dr. rivlin and also for dr. klein. i don't want to get into so much on the cause, but i'm trying to get an assessment on how serious you think the world financial crisis is. a lot of us, you know, put a lot of blame on monetary policy and federal reserve and the dollar reserve standard and excessive debt in these issues. we're not going to resolve that today, who is to blame, but do you consider the world financial swaying to be a mess or just something that will be taken care of soon and there's not that much to worry about? >> i'm very worried about europe. i think the austerity policies are the wrong policies at the moment, but they have -- they'll make the situation worse, and that could be bad for us. the long-run debt situation in europe is serious, but at the moment i would focus attention on their getting out of the recession. for us, i think we've got to get out of this recession, too, but we've got to get our long-run debt under control. i think we can, but we haven't. >> all right. could you follow-up, dr. k

dr. rivlin. dr. rivlin, at any time during your tenure on the board of governors, did the dual mandate interfere with the bord's ability to set monetary policy? >> no, i don't believe it did, mr. clay. setting monetary policy is really difficult, and you're always weighing different considerations, but we were very focused when i was there on what was happening to productivity growth, which was something of a mystery. we weren't very worried about inflation because it was falling, and so we continued thinking we were in conjunction with both mandates to the keep interest rates relatively low. >> and inflation was falling because the economy was robust, it was growing jobs, and that was because the administration was working with congress to help the economy along. is that correct? >> well, we had strong growth in the economy. we had a restrictive fiscal policy in that period. we were trying to get back to a balanced budget which sounds like a fantasy now, and we did it. so the fed's job was easier at

dr. rivlin? you will not remember, but many years ago i ran into you walking down the street, and you were very, very kind to me. you spent literally 10, 15 minutes just talking to me on the street about some, a couple also esoteric issues so i have always been very appreciative of your time. >> thank you. glad you have that memory. i think asset bubbles are a real problem for the fed, but not because of the balance sheet effect. because monetary policy is not a good tool for dealing with asset bubbles. it's a good tool for dealing with general price inflation. so the fed needs different tools. credit, specific credit controls, and controls on excessive leverage to deal with bubbles, and the dodd/frank act does put them in that business, and i think that's good. >> well, could current fed action and even dr. galbraith's opinion, could the current fed balance sheet, the mechanics there, could it also be leading to a bond bubble right now? if we start to move towards more normalized interest rates,

dr. rivlin said. and i think that that is my point when i say if tax reform is part of this process, it's very hard to get done in a six-week period because i think that there's going to be great reluctance to make radical changes. i think there's significant things we can do. i also think that there's ways to do it where you're not picking on any one deduction or another. you are taking the marty fell steen approach. i'm not endorsing the specifics of that proposal. the idea is you're not picking on any one kind of deduction. you're redusing the value of the deduction overall. let me give you one fact, nerd to get from 25% to 35% according to the tax policy center that's $4.6 trillion in revenue. that's on top of the $5 trillion of revenue from the end of the 2001 -- making up $4.6 trillion of revenue by reducing the -- eliminating some of the tax expenditures i would suggest is a huge challenge. i have not seen we challenge our republican are colleagues to show us how you do that without reducing th

dr. rivlin, you have a lot of experience in this. you want to take that first? >> it's just hard because there may be duplications in programs, there certainly are. but every program has a constituency that it is serving and believes it shouldn't be cut and a subcommittee that is protecting it. so it's very difficult to do a grand design that says these things should be consolidated. it also doesn't save much money. so the motivation to do these difficult tinkering things in defense or domestic spending and there's waste in both is limited because you go through enormous effort and political cost and you haven't saved much. >> i would say there should be an added incentive for a lot of the federal agencies to make some of the changes that the gao's proposed. as part of the budget control act we did put spending caps on discretionary spending which is close to a trillion dollars over ten years. so that will build greater pressure to achieve those savings. these are important recommendations. some of the big drivers in the long-term report the health care costs. i

dr. rivlin said. and i think that that is my point when i say if tax reform is part of this process, it's very hard to get done in a six-week period. because i think that there's going to be great reluctance to make radical changes. i think there's significant things we can do. i also think that there are ways to do it where you're not picking on anyone deduction or another. you are taking sort of the marty feldstein approach, and i'm not endorsing the specifics of the proposal, but the ideas you're not picking on anyone kind of deduction but you're reducing the value of the deductions overall. but let me just give you one fact. in order to get from 35% to 25%, according to the tax policy center, that's $4.6 trillion in revenue. now, that's on top of the $5 trillion of revenue from the end of the 2001 -- making up the $4.6 trillion of revenue by reducing, eliminating some of the tax expenditures. i would suggest the huge challenge, and i've not seen, we have challenge our republican colleagues to show

dr. alice rivlin is a senior follow in academic studies at the brookings institution and former vice chair of the federal reserve board of governors. without objection, your written statements will be made part of the record. you will now be recognized for a five minute summary of your testimony and we'll begin with dr. herbener. >> chairman paul, ranking member clay -- >> keep the mike up close. >> and distinguish members of the committee, it is an honor to appear before you. left to the market the production of all goods including money, passes the profit and loss test to socially beneficial production. like all private enterprises a gold mining produces if the revenue from the sale of its output exceeds the cost of its inputs and beneficial because the value of inputs to satisfy its customers exceeds the value of those inputs in producing those goods to satisfy other customers. in the market money production is regulated by profit and loss. changes and demands bring forth more production. if the demand for money increases making the value of more gold coins rises, minting companies woul

dr. rivlin said, an important part of that is deficit reduction at the same time.if you were to create a structure and make sure you kept short views on the process, that could be a recipe for success. the danger is that you just get to the end of the three months to kick the ball down the road. i do believe that outside pressures will be great enough to require forcing the action and we have tried -- these efforts are designed to try to force action because the alternatives are worse. >> and they are the law of the land. >> no doubt. it is an action-forcing event. >> doesn't a lot of this reston in the election in november? is there an ideal? is it true when packages have tended to pass, they have been in divided governments? >> i think it depends on the election and i do believe that the outcome, one outcome will favor a solution more than the other. obviously i am a democrat. i would propose to everybody on a non-partisan basis, what of outcomes in the selection do you think it would best lead to a solution? every bipartisan group has said we need a balanced app

dr. rivlin and mr.len. >> this week on q&a, our guest is the president of southern methodist university, r. gerald turner. the university will be the site of the george w. bush presidential library scheduled to open in 2013. c-span: dr. gerald turner, president of southern methodist university, is it true you have not spoken the truth shall set you free? >> guest: that was the motto that was identified that accompanied the opening of the school when it was founded in 1911 and opened in 1915 so that is the motto. c-span: what does it mean today to you? >> guest: i think it means to all of us the truth will set you free. that means the basic goal of institution is to try to find truth whether that is in our research efforts in teaching or in the human experiences or whatever. of course ultimately the goal is to find what is really there. c-span: what is the toughest part of being a president today and what is the best part of being the president? >> guest: the toughest part of being a president, i tell pe

dr. krueger, thank you very much. >> several live events to tell you about this morning. the brookings institution hosts a discussion on u.s. tax policy. panelists include form beer treasury secretary robert rubin and alice rivlin the founding director of the congressional budget office and the former head of the office of management and budget. that's here on c-span2 at 9:30 eastern. and on our companion network, c-span, the heritage foundation hosts a discussion of how to help veterans and their families. the forum includes service groups outlining their programs for veterans. that's at 10 a.m. eastern. >>> sunday on q&a -- >> i don't regard this as just the biography of lyndon johnson. i want each book to examine a kind of political power in america. i'm saying this is a kind of political power. seeing what a president can do in a moment of great, a time of great crisis, great crisis, how he gathers all around, what does he do to get legislation moving, to take command in washington, that's a way of examining power in a time of crisis. i said i want to do this in full. i suppose it takes 300 pages in there. so i couldn't, that's why i just said let's examine this. >> robert care row on the passage of power,