sure that we do this self-examination. when i talk about the strategic direction forward, that is articulated in a document called the design for maintaining maritime superiority, which was issued last january, we talk about the strategic environment, and we have done some of that already. lines of about four effort that we will take to address that environment. and then we talked about those lines of effort resting on a foundation of what i call core attributes, integrity, the attribute of accountability, initiative, and toughness. so that we ensure to the greatest degree possible that our behaviors as an organization, all the way down to our individual behaviors, are consistent with our core values of honor, courage, and commitment. the message that i sent out, which has been in the media, and

the discussion that we had last week, which was a scheduled meeting of all of my flag some timewe did spend talking about the absolute importance of these core of disputes, our -- core attributes, to make sure that we in particular are behaving consistent with those core values. and it really goes down to the fundamental, existential importance of maintaining trust and confidence. trust and confidence of leaders from superiors, subordinates within the navy, and the trust and confidence that the navy and u.s. military has with the american people. so we had a rich discussion about that. there interesting and engaging group. i think we all went away with a renewed sense of how important it is for us to ensure that our behaviors are consistent with

our values. >> as you know, the public at large and public opinion surveys always say it has a very high degree of trust and respect for people in the military, particularly military officers. the one institution that consistently ranks ahead of many others in our society. yet over the last couple years the navy this contracting investigation involving an asian defense contractor, it seems several officers who have pleaded guilty, not just to accepting bribes, but giving classified information to this defense contractor in singapore. that has come across as a bit of a shock to many members of the public, that this happened not just in one or two cases, but in several cases, and this is an ongoing investigation. within the navy, how is this case being felt? what kind of damage is it causing? what kind of reaction is a causing within the many officers

who do not engage in that kind of behavior, but see a pattern of a problem out there? admiral richardson: if i could quickly asked sir. you have characterized it everywhere. one is an investigation in progress, so we can only talk about it to a certain degree of detail. the vast majority of our leaders, in the uniform and civilian force, are behaving consistent with that trust and confidence in american people have been us. for that small minority we are involved in, this type of behavior, behavior that nobody can be proud of, we have got to let the investigation complete, and we will respond to the information in a way that will i hope maintain and strengthen that trust and confidence, that we can police ourselves and hold those folks accountable to the agreed that the facts dictate. susan: we have 30 seconds, gordon.

to the broader question of the credibility of the military and the public side, to what degree you are worried that is slowly eroding with cases like this? admiral richardson: i do not think it is it eroding, gordon, but we cannot wait for that to happen. if that starts to happen, we are already shooting behind the target. that is what i wanted with this message and with prioritizing it this last fight officer and the conference that we continue to stay -- "newsmakers" can be viewed at our website. we leave the last few minutes for a heritage foundation discussion for between worker pay and economic productivity. >> we will post the program today on the website following its presentation for your future

reference as well. hosting our discussion today is james sherk, who is a fellow in our data center for labor economics. his research involves promoting competition and mobility in the workforce. his commentary and analysis has appeared in major publications. such a guest expert on experts as cnn, fox news. testifying on labor issues before committees of congress. join me in welcoming james sherk. james? mr. sherk: thank you. i would like to introduce we and veroniqueship de rugy. i am obligated to invite somebody from france to come to

my events. one of the major issues that we face in the u.s. is how do we raise workers' pay? this is come to the forefront since the recession. we have seen a typical family's income has not recovered yet from the recession. it is on the front of the mind of many policymakers, many in the news, and yet the obvious answers with see there are people saying that does not do it anymore, because if you asked any economist, how we raise a 101er's rates, whether econ or got your phd, the answer will workers will get paid according to their productivity. the answer would be make them more production, education to make them more productive, experience, removing regulatory carriers, whatever it is, generally speaking, economics

arguments say workers get paid according to their productivity. if you are more valuable, you will get paid more. us,le this is a consiss there have been some saying this is not the case. we're seeing a lot of charts from an organization called the aonomics policy institute, think tank. the chairman is richard trumka, and they are coming from a left wing perspective, but that does not mean they are wrong. at heritage we do not believe anybody who has a position you should not ignore their arguments and take a conservative position. fact that epi is coming up with these charts, it is worth taking a look at. what this chart shows is productivity and compensation

growing together up until about the early 1970's, and then onwards huge increase in productivity. productivity increasing about 70% in their data, but pay does not do the same thing. they only grows by about 9%. this is something to me as an economist looks very weird. ofis something that a lot senior policymakers believe is happening in economy. basedent obama has to administration's policies basically forced companies to give workers the productivity. his arguments and the argument of epi is workers are making more than ever, and yet the companies are holding back that productivity. are onlych, the ceo's, getting the benefit of increased workers productivity.

the new overtime workers relations, we are going to require salaried workers who make less than $47,500 a year, to track their time because they now qualify for overtime. if you want to get overtime, you have to log you are our street the administration said we are doing this because companies are not paying workers in the more for their productivity, so we will force them to share that productivity with their workers. we are hearing his argument that workers are more productive and in essence companies are achieving them. they are not paying them for that greater productivity. i found that very interesting, so i look at the numbers myself. as you can see, i found results that were somewhat different. this is looking at the nonprofit sector, a bit different from what epi did. in the nonfarm business sector, i found that productivity has grown by 81% since 1973, when

this diversion began to an average compensation has risen by 78% or do any gap whatsoever. if that is the case, then the administration's proposals do not make as much sense. it is one thing to push for higher minimum wage if companies are not paying workers for their productivity. but if a worker is paid for the productivity and you tell them this guy you are paying $10 we are paying $15 an hour now, he is going to get fired. you cannot force a company to pay a worker more than he produces. this has very significant implications for what labor policies will help workers get ahead. to do epi and i come different conclusions? it is not just me here. most economists who look at these numbers, from the president of the national bureau of economic research, to left

a very economists, honest left wing guy who looks at these numbers and says you cannot come to the conclusion that pay and productivity have a hefty diverge. one was on the council of economic advisers under president clinton, now at harvard, many other economists come to conclusions similar to what i do and different from epi. what explains that averages? epi is making an apples to oranges comparison, and if you make that comparison, you find the same groups of workers, productivity and pay have grown almost actually together. the first thing that is going on is epi is comparing different groups of workers. isir measure of pay here based on the bureau of labor's

assistance payroll survey for production and nonsupervisory workers. it covers in theory about 80% of the private sector workforce. i think in theory, because the hasau of labor determined companies do not appear to be recording the wages of the workers who should be in these nonsupervisory employees. they are reporting the wages of hourly workers, it production and nonsupervisory employee are not a classification. they get asked that. that is not the entire private sector. there's a lot more workers. productivitying a for two different groups of workers. that will give you a different result. there is no reason to expect that pay and productivity for two different workers to her at the same rate. another thing going on is that chart only that the pay of workers who are not

self-employed. they are not there in that survey. it includes the productivity growth in self employment. this includes people who run their own dry circa also someone er, drives for ub independent contractors. their data do not show up in the survey. a show up in the tax filings with the irs. growth is feeling its economy, but not being recorded on the survey. if we didn't everybody who self employed, but not their earnings, self-employment earnings are a growing share of the nonfarm business sector. it is not an apples to apples comparison. we say we count your productivity if you are self employed, but ignore all the growth in their pay.

a lot of uber workers would be shocked if they knew they did not count. they're using different measures to it and just pay and productivity for inflation. the government has many service that measure inflation. what the policy since it is using is the survey that shows payfastest measure of growth that nascent looks lik e inflation aggressive growth is growing slower. it makes it look like inflation adjusted productivity has grown faster. this alone apart from any other change will make pay and productivity appear to grow differently can even if in terms in nominal dollars from the paycheck workers get him they will have exactly the same pay. they are using a different measure of inflation, differences that are caused solely by the difference in how you technically inflation and are not caused by data.

what happens is this chart shows what happens when you account for these different factors. what you can see is the top bar shows the gap caused by the difference between the excluded or included growth in productivity growth, the bottom is looking at only a different subset of workers, and the middle two bars show the different of attacks using different measures of inflation. detailpy to go into more later. these berries factors account for the entirety of the difference drink productivity -- different between productivity and compensation great. if you measure to an apples to apples basis, pay and productivity for the same groups of workers are growing at the same rate. this chart rates down the regions of the gap. 45% comes from you are not

looking at all employees, not looking at the pay of all employees. another 12.5% comes from the south employed -- self-employed. 39 present is coming from using different measures of inflation. 4% leftds a total of over at the end of the day. if pay and productivity are growing together at 96% and there is on a 4% difference, i do not we should be drug conclusions that companies are holding back workers and denying them the fruits of their labor. we should not say they are looking for wasting help workers become productive. state in the country can you need a government license to be a barber. as a man, the difference been a badd haircut and a tha haircut is about three weeks.

the reasons we have these licensing is the incumbent arbors are lobbying for it to keep out potential competitors. you have a lot of workers who lose their job in another sector of the economy could work as a barber but are barred by law. it is not so much redistribution from but how do we help workers become more productive, how do we improve education, job theirng, reduc improve productivity. what we are to be looking with renewed urgency following the great recession. but if you are skeptical of my claims can there is another way of looking at it, and that is what chair of national income do workers take home, do workers collect? there was an argument in the late 1990's, we should expect to

see workers share a national income just flapping. [indiscernible] we are again seeing this argument come back because it seems to look in this measure of the bureau of labour statistics data that the share of income is going down, it has fallen. people something that are saying it shows workers are getting mistreated by employers. this is one of those cases where you need to make an apples to apples comparison and understand the data you're looking at. the bureau shows labor share of gross income, income before depreciation. if you are a company, you need use capital to produce goods and services you need to buy computers for your employees

to write reports. up,eciation has gone particularly as we have been using more computers. ago, i would not to want to be a person using a computer built in 2001. companies have to use more of their income to replace depreciation. net income, what is left over to replace depreciation, and everybody agrees with this, but that is much not what the u.s. reports. bls just changed how they reinforce income, cause if you work for yourself, what part of that is capital income and what is labor income? it is very ambiguous. the bureau changed how they did that in 2000. before they attributed it to 4/5 of income to self-employment

lit income, but now it is about half. in 2001 like starting there is a huge drop in worker share of income but it is because we are treating self-employment income differently. nothing changed in the real world. if we account for these factors, this huge gap -- drop in ladenburg share of income graduate. workers share of income went and andup in the tech bubble, the redline indiscretions that. if you look at net income and self-employment income consistently come there's no real drop in labor share. i am running out of time, so i will slide over this slide. say one thing, the fact that average productivity grows together does not mean every worker is experiencing the same average credit in productivity.

this graph shows the average growth of productivity. as you can see him pretty sharp growth. not as well report for the pretty healthy, growth in labor income for the bottom fifth of households, but for the middle fifth, only looking at about 18% growth, 20% growth for the second of the third when tiles. the key challenge is facing toicymakers is how increase the productivity for all workers. if we do that, wages will rise. it is the productivity has grown faster for some persons than others, and the challenge is how do we close that gap in productivity. with that, i will turn it over veronique.d

i think it is an incredible report that james has written. i have been an admirer of jame'' research. i aspire in my work and occasionally successful in writing something where somebody who is new to the topic can come to its, and if they redouble think carefully and slowly, they have been brought up to speed in a way that a good fraction of the experts out there are not this the on, and i think james work is consistent. i will also say i agree with james that this is incredibly important policy issue. 's tends to make people eyes glaze over. if you're willing to trust james, do not worry about the

technical issues. he is right on them. but the bottom line is that labor share of income has not fallen, that worker pay has tracked worker productivity over time, those are crucial conclusions, and it is not the conventional wisdom. there are a few issues that drive me nuts because the facts are so clear, but the conventional wisdom has not caught up. i believe in five or 10 years this will not be controversial at all. it is just that you have a lot of people who read something earlier in the careers and did not read anything ever again and arguments that pay has not epi,ked productivity, groups that produce results that are ultimately misleading. so the other thing i wanted to say, recently there has been this blossoming of research that will produce this with them, so here is james' paper and

has done other work for this. i wrote something in late 2014 myself. m.i.t. raskin, wrote something for the brookings paper in march of last are, and there is an economist who wrote something in late 2014m lookin at these findings and these findings what james talks about our in other countries -- are in other countries as well. there's a trend in people finding this same result. then i want to use the rest of my time to talk about a few extensions to the research here. i have been working on some of this myself. i have benefited greatly from medicating with james along the way and realizing i do not know the data as well as he did. in work i am doing, it is

important to know that since 1948 that worker pay has kept up with worker productivity. you cannot take hourly pay data that before 1948, if at all, but you can look at annual compensation rather than hourly compensation, and you can look at net gdp instead of net productivity. because both of those are divided by the same hours to get hourly compensation or net productivity, comparing total compensation to net ddp basically tells you the same think of that we could look at hourly compensation going all the way back, and we can look at productivity going all the way back. when you do that, if your starting point was 1929, they still line up in 2001, the annual compensation and that gdp were 20.1 times higher than the

1929 to 1934 average. this conclusion we can extend back further, and it is remarkable how well they line, especially given that data is no -- is by no means perfect. i do think it is an important policy question, what has happened to the median workers' hourly compensation. it is groups like epi, if they were smart, they would concede james' argument about overall pay tracking overall productivity, because it is an open and shut case. do is they present a chart the chairs the median workers' pay has not kept up with productivity, and that is a point that james raises and is an important one, but it is also misunderstood quite a bit.

so just let me go into more detail. you will see with epi's analyses, something like for 1973 to the ending date, 2011, the median hourly compensation rose by 37%. the median productivity increased by -- i'm sorry, not median productivity -- increased by 84%. including inflation adjustment and everything i am giving you from here on out uses the same inflation adjustment. has not kept up with productivity. we do not have the median workers' productivity that has kept up with the median worker'' pay. it is higher for higher earning

workers. there is not really evidence on that. i do to not think we'll have the data that will let us answer that question, what in theory, it is not right to look at the median worker and to compare whether their pay has kept up iseh overall economy-w productivity, even in the nonfarm business sector, for that matter. we cannot track hourly, vision much -- hourly compensation farther back than 1970, but there was a paper by a man and his colleagues where they looked at the annual median earnings of commerce and industry workers, between ages 25 and 60, from 1973 until 2004. their trend should you -- show you the base same thing, a big divergence. it is important to think about the starting point.

in 1970, the assumption with all these analyses was worker pay was essentially where worker productivity would have been predicted. because of it was, you would expect it to grow at the same rate. what if it were the case that actually worker pay in 1973 was higher than worker productivity levels actually justified? it is not hard to think about a scenario where that might be the case. we had a big area of unitization in the mid-20th century, until the recent decades we were paying man, a breadwinner premium, essentially, because we thought the worst thing in the world was for married women tour, and we were if it is the case that worker pay in 1973 was higher than productivity level was justified, well, this is missing

the boat, so what i have done -- it turns out in the 1940's, median pay growth exceeded productivity growth. you think of this between the wagner act that made work a lot mader and another act that it more difficult, so in 1970 three, median annual earnings ,ad grown by 176% since 1940 whereas productivity had only grown by 145%. as of 1973, if you pick 1940 as the base year, worker pay was above the level of productivity would have predicted, so what would you expect to see? you might expect to see a correction of the time i think that is what has happened. 1980 is a bigfter gender difference. among laymen, median hourly overall net tracks

productivity very well until about 2000. over the 1980's and the first part of the 1990's, the pay stagnates and declines. after that, it follows the same path as women's median compensation, that it is much lower now, so most of the decoupling to the extent that it has been any has been around man and there is a reason to think that this is in some way the big historical correction for an era that none of us really want to go back, and some of us might, that few women would want to go back to where there was this wedge between worker productivity levels and the pay that they received. i think that is another important difference of secured by these analyses showing median y not keeping up with

productivity. i will stop for q and a. >> thanks. echo what he said about the importance of james. i also want to echo what he said about the ability of james to communicate to people who may be do not quite understand what james is talking about as an outsider and make it crystal clear. i go through the research all the time and ago in bug him when i'll write something about his work and i want to make sure i'm not saying something that is not correct, and he is always very gracious and scott is the same way. the incredible values of these two guys is that they are debunking a lot of rings that andconventional wisdom, they helped this conventional

wisdom move toward the truth. this is particularly important. but io labor economist, would tell you why i have been following their work quite closely. not always understanding it fully, but quite closely. play the french card often, but i am going to now. i am extremely concerned by the development in the labor market in the united states, and i'm really concerned that there are a lot of forces trying to push the american labor market into becoming more like the french labor market. why is that a bad thing, right? you always hear about french lifestyle, note being forced to shower, all of that stuff. [laughter] the reason is that i think there is quite the consensus, even among socialists.

yes, we have a socialist party in france, but the labor market in france is one of the main causes of the problems in the economy in france, it is not the only one, but it is one. it?bad is in the last 25 years, the average among women and men, 9.6% compared to the u.s. at roughly 5.4%. the other thing is when you look at the unemployment in france, it is long-term. forployment right now people younger than 24 is about 25% and it has been for a long time unemployment among women that is also fairly high, so i just really quite fear the consequences for the u.s. if we introduce so many of these. the way they are introduced is

by pushing arguments, such as the one that came in the paper and the research and the scott has been debunking, and eventually, they will be the actual fact where you put in place the right policy. with that in mind, i could tell you what my feeling from the outside is kind of about what is wrong about the argument. they presented the technical case about what is wrong with the numbers, but what hollywood strikes me as problematic in the argument as made. first, i think there is an inconsistency amongst people on the left, but also people who are pushing for strict french life regulations, right? wo.ould just give you to can you put your chart up? yours. yes, this one. on one hand, or actually the

other one is editor. they argued that productivity is increasing quite dramatically, the wage growth and worker pay, but on the other hand, right, they also argue that workers have become more expendable. in a precarious position and jobs are less secure than they used to be. to put those hard claims together. if you think about it, if the ise of return on the masses that rate of return goes up, and it holds that asset, right, much more, you want to keep it. it is more secure, right? if you actually did not process it, you may try to acquire it.

that isn't quite make sense. there is another inconsistency. i wonder how those talks about this gap, this decoupling that exist, actually squares with iner talk about the slowdown productivity of the american on the one hand we have what we call this great fascination, which often is argued from the point of view that there has also been a reduction in a gross productivity of workers, and on the other hand, you have an argument that you have great decoupling where you have productivity where it is growing tremendously. square.o things are not there is a tension. it may not be inconsistency, but there is a real tension. a lot of the debate, even the

economic debate takes place in this schizophrenic world, where you always have those two things living together, even though they really should not. would like tot i make is that i think in berry, and you guys can correct me, the only way this decoupling sustains its up over time, which is what has been argued, sustains itself over time if you widespread -- basically, you have a egg, fact the importer with a monopoly position in the labor market. is this how we feel the u.s. has been? it is hard to argue that basically there is like -- even if you don't want to think about the labor market and the u.s. as one big one in all of these labor markets. it is hard to argue that it is the case. even in washington, d.c., where government.federal

we cannot argue that is the case. however, i actually think that the burden -- if that is not the case, the burden should be on the people who argue and to actually produce a theory behind their chart that actually sense, theat makes theory in the real world. finally, i will say that i thatlly think the worst they are doing is extremely important because if anything, measuring real wages, measuring wage and french benefits, getting those numbers right is going to become more and more as there are multiple

and growing ways that employers actually paid to workers. think about it this way, flexibility, telecommuting, which will only go up, but even things like your work offers a cafeteria, you have a gourmet , a coffee machine in your office, i mean, there are just all these ways that actually your job that goes beyond and a conversation that goes way and measuring wages correctly will trigger more fake theories, more fake arguments frut why we need more

ecnh like cricket -- french like regulations in the market rate i will finally conclude with saying that i absolutely agree with you that it is the destructive force of the foromy, it even though women, a bad haircut is more than three weeks -- [laughter] still. so thank you. >> let's open it up to question. we have staff going around with microphones. if you are called upon, up stand and state your name and affiliation. any questions from the audience? the gentleman in the front. >> hi, i am terrell brown. it has been a pleasure listening to you. you mentioned a variety of discrepancies used when measuring productivity by organizations and institutions.

athink you mentioned the epa one point. epi, ok, when you measure all these different discrepancies or you try to create accurate information for all your research, what about other groups of working individuals like undocumented immigrants, a , or peopleentation in prison systems where the information is not compiled? what about those groups of individuals? are they measured or how would your colleagues comment on that? >> we are using the basis of the numbers used up there. they comes from economic analysis, so that is the data that feeds into the ghost of mustard product, so when you hear the report that the economy grew 20% last quarter going over the growth wines of the income of that is coming under this idea of national accounts. to the extent of undocumented immigrants, but

state they report them in the whatevernd i paid them amount last month and they show up into the payrolls and that information was reported to the authorities and that will feed into the data. the employee reports about the payroll that comes in. outs entirely -- if it is of the books, a construction worker, someone taking cash wages, then he will not show up. i believe in it comes to prison labor, that is not get counted in that. scott may know better than i, but generally speaking, i know a lot of labor statistics are done on civilian and noninstitutional population, so you are not a military, imprisoned, and i believe they are doing the same, so i don't believe prison labor would be counted unless you were somehow running an online business or something. it was not prison labor per se,

but it would be official business in the market economy. >> that is the really important question, particularly the prisoner part of it. in the median compensation numbers that i was giving you, those come from household said, they as james are surveys of the noninstitutionalized population. they exclude anyone in prison. there is an argument that i think has a lot to it that if these guys wearing the labor force instead of in prison, they probably would be below median workers on average, so it would pull the median compensation downward in the extent that we had this prison boom over the 1980's and 1990's and it would by 2000 thanmore it would in 1980. in some ways, i growth estimates , our wage growth estimates are to those workers

productivity levels are also probably below average productivity levels, so just as the wage growth says it is probably too optimistic, productivity data would be equally so, so the press you attract over time, it is not clear at all how the picture would change if we have not had a big incarceration boom. >> any other questions? gentleman in the corner? how are you all doing? with responsible citizenship. my question is directed to you, in the paper entitled board of compensation, on page nine you mentioned under the patterns ipd uses a chain

methodology on regulating the accounts of changing. can you explain chain methodology? >> this is an important question. there are a number of different places for consumer prices. one is typically what the media reports. there is another that scott and i, the federal reserve also a that is a better measure of changes in price patterns, personal consumption, tax. one of the main differences between the two is whether or not you adopt what is called a fixed basket or changed methodology. what a fixed basket does, we'll estimate what all americans are going to consume on average and it spends 1% of their budget on ,ovie tickets and 25% on grand 10% on gas, and so on and so forth. and that we just measure the

prices of those goods of that change over time and we use that same basket, so let's assume you and you use basket that fixed basket, but consumption matters change. i imagine most people in this audience have something like this in their pockets, but what happened in 2007, no one could bite into something like this because the iphone had not been invented. starting in 2007, apple introduced the iphone and android comes along. the price of the smartphones drop a lot and however, if you are using a fixed basket in 2005 or 2006, you'll miss the effect of the money spent on that and you will miss entirely the drop in prices and smartphones because it is not in your basket . what think about things like as i'm sure we have all experienced.

the price is gone from four dollars a gallon to two dollars a gallon in the past 18 months. as a result, they spend more on gas. after driving more, people are driving more, they have more money to spend on other things because they are not spending as much on the gas, so the quantity of gas and purchase has gone up and the amount of money that you had to spend another things because the price of gas will be down is also going up, but if you are using a basket extent 2013 when the price of gas was a lot higher, you would miss the fact of all the change in gas prices. it is widely agreed among economists for what is called a change methodology, or you are whated and you say, here's families now spend their income on, here is how the prices have changed and how it has been updated. almost no one disagrees with the

fact that this is a more accurate methodology. however, why have we not fixed the consumer prices? social security benefits are indexes to cpi, as are the federal tax brackets. in chain methodology, it reports lower inflation mathematically so if youed basket, adopted a chain index for the cbi, social security benefits would not grow as quickly and taxes would rise. you can imagine that this is anything that would reduce the and affectenefits thai taxes is going to have a lot of people who were not going actuallyhat, so it is produced a changed consumer price. they recognize this as a better methodology, they have implemented this, use this and congress does not want that to be official, so that is why we officialpi.y used

the federal reserve recognizes this. they use this alternative measure that uses change index. there are a few other differences. the congressional budget office uses the change index. --epi, because they use fixed baskets and the chain index to measure the different to it is inflation rates. it has nothing to do with anything in the real world. it is just a mathematical formula you are using. there is a difference in mathematical formulas and they are details, but it is an important question because if you look at the world through a less accurate inflation lens, it makes it look like things are not getting better. kenexa look like, man, the workers are just not seeing any

benefits. productivity is going up, workers are getting mistreated, what is going on question mark all that is happening is you are using a less measure and that accounts for 40% of the gap, the difference in inflation. recognizes this because they have some justification for using the price index and as a good thing the appendix, their explanations are not factually accurate. and at that some of the specific claims they justified using the cpi and they are just making claims that they had to object because they are not accurate. epiink ep at some leveli -- believes this at some level and uses the price indexes as one way to show that, but if you use the same index and the same group of workers, it is hard to escape the conclusion that productivity and compensation have been going up at the same rate. i don't know they want to add anything on this point.

>> no, but i have a follow-up question. we can hope that conventional wisdom is going to evolve, but how do you see it happening? something see that happens? how does it happen and how does the process take place? >> do you want to take a stab at that? [laughter] >> i think it is important that the change does happen. hopefully, it comes about by enough of us by pointing out with the basic facts are and by pointing out that it is not just conservatives that are making these points. the idea ofht that changing is not controversial in any way. the census bureau, for instance, in their research papers has timehed to an index over that does try to account for the fax that the consumers change

what they buy when prices of change, so for anything going 1994,i think earlier the they use a different index than is the one that public a benefits and tax brackets are paid to. there iss bureau knows this thing called the chain cpi, which is kryptonite or dynamite for discussions of public but in understanding you ask why the census bureau would not start using that index or research studies, why is it that the policy institute does not use c the changedpi -- does not use that theyd cpi or pce

can use all the way back to 1929? there's not a matter of tax and benefit politics. it is a matter of big p politics, where some people have wherenterest in showing things like they're getting worse or they're not getting better as rapidly as they are, and there are a lot of other people out there, consumers, and researchers who are just not cognizant of all of the detail that james was talking about, so they do it the census bureau does, what other people are doing, and it in trenches itself, so it is frustrating when this is another one of those examples where the facts could not be clearer, yet, the cw lags. the only thing we can do is bangor drums about it, and if we cannot have social security benefits rising at a slower

pace, well, maybe we can convince the bureau labor statistics, the census bureau to start using the more accurate inflation measure so we can understand the world better than we currently do. thereould also add that are a lot of people who do get this. he is basically -- he has basically written about how a liberalo gap and guy, i mean, some of those policies, i want to tear my head out, like you're getting rid of for electrical conjugations, but he is very serious with his concern about the truth, and he has written, you cannot specify this. steven rose, the affiliate for an institute, a lot of folks on saying, lookend up

[indiscernible] said, initially in some of their analysis the cpi and then they say, you have these problems and the numbers show faster growth of people below the 90th percentile and other numbers show complete stagnation. it does not show .1 of 1% in the data and i would not disagree with that, but it does show the income growth for broad majority and maybe not as fast as she faces might have enjoyed. i think we have time for one more question. the gentleman in the back. >> you talk about productivity, how it is measured, what is the formula? probably speaking, it is a

difficult question at conception level if you talk about an individual worker. my productivity is whatever i bring in, what is john smith's contribution to enterprise of smith and tomrsus fisher, however, you are working in teams, what have you, but if you want to talk about the , it is productivity simple. take the entire economic value that they produce and divided by the number of work hours with everyone in the facility. probably speaking, that would give you an evidence of what it cost at the company. it will give you the number of hours everyone has put in. you had up what is the total bio everything produced divided by the total number of hours and you get your answer. where you run into some problems

would be things like the government. the government does not sell anything the worker does. that is a very interesting question. many of us have inherited the product produced as negative. answer because you have to look for a number is basically to assume that the productivity of the government [indiscernible] if the bureau or if the labor department spends $12 billion in spending, you divide that by the number of hours working in the labor department and that is the compensation and since most of the cost will be labor cost, you basically assume that the number of employees is equivalent to pay. a little bit different, but [indiscernible] is whyt so sure, so that a work in the known business sector because he basically work with private sector businesses where that activity is much more clear-cut.

again, you have issues. how do we know what the hours of where everyone work are? we have the employer surveys and those will be fairly accurate for hourly workers. how about a salaried worker? what if you are checking e-mails on a saturday after work? what if you come into the office late one morning or you take over and make up the hours on a saturday afternoon? many have the flexibility to do that. if you venture into a household survey on those hours, you theably are going to report hours you are away and you probably will not count when you spend on after hours. maybe it you do. there is some imprecision, particularly in our you populate the hours. it is based on a survey and that is all you can do. you can watch the rest of

this heritage foundation of an later today on their website on www.c-span.org. the u.s. house is about to meet with no legislative business. legislative work resumes tuesday, june 7. >> the gavel first. [gavel] >> the house will come to order. speakers room washington, d.c., may 31, 2016. i appoint to act as tempers speaker on this day, signed paul ryan, speaker of the house of representatives. >> the prayer will be offered i reverend gene, st. joseph's

catholic church, washington, d.c. >> the lord on the house side of theu.s. capital is titled apotheosis of democracy, depicting the horn would plenty which you have blessed the country and the industrious people who are responsible for it. the season of summer, we pray that you bless those here who govern and the governed with your divine wisdom needed to continue the awe-inspiring prosperity with which you provide us. amen. presume to section four a of house resolution. the journal of the last day proceedings is approved. the chair will leave the house in the pledge of allegiance. allegiance to the flag of the united states of

america, and to the republic for nation, stands one under god, indivisible, with liberty and justice for all. please, be seated. 4b of house ation solution. the house stands adjourned until 4:30 p.m. on friday, june the third, 2016. finishing up a pro forma session with no legislative business. reconvene tuesday, june 7, 4 legislative session. coming up in less than a half-hour, unveiling a new u.s. military officials as they discuss the region. the center for a new american security will host the event at 5:00, about 30 minutes from now at one: 30 pm eastern time.

"washington journal" will be live from laredo, texas, starting tomorrow. tomorrow, the focus is immigration and thursdays program will focus on trade. here is a preview. at the laredo field office. $166 billion in imported in .iscal year 15 over 3 million commercial conveyances. at laredo port of entry, ozone, over 2 million tracks, $115 billion in trade. that translates to a little over cks the day that comes through this. there are enforcement strategies that involves the advanced information that is transmitted to us. we use that information to identify the higher risk conveyances and we want to dedicate our resources to it.

it is really about before the shipment gets to the border. it is about government agency partners, our trust trade importers, custom trade partnership, to make sure they are employing very secure controls throughout the import process, and the shipment gets is determined what needs to be examined, the shipment is released, and then even after the shipment is released, our job is not ended. we still continue to look at paperwork after the fact, the post-entry of view, to make sure we collect all the proper revenue, making sure that they are in compliance with all of the u.s. government regulations. cdp works the laws of regulations of for the other

federal agents. blaster, the field office had 700 -- -- >> our user fees different? >> user fees are a separate fund. general, kind the of our general fund, house pay, to help offset the cost of our operations. and the money from duties goes to the treasury question mark -- treasury? >> that is correct. differentot of commodities. some of our highest volume, automobiles, automobile parts, medical devices, computer equipment, telecommunications equipment. i would also point out we are seeing more and more agricultural goods. throughout the field office, especially down in the rio valley, we see a lot

of fruits and vegetables coming across. we have textile products as well, so we see quite a bit. a lot comes out of the motor industry and the oil industry. does it ever slow down? >> not really. there are seasonal peaks, but it is ready steady throughout the year. when the holidays roll around, given a chance to take a deep breath, but i was here last summer, and even over the christmas holiday, we still have significant amounts coming dayss, so it is a dream 65 a year operation. >> we will go -- so it is a 355

days a year operation. >> here is a portion of today's "washington journal" on the future of flying cars. [laughter] " continues.journal next guest is talking about flying cars, good morning. guest: good morning, how are you? host: this sounds more like science fiction but you say it is fact and it's happening today. guest: yes. on the right here this morning, to get to the studio, i kept looking out the window. i encourage any viewer to do this on your way to work today or the grocery store. you will see that there are kids on hoverboards and people on electric icicles, you will see people on homemade solar bicycles. ofre is an explosion

experimentation that's going on now in the country in every respect of transportation. i would argue that this is the inventionplosion of since the 1890's-1910 which is when the modern combustion engine came into being. we are clearly at some kind of big hinge point in technology innovation -- and fuel and innovation. there is a lot of experimentation going on. if not a coincidence that you hear about flying cars, self driving cars, robotic cars, smart cars, all manner of bicycles, public transportation. muskple of years ago, elon runs tesla proposed the hyper loop which was a superduper train system based on the old pneumatic tube idea. in this creative

frenzy right now to try to figure out what is the next , financiallyent smart way to move us around. that's what happening. host: there is a mockup of one of these type of vehicles on the pages of smithsonian magazine. can you give us a sense of what these cars will look like? guest: it depends on which one you are looking at. the flying car right now -- there are flying cars. there is a company in massachusetts that has one. you can go online and order one. it does require a pilot's license. it fits inside a garage. it is folded up with the wings on the side of the car. you can drive that car to an airport and push a button and the wings poke out. then you can fly. are inve done this and the process of now manufacturing these and selling them. the flying car exists. the big leap i think people are

looking forward to and what all of these flying car companies are trying to build -- there is about dozen of these flying car with prototypes and mockups. you can find them online. they are trying to get to the robotic flying car. which is better than what you saw in the jetsons when you were a kid. george had to steer that. the hoped-for flying car is the one where you would open the app on your phone and say i want to fly from new haven, connecticut to boston, massachusetts and punch in the address and a robotic car would come to your house and you would get in it and there would be no steering wheel. they would be no steering whatsoever. the car would go to an agreed-upon launch place and take off and fly robotically to boston and land and drive you to

your location. flying cart these companies are shooting for. host: we're talking with jack hitt from smithsonian magazine. questionst to ask about what these cars look like and how they will operate and the regulatory issues and other things involved come you can call and ask our guest directly. you can also post on our website and facebook and twitter page. in this video, it seems that will have tordles be conquered to make these more mainstream. guest: there is a competition between the driverless car which happens on the ground in the flying car which happens in the air. each have advantages and one of the disadvantages are the flying car is there are more regulatory

hurdles to go through. really has not clarified where drone policy is right now. they will have to work that through and then get to the issues of flying cars. ground,ss cars among they have an easier task in terms of your craddock castle but they have a more difficult task in terms of technology. strangely, flying cars probably technologically more feasible than a driverless car. think about it -- a car on the ground is on a two-dimensional sort of plane. it's on the ground. it can only operate in these little core doors. it cannot drive on the sidewalks or go anywhere wants to. it can only go in specific places and it has to look out for a huge area problems like children dashing into the road, anything. a plane in the air has a three-dimensional space to work with. that has very few obstacles in

the way. even if we loaded up the air with lots of flying devices, computers would be good at is a multiplicity of objects flying through space. it sounds contradictory but that is true. that is the hassle that the flying car will have to contend with is the bureaucracy of regulation and regulating the air moves slowly. we have 120 year experience of bureaucratically managing the ground. we have been pioneering that for quite a while. have an easier technological hurdle to climb over but a more difficult bureaucratic one. host: let's hear from our viewers. its is from egg harbor, new jersey, independent line. i don't know if you commented on this.

words, profit and control. right now, it has been a with planes and air traffic going on. amazon came out with drones. traffic control. guest: yes, think about it -- planes crash very rarely. traffic control in the air is actually very efficient. when planes go down now, what is our first thought? terrorism. it's not that traffic control screwed up, it's that someone tampered with a regular system of flight. actually, traffic control in the air is an easier path to deal with an traffic control on the ground. hitt is joining us

and these are the phone lines. this is going to be pretty much an economic thing in the sense that not everyone will be able to afford these vehicles? guest: we will see. there are several revolutions happening at the same time. one is technological but the other is fuel. we are at a juncture in the way we use fuel. it's the same way when oil came online and we moved into the combustion engine age, we were coming out of the coal age and oil was the clean energy 100 years ago. now call has been in decline since world war ii. now fossil fuels are in decline. the alternative energies are growing every year and getting more efficient and better. the way to think about this is there is a number of different innovations that could happen.

any one of them will push our transportation future into a different direction. if batteries become more efficient, a lot more efficient, we would then be able to do things with their cars and trains and planes that we never thought we could do before. if the technology becomes more efficient, there will be other advantages in that direction. let me give you one. the people who really promote the driverless car idea love the notion of transponders. those are the devices inside cars which already exist in the newer models that become aware of other cars in the road. eventually, those computer systems will be able to speak to road.her cars on the imagine if you are 10 cars in a line at a red light and all of the cars are talking in the redline turns green, everybody can move at the same time. there are huge energy efficiencies in that.

awarenessituational and that which means there will be fewer actions because the car will be aware of other cars in the vicinity. if that kind of technology takes off and we have enough cars with transponders, then the whole ground transportation system becomes infinitely safer and much more efficient. it depends on which of these technologies or fuel efficiencies or bureaucratic and depending on which one of those occurs, i think we will have our transportation future going in one direction or the other. host: rob is from georgia, good morning. caller: good morning. i'm a pilot instructor my question is more about licensing or the ability of the. pilot. i'm an instructor in savannah, georgia.

i'm wondering when the computer who will beg, flying this airplane? the ability of the person with the controls -- you are talking about computers running this thing. working,computer stops does the pilot have to be able to manipulate the controls? guest: yes, that's everyone's first thought. if you talk to the flying car innovators, one of the guys i who is creating a flying car called a switchblade, it has switchblade wings so they talk under the car. under the car and it's very appealing looking. after the pilot issue, the safety question that many people think about is dealt with by

redundancy. technology progresses as quickly as we wanted to, you will end up with a kind of plane or flying car that has redundant system so that if anyone of these sensor systems fails, the other systems will step in and take over. what that question really gets to is about autonomy. the autonomy of the pilot flying car.the on ourlity to get transportation device and the in command -- and be in command.

that was very important. what you are watching with a lot of this technology is the technology is taking the control from us inch by inch and that is happening in the cars you are driving right now. many people are not aware that the cars they drive have smart raking systems. the car is breaking before your foot actually gets to the pedal in a crisis situation. accustomed to cruise control but now there is smart for his controller you get on a highway and turn on smart cruise control when the radar in the car sees the car in front of you and the car behind you and monitors the white lines and ands the car in the lane keeps it speeding up or slowing down depending on the momentum of traffic. that already exists. we are giving away that control constantly and you find a younger drivers -- my children's

have no a lot of them interest in learning how to drive. that whole question of autonomy, the desire to be in the drivers seat, that is changing. as driver apathy increases and technological efficiency increases, we may well get to the point where people don't want to drive a car. haveu could hit an app and a car drive you two hours to a location than you can spend that time sitting in the backseat like in a limo reading or talking or watching a movie. would that be more appealing than having the autonomous power of controlling the vehicle? that's the question. the next couple of years we will answer that. caller: host: if you go to the pages of smithsonian, there are drawings and illustrations of the flying car concepts.

jackk hitt is talking about it. alexandria, virginia, democrats line, hello. caller: there are two aspects of what you are missing. one is the design aspect and engineering. the things that make a car stable and sturdy and safe on a highway are not necessarily the things that make them efficient and lightweight and able to perform well in the air. it's a standard engineering trade-off. the other aspect is the financial peace of it or you when you look at what it cost to have certified equipment on a certified aircraft in the u.s., it costs an order of magnitude as if it were onyx bar mental aircraft. you're talking about an electronic flight display on an airplane that would the $5,000

then would turn into $50,000. guest: there is also godwin's law. and in accessible technology tenures ago and now teenagers flight of them around and try to peak in windows. occurschnological curve with any technology and that will happen certainly with pilot technology and airplanes. the other question about design is key. i heard about it constantly. to be a stable car and what it takes to be a smooth flying airplane are two very different features. one of the executives from detroit that i spoke with said that problem with the flying car is that you end up with a crummy car and a lousy airplane once you marry the two. that is actually the

technological and design issues you see being worked through in these hangers which i visited where these guys are inventing the next generation of flying cars. switchblade is a stable three wheeled car that is very cool to look at and has a very nice wing design. the problem with the earlier cars that the wings had to fold up for the head to telescope in and the problem is every time you mess with the smooth design of the wing, you are interfering with the efficiency of the plane. the nice thing about the switchblade is that you have a fully designed smooth wing tucked under the car so when it comes out, you get a much better plane and a much better car but that design question is key. that's what everybody is working on. switchblade design is

illustrated in the pages of the magazine and the website. honolulu, hawaii, independent line, good morning. caller: i would like to comment. we are all thinking about the future of flying cars from a personal perspective. i think we are missing the bigger picture. adopters and sometimes the most important adopters will be essential services like ambulances. think about the countless number of lives that would be saved from ambulances that don't have to sit in traffic waiting for cars to get out of the way. these ambulances can bypass the traffic entirely and go to the hospital without anything in their way. the potential for this and other services in other industries is a magnitude greater to save lives. that is my comment. true. that is so we like to think that revolutions happen like the

american revolution that all of a sudden everyone takes up arms in a reading changes overnight. most revolutions are incremental. people mention that aspect3 . it's probably the first use of the flying car, the pilotless flying car would be an ambulance. imagine if there is a car wreck on a road in an ambulance could beive and the injured could put in this flying car and airlifted immediately to the nearest hospital. that will be very appealing and people want that. the technology and bureaucracy will shift in order to make it happen because we all wanted to happen. car,rms of the driverless you will not see these on the road overnight but what you may see -- one of the driverless car engineers was telling me that their first thought was to try to put these in retirement villages in florida where there

is not a lot of people wandering the streets and things move very slowly and it would follow routines that the driverless cars couldn't he mapped out that way. -- could be mapped out that way. these inventions will have an incremental sort of presence in our lives. it's the same way the combustion engine happened. that's the way it crept into american life. it did not happen over night. it happened over decades. go back to the 1890's and you could stand on a street corner in manhattan as hydrogen cars or steam powered cars, electric cars, combustion engine cars are in for a while there in the 1890's, 1910's, i don't know the exact year, but the almost entire fleet of new york taxis were electric cars. that was in part because even drove aroundc cars

for a while and ran out of energy and would come back and recharge. it's only when we created longer highways and farther driving distances that we sort of went with the combustion engine car because that was the most adaptable to long-term driving and it still is. this is one of the problems that people still talk about with electric cars, range anxiety. 10/ tesla is trying to change that with our stations. if lithium or a new version of lithium increases the efficiency so you can get 1000 miles on a charge, that would completely alter the market and the electric car would become a completely different and far more appealing vehicle. each one of these roads out of our current transportation or twois blocked by one or three or four of these technologies or bureaucracies or energy efficiency questions.

in this frenzy we are in now, those of the questions that are being dealt with and answered by inventors and car companies and flying car companies and everybody else. host: our guest is contributed to smithsonian magazine but also the new york times magazine, harpers and radio. did you first become interested in this flying car idea? in new haven, connecticut and i was having a coffee with a professor of energy at gateway community college which is a school that teaches all kinds of things. argument.ot into this i asked how hard it would need for me to take a combustion engine,ar tear out the put in a battery-powered motor and batteries and then charge

that off of a solar panel on my house? is,question i wanted to ask could i build a car that runs entirely off of sunshine. he was like yes, that technology is here. that is totally possible. i thought about it for a while. i took him up on his suggestion. he and i spent about a year of weekends in his backyard with my and will wagon cabrio ripped the engine out and install the three-phase motor with lithium-ion batteries. i get about 70 miles on a charge. it's a small car. if i did it all over again, i would probably choose a different car. i have that car once i get the panels up, i will have a vehicle that runs entirely off of sunshine. i did that to find out how much that would cost. could i build a car that was roughly the cost of regular car question mark that car cost me

about $23,000 to build from buying the car to driving it out of the driveway. i have had it for three years. i never bought a tank of gas in that time. one of the nice things about electric cars is that most of the problems in a combustion engine car comes from fluid dynamics. we know to change our oil. the reason is junk gets in there and breaks things down. it gets stuck in places. an electric motor is just wires. the in -- my entire cars just wires. there are no fluids. nothing is flowing anywhere. except electrons on wires. it does not really break down. if anything breaks down, it body of the car itself. i have a problem with the driver door because someone smacked it but that has nothing to do with

the electrical construction. that is what got me interested in this. i wanted to participate hands-on and see what it was like to jump into this inventive frenzy we are in now and see how that feels and whether i could pull this off. in time, i bumped into people inventing electric icicles or bicycles that are powered -- when you go downhill, you paddle and store that energy and you redeploying it later. there are all kinds of technologies people are playing with. i think it's because we are at this juncture in terms of technology and energy. it's a great time for invention. it's a great time for creativity. it's a great time for going into your garage to figure out what the next big thing is. host: nashville, tennessee, hi. caller: hi,

>> a reminder that "washington journal" is live from laredo on thursday. here, we will take you live for a discussion with former israeli and u.s. military officials including former undersecretary of defense michele flournoy. they will be talking about the israeli-palestinian conflict. the coverage here from center of new american security on c-span. the whole purpose of this report, and i want to talk about it for a couple of minutes and we have an excellent talent want to introduce as we go through the discussion. fundamentally, the whole purpose is we have come to the conclusion, at least i did during the last round of williations that israelis never agree to a permanent status agreement unless their security of -- security requirements are met. toestinians will never agree

anything if there is a permanent occupation. how do you balance these and try to find a security system that meets the needs of both sides? what we will try to do today is detailed the most public study on security arrangements that has ever been put together that meets both sides. we don't believe this is the final answer, take it or leave it. the reason it's part of the discussion is that this is a set of ideas we hope can continue to fuel a conversation. there are a number of reasons we have decided to do this now, which you might ask why would you do this now given how givenult the situation is that the moment of an agreement seems so far away. but i think there are a few central reasons.

worked on a round of negotiations for secretary kerry -- the first thing we did is go outside and examine all the work that had been done prior between the camp david accords in 2000 all the way through 2013 in annapolis. so much had been done externally that made it easier for negotiators to wrap their heads around what the solution might be and we hope this effort continues and we can push the ball forward when there is no negotiations. it's important to do this because many of the things we are recommending for the future, you can work back from and see what should we be doing today to get ready for that moment? this helps israelis, helps palestinians, helps americans

training palestinians in the last bank see what it looks like and from it derive conclusions from today. him a very we felt important to communicate with the israeli public and demonstrate that security is possible, that there is a solution to something that is comprehensive and technical. this is how you can do it and this is an important message to send to everyone, but especially the israeli public, which is so sensitive to this in the aftermath of the withdrawal in and the fear that if israel were to redeploy to the west bank you would end up with a situation similar to what you have in gaza today. sigh couple of things about the overall principles and proposals we are making and then i will turn it over for discussion. first, the idea behind this security system is to build a

multilayered security system that includes much stronger border security systems and a much better internal security system inside the future palestinian state. israel still maintains the capacity to defend itself as always has. palestinians will not agree to that, but they have taken unilateral action in the past states does that when they feel their interests are at stake. the key is to build the system so the need for this type of action is absolutely limited. default, itmes the will not work in the palestinians will not accept it. two other key principles we have based this work on. one is that there are a lot of

things that can be done that are easy that can minimize israeli visibility and remove the feeling of occupation palestinians feel. that can be done quickly. in exchange for that, there are core fundamental things the israelis need and that can take longer. between is a trade-off data and what will take a lot longer. finally, very important for both sides, israelis need to know that they will not redeploy from the west bank and then have it become gaza. know if ans need to clear timetable for withdrawal. so what we have designed is a condition-dependent, way ofance-based withdrawal. it means israelis and palestinians and americans come together in very detailed fashion and agree on the

security criteria that will be necessary before an israeli force hands over responsibility in a particular area. once all of that has been negotiated, there's a process by which palestinians are trained for that capacity, a process by .hich there is judgment made it includes target timetables and if they meet the criteria they have agreed to, they get their timetable. that therelear certain criteria that must be met for the deal to work. for far too long and would like to engage the panel in this discussion. so i'm going to do that and introduce them one at a time. i would argue that none of these three need any introduction whatsoever. they are known as serious

security professionals and have been dealing with these issues for a long time. we are honored to have michele flournoy and general john allen with us here today for this discussion. before we get into the details of the discussion, i want to start with why do this study, especially now? do you think this is still possible and why to spend as much as working on this given -- it's interesting given that you were the commander for the idf. you were a former military advisor and led troops in have bronze and in gaza. from that perspective, why now

and why this? good morning or good afternoon, thank you for introducing me. think israelis cannot allow anything tot to do achieve peace with our palestinian neighbors that will lead us to a much broader peace with our neighbors. this is something we have to do for the sake of israel and the future of the next generation in the whole region. is the deep reason. but there are so many controversial issues. the security issue is the most delicate one. the condition for everything to move forward to solve these

security issues. explain that a vibrant security solution exists and not without taking risks. we know that in order to move take risksu have to it can and should take risks in order to achieve peace. a significant experience in this arena of the palestinian issue and i how complicated it is. when i came to command the city of have bronze in 96 or 97, so it is just after the withdrawal after evacuating the

palestinian cities in the west bank. it was actually shaped together -- i did not work directly with them but they did ask questions specialonstructed agreements for have bronze and we deployed from have bronze at the end of 96. responsibility for 85% of the city, we build complicated security arrangements. for me, it was an example on how .hings can work

since then, four years later, the second thing we saw, because arafatattitude of dealing with peace and terror at the same time, the second intifada, i am sure you all know the history. sides.terrible for both the economy was devastated and both sides were big losers of this intifada. to suppress years this wave of terrorism. to adjust before the cu in gaza. coup in gaza.

one month after i entered the , the morningnd men and talked to my there is an opportunity to start something new. cooperate with -- i call them the new palestinians. veryalestinians i met were different from the palestinians i met in 96 and 97. i think the heads of the security organization are committed to fight terrorism even though i can tell you to do so. they have many reasons to be

unhappy with the way we treat them. but still, they do what they need to do. believe we are in a unique -palestinianeli history right now. moderator: thank you. that's a very powerful message, especially in the aftermath of p in gaza.cou i want to turn to john -- you have led special forces and have been the envoy for the isis fight, you have led men in an bar province. i know from the conversations we have had that this is something you care deeply about and spend so much time on. so the question is why? issue?nd so much on this

-- general allen: ira number stories for my mother and father. an important focus of who we are as americans. israel, as a jewish state, is important to that. if i am going to be committed to something that supports the jewish people and the long-term viability of israel, which is what i believe is at stake here, trying to participate in and being part of a process that can bring about a two state solution were israel's security is guaranteed but can create a sovereign, independent palestine for the arab people in

partnership with israel so both of their security is enhanced by virtue of that partnership, there's no bad time to be fully committed to this. as you know, i left the government in november as the special envoy and the last conversation i had with john kerry was should the opportunity arise, what i come back? i said i would come off the bench for the rest of my life if i needed to. it is important because this relationship, israel with the palestinians, the israelis with often at theans is heart of so many issues we find in the region. creating an environment where strategic israel's viability and where the

palestinians believe their interests have been served, we put paid to a number of entities in the region that use this as a crutch on how to move and relationseace with israel, and i think a ron, in particular, which has sought to falsely champion the values and rights of palestinians. by working hard for this to state outcome, where israel's security is guaranteed and the palestinians have a sovereign, independent, viable state and a security partner with israel, we can begin the process of solving many of the problems with the middle east. moderator: thank you. that is a powerful statement.

you have had extensive experience at the pentagon working on these issues, especially as undersecretary of defense, where you dealt with the most sensitive policy issues with the israelis and they were like nothing else, in my view. seeing it from the state department site and the pentagon side -- maybe you can talk about some of your experiences there. speaking, about the experiences you have had. ms. flournoy: thank you all for coming today. we are excited to see you for this report. commitment tos. the state of israel and the security of israel is a historic one and is one that has been carried through from administration to administration .

it's one of the few areas of foreign policy that receives consistent, solid bipartisan support. within that, the defense relationship between the u.s. and israel is unique. bestnk both sides do their to insulate the defense relationship and are cooperation from the ups and downs and the roller coaster ride we sometimes felt. we have agreement on this and disagreement on that, but having had the opportunity to work on this unique relationship, the real governing principle is this notion of maintaining israel's ensuretive edge and to israel has the ability to defend itself by itself. people too often think about this as something that you

obtain. we get to it and we can pat ourselves on the back. the truth is that it is a dynamic. dramatic changes in the region. we have seen all kinds of threats and opportunities emerge around, so q andy has to supported in that very dynamic environment. what really drew me to this project was this notion of if you assume that ironclad u.s. commitment to israel and to inael security would remain future administrations, and i believe that is the case, how would you ensure the state of israel's security?

in the context of a permanent status agreement. isis a question i think fascinating and it does go to the greatest concern israelis have about the agreement. you reassure me that i will be secured in a two state solution? wewe can crack that not, create a lot of potential once negotiations resume for making real progress and i think that is part of securing israeli population and palestinian people for the long-term. we do not really spend that much time on qme. think -- what we are going to

do is start diving into some of thespecific details of report and different proposals that are out there and i want to start with internal security because internal security is the most important thing. there's a need to know and the first argument you hear is that bank, thee the west west bank will become gaza and hamas will take over right away and palestinians can't secure themselves. israel has to be there forever. what kind of system can you build that you think can prevent that outcome? that palestinians don't feel like there is the ibf controlling large parts of their territory? gen. shamni: the security system is a multilayered system.

it's very far from the israeli border. for example the border to the east. it is on the border of jordan with iraq. imagine peace with more countries in the region. step which isone a controversial issue. if you ask most israelis, they idf will you that state in jordan. claim know many will

occupation has never ended. if we invent a system of , we would be able to support an effective counter of terrorism internally by giving a strong palestinian force that cannot post any threat to the state of israel but can be very effective internally supported by the u.s., supported by others, supported by israel, supported by a system of intelligence and sharing information.

will enable that palestinians to present tourism in the region. we leave the jordan valley and i thek, as i said before, palestinians have proved when they want to fight, they can do it. we pass responsibility to palestiniansd [inaudible] the cooperation between us and the palestinians to transfer

even the most sensitive intelligence for us to take action, i take all of these together, the coordination we oneady have on the ground issue we have to talk about is gaza. how do you solve the problem with is a? gaza will have to meet certain today is part of the problem.

something i think the report addresses. moderator: i'm going to continue to follow on this point. one of the things the report oflly gets into is the idea taking a small counterterrorism force and training to a level equivalent to that of a swat team and having that be an elite notterterrorism force necessarily threatening israel fromhat it goes from that the action all the way to the , that basically the palestinians have this unique capacity.

your ideas on that is how you get there and how you train that force well. gen. allen: general allen: it is a really important point that is about the security of the border and security inside with the future state of palestine. the approach we took when i let the process was to, again, look very hard at a trilateral process and a regime of cooperation, where we would see an intelligence fusion capacity where all three parties participated, which would hand off developing intelligence to an operational entity, a fused operational entity, which would be emphasizing a palestinian counterterrorism