at the kind of structure of our proposal and the structure of the cap proposal, it shows that there is a lot of room to work together. and the important thing about the toll charge come with you and fits -- charge, with your interest in infrastructure, we think that would be an oversight important. if that toll charge were used for anything other than a one-time expenditure, for example if it were used to lower rates permanently, it would not be revenue neutral overtime. so we think it is a perfect accommodation of things that we think are important. >> one quick question because my time is running out. with the administration report voluntary repatriation to refund -- to fund infrastructure? >> well, that in 2004 was not very good. it turns out to be a bad incentive because after a repatriation holiday, you start

to build up reserves overseas with businesses waiting for the next holiday. secondly, we didn't see the reinvestment come from it. what we proposed is what we think is the right way to do it. a transition to a new system where, going forward, businesses will bring their earnings home. >> thank you, senator. >> they could, mr. chairman. i want to applaud you on the work you have done. the work on the middle class is really excellent. you are working to find some common ground, and yet stay true to your principles. i was very impressed with the budget and i think you for your hard work. on that budget obviously one of the things you are focused on is infrastructure. one of the ways you talk about paying for it is the one time 14% tax on previously untaxed

foreign income. i'm very interested in that idea. or some variation of it. i think it makes a great deal of sense. something that i have been talking about for a while. i think you have resided in a much better way than just about anybody has but here's my question. do you believe it is feasible to consider the toll charge by itself, or inclination with other international tax reform even if we cannot reach an agreement on a broader reform package? it is my view, probably different than some here, it will be really hard to get to real reform lower than 20%. but the idea of some kind of deemed repatriation for a broad infrastructure proposal, i think, can get broad support on both sides of the aisle. so, tell me what your thinking is on this.

>> well, senator, i would say that the best way to do it would be through broad tax reform. if we don't do something about our broad statutory rate, which is the highest in the world, if we don't eliminate the incentive for companies to move overseas if we don't close the loopholes for inversions we will see a lot of the problems that we still have. that cannot all be fixed just with the -- the international provisions. it is always hard to do broad tax reform. it was hard in 1986. it is going to be hard because there are interest that are very much value the deductions and credits that have right now. you separate out the international peace? one could. but it wouldn't solve the whole problem. >> i understand. i have to say, on inversions and you guys don't get enough credit or take enough credit the reforms that you have made internally have stopped most inversions in their tax.

and the financial people in new york that i have talked to say that in most cases it is not worth it anymore. so you have done an excellent job on that. >> thank you. i'm sorry. >> i wanted to go to a less happy topic, at least one between you and me. overall on trade, my views have shifted some. the decline of middle class incomes is the number one problem america faces. and if, and obviously this will be disputed by members on both sides, but if these trade agreements, even though they might increase gdp and even though they might increase corporate profits, serve to decrease middle-class wages because the company makes money whether it makes a product here or in china. so they will make profits or you might even get gdp gain for a lot of reasons.

i can't support trade agreements like that and more, ok? i can't because of my value system where the middle class has become -- middle-class decline has become so great. i have talked to you about this i have talked to the president about this. on something where we can counterbalance any of the things you want to do in tpp, many of which are good, and currency is the most logical one because it has broad support currency bill that i authored along with others. it got 60 votes a while ago. so what i'm asking you is, now we have heard some talk from the administration that currency is not going to be a part of tpp. whether against japan, which is a part of tpp, or more important to me, although that is important to me, china which

takes more jobs away, doesn't play fair, steals our intellectual property. when america has a good product 80% of the time or so they don't let it in. and we just shrug our shoulders. and it is estimated that millions of jobs have gone away. so my question, as i know my time is running out, ok, will you -- will the administration supports him credit for chris controls -- support some kind of vigorous controls on china? tell us about currency and the relation, in your view, to tpp. >> senator, may i respond? >> yes, you get the last word.

>> i'm asking the chairman of i can take a couple minutes. senator, let me start by strongly agreeing with you that if countries do things to intervene in a way that is designed to gain unfair advantage in trade, it is wrong and we oppose it. we do not just oppose it, we take very strong action. i can tell you that when i meet bilaterally with countries whether there is any question, the number one topic we raise. and when we pushed back, there is a response. i think the challenge in the context of a trade agreement is how to address the issue in a way that helps and doesn't hurt. i would be concerned that the

effectiveness we have dealing through the existing channels could be diminished, in some ways, if some approaches were taken. i think that we need to make sure that we use every tool we have to make sure that the countries do not take the steps to intervene in ways that are unfair. and i think that if you look at recent years, we have been quite successful. i mean, the d7 agreement -- >> that is where we disagree. >> well, there certainly and historical problem if we go back but i'm talking about the immediate to present. two years ago, there was an agreement at the g7 that we go forward, that countries can only use domestic tools for domestic purposes. we had a policy in the united states. the united kingdom had qe policies. they have been critical to getting economies moving after the great recession.

quantitative easing. monetary policies. i don't think that any one thinks that those policies should be equated with unfair intervention. you know, we have not seen the kinds of intervention that i think you are describing as much as in recent times and we have actually made progress pushing back on it. with that said, we want to work together as we go through the discussions on trade legislations to see if there is a way for us to build the bridge between the tools that we have at the trade discussions. i look for the having that conversation. >> i would just say, one sentence, we have not been play successful against china. i totally disagree with you. we need much more. >> can i just say one thing? since 2010, we have actually seen an appreciation -- it bounces around day-to-day, but roughly 10% -- in china's currency. we have pushed hard to have china stop intervening in ways

that they have been. they have agreed to limit their interventions to macro economics. we have pushed hard for transparency policies. they have agreed to subscribe to the ims transparency policy. i'm not going to say that there hasn't historically been issues but we have asked me made progress working through these issues. >> ok, you guys can carry on this conversation outside the room. >> thank you. to continue this conversation. welcome. and i do want to say, not to debate it, but just for the record before talking about another issue that i appreciate your efforts to address currency manipulation -- but these actions have not kept pace with increasing adverse impacts of concern -- of currency

manipulation and the impacts on american workers and businesses. economists across the political spectrum, the economic policy into student -- policy institute, the former advisor to president draghi, all agree that currency manipulation has cost the united states millions of jobs. and specifically on tpa and as you know, what is coming before us. and japan would be -- with the auto industry. i appreciate the administration standing with us and the auto industry. as you know, we have seen the top financial executive at four moto -- company -- ford motor company, gives japanese companies more profit per card per year. $11,000 per car is a big deal

and a sensitive marketplace. i want to talk about some thing else. i know your concerns about this. i disagree that quantitative easing and the mystic policy are the same as intervening and foreign currency. we will debate that more later. this is a big deal. with 60 of us in the senate, and a bipartisan letter, 60 of us saying that we want currency addressed in trade agreement. i hope you understand that we are very serious about this. >> senator, as we have discussed, we look forward to work together to see if there is lingwood we can work through that would address the concern in a way consistent with our legal obligations and policy. about japan for 15 years, we had the view that it was bad for the u.s. economy and the global economy for japan to be in an economic rut. they issued monetary policies

similar to those that are -- put in place. for the first time it gave the japanese economy a boost which was good for the global economy and the u.s. economy. they are not growing as fast as they should be. they need to use all the tools. they need fiscal policies tools, they need fiscal reform. if you look at the policy that they are put in effect, does not meet the criteria of unfit practices. it was different from the 70's. i will not say -- we need to be careful that we do not make a standard of a set of rules that would make monetary policies -- >> i appreciate that. let me say that if they agreed to the imf they would not do this. they have done it three hundred times. something like that. all i will say is that we are in open market.

japanese companies that is a buy everything, including what we have done on monetary policy. yes, they are the most close market. we cannot get into them. you cannot see an american-made vehicle. i want to change the subject one second. to something that we agree more on. simply to ask you to respond again to the big structure, in terms of how we move forward in the economy. i think we need to talk about what works. when you look at the clinton years, we raised taxes on americans, asking them to pay more to balance the budget. we created 22 million jobs. actually saw a robust economy, asking people at the top to do a bit more. bush years it seems that every once to go back to them, the bush years. leave everyone at the top

trickle down, don't pay for it. have a regular spec relation going on -- speculation going on. we saw what happened, recession. now we are back. we asked those of the top to do a little more it are friends of the world would end, it did not end. we reduce the deficit. i monday the can speak briefly to the macroeconomics of putting money into people's pockets, pain down the debt the right way, and growing the economy through a strong middle class. christ i think we had an experiment. we saw what tax rates and policies of the 1990's did. we had the longest history of on -- uninterrupted growth. we had policies that caught taxes, particularly at the top. as you said, had wars and other things that we did not pay for.

we ended up with a financial crisis on top of that, creating the biggest deficit that we have had in history. and, and economic hole that we have been to guess of out of. i think we have had a test of the two theories. that is why i am confident that the tax proposal we both lord our good for the economy. >> inc. you. > -- thank you. >> you know, i've only been on the committee for three weeks. city out there in the left-field bleachers with my friend from nevada, i noticed that the site or the right-field bleachers had other things to do. all of a sudden i am here with a gavel at home plate. now, i am in control. i feel like recognizing myself for a long speech. [laughter] senator cantwell, you are up.

>> thank you, mr. chairman. mr. secretary, thank you for your comments this morning. and for your focus on economic strategy moving forward. and for your emphasis on exports. my views are a little different from those that have been excess by my colleagues. we have a more integrated trade dependent economy in the pacific northwest. i want to get your views on a couple things that i believe are critical for this opportunity. that 95% of consumers live outside the united states, the doubling of the middle class around the gold -- globe in the next 15 hits great economic opportunity for the u.s.. one of the policies that we need to pursue to dig a manager that. things on our agenda -- i almost feel like our economic agenda should have the word exports on

it. freight mobility, improving our freight infrastructure so we can get products to market quicker. one of the stumbling blocks that we are facing right now is the reauthorization of the export-import bank. if you could talk a little about what you think the importance of that structure is in this context, and how important it is for the u.s. to have finance tools, but also the fact that when you actually a member and have a credit agency, you can bridge say and a rules dialog of credit agencies around the globe for policies that are fair and transparent. if we do not have that, we also will not be participating in this international discussion. >> senator cantwell, i think you

are right. experts are a key to our economic future. that is why we are pursuing trade promotion authority and negotiating tbp. we are looking at whether markets are growing and we want americans to have access to those markets, it will be a way to create good middle-class jobs in the united states. that is stealing reason we are focus of much on this trade issue. the export-import bank is a critical component of our export strategy. in a world where nobody had export subsidies, one can have a conversation as to whether or not we should have one. in a world where our competitors have export -- and export program and we do not, that is putting a burden on our exporters that is not fair. if you are still -- settling from washington and aircraft, to companies that export financing, because of programs like the

i-4-import bank, and we do not that is not something you can make up for just by running a tighter operation. we had discussions going on on internet -- an international basis to see is on a global basis we can lower this excellent sassy program. in that serve environment, it would be a different question. we cannot unilaterally put our companies in a position where exports from other companies have export support and they do not. i think the authorization of the export-import bank is critical. >> what would be administration like to see as we move towards a. -- i think it is may 31. >> we have for a longtime advocate a reauthorization that would provide longer-term certainty around the program. i think the sooner it is

enacted, the better. uncertainty is not a good thing. >> thank you. >> thank you senator -- menendez arrived just in the neck of time to secure the next spot. >> thank you, mr. chairman. i want to raise an issue that has huge bipartisan support in the senate and support of the ministration. it is reforming the foreign real estate and investment properties so that foreign pension funds can put much-needed capital in the u.s. residential market. we have tossed about this before and how bringing this needed equity to the u.s. can create jobs at home. as you know, the current tax on real estate, earned by foreign pension funds, was due to an administrative action and not a

legislative one. indeed, up until treasury issued a notice foreign pension funds were treated equally with domestic counterparts. it seems to me that the treasury made this change in the first place, it can also under this policy. and at limiting a barrier to private investment. i am pleased to see once again that the president agrees with me on the need for further reform, as illustrated in his budget. since we all agree that this is about policy, and treasury clearly has the authority to reverse this ruling, i hope that you would look at taking some of action on this. my question is -- one, does it make any sense to create obstacles for foreign investment in the u.s.? especially considering our dire need for investments. will you commit to working with me and a bipartisan group of

this committee and beyond who support this effort? >> we have discussed this before. as you ignore knowledge, we agree that there should be fixed. we believe and needs to be fixed through legislation. i actually hope that in the discussions we are having on business tax reform, it provides an op attorney to do this on -- in a bipartisan way. we have put forward legislation again, and i look forward to dealing -- working with you on it. quite so the question is -- you do support the administration? [indiscernible] let me ask you in the same lie one of the things in the president's budget is extensive needs in an investment in roads bridges, and critical infrastructure. one of the most effective ways to support local minims of bodies -- local municipalities is --

unfortunately, cap's on water makes it extremely difficult for people to advance on these needs. i have legislation i plan to reintroduce that would move cap's for water and wastewater infrastructure projects, i am pleased to see that the president has included positive reforms in this regard. wouldn't removing caps on allow local communities reform their antiquated and infrastructure? >> we didn't put the new proposal in a budget to try to accomplices same goal. obviously, raising caps would allow more room for local authorities. we think that what we proposed is a similar theory, and we look forward to working together to get something enacted into law to enable local projects to go forward more easily. quite finally, we have record

job growth. the administration has done -- economically, i think, a great job. lowest unemployment private-sector job growth. with that said, lowest gdp in several years. we still have a stagnant -- long-term unemployment rate is still far too high. people are stuck on the sideline, and while they are their skills and networks become out of date. i heard someone trying to get back in the economy. i have introduced legislation called better skills and education for the american workforce, that would provide a robust tax credit. it would create a competitive pool of tax breaks for tax

clusters that would create trainings on community colleges. do you believe that designing a job training program to focus on long-term unemployed with skills and demands would help reduce the desert fortunately rate of unemployed people in our country? >> group policies we put together in the budget, we feel strongly that cheney needs to be available for people to get into her get back into the workforce. that is where community college proposal comes in. that is where the training proposal comes in. there are multiple ways that one can accomplish it. we put in our budget the ways that we think would be most effective. we look forward to working together. >> i will close by saying that we would like to work with you. i understand and support the president potter and initiatives, how we deal with longtime -- long-term unemployed

is very important. >> totally agree. if you look at total gdp and medium-term, getting people back into the labor force is not just something that is right for the individual, it is a way to make sure that our economy is growing. thrilled to find at least three areas in which we can largely agree. >> senator carper. >> thanks, mr. chairman. welcome. i would like to start off by thinking you and the ministration for working so hard last year to find common ground on health insurance. if we can work out some of these issues as well. you mention, you start off, mr. secretary, talking about the strength of economic recovery. it is not everything that we like, but for us, it is encouraging. by today, we see from the department of labor the latest unemployment rates, numbers are

averaging around 280,000. when president obama was inaugurated, that number was 600,000. now we are around three -- 200 80,000. what we know that will do is tight enough the labor market and hopefully as a positive effect on wages. one of the things that i sought to do coming out of election was to find some areas where we could agree on a number of those. you touch -- although we are not 100% honest committee, my hope is that we can move forward on trade, including tpa, and cyber security. comprehensive tax reform, i would like very much to do that. you mentioned the need to do it. it is tough not to do it.

so important. immigration reform. we need to take up immigration form, it reduces the deficit. it raises the gdp very substantially. we ought to do that. workforce. i like the present proposal with respect to community college trying to encourage people to continue their education after high school. the last one i want to mention is transportation. a lot of my colleagues have mentioned it. we have jurisdiction over that. environmental and public works is the committee. we need to figure out how to pay for these commitments. i'm not an advocate for repatriating money. if we repatriate money every 10 years, companies will continue to have money part overseas. giving them a free pass. i do not think that is a good

idea. i think the imitations idea is intriguing. i think it would be difficult to achieve. i am interested in exploring it with you. over the last six months isaac i thought to everyone on this committee. a lot of republicans in the senate and house. democrats and the senate and house. what do you think we should do for transportation funding? i got a number of edges thing ideas. i want to mention them today. one of them is a user fee. it is a better bones approach. it gives is about $100 billion per year. the minute -- minimum. bare-bones of what we need. second idea -- talking to my republican colleagues, a number of them said why don't we open additional areas for oil and gas

expiration. some of the revenues from that could go into the transportation trust fund. it turns out that the president has proposed areas off of virginia, south carolina, north carolina, and georgia be open to expiration. that could marry an idea with an idea from republican colleagues. i heard from a number of republican colleagues, and democrats to, why can we figure out to do transportation projects less expensively. as it turns out, department of transportation has legislation outlines a lot of new ideas. that might be something the administration, democrats, and republicans, could agree on. those are just some of the ideas that i have heard. i would like to talk about energy policy. the all the above upper -- approach. there might be an all the above

competence of approach. your reaction please. >> we obviously very strongly share the sense of urgency to get a long-term service transportation will enacted. there is no way to effectively plan infrastructure. six months at a time, or even one year at a time. you need the time to plan complicated projects. we put in our budget proposal that i think has the basis for a partisan support. we genuinely want to pursue it and think it is the best approach. if that were to turn out not to be the approach that could bus -- bolster bipartisan support we would look at other options. i asked a think that there is a reason to be optimistic that we can get the president's proposal, or a form of it, enacted into law.

it draws on principles that are shared on both sides. it is good for the economy, will create good middle-class jobs. we will roll up our sleeves and try to get it done. i think so much. -- thanks so much. >> states are starting to shut down projects. i think the president's idea has merit. i think it will be hard to do. the question for us is if we are not able to do that for a while, what will we do for in the meantime. the answer cannot be nothing. thank you so much. >> let's go to senator cardin. >> thank you. very much appreciate your long-standing commitment to service and the effective job that you're doing as secretary of treasury. i first want to talk run area

that i once talked to you before about. that is our community banks. we are still seeing committee banks and maryland being challenged to survive. not because of their viability individually but because of the new regulations, etc.. they were not the speculators that brought about the financial class. they are trying to find a way to remain relevant in today's banking world. one area where we get help is during the top. there was the preferred stock of community banks now held by treasury. they want to buy back that preferred stock. there are certain austin -- obstacles. i'm wondering about has been on your radar screen and if we can facilitate the viability of community banks through considerations by the treasury to make it easier for them to recoup that preferred stock. >> we shared the view that

community banks play at -- a critical role in local economies and creating a engine for small business growth and local economic activity. in the tarp program we have worked with community banks and will continue to. we obviously has some constraints as to how we can dispose of assets. i'm happy to look into it again. >> i appreciate very much. i was interested in your exchange with the center in regards to the u.s. harmonizing with the global a community on tax rates. the fact that we have high corporate tax rates. i was also adjusted in the exchange on simplification where you are -- the senator wants you the code much more simple fight and i agree. i would just put in a sock that you would look at the conception of tax citizens that i filed.

we would have the lotus -- lowest marginal tax rate in the world. if we are going to harmonize let's look at where the rest of the oecd companies are receiving their revenues if we want to be competitive. i urge you to look at it because i think it would answer some of your questions. i want to get your comment in regards to the administration doing business tax reform. along with another senator, i will cochair a group to look at tax issues. we have concerns as to how small business is treated. if you deal with just me corporate tax rate, those who have entities or use as corporations would be at a competitive disadvantage if that is all we do. because of the high individual rates. i would ask, how can you really just do corporate tax reform and be fair to small businesses in our country?

>> we have always talked up business tax reform, not corporate tax reform. we think it is important that what we do business tax a we look at small businesses as well as the corporate side. we have in our proposal, for example, an extension -- expansion of a division on taking of depreciation. so, if you take $1 million per year, you could take a full deduction in the year the take an investment. we have done a number of civil vacations to make it easier for small businesses. i think we have designed provisions that are going to help small businesses. we are open to ideas if there are ideas that, conversations that you another senator have. we look forward to working with you. i would point out that if you do in a position -- one of the

reasons businesses choose to file as individual businesses as opposed to corporations, is because it is better for them to do. if he becomes advantageous, it can also make -- >> it changes the current competitive situation. small businesses are already challenge today. i understand they can make that choice. i want to get one more point in, it is on retirement and savings. again, a progressive consumption tax would reward savings. one of the things that we learned working with said airport when we are in the house is that tax incentives alone are not enough for working middle income families. that is why the saver's credit is important. employer-sponsored plans are important. as you look at your proposal for retirement security, we do not have the unintended consequence of adversely affecting

employer-sponsored plans where they had money on the table. where we would only be using the tax deferral as an incentive. i do not think that is enough. >> we agree, and we actually have a proposal in our budget to make it more advantageous for firms to contribute to small businesses especially. to make a contribution into employees retirement plan. we look forward to working with you on that. >> thank you. >> said around. senator brown . >> a short statement. i know the other senators asked you about currency. i want to echo their remarks. i also want to remind you that there are's is strong support in the senate for world currency is provisions, both for tpa and tpa. real enforceable currency

standards, i d do not need you to repeat your comment, but i am hopeful that when we move forward, we can bring you in our direction. i want to walk through the country by country global minimum tax that you and the president proposed. just a series of questions because i think it is often difficult for us to process this. the tax you are proposing is 19%, correct? >> correct. >> is companies get a tax credit of 85% in every country where they do business. >> correct. >> that means if a corporation shifts its product profits to bermuda, they would then oh 19% to our government. >> correct. >> but if the company went to south korea, or india, or

germany where it is in the high 20's. the corporation would potentially not a single dollar more in u.s. taxes. >> correct. >> this is a proposal that fundamentally shuts down tax havens. and creates a global race to the bottom. >> i think that is an accurate description. when we are in international meetings, there is huge discussions around what they call erosion there are two problems. there are broken tax codes like ours. we put in a proposal that we think does what we need t it to do. we will be vigorous in the air national setting to push against the tax having raced to the bottom. i think we have an enormously better argument if we do our part. >> to what would you describe

the opposition to your proposal in congress? and it among among some in the business community. what do you describe that ascribe that? >> i think there will always be a lower rate. it is not surprising that we are hearing argument there should be lower than 19% or 14%. we have not heard arguments that undermine the basic integrity of the approach. i do not think that we've heard arguments that there is not a basis for bipartisan discussion to work through this. we do not think that the numbers that we have picked have absolute truth to them. we could have gone a little higher or lower. this is the kindest thing that we ought to be able to work out. it would fix the broken tax system and keep jobs here. >> thank you for that. and, we have worked on this bipartisan the four decades. that is social security

insurance. social security disability insurance. the president's budget supports something called reallocations. we had hearings on this. we have had discussions with 30 much everybody on this committee on the issue of reallocation. it does not cost taxpayers money. it has been done 11 times before. walk us through what you suggest on reallocation. tell us what will happen if we refuse to do it and why we should do it. >> senator, we have a two-part proposal. we have proposals that would do things like disability reviews, and incentives to get back to work. a pilot program to help people get back to work on disability. i do not think there are any experts that believe that any approach that you could design would fix the disability

shortfall in the short term. we saw a huge increase in the disability rate during economic crisis for a variety of reasons. the only short-term solution is a reallocation of the rate. i have been doing is long enough that i remember what we had to real reallocate to disability, in order to get to the 1980's three reforms. it is many times that we have had reallocations and it has got them both directions. i think we need to work together on the longer-term solution. i do not see any alternative. but for there to be a reallocation to deal with the upcoming challenge. >> is my my recollection is that we have known for some time about a fairly accurate prediction as to when this would happen. >> correct.

we have known it was in the zone of one year or one year and a half. >> thank you. >> thank you mr. chairman. think you for being here. just when things could not possibly get worse congress passed a bill that among other things inc. included an extension of the wind tax credit for two weeks. you have host: -- you have described our tax code as broken and ridiculous. there's not one person on the committee that the agree with that characterization of the tax code. you have been a around a long time and acquired a lot of wisdom. i think what the people of colorado would like to know is what are the conditions that are

required to fix this tax code? to reform the tax code. what do we have to do to put this committee in the position to actually do the people's business? to not do this insanely minor and ridiculous legislation baxley gets a place where we can fix this code? >> senator, to allow the private sector to compete in this global economy. i cannot agree more that short term extenders are a terrible way to do business. for company that at the beginning of 2014 wanted to know what their tax code status would be, waiting to the last week of the year does not help you plan your business. it is all retroactive for when people did not know what the tax code could be. it could not possibly have the incentive affect that it would if it were a permanent tax law. they propose dealing with

extenders in the context of the tax reform, so we should pick the ones that are permanent. and have a tax code as stability and certainty to it. i think the answer of what we have to have do -- we learned in 1960 what we have to do, we have to work together. on a bipartisan basis, say that it is worth lowering the rate and if we do it together, we can get it done. i have more often misses than many. it makes this profound sense to do it. i also think that if we do not do it, it will lead to an economy where we see more companies doing things that we do not like. that is not a good outcome. >> i want to thank the chairman for putting us in these working groups. i think it presents at least a

bipartisan start to our efforts. i once asked a charter school in my district, you could hear a pin drop, i say, how do you create the conditions for getting things done? he said, i visualized the conflict in advance. when it comes, i know it is there, and i can get through it. i think that is what we need to do. >> i have offered -- we look forward to working with the bipartisan groups. i look forward to working with you. >> i think there are number of us on both sides of the aisle that feel the same way. i went to ask you an education question two. it was found that in 2009, 1 .5 million students failed to take a deduction for which they were eligible. others fail to take the maximum education benefit.

i was really pleased to see the budget simplifies the system of tax expenditures, and makes the system -- i wonder if you could talk in more detail and describe how simplification can better target overall college affordability. >> we share the concern that the current array of patchwork of benefits, tax benefits, and grants, makes it very difficult for a family to take full advantage of everything available to them. one of the reasons that we put together this approach was this of the fire. and to make it so that families could understand what it is that they have available. we've consolidated the education tax credit. we have citified taxes for pell grant recipients.

we have improved reporting of tuition and related expenses for scholarship. part of this is that reporting will be more day forward. it is easier. we have are healed student loan exceptions. we have reduced the tax benefits of education savings accounts. we have set we will not do that. >> i am out of time. i just want to call your attention to a bill that senator alexander and i have it would reduce the question of the financial aid form from 108 questions to two questions. i think that would be in line with the work that you are doing. thank you. >> senator scott. >> he is headed over so you can continue.

we would like to finish so you do not have to sit around, mr. secretary. i promise not to take more than 30 minutes. >> i'm smart enough to not try. you have done something that i am very surprised that. you've actually answer questions. it is a remarkable experience for a new senator. thank you very much. i have not liked your answers to silly, but at least you have provided true direction to the committee. i appreciate that. i want to go back to a question that you heard from other centers as it relates to the inheritance tax. i started a small business a number of years ago. through that business ike grew it from zero cash to some real money, and mike perspective. that same that business and up

being worth $2 billion. i know there is a $1 million threshold that if you are a small business owner, you do not pay taxes. ipass that business onto my nonexistent child. a $2 million value. what is the tax code? >> senator, we do have the $1 million of jim. quite so the first million is gone. >> i'm sorry -- >> stepped out aces. >> first step up basis, we have a $1 million exemption. >> in 15 years. >> it would be taxed at the rate of the individual's income. if they were not earning a lot they would hate a low rate. if they were earning more, a high rate. >> so a couple thousand dollars. anytime you have a non-liquid

asset that you have to sell, you reduce the actual value of the asset. that means that for small business owners, and is physically for minority business owners, the way to you create wealth in this nation is by creating profit, creating profit happens a couple of ways. in the area of business ownership, when you're are in the position to create profits you have to be able to pass it on generation by generation. hence the forwards, etc. there's actually impedes the ability for minority small business owners to as on wealth p. i would like you to go back to the drawing board and be a little malleable in this area. a $1 million threshold is actually worth about $600,000 in

my experience. >> through the exemptions, we tried to be sensitive to the issue. through the long. of payment, we try to make it not be overwhelmingly burdened son. i think if you look at not be liquid assets, but things like stocks and bonds, it is much harder to make the case. most of the money that is involved in stepped up basis is in those kinds of assets. that is where substantial wealth is transferred from generation to generation. >> i'm trying to not take 30 minutes. but perhaps there is part of the narrative that is factual. unlike farms, there are hundreds of thousands of minority small business owners that would be impacted negatively by this conversation. let me ask you a different question. i think it is dodd frank that really gives the said unlimited discretion so that banks and financial institutions are not

taking on too much risk. the president in his budget includes a new fax, or fee, on banking liabilities supposedly to curb the excess of risk-taking. i believe that any new tax on banks finds its way ultimately to the consumer. does the request for this new bank tax, or fee, suggest that the present -- president believes that dodd frank -- a law pace al passed almost entirely on party lines -- >> we think that dodd frank is working well and has reduced risk in the system. we think the tax code we have but ford is entirely consistent in the dodd frank act. it is designed to make it a little bit more expensive for firms to be highly leverage.

i think they've you look at the overall tax proposal, by reducing the corporate tax rate, that will also have a benefit for financial institutions and other companies. if you look on balance, we treat financial institutions quite fairly. >> i would tell you that the seven business points that you increase it by may mitigate risk, but really passes on a greater burden to the consumer. that makes it even more difficult for small business owners tos. i would say that 20% rate would be a positive rate and put us in a position to be globally competitive. however, to get there, there is a 14% repatriation deemed rate. if you must know i guess you do not have to be home. you must know that there have to be a nonstarter on our side of

the isle. it would be helpful to go back to the drawing board and look at how to make progress. >> similar to the proposal put forward by the house ways and means committee. we view it very much as an issue that we can have a good constructive bipartisan conversation. >> conversation, yes. progress, probably not. >> i appreciate the fact that tax reform got so much notice today. i think there is an opportunity in this budget forth to make progress. i think senator scott is right. it is one where he had differences in terms of the repatriation rate, and for that matter, their perspective international rate. i do think the structure is consistent with what many of us on the site of the isle had talked about. we need to do it. in ohio, we've asked at the -- a

company has inverted. this is happening all over the country. more importantly i think a lot of the that are u.s. companies cannot compete. u.s. employees cannot compete. for an companies are buying them. there is a study coming out and says that over 9000 u.s. companies have been acquired by foreign companies in the past 10 years alone. finally, it is tougher to compete. if you are not taken over by foreign company, you have more difficulty to expand. one small business came recently and said they can pleated -- completed a deal. a german company walked in and said they would pay more. they lost the ability to expand. this is happening and it is american workers taking the brunt of it. i would commend you for

putting the concern in the budget. many of us used to be in the budget job. with this particular provision i think against us a chance to do something that would help american workers, and therefore not just increase economic growth, but create economic jobs that we are always talking about. these jobs are the ones that are at stake right now. and those of the ones who lose out. there is a great study that shows that. it is not about the boardroom it is about the workers. we need to work on this. the one question i have for you today to make sure we understand where we are is on the highway trust fund. this came up with a number of members. there was discussion as to why we do not just do a tax holiday. we would therefore be able to fund the highway trust fund.

if we just did at tax holiday, what would be the impact? >> we have looked at it in both the joint tax committee and our estimators in the tax policy have determined that it costs money. it is not save money. >> so it would not create money for the highway tax under conventional scoring. i think as a structure a one time tax holiday, a voluntary tax solid he does not create a structural problem. what it does is it keeps all of your earnings overseas. it does not regularize the tax treatment in any meaningful way. i think we can accomplish the goal of having our tax system work properly so the business officials -- maybe not in economic terms, tax determined terms, i think it will created a better climate for creating jobs in the night of dates.

-- in the united states. i do not think a one time tax holiday works well and accomplishes the goal. i think as you and i have discussed, the question of where you set the rate -- i think this is the basis for bipartisan conversation. >> i hope you will reiterate today for the record what you have said publicly and this is a starting point for you all in terms of the rates. i do think we could have some businesses in terms -- some differences in terms of the rates. if we end up with a rate of 19% for instance, some would argue we have not accomplished that because you look at the comparable rates around the world now, the effective rate has to be in the mid-20's in order for us to be competitive.

if you look of the tax rate here, it is actually below the other countries. i think we do need to come to some understanding about how we will do with extenders. maybe that can be part of this. and let's make sure we are working together to find a baseline that works. if you do do the deemed repatriation, and you think there could be some revenue for the highway trust fund. >> i do think there could be revenue for the highway trust fund. as we deal with the expiring provisions, we have to deal with the individuals that expire as well, not just the business credit. >> determined like to put in the record without objection two letters i got from the uaw, the ford motor company back in ohio. this is about the issue of currency. i do think currency manipulation affects trade. i hope that you will work with us on this issue to put in some enforceable

standards on currency. i think it makes a lot of sense because it does affect the way that american workers can compete globally. thank you, mr. chairman. >> would you like to -- >> would you -- >> i'm happy to have you go. we are limited -- >> we are limited to five minutes. you go ahead. >> secretary lu, let me walk you through this -- secretary lew, let me walk you through this. we had the gas tax issue and we had a cents last year it would be hard to build significant bipartisan support for a major hike in the gas tax. then there is the repatriation issue and i am certainly open to looking at this, the question of taxes and transportation --

there is clearly an infrastructure, and this their. we have trust funds and excise taxes. we have learned from experience that there is no repatriation rainbow out there, and in fact my senses that if you make it voluntary, with respect to the whole process the joint committee on taxation, these scorekeeper wants to score it. that is certainly a password -- a path worth debating. the path that does works is the bond question. the path where getting some of his last sum of money is off the sidelines and into infrastructure. it is a good investment and bonding works. it was in this room six years ago after decades of i partisan

efforts, and chairman baucus talked about bonds and people wanted to know what happened. i told people, we had $3 billion, four billion dollars, 5 billion dollars worth. three years later we had $103 billion worth of build america bonds were sold all up and down the east coast. governor casey, avner rendell, others major support -- governor rendell, others major supporters of build america bonds. you can debate what type they should we. i think we understand that. but to me, a because it has actually worked and helped us get more revenue, and b because there is a bipartisan history there, i think it would be very helpful if we had something like public infrastructure bonds, as

you are aware. we have a variety of approaches that can draw of investment into the country's infrastructure. you have thoughts about how the approach you all are talking about would lend itself to a bipartisan alliance to get more funding into infrastructure? >> senator, as you and i have discussed, this scenario we violently agree on -- >> we violently agree on? >> yes, violent agreement. your leadership in the design of bond provisions here has been extremely important. we have worked with you on these . i hope we can work on a bipartisan basis to get either the qualified public infrastructure bonds or you can name any number of businesses -- whether you call them build america bonds or america fast-forward bonds. this idea is to create

opportunities for private capital to be invested in infrastructure. one thing we note for sure -- we know for sure, even if we are successful in extending our transportation bill for six years at a higher level, that will only meet a fraction of the infrastructure needs we have in this country. it is not a case of meaning to do either/or. we need to do both. infrastructure growth is one of the serious economic challenges for us to deal with in order to ensure the future of the economy is where it has been at the past. we can't have airports that are subpar and behind their international competitors. we can't have roads that take hours to get somewhere than

it should. that cost time. that calls money. it a drag on economic growth. long-term for the entire history of our country, it is one of the keys to our economic success, to build the infrastructure we need for the future. >> my time is expired. i know that my colleagues of been very patient and i appreciate that. >> i think the ranking member. i want to apologize i was not here earlier, mr. secretary. i did not have the chance to hear your testimony. it was one of those conflicted mornings, but we are grateful you are here -- >> good afternoon, everybody.

it is my pleasure and honor to welcome all of you. with respect to our guest of honor, ambassador rice, i want to welcome her back. she is a former colleague of martin and dick's and mine at the institution and in government in the 1990's. and a special welcome to bob. how about that? to hear her daughter -- a special welcome to mom. how about that? she came to hear her daughter speak. i'm quite sure in the 99-year i history of brookings there is only been one mother-daughter team. susan and lois were in economic studies at the same time and

lois continues to be a very important part of this institution. as you all know, susan is here to talk about the national security strategy for 2015 and into the future. the origins of this document this exercise within me executive -- within the executive branch goes back to the aftermath of world war ii and the dawn of the cold war. today, the big challenge facing the united states and its partners and allies in the international community is not containment. although russia is back and moving backwards in troublesome ways. but rather, the number one challenge today is building an inclusive, cooperative efficacious international system

that will, among other things, bring rule-based order out of the violent chaos of the sort wrenching the eastern ukraine and the self-proclaimed islamic state. that is a goal of the new initiative that the colleagues in the foreign policy program -- which is susan's alma mater here at brookings -- will launch next week. we hope, susan, that our efforts at brookings and those of other think tanks will reinforce government's efforts you will be talking to us about today. the podium is yours. let me tell all of the -- what do i say tweeters. i almost said twitterers. they can follow what she has to say under #2015nss.

susan, thank you. [applause] >> good afternoon, everyone. thank you very much joe, for that very kind introduction and thank you to everyone here at brookings. as joe said, this was my home for six very peaceful years, and truthfully, i miss it. thank you especially for things such kind words about my mom lois rice, whose ties with brookings go back many, many years. looking around the room, i'm grateful to seeing many friends who challenged and encouraged me throughout my tenure here at brookings and to continue to generate some of the best ideas for america's foreign policy. so broadly speaking, in every

respect, i am glad to be here. this morning president obama released his 2015 national security strategy. fundamentally, a strategy to strengthen the foundation of america's power. political, economic, and military. and sustain american leadership in this new century so we can surmount the challenges of today and capture the opportunities up tomorrow. our strategy is guided by the same enduring national interests we laid out in the 2010 national strategy. security, prosperity values, and rules-based international order. of interest -- our interests are enduring, but in many respects 2015 is a whole new ballgame. much as changed in the last five years. as a nation, we are stronger than we have been in a very long

time. since president obama took office we have corrected the worst financial crisis and repair the biggest collapse in world trade since the great depression. in 2010, unemployment in the united states was almost 10%. today, businesses have added more than 11 million jobs and unemployment is down to 5.7%. in 2010, our deficits topped $1 trillion. today we have cut that in half to less than $500 billion. our kids are graduating at higher rates and millions more americans have health care. we have a domestic energy boom that has made of the world from number one producer of oil and gas, strengthening -- the world's number one producer of oil and gas, strengthening our

country with impacts in geopolitics. we have brought home almost 170,000 american troops ending two long and costly ground wars and repurposing our military strength so we can better respond to emerging threats and crises. the diversity and creativity of the american people continue to be a wellspring of american power. driving innovations that are revolutionizing everything, from the way we account to the way we treat disease. america is in a better position to confront current crises and seize the opportunities of this new century. yet, few know better than way the complexity of the challenges america faces are it every day i start my morning with a briefing

that covers the most sobering threats and difficult problems that confront us around the world. these include the following -- the air of uprising, russian oppression, the bola -- ebola cyberattacks, and a more diffuse terrorist attack threat. yes, there is a lot going on. still, while the dangers we face may be more numerous and varied, they are not of the essential nature of what we confronted during world war ii and the cold war. we cannot be sidelined by a an instantaneous new cycle. we must complete to do the hard

work in a complex and rapidly evolving world. we must these new opportunities and winning the future for our children. strong and sustained american leadership remains as central as ever. think for a minute or the globe would be today without decisive american leadership. ebola would be spreading throughout west africa and likely too far corners of the world. instead america galvanized the world to roll back this horrible disease. without us russia would be suffering no consequences for its actions in ukraine. instead of the ruble is in a freefall and russia is paying dearly for flouting the rules. without us, there would be no military campaign or 60 countries countering isil's

advance. there would be no pressure for iran to be at the negotiating table. no potential for trade that meets a higher standard for our workers and our businesses. nonetheless, there is a loud debate in washington about american leadership in the 21st century. the issue is not simply when we should have started arming the syrian rebels are when we should provide lethal assistance and weapons to ukraine. it is about the nature of u.s. leadership for the future. with this national security strategy we stake out a much larger role for america in shaping the world, while anticipating challenges to come. before i go through the elements of this strategy, i want to note how our approach may differ from

what others may recommend. we believe in the importance of economic growth, but we insist upon investing in the foundations of america's power. education and health care, clean energy and basic research. we will always act to defend our country and its people, but we aim to avoid sending many thousands of ground forces into combat in hostile lands. we have renewed our core alliance is well also building partnerships with emerging powers and neglected regions. we are committed to fighting terrorism and stopping the spread of nuclear weapons even as we rally the world to meet the threats of tomorrow. malicious cyber actors, pandemics, deadly competition in

space. we focus every day on the crises in the middle east and ukraine but we are simultaneously rebalancing so the regions will do more to determine the course of the 21st century. it's déjà vu -- east asia, and india, sub-saharan africa, the americas. with that in mind, let me outline before ways we are advancing our core interest. the first element of our strategy is to secure the united states, our citizens, our allies, and partners through a dynamic global security posture in which we employ unique capabilities, forge coalitions and support local partners. this approach builds a more secure homeland and national defense that is second to none. president obama is committed to maintaining the best trained

best equipped, and best led military force the world is ever known while honoring our promises to service members, veterans, and their families. to ensure success, we call on congress, including by ending sequestration. to counter today's threats, we are implementing a conference of counterterrorism approach that takes account how the enemy has evolved. as al qaeda's core has been decimated, we have seen the diffusion of the threat to al qaeda affiliates, isil, local militias, and homegrown violent extremists. this may for now reduce the risk for spectacular attacks like

9/11, but it makes more likely the kind of attacks we've seen in boston, ottawa, sydney, and paris. to meet this challenge, we are combining our decisive military capabilities with local partnerships with financial tools to choke off funding and the international reach of our law enforcement and intelligence agencies. we are strengthening the capacity of weak states to govern their territory and provide for their people while countering the corrosive ideology of violent extremism. fighting terrorism is a long-term study -- struggle. there are no one-size-fits-all solutions. we have to work across multiple lines of effort in diverse contexts to be effective. to degrade and defeat isil, we

have assembled a broad coalition that is confronting this from all angles and we are encouraging political reforms in iraq that call for greater inclusion. together, we have taken up the balance of isil's fighters destroyed nearly 200 oil and gas facilities that funded terror, and push them out of the territory, including areas around baghdad, sinjar, and the mosul dam. isil conceded defeat in their month-long siege of the body, and with the world united in condemnation of its terrific x -- horrific executions, isolate should know that they only strengthened the world's continued resolve.

we have ended our combat mission in afghanistan. now we are focused on supporting a sovereign, stable afghanistan that will not be a safe haven for al qaeda terrorists. we will continue to keep pressure on al qaeda through a capable counterterrorism mission. american leadership remains essential. not only to a tackling today's threats, but also to addressing the global challenges that will define the world for our children and grandchildren. here, too, we have to lead with our head. american leadership is addressing the danger of nuclear proliferation. nothing poses a greater risk to

our security than the potential use of nuclear weapons. that is why we continue to strengthen international norms against the use of all weapons of mass destruction, moving us closer to achieving bps and security of a world without -- the peace and security of a world without nuclear weapons. we are strengthening sanctions against iran through -- iran. through diplomacy and increasing economic pressure we have halted the progress of their nuclear program and rolled it back in key respects. now we must give diplomacy a chance to finish the job. if diplomacy fails, it will not be four lakh of good faith by america -- for lack of faith by america or the p5 plus one. we must work with our partners

to dial up the pressure and in short iran does not obtain a nuclear weapon. america is addressing the dangers of pandemic disease. our objective is to improve global health security and does not end with ebola. it is strengthening the capacity of international institutions to detect prevent, and respond to future outbreaks before they become deadly epidemics. american leadership is addressing the very real threat of climate change. the science is clear. the impacts of climate change will only worsen over time. even longer droughts, more severe storms, more forced migrations. so we're making smart decisions today that will pay off for generations. like our groundbreaking climate

deal with china that will bend down the global emissions curve. american leadership is also addressing the pressing need for enhanced cyber security. as more of the world comes online, we are leading an international effort to define the roles for how states engage with one another in cyber space while ensuring the internet remains a powerful tool to drive advances. at the same time, we are on rolling -- and rolling new resources to drive new resources against cyber threats. secondly will expand prosperity by using a renewed economic strength, our research and improve energy security to bolster the global financial

system, advance, and opened the economic order, and reduce inequality and poverty. with the world's top universities, premier research facilities and a culture of entrepreneurship, america already has the keys that will drive the economy through the coming century and with critical investments in technology and innovation, will keep sharpening our technological edge to keep the american economy at the forefront of innovation. we are opening more markets to american business, workers, and farmers while forging trade agreements that set high standards for safe work standards and environmental protections and to make sure new trade and growth and if the people across the world we will continue to pursue sustainable development, grounded in our

commitment to end extreme poverty. we will work with congress to pass the promotion authority so we can finalize the transatlantic partnership, thus securing a free treat -- trade agreement with many of the world's most rapidly groping economies. we are expanding what is already the largest trading relationship in the world and we are committed to renewing and enhancing the growth and opportunity act to further deepen our opportunities in that developing region. africa is primed to become a major center of global growth. we have ramped up our commitment across the continent, including through the president's power initiative to connect millions more people through reliable

electricity. through our feed the future program, we are helping farmers and improving the food security of the region. last august for the first time ever pros -- president obama hosted some 50-some african leaders to chart ways our nations will do more together and seize opportunities for u.s. businesses to invest in africa's future. at a time when citizens of every region are demanding greater freedom and more accountability from their governments, our strategy is to defend human rights combat corruption promote government and stand with civil society. we do so by leaving our values

at home, by growing the ranks of the democratic state to defend universal rights. we will help states and transition like tunisia, burma and sri lanka to become more open more democratic, more inclusive. we will help establish democracies that are in danger of backsliding. we will empower ngo's that are closest to where they attack. at the same time, president obama has deepened our commitment to promoting that basic american value, equality. we believe everyone should be able to speak their minds and practice their faith freely. we believe that all girls deserve the very same opportunities as boys. we believe that all human beings are created equal and are worthy of the same love and respect

including our lesbian, gay, bisexual, and transgender brothers and sisters. these beliefs are fundamental to who we are. advancing equality is both morally right and a smart strategy. if we reduce disparity, we can increase our shared security. reams of evidence demonstrate how countries do better across every metric when they protect the rights of all of their people. we champion the rights of these communities and counter escalating cycles of hatred.

we affirm that governments have a responsibility to protect civilians. we will continue to lead global efforts to prevent atrocities and hold accountable those who responsible for those abuses. we are also reaching out to populations we can ill afford to neglect. more than half of the world's population under 30, we invest and empower adjuvant or ship. our young leaders initiatives in africa and southeast asia identify and mentor the next generation of talent to grasp opportunity. and because we seek to lead by example, we will keep working to make our own laws more inclusive , to sustain our prohibitions

against torture, to protect civil liberty and to advance issues like cyber surveillance. we have reduced the population of guantánamo by half, and while there are tough challenges they had, we need to keep going until we finish the job. and finally, we will work to uphold the liberal international order which has served us and the world very well for 70 years. we are strengthening and diversifying our alliances and partnerships in every region of the world. russia's aggression against ukraine is a heinous and deadly of fronts too long -- affront to long-standing norms.

in lockstep with european allies, we have built a coalition of partners around the world to impose steep political and economic costs on europe, in contrast to the country's invasion of georgia and we will continue to tour about -- turn up the pressure on less russia decisively reverses course. at the same time we are providing economic support to up ukrainian people provide a better future for their country and where strengthening our alliance with europe by ensuring our allies in eastern europe that investing -- investing in modernizing nato. our strategy is to enhance our focus on regions that will shape the century ahead, starting with the agent the civic. -- the asian-pacific. our focus is on strengthening

long-standing alliances and promoting cooperation. we are invested in the pacific islands forum and the east asia and summit, to strengthen their capacity to respond to crises like natural disasters and resolve disputes peacefully so the asia pacific remains a region of dynamic growth and opportunity. with china we are building a constructive relationship that expands cooperation across a wide spectrum of issues from global health to nonproliferation. even as we confront real difference over human rights, cyber enabled economic espionage, and the use of coercion to advance territorial claims, president obama's recent trip to india strengthened and other critical relationship that

will emphasize benefits for both of our nations and help uplift the lives of more of their people. i am pleased to announce today that we have invited prime minister of a -- prime minister abe of japan and president xi jinping of china for state visits and look forward to the president of south korea and the president of indonesia. at the same time, we seek a middle east that is more secure, prosperous, and where democracy can take root. that is the ultimate vision we are working towards with partners throughout the region. we will continuously strengthen the unique bonds that unite the

people of israel and the united states. our commitment to israel's security remains in during and unshakable. we refused to give up on a peaceful resolution to the conflict between israelis and palestinians. we will keep investing in the ability of all partners like saudi arabia, united arab emirates to deter aggression, even as we deepen cooperation. since libya, syria, and yemen erupted in persistent violence and instability, we must protect our people, work with partners to shrink terrorist safe havens and support those working to achieve political and social reform. to be sure, this region's challenges are many, including a generational transformation, citizens' legitimate demands

for political and economic reforms, ethnic and tribal regions and iran's destabilizing influence. we will continue to draw on all sources of our influence, not just a military and we will work to foster a process that endures. closer to home, there is a region that has experienced rapid growth with a large and growing middle class and it is grappling with issues like international trafficking in crime that have serious implications on our own security. we now have new opportunities to strengthen our partnerships with our neighbors.

we are investing particularly in central america, to improve governance, citizen security, to address the root causes of mass migrations like we saw last summer. across a range of issues, with an array of partners, the united states is proudly shouldering the responsibilities of global leadership. as president obama made clear during his state of the union address, the question is not whether america leave in the world, but how, and the answer is we are pursuing an ambitious yet achievable agenda worthy of a great power. the president's budget directly supports his strategy. our national security leadership is united around this shared vision and agenda and we are eager to work with congress to

restore the vital bipartisan center to u.s. foreign policy. our unparalleled leadership is grounded in america for all enduring strength and guided by a clear sense of purpose. we approach challenges using all levers of our power -- diplomacy, broad-based development, economic leverage, technological advances, talent, diversity of our people, and where needed, our military might . we rally partners to enact sustainable solutions when challenges arise. we strive to set the highest standards by our own example and we lead with our eyes fixed firmly on the future, alert to opportunities to make the world safer and increasingly just.

president obama has two years left in his term and that is plenty. this is a blueprint for what we plan to get done over the next seat of years -- from degrading isil and opposing russian aggression to fostering a world that can more effectively meet the challenges of disease, cyber threats, and extreme poverty. if we run through the tape, america will be better and more sustainably position to continue to lead on the issues and in the regions that will shape our future. one thing i can guarantee you president obama is going to leave everything on the field and so will the rest. the challenges ahead will surely continue to be many and great. progress will not be quick or

linear. we are committed to seeing the future that lies beyond the crisis of the day and pursuing a vision of the world as it can and should be. that is our strategy for sustaining the leadership that future generations deserve. anything less would not be worthy of the american people or of our great nation. thank you very much. [applause] >> thank you very much, susan.

susan has agreed to have a short conversation with me. then we will open up to questions from the audience. before we start, i want to say thank you. that does not get said enough. i have seen the pressure you are under and you have been slaving in the vineyard sports six years now. i just want to say thank you, thank you for your service. [applause] >> what i heard in your presentation, and the documents i had a chance to read this morning, essentially the headline seems to be america is back. we are going to lead. but we are going to lead in a different way.

the emphasis on the troops coming home of the focus essentially on issues that don't get the usual attention of headlines, except when evil is strikes, -- ebola strikes -- pandemics, cyber security, a focus on africa. these are things that seem to be things which they report does emphasize. the relationships with major powers -- certainly the mention there was mentioned in the speech but it does not get the attention that someone say they deserve given what has happened in the world, particularly with russia. i'm wondering if you can explain to us how relations with major powers continue under this broad national security strategy?

>> firstly, thank you for your kind remarks. i am grateful that my voice has held up the us far. i will continue to do my best. this is a multidimensional strategy. it recognizes in short we have to walk and chew gum at the same time. we have to deal with immediate crises and threats and at the same time have a long view and be prepared to seize opportunity. we have to focus on the regions that have traditionally consumed american attention and energy like the middle east and europe particularly now with an aggressive russia, but at the same time we cannot neglect or leave untapped parts of the world that have not less attention, particularly in recent years. we have to do multiple things simultaneously and believe it or not, we can and we are. that includes dealing with great powers and dealing with very

proximate threats that we are very well aware of that we face. i did spend a good amount of time in my speech and also in the strategy itself on a relationship with china, which we see is one of the defining relationships for the 21st century. complex, one of both cooperation and competition, but it is very much a part of how we view the world. we also look at emerging powers that have great potential and there, too, we are investing and the president's recent trip to india, coming three months after prime minister modi, an example of another large power relationship we intend to invest in. russia is a particular challenge and there is no question that a great deal of our effort and attention and our resource will be devoted to dealing with a

russia that is now acting in a very aggressive and threatening fashion. if you read the 2010 national security strategy, it has a different perspective and a different orientation towards russia. at that stage, there still seem to be prospect of a more cooperative and collaborative relationship. now we have to deal with the realities we face, and that means we will continue to reinforce our partners and allies in nato. we will invest the resources and posture ourselves to be sure there is an adequate defense and we are calling on them to do their part as they are increasingly. and we will push back end impose costs -- and impose costs for russia's aggression. we have made clear unless russia reverses course we will look for

ways to continue that pressure and we will do so in partnership with our european allies and others around the world who share that concern. so, that is the reality. of course, the second piece of it is the issue with upholding arms-control obligations to collaborating with p5 plus one with respect to iran. we have managed to work together and to the extent that that remains possible, even in the context of these other challenges, and even as we necessarily increase the cost and deter the effects of russia's actions, we will continue to cooperate where we can. >> you said in your speech and now that you will increase the pressure on russia until they review -- reverse course and ukraine. in the document itself, you

say you will help ukraine provide for its own defense. the big debate whether arms should be provided to the ukraine. can you respond to that question? >> yes. i am well aware of the debate. joe, as he only says, he has done a very good job with friends and colleagues of putting forward the apple recommendations on the way ahead. we are very much a sussing a partnership with our european allies, what comes next? what comes next with respect to economic pressure and other forms of russia. we are already providing military assistance to ukraine. we have not taken the decision yet to up that, and the nature of that assistance.

it is something under consideration. it is a significant step and we will want to do so in close consultation, adding coordination with our partners who with us thus far have been a core element of our strength in responding to russian aggression. >> china, what you said in this document about the way you'll cooperate with china -- but compete where necessary and build up relations with traditional allies in asia -- but the language in terms of india is different. it talks about, the document talks about "strategic convergence" with india, with india's east policy and america 's rebalance. that seems to be a pretty clear indication that you are going to

be working with india in this region, not necessarily against china, but where necessary to balance china. is that a fair read of the strategy? >> i would not put it that way. i would say that these are two very important relationships and we are committed to building them but they are very different. obviously our relationship with india, as the world's oldest democracy in the world's largest democracy, has the potential to be different in important respects, with respect to shared value, and perhaps a broader sense of interests, but it is not about pitting one against the other. it is about building the potential of both these important relationships to the extent possible. and let's be pragmatic. even with india, obviously, we have had differences in the past .

india has enormous and very real development challenges and it has a history and the international system that makes it different than our own and where we can expand the scope of what operation -- and i think we have demonstrated that potential is now greater than ever, we will do so, but i would suggest they would be without -- i would not suggest it would be without some moments of disagreement. >> last question before we go to the audience. in iraq in syria, the national security plays out in terms of dealing with the challenge of ice is in iraq. in syria, it talks about the notion of some sort of political rearrangement there that will be necessary. it does not really sound like a

plausible strategy. it may never be possible to have a plausible strategy in syria given the situation. but how do you deal with the fact that this is a phenomenon -- there is no border anymore. do you have a way of dealing with it in iraq -- it does not so much we have a way of dealing with it in syria? >> martin, there is no question the challenges in iraq and syria are different and by necessity we have to approach them differently. yet, it is a region where the violence is spilling, not only between iraq and syria, but other nations in that same region. in iraq, we have the prospect of working with the government in a fashion that provides hope and a nonsectarian way, and inclusive

way to give us a partner on the ground that, however weakened, it is established can be built up. that is exactly what we are doing with our coalition partners in the iraq context. we are building up, assisting the iraqi security forces, providing active support from the air, and as a consequence pushing at numerous contested areas. in syria it is different. we have a government that has violated all of the norms and lost its legitimacy to govern. it has implemented horrific violence against its own people. that is not a partner, for the united states or any other member of the coalition. but that the same time, we need

to not only take the opportunity to degrade and defeat isil from the air and cut off the financial flows and cut off the support -- we ultimately need partners on the ground, and they are building from a lower base, no question. we have committed and we are working and have been to bolster the moderate syrian opposition. but obviously that opposition is weakened and under strain. so, the process of working with our coalition partners to build that capacity will be longer and more challenging. even then it is in iraq. >> great. let's go to the audience. i would ask three things. identify yourself. ask a question. and number three, please let's focus on the national security strategy that is the focus of this meeting today. yes, please.

yes, the lady. >> [indiscernible] the hostage policy of the u.s. in terms of national security. >> in the first instance, we are obviously very concerned about the reports that have common in recent hours. we do not at the present have any evidence to corroborate isil's claims, but obviously we will keep reviewing the information at hand. we have a broader policy with respect to hostages around the world. we don't make concessions to terrorists and hostage takers. we don't pay ransom. we adhere to that policy because it is our strong view and our

experience that when you make concessions and pay ransom, you are only generating greater incentive for additional acts of hostagetaking and you are providing process -- resources to fuel this continued operation and horrific attacks. so, in the broader sense that is how we approach this. we all learned the process in the review of our hostage policy -- not with respect to the no concessions aspect i have outlined, but with respect to how we can support and be more responsive to the needs of -- for example, the families that are suffering so enormously when a loved one is in that circumstance. frankly, this is an area in which the president believes we can do better. at and we are

trying to learn from the experiences of other partner countries that have similar approaches to the united states and we are in close consultation, for example, with united kingdom on this, and we try to learn from the experience of families themselves. part of the effort is to be in broad communication with them and ask them, what is it you have experienced? what has not worked for you and how might we do better? >> yes please. >> thank you. my name is martin. i'm the ambassador of switzerland. i did not have a chance to read the strategy, but from what you have explained, multilateral institutions, multilateralism does not play an important role. is this impression right? >> it's wrong.

>> it's wrong, ok. [laughter] >> obviously, it has just come out. i commend the multilateralism remains an important element of our approach. it is treated in some depth in this strategy, as it was in the 20 to -- 2010 strategy. i think throughout the document you will see a great emphasis on partnership, alliances coalitions, and collective action. some of that will be best conducted through existing international institutions. there is emphasis on international order and norms the rules of the road. but also, updating these institutions for the challenges of the 21st century. i think you will be that seem well treated.