if you talk about economics, you will find there are a lot of people in the african-american community who understand their community has been devastated by abortion. if you want to talk about the worry and some states about

demographics working against us because we have an aging population and you think about the number of lives that have been ended in this country through abortion, that is an economic issue. we are not going to all agree on all aspects of abortion in this country. even on that issue that people tend to shy away from, there is common ground. on this issue, it is the democratic party that has become extreme. i get asked all the time, how can you support the republican party platform on abortion? i say how can you support the democratic party platform? what it says at any abortion for any reason at any point in a woman's pregnancy, including now in new york, a non-doctor could perform an abortion up to nine months.

that is extreme. it is inhumane. it is also bad economic policy. >> pitino's, african-americans, asians. you are dead right. .e have a population decline our growth rate in the population is slowing down. >> it is slowing. older countries with the client populations tend to be less innovative. - with declining populations tend to be less innovative. you cannot have -- i think the marriage message, when at the same time you're saying i would like to cut the minimum wage and medicaid and not have something to supplant them with is going to be an ineffective message. >> i have not set any of that. >> not you personally.

republicans want to cut the itc. ea ofdo not have a good id what to do to replace it. >> conservatives must offer solutions. i believe we have a lot of solutions. my point is, we have to communicate those solutions in the context of people's lives. not in abstract terms but in the context of people's lives. >> i guess we're going to wrap up. one of my other beefs about the current environment is there is too much pessimism. a psychology of pessimism in this country that drives me crazy. i am a reagan guy and i learned -- them about the ballot value and truth of optimism. i've had my ups and downs.

i think if you believe in a higher power, you have to be an optimist. i think we need more of that in this country. my final thought is, we need positive agendas. progrowth, positive agendas. that is the gop. i am writing about the last democrat who did and that is john f. kennedy. my point is, optimism, lifting , irather than tearing down believe america is the greatest country in the world. there is no reason why a candidate for president in either party cannot say, here are the problems, but, here are the solutions. and we can do this and actually do it in a fairly short period of time. i learned that from reagan.

thank you for your time. average foundation, thank you for your sponsorship. [applause] -- heritage foundation, thank you for your sponsorship. [applause] >> if you missed any of this discussion, you can see it again later today on our website, www.c-span.org. energy secretary and the director of the international energy agency will talk about policy. it gets underway at 2:00 p.m. eastern.

at 5:30, bob cheever leads a discussion. so huntsman and evan us know who is written about china, will offer their views about u.s. engagement with chinese leadership. you can see that live on c-span. that starts a5:30 eastern. vladimir putin tried to portray his antagonist in the west as hypocritical while defending the actions of his government in ukraine. prudence said, to they want our bear to become a stuffed animal? the reality is usually more complex. in the usa,r 9/11 they legalized torture. this is from his comments at a news conference.

rover 1000 journalists in attendance. we'll be airing a portion of that -- there were over 1000 journalists in attendance. we'll be airing a portion of that. >> what is your problem is you say, ted kennedy. >> it goes back to the idea for where this book came from. the 2012 dnc convention where they were showing distribute visio -- video to him because he passed away and portraying him as a women's rights champion when he left a young woman to drown in his car. ineyou not gone back for n hours and try to save his own behind, she would have survived. you cannot do an entire video at a convention claiming to be fighting about the war on women and glorify someone like that

while not including that part of his life in a video about his women's rights record. >> sunday night at 8:00 eastern. we are airing one program from each year starting december 22 at 7:00 p.m. on c-span. >> the cancellation of the film "the interview" along with u.s. relations in cuba are likely topics for today's white house briefing. now, the president's advisor townsend.o and fran the two talked about the demands of the job as well as national security issues facing the country including isis, cyber threats and the sony pictures decision to cancel a film.

the atlantic hosted yesterday's of event. yesterday's event. >> hello everybody. lifepresident of atlantic and welcome to women of washington, where we spotlight eminent women of the city. among the people we met over the years, janet napolitano, judith ronan, these are great women of washington. we call this series by its acronym, "wow." susan carter is in the audience. susan, would you stand? [applause] thank you to you and your team for support. i think this series reaches into

the heart of a lot of women and men around washington. the women we are going to meet dedicated their lives to public service and dealt with some of the most daunting issues of our time, ebola, torture, cyber security. lisa monaco, the counterterrorism advisor to president obama and prints it -- and francis tauzin -- townsend who had the same role under george w. bush. they will sit down with my colleague, steve clemons. they will talk about national security, the white house trajectory -- the white house experience and the trajectory of their lives and work. silence your cell phones. please follow us on twitter at .tlantic underscore live .atlantic wow >> happy holidays.

i wore my red sox. [applause] i'm obsessed with national security issues. it is so cool to make our final program about this subject. usually when we have these events we try to work out a deal with the stars and say, can you give us a big report? i should not joke about terrorist incidents. the things you guys do are in the news. -- you saides you're been into guantanamo a few times but have not made it to havana. i guess the part of what i liked is you to have been in the same business. how did you two first meet?

>> it is great to be here. i want to thank the museum -- >> i hope you feel that when the interview is over. >> this will be the best part of my day. [laughter] in thes a young lawyer justice department working as counsel to janet reno. i would see this woman, very intense, clearly had everything together, who had walking rights to the attorney general. i learned it was because she was standing on the front lines, keeping us safe, dealing with national security issues. that was my first in princes -- first impression of fran. a job lisaing earlier had held. for wiretapsible

in the national security arena and would often have to go in. lisa was a bright lawyer and there was nothing she did not want to learn. if it was a particular narrow area and not a lot of people understood, you're going back to the time of the east africa bombings, not a lot understood what pfizer was. lisa had an appetite in intellect to absorb all that. in an areanterest early in her career. >> we are going to open this up in a bit. we want to get to the substance of how to think about counterterrorism. what you're thinking about isis and a variety of things. i want to start with something more monday. when you sit in your job and you have to task of advising the president of the united states on this sort of stuff, how do you approach that?

it is interesting because i think many of us are interested in shows like "house of cards" because everyone wants to know how it unfolds. there could probably be tv shows based on both of you down the road. what is the real world like in terms of this? intelligence bureaucracy so big that human beings in the middle of that not matter? >> human beings matter tremendously. the relationships that you are able to build in our job, the one i hold and the one ran previously held -- the one fran previously held, it is critical. to get all the views out on the table, understand rapidly what the situation is and might be and to be able to relay that to the president.

and hopefully be right and give the best advice you can with the information at the time. trust isionships of integrated -- is vital. there is much more that comes to you then goes to the president. part of your job is to filter, and not in a good way, human has some he hours in the day. you have to make judgment of what he must know so that he is prepared. what is most likely to require his attention. for me, the days start at 3:30 in the morning. workout, shower, get dressed. i was in the car by 5:30 to read daily briefs. hour, there was

interaction with the intelligence committee. i thought additional information .hould be added to it it is a process to get the right information to him in a timely way that is comprehensive. so he is not getting a single agency's view but rather an integrated view. it would not be in accurate to describe this time as a time of 9/11. after 9/11, the shot that hit the country changed the way we do security -- view security. we changed the way we think about intelligence. in my view, you see the growth of executive power over issues. we just had the release of interrogation report. often called the torture report. fran, you're not read in on many of those issues. but was not your purview, it does raise the question of whether or not we have had a

healthy balance between creating institutions around security --h appropriate back some stuff on drones. we have to make decisions differently. is not a lot of difference between president bush and obama in how they practice these techniques. what is healthy? >> frankly, there has been a tremendous around -- amount of back and forth between the intelligence committee -- community and congress. the extent that the richer has been painted -- the picture has do notinted, that they have sufficient access, that is unfair. it is hard for the intelligence community to make that case to you. i will tell you, on the most

sensitive of programs, including those i was not read into, there was a gang of eight. there was a good deal of information back and forth. there is an overwhelming amount of material and it is difficult to have the resources and devote the time. we have to do a better balance with that. we have to do a better balance in terms of transparency. how and when we speak to the american people about programs. there been an ungodly number of leaks of information. on the other hand, there are ways in which we can talk about programs and issues that we do not do enough of. >> i agree. we need to do more in the transparency realm. the president has spoken about that across the board. we took a number of steps to do that in the wake of the stone disclosure.

that opened up a debate we had not had. i think there are good and .roductive ways i think it is an important debate to have. you have seen it is all -- you have seen it evolve. it should involve congress more. there is a question about what is a legal floor. what can you do and what should you do? the president has spoken to whether it might not be wise to put constraints over that legal and tot a policy level discuss those with congress and make sure those are transparent. >> both of you think a lot about terrorism in the world and how to pull the plug on it. fran, you're the president of a new group called the counter extremism project. of the conceit of women in

washington is that many others would like to know what your track was. over those pillars that help you achieve success? in this particular field, we see isis, we were just talking about james foley. thinking about how you pull the plug on that. projectounter extremism is a nonpartisan -- joe lieberman and i announced it on the margins of the u.n. general assembly. before we did that, i called lisa and center everything about the organization because the organization was not meant to compete with government. it was meant to supplement what the government does in a way that government cannot attack the problem alone. ,he idea was two or threefold

to challenge bad guys like isis, al qaeda and their affiliates in this social media world. that is, to challenge to shut them down. we cherish our first amendment and are right to speak. there was no one who would believe that beheading videos and pictures ought to be permitted on social media. i think the social media companies would agree, they just do not have the resources to devote to it to take it down. we started this nonprofit with the idea we were going to hunt them on the internet. we were going to announce them ieslicly and to the compan and asked that they be taken down. i know we are being affected because the results of that, i've got death threats. you go, death threat wow, i'm doing a good job? [laughter] >> it is a badge of honor.

the other part was to track the money. looking at companies that sanction busted in a run. we have the technology and the know-how to use public source material to go out and find the people who were the traders, allowing isis to move their oil onto the black market and to out them. if we cannot out them and that does not change behavior, we can provide that information to governments around the world. there you surprised by sophistication of some of these people you are tracking down? i interviewed david: who is a lot of responsibility for targeting sections. one of the areas isis is blocking is antiquities. you have to know something about thesern these -- south of -- that requires educational the world. does that shock you? >> at the shock me.

the thing that is incredible is when you look at their propaganda, there was the inspire magazine that al qaeda had each was a folded thing. you could tuck it in your pocket and we would find it in caves and searches. now, they have the internet and we see hollywood style reductions -- productions. they have someone filming when they do a raid and they incorporate those clips, it is set to music. done and itsionally is hard for the u.s. government to compete with that sort of a narrative. to applaud what the counter extreme and -- i want to applaud what fran has done. it is something government cannot do effectively. to be honest, sometimes, the government is not the best messenger on countering the legitimacy of the brutal message

that isis is sending. we need muslim voices, voices the the arab community and countries that have joined the coalition. ,e need the private sector nonprofits, other voices countering, sending out messages and using social media platforms as effectively as the extremists. fran would probably agree with me, the evolution of the threat -- the framework has stayed largely the same. plottingcore, continue from the territories in pakistan. there been greatly diminished. lanningdistracted from -- >> can you tell us anything khorasan?se on -- , thatreading of things

sounded like an important passion -- action. this was slipped in under the rug of something we have been watching or thinking about. most of us who follow this had never heard of the group. what was going on? >> i think it is a good thing you have not heard of them because we were doing our job, trying to disrupt threats before they became public knowledge. khorasan group is the name for a group of al qaeda veterans who have transported themselves from afghanistan, pakistan and sought the safe haven of syria. they did not go there to fight aside. -- they did not go there to fight a side.

that it is basically an ungoverned space. these are veterans plotting against the west and the homeland. that is what -- >> are other pockets like that in the world that we have not heard yet that you are worried about? >> we are worried about al qaeda --aqap.es like a q ap they have been persistent and skillful when it comes to aviation plotting. that is something we have not taken our eye off that all for one minute. even as we are focused on actors group.il in the khorasan >> when we talk about foreign fighters, it sounds a people far

away. we are foreign fighters in the united states. australia, which we've been talking about the last few days, and were a lot of people looking at australia that was the first to line up in the coalition against isis. devoted fighters and personnel. about 60 people go abroad. they have about a hundred who have been actively financing or trying to finance isis australia. how do you deal with that? that is a different thing than out there. that is an inside problem, right? >> i think people have to look at this -- there are two prongs. one is the foreign site -- the foreign fighter who may return. the more immediate problem is what you saw in australia. that is a self radicalized individual. harder to catch.

there is a shorter loop for lisa and her colleagues. it is easier to interrupt the room -- the loop that involves foreign fighters. , 24the loan individual hours earlier australians had no idea -- >> the self radicalized person is just a criminal and not a terrorist. how do you feel about that? >> if you were inside that cafe, it does not matter. if you are lisa, it does not matter. you cannot talk about one without understanding there are two prongs to this threat. she has to do with both at the same time. the self radicalized one is closer to home at the moment. >> the thing that fran and i, throughout our time in the white house have had to deal with is the al qaeda core threat, the , but this other

category we have talked about wolves. those who are susceptible to the ,deology who will turn potentially, after a series of messages. we have always been concerned about those groups, if you will. this last one takes two forms. it is this one we of seen the most change in. it used to be that these individuals would self radicalized by doing something .n the internet or a magazine now, with the evolution and proliferation and prowess that a group like isil is making of the social media platform, that has altered the homegrown violent inremist threat that we face

ways that we are just beginning to understand. groups like the one fran is heading is a vital part of our ability to combat that change. >> which is why we founded it. it is a greater threat now as a result of that. the private sector needed to play a role. when we talk about the isis threat, we talk about where we fight it today. we are fighting in iraq, syria. it is worth noting that they are on to the next thing. it is clear from what we see that isis is already working through their playbook in places like saudi arabia, jordan, lebanon. they are fighting in iraq and syria. the focus is there expansion of the caliphate. they are doing many of the same

things in those places that they did in the early days before it was a public war. challenge.eal it is a challenge for the intelligence committee and our allies. >> both of you have to deal internationally. as women, i do not want to presuppose this, it is a field dominated by men. i went through and listed a lot of other women from condoleezza rice to hillary clinton to michele flournoy. list but ittantive is not a giant list. it is interesting within this country how do are treated as women. is it a nonissue? how do you deal with saudi uae where someone

like you is somewhat unusual? >> give us a good story. >> ion going to take you back. 2003.august i don't think i'm in the job three or four months. pages inhe infamous 28 the 9/11 report that remain classified related to saudi arabia. there is big meeting in the oval office with the president and foreign minister of saudi arabia, all of this national security leadership from both sides. deputy at the time and i'm not invited. the meeting goes poorly. president bush says he will not declassify it. the saudis leave angry. is ane first time, there official break. the saudis have been very maligned after 9/11. we all know the