Transcripts For CSPAN Washington This Week 20111119

particularly our budget office director, douglas elmendorf. thank you for being here. thank you for your good work. we will focus again on the economy and steps that can be taken to focus on the recovery and create jobs here last year, at my request, the congressional budget office completed an analysis of the so-called bang for the buck achieved by different fiscal policies proposals. cbo has not updated that work, so we thought it would be useful to have director elmendorf here today to report on his agency's latest conclusions. i am hopeful that congress will .onsider ceo's analysis i would like to begin by briefly reviewing the economic situation now confronting the nation. it is clear that economic recovery we are now experiencing is not what it should be or what we would like it to be. here are some of the factors i believe that are holding back the economy. unemployment remains stubbornly high. the housing crisis that helped spark the downturn is continuing. we have weak consumer confidence and weak consumer demand. personal debts is still near record levels. businesses and consumers still face heightened borrowing standards. state and local cutbacks are continuing to create a drag on economic growth, and debt is not a challenge to economic growth. among these challenges, the housing crisis is particularly notable. we look back at the seven previous recoveries and can see that a surge in housing market was a driving force behind the return to economic growth. housing starts rose dramatically in every one of those recoveries. but in this recovery, housing starts have remained low and continue to be. we know some of the drag holding back the economy is caused by the nature of the recession that preceded it. economists have found that the sessions caused by or company by a severe financial crisis, recoveries tend to be shallower and take much longer. two leading economists found in their research, "real per-capita gdp growth rates are significantly lower during the decade following severe financial crises." in the 10-year when the following a severe financial crisis, unemployment rates are significantly higher than in the decade that preceded the crisis. the decade of relative prosperity prior to the fall was importantly fuelled by an expansion in credit and rising leverage that spanned about 10 years. it is followed by a lengthy period of retrenchment that most often only begins after the crisis and last almost as long as the credit surge. in other words, we could see low growth and relatively high unemployment for some time because we are recovering from a severe financial crisis, the most severe since the great depression. if we look at private sector job growth, we see it has improved dramatically from where we were in recession. in january 2009, the economy lost more than 800,000 private- sector jobs in one month. private-sector job growth return in march 2010, and we have now had 20 consecutive quarters of growth -- 20 consecutive months of growth. however, clearly, we have to do better. we need considerably more job growth in order to fuel the stronger recovery. the unemployment rate remains far too high. as of october, the unemployment rate was still hovering at 9%. although the recovery is not as strong as we would like, it is important to recognize our economic situation would be much worse if we had not had the federal response to the recession and the financial crisis, including both the fed's monetary action and the fiscal policy actions taken by congress and the administration. that federal response, i believe, pulled the economy back from the brink and likely prevented us from slipping into a depression. it may not have been slipping into a depression. we may have gone head first into a depression. two other leading economists completed the study last year that measured the impact of federal actions on shoring up the economy. here is a key quotation from their report -- "we find that its effects on real gdp, jobs, and inflation are huge and probably averted what could have been called depression 2.0. when all is said and done, the financial and fiscal policies will have cost taxpayers a substantial sum, but not nearly as much as most had feared and not nearly as much as a policy makers had not acted at all. if the comprehensive policy response save the economy from depression, as we estimate, they were well worth their costs." the chart shows the estimate of the number of jobs we would have had without the federal response. it shows that we would have had 8.1 million fewer jobs in the second quarter of 2010 if we had not had the federal response. we see a similar picture in the unemployment rate. according to these findings, if we had not had the federal response, the unemployment rate would have been 15% in the second quarter of 2010 and would have continued rising to 16.2% in the fourth quarter of 2010. looking forward, it is clear there are further steps that can be taken to help shore up the recovery in the near term. cbo's analysis looks at some of these steps and determines which would provide the greatest bang for the buck. here are ceo's key findings. on the upper end of the scale, it shows that policies like extending unemployment insurance and employer payroll tax cut give you a higher impact on gdp for each dollar spent. on the bottom end of the scale, cbo once again found that extending the bush era tax cuts provide a much lower impact on gdp for each dollar spent. it also found that a repeat creation tax holiday provides very little bang for the buck. i look forward to hearing more about these findings from the director. to be clear, there is nothing contradictory about pursuing near-term economic growth measures at the same time we pursue long-term debt reduction. we can and we must do both. we need to give a near-term boost to the recovery while simultaneously putting in place policies that will bring down deficits and debt over the long term. the deficit reduction can be phased in after the recovery is on a stronger footing, but it should be enacted into law now. i want to be very clear about this -- on every group that i have served, whether it is the fiscal commission or the group of six, we adopted the basic strategy, but it is clear we must put into lawn now a long- term deficit reduction plan. i believe that would provide a significant boost in confidence in the markets as people say the government finally putting its fiscal house in order. with that, we will now turn to senator sessions for his opening remarks. >> thank you, mr. chairman. thank you, director elmendorf. we respect the work you do and rely on it, but not aware, it just reading recently alan greenspan was a testimony before this committee, quoting cbo numbers projecting in 200130 years of surpluses and that we would pay down the entire debt of the united states of america, and he wondered what to do with the surplus. we have been wrong before. you predicted 3.1% growth this year. it will probably come in half that. dr. zandy to 3.9% growth. they revised that to 1.6%. i do not agree that there are no contradictions between borrowing and taxing to spend today and the problems that have gotten this country into the fix we are in as i see it. we are in a long-term financial difficulty as a result of debt. the government assumed a huge amount of private debt. we had a much bigger deleveraging process to go through, and we are not going to see the growth week -- we would like to see, so i would oppose adding more debt. i think nothing could be simpler. nothing could be more basic. and under the plan the president has proposed -- $450 billion in borrowing and spending in the near term, plus a $450 billion tax increase, i do not believe that is going to be a 10-year benefit for the economy. i would be delighted to hear your view on this, and i do appreciate the fact that you predicted, when we passed the first $800 billion stimulus package -- you predicted that in the short run, there would be some benefit, but over 10 years, you predicted there would be a net negative because there is a reality of debt out there that just cannot be wished away. all of that was borrowed. all of that added to our debt, and i am sure you would agree that after the 10 years, since we paid none of the -- we will have paid none of that down, it will continue to be a drag on the economy for decades to come long after the short-term sugar high we may have achieved as a result of it. i am very concerned about where we are going. i am concerned about the committee of 12. we were told just a few weeks ago we had to have $4 trillion reduced from the deficit. $4 trillion, he said, as an absolute minimum, as has every other witness, as you have said, and i am not aware they are moving toward that kind of agreement. we are still in denial, it seems to me. if we have learned nothing else from the financial crisis in 2008, it is that prosperity cannot be built on a foundation of debt. excessive debt, public and private, provided the air that pumped into the economy, resulting in the first bobble. surely we know that debt is not solution. not more debt. and if there is a second lesson we should have learned, it is a healthy skepticism for washington elites. many of the same people who fell asleep at the switch before the housing bubble did not see it coming and are now urging us to create more debt in the government, a government bubble. i call them affectionately sometimes masters of the universe. they are quick to make confident predictions and even quicker to explain why the failure of their last prediction should not count against the what is just making today. the explosion in regulation helped the economy. we need more regulation, they say. advocates for more stimulus, economic model, the cbo projected a long-term negative growth in 2009. stated in your report, and it certainly appears you have been correct, "the increased debt will tend to reduce the stock of productive capital and economic parlance. the debt will crowd out private investment. --'s projections were that your projections also are that reducing the deficit by $2 trillion would eventually boost economic growth, so that is a good sign. it tells us what we need to be doing, which is reducing debt. we need a long-term plan in a time of crisis, confusion, and fear. we should return to basic core principles, the tried and true pay your debt, spend within your means, and instead of asking the taxpayers for a bailout, washington must end the dishonest accounting of waste and abuse we have in our country. what we need is a middle class agenda. that means creating jobs through the private sector, producing more american energy, making the government lean and productive, confronting our dangerously rising debt, adopting a globally competitive tax code, upholding the rule of law in trade, commerce, and immigration, and finally, delivering the good people of this country the honest and responsible budget they deserve and have not had in over 900 days. thank you. >> thank you. two quick things i would say -- we may have a disagreement about short-term, but we have an agreement about long term. the debt is the threat. it would be, i think, a huge boost for this country. i think it would be a boost globally if the special committee came back with a 10- year plan that reduced the deficits in the range of $4 trillion. i tried to convince the commission to do $6 trillion over 10 years. we could have balanced the budget with that size of a deficit adjustment. and it is not that hard to do. i think some people think this is so hard to do it is impossible. >> it is not impossible. >> i showed our colleagues one plan that i did that if you added 6% to the revenue that we project now and reduce expenditures 6%, you would save $6 trillion over 10 years. we call it the 6% solution. we can have a debate and a discussion about what the mix should be in revenue and spending. maybe some people want to do it all. maybe some people want to do it two to one or three to one, spending and revenue. to me, the real issue is how do we find a way to come to get the to get the job done? it is a serious obligation. let me just say on the question of not having a budget -- we passed the budget control act. the budget control act provides a budget for this year and next. we may not like it, but that is the law. it is the law of the land. the budget control act passed. signed by the president. it lays out the budget for this year and next year and it provided for this special committee that is in effect the reconciliation process, clear and simple. so we have got a budget. we may not particularly like it or agree with it, but we have got one, and we got it in the budget control act. >> to follow up on part of what you were saying -- you quoted, i believe, rinehart and reinhardt. this being a financial crisis takes the longer term -- i think that there's a little bit of a misconception. most think financial crisis means a bank crisis, but it means a debt financial crisis. in other words, people as a tiny bubble burst were saving nothing in the united states. we were actually showing -- we were drawing down our savings, which is really unprecedented in our history. individuals had great personal debt. the government is now running for the third consecutive year trillion-dollar debt, and we have taken over huge mortgage problems and liabilities from banks and assumed that on the public sector. it is a simple thing. you either default on your debt, which has an immediate short- term pain for ratification, or you somehow carry the debt over a long airtime and try to pay it off and reduce it. the problem is that when you do that, it is a depressant on the economy. money is being spent not to consume by or purchase, but consumed to pay down debt or pay interest on the debt. we are not close to paying down the debt as of today, so i guess i acknowledge -- and i think we all need to understand that we're going to be in a long- term effort to move ourselves out of this deleveraging period. the first thing you should do is not add more to the debt and acknowledge it is going to be a tough per timeiod , and we need to do everything possible that helps working americans be successful by creating a climate for long-term growth. we can all disagree and will agree on how to do the but that is where i am on it, and i think that is where most of the american people are, and i look forward to hearing mr. elmendorf. >> when they talk about financial crisis, they are talking about not only the circumstances of individual states, but also damage to the financial institutions, including private sector institutions. when you have that kind of dramatic break in the financial markets and damage to the balance sheets of the major lending institutions, that has an effect on credit going forward. what they found is that when you have an explosion of credit, as we did before this downturn, in part fueled by federal reserve policy, interest rates kept abnormally low for an extended time, fiscal policy -- very loose fiscal policy under the control of congress and the administration, we were running massive deficits even then. that combination, i believe, coupled with a lack of regulation of derivatives and the explosion of aig did enormous damage to the financial structures, both private and public, and exploded debt both public and private, and the result is you have got financial institutions with impaired balance sheets, which means they cannot extend credit in the same way they normally would. that is what they find in their study. first, you have a credit bubble. then, usually 10 years in duration, and then, you had a recovery about the same time. we have cooked a real suit. >> you are right. i guess i will not -- i figure we both can join together and say this is not going to be an easy fix. there is no quick fix out there. how we handle it -- we will have to work together and do what is best for the country. i just believe that the quick fix days are over. as one of our witnesses said not long ago, you get the stimulus benefit from spending today, and it is a year or two of benefits, but if you are in a decade working your way out of this economic difficulty, then the hit hits you before the 10 years is up, before you are out of the recovery. that is why i did not think we can any longer continue to short-term sugar high stimulus spend and create more debt because it is simply going to catch us before the 10 years is up, and we need to have an honest, long-term plan. the president needs to be far more honest with american people about how difficult this is and do it in a long-term view, not a short-term view. >> the place you and i agree -- we clearly have a disagreement short-term, but the place we have agreement is a longer-term. somehow, collectively, we have got to find a way to be successful here in changing course. when we are borrowing 40 cents of every dollar, revenues the lowest it has been in 60 years, spending the highest it has been in 60 years, certainly i think we can agree we have a serious problem, and we had a collective responsibility to dig out of it. director elmendorf, apologize for this early discussion, but i think it is important to have. please proceed with your testimony and then we will go to questions. >> thank you, chairman and senator. i appreciate the opportunity to testify today about the outlook of the economy and policy options for increasing output and employment over the next few years. the u.s. economy has struggled to recover from the deep recession. although total output started to expand more than two years ago, the pace of recovery compared with the average recovery since world war ii, and the economy remains in a severe slump. we expect that under current law, growth in output will remain slow. as a result, job gains will be limited, leaving the unemployment rate close to 9% through the end of 2012. given the outlook for the economy, which is similar to that of many private forecasters, a large portion of the economic and human cost of this downturn remained ahead of us. we think the economy is only about half way through the cumulative shortfall in output relative to the potential level that could be achieved if our labor and capital war more fully employed. the cost of the shortfall are in minsk in total and fall disproportionately on people who lose their jobs, who are displaced from their homes, or who own businesses that fail. concerns about the weak economic recovery have prompted the consideration of fiscal policy actions to spur economic growth and increase employment during the next few years. cbo assessed the cost effectiveness in boosting the economy of a variety of possible changes in tax and spending policies. figure one from the testimony reproduced on the back of a single piece of paper in front of you, summarizes our findings. the figure shows the estimated impact on years of full-time equivalent employment in 2012 and 2013 per million dollars a budgetary cost. to be sure, this measure of cost effectiveness is only one of the criteria that might be applied in evaluating policies. other criteria are discussed in the written testimony. the policies that we estimate would have the largest affect on employment in 2012 and 2013 our policies that will be targeted toward people who would be most likely to spend the additional income, such as increasing aid to the unemployed, shown in the top bar in the figure, or providing additional refundable tax credits for lower and middle income households the next bar down. or policies that would reduce the incremental cost to businesses of adding employees such as reducing employer payroll taxes, which is the top bar on the second bank, or reducing employer payroll taxes only for firms that are increasing their payroll, which is the bar below that. the policy we estimate would have the smallest effects on employment in 2012 and 2013 per dollar budgetary costs are policies that would affect a business's cash flow but would have little impact on their incremental incentive to hire or invest. examples include reducing taxes on business income and reducing taxes on repatriated for an earnings shown in the bottom two bars in the middle bank. despite the near-term economic benefits that would arise from reductions in taxes and increases in government spending, such actions would add to the already large projected deficits unless offsetting actions were taken to reverse the accumulation of additional debt. the nation was the future output and income would be lower than it otherwise would have been. if policy makers wanted to boost the economy in the near term, while also achieving long-term fiscal sustainability, a combination of policies would be needed. , changes in taxes and spending that would widen the deficit now but reduced it later in the decade. such an approach would work best if policy changes were sufficiently specific and widely supported so that households, businesses, and participants in financial markets believe that the future of the school district -- the future fiscal restraint would truly take effect. lawmakers could also impact economic growth by changing policies apart from taxation and government spending. for example, legislation could modify existing or proposed regulation, all to the government's role in a particular sector of the economy, or change trade relationships with other countries. the near-term economic impact of such changes would depend on how the affected businesses, investments and higher decisions, household purchasing power and wealth, and a portly, expectations and uncertainty about future government policies and conditions. cbo considered potential changes in policies related to energy and the environment, the financial and health-care sectors, and international trade, but there are few analytic tools for estimating the near-term effect on overall economic activity of such changes, so we did not attempt to quantify the effect of those potential changes with any precision. in our judgment, however, the effects of the specific changes in regulatory policies or other policies apart from fiscal policies that we considered probably would be too small or would affect the economy too slowly to make an important difference in overall output or employment during the next two years. i should emphasize that the policy changes of the sort we examine our illustrative rather than exhausted. many other changes, which might have larger or smaller economic effects are possible. moreover, the analysis does not address other critical examinations including the long- term effects of the economy on people's health and on the environment. thank you. i am happy to try to answer any questions you have. >> thank you for your testimony. thank you for your work. let's go back to the conversation senators sessions and i were having as we began this hearing. i think it is an important conversation and an important debate. it meant -- in many ways, the biggest regret i have this year is that we did not have this discussion and debate because the country needs it and i think this body needs it. let's go back to that conversation we were having. senator sessions and i began this hearing by agreeing on the danger of our longer-term debt situation. i have said many times to my colleagues that debt is the threat long term. do you see danger in our long- term debt situation? if so, what form does that danger take? >> as you know, under current policies, u.s. fiscal policy is on an unsustainable path. federal debt is already very high relative to our output, compared with historical experience and ideas on a path under current policy to continue to rise. that cannot go on indefinitely. the costs of that are many fold, partly that rising debt crowds out private capital investment and reduces future income, also that extra debt needs to be serviced so you can pay interest on it, and that crowds out future government spending. the run-up in that also means that policymakers have less flexibility in responding to unexpected developments, international crises, or crises at home. beyond all that, there is increasing risk as debt rises of a fiscal crisis in which investors will lose confidence in our government's ability to manage its finances and thereby, the government will lose the ability to borrow at affordable rates. when that sort of crisis might hit we cannot predict. it depends not just on the level of debt at a point in time, but on expectations and expectations not just under current law or current policies, but also a sense of the ability of the political system to confront the nation's fiscal challenges and make deliberate choice is to try to stay out of danger. >> i think you have said that very well. i agree with that. senator sessions -- i will not speak for him, but he has made clear how serious he believes this debt threat is. so how could it be that there would be any benefit from fiscal measures taken now that would increase our debts? >> i recognize that it may seem like a paradox that rising levels of debt are bad for the economy in the long run, but nonetheless, if viewed in certain ways, as we're talking about in our testimony, could be good for the economy in the short run, but it is not really a paradox. it simply recognizes that the nature of the economic challenge that we face as a country is somewhat different over the next few years than it is over the medium run the war long run. economists in general agreed that the restraint on our output and our incomes is the capital stock, the quantity and quality of our labor force, the level of technology and the way we bring these inputs together in businesses, but in the short term, again, most economists agree the constraints on our output incomes today and next year and the year after that is principally in a weak demand for goods and services. we have the factories and equipment to produce more. we have people who would like to work to produce more. the reason they are not fully employed is a lack of demand for goods and services. in the short term, what can strengthen the economy in our analysis and the analysis of, i think, a broad consensus of economists, is cuts in taxes or increases in spending because those can either spur public demand for goods and services, or could lower taxes for private demand for goods and services. i can help in the short term, but in the medium and long-term, surely enough, that would be counterproductive. even if one does this in the short term and gets a short-term boost, unless one offsets the extra accumulation of debt, then one will be a little worse off in the long run than otherwise. there are very complicated forces are around that. it matters what you spend money on today, publicly or privately. it matters how you address the long-term fiscal challenge, of course, but the general rule, detriment of debt that will be accumulated and the policies of the sort we have analyzed here, would be bad for the economy in the medium term and long term, even though it would provide a boost to outcome in the short term. it is not really a paradox. it will just reflects the nature of the economic challenge, which is different at different points in time. >> alright, i thank you for that explanation. let me go to some of the specifics of what is in your study. i notice there is a difference between what is in this study and the previous study in that as i understand it, this is looking at a two-year effect. the previous study was looking at a five-year effect. is that right? >> we focus in this case on the two-year horizon. >> when you look at the five- year, infrastructure was much higher on the list in terms of bang for the buck. year, when you are looking at a shorter-term horizon, infrastructure drops down. these other more short-term measures -- increasing aid to the unemployed, providing refundable tax credits to lower and middle-income households, reducing employee payroll taxes, subsidizing interest rates on certain mortgages that are refinanced -- those things moved up in relative position. just to make clear my own bias, i tried very hard when we were doing stimulus to have more infrastructure. i argued strenuously for a package of $200 billion of infrastructure, largely focused on transportation. the argument made then against it was from analysis that we are seeing here. that is it takes longer to get infrastructure spending into the bloodstream. my argument was after a fiscal crisis, you will have a downturn that last longer. so having something that hits later, not a bad thing. maybe a good thing. i wish that you had prevailed then. because we are in a longer-term weakness. tell me about infrastructure. why, in your analysis, shift from a five-year focus to a two- year does infrastructure drop down in terms of bang for the buck? >> you have it just right. if we had shown here the five- year effects, infrastructure would have looked relatively better for just the reason you say, which is that that money takes some time to get out the door. certain projects, as we know, and it happen fairly quickly, repaving of roads can be done fairly quickly, but more substantial projects generally take years to complete, and the money, basically, is spent over the course of those sets of yours. >> do you know how long it took to build the pentagon? then they did that very rapidly. that was an unusual circumstance under an unusual experiment. >> that is the argument i made in this case. we were in an unusual circumstance in 2009 year the answer to the question is it took nine months to build the pentagon. nine months. now, we seem to think we cannot do things and in part, we have done it to ourselves. i can tell you in my state, we are having an energy boom of incredible proportions. we are now the fourth largest oil producer in the nation, and we are headed for second or third. i will tell you what -- we have a need for thousands of people to work in north dakota right now. we need thousands of people to work there. why are they not there? because they do not have a place to live. we do not have a place -- i just was in north dakota in the heart of the oil boom. i had the school administrator tell me she had 14 children who come to school there every day who are living in their parent'' vehicles. they do not have a place to live. less than 2.5%. we have the need for thousands of people to work. we need to build roads. it takes over 1000 truck loads. some tell me 2000 truckloads to do one well. our roads -- people are dying on our roads. these are two-lane roads, right through the heart of oil country. we need to build roads. that could avoid thousands of people. let's get to it. this idea that we cannot do anything or cannot get the money out the door -- i know in normal times we cannot get the money out the door. when do we go through serious footing of let's get it done? i believe deeply in my state if somebody would help us get some of the things that normally we would do in normal order of business, we would get out of the way, we could get a lot done. i will let you respond. i have used my time. >> i think you are right that it depends crucially on what else you get out of the way. projects can require bidding. there are reviews of various sorts for environmental purposes, and that is part of why i think it does take longer to complete large projects than it did when they built the pentagon. you are also right that under our forecast and the forecasts of most private sector people, we expect there to be a shortfall in demand for goods and services and still access numbers of unemployed people will be on the two years we have focused on in this particular calculations. we have the and implement a coming down to close to 5% by 2017 in our august forecast, which is six years from now. there can be justification. it depends on the priorities of you and other members of congress, but there can be a macro economic justification for continuing to have that sort of the biggest spending out for an entire five years. >> with regard to this chart that you provided to us, it is important to know that just did a wsip -- 2012, 2013 and, for example, on infrastructure improvements would not be complete then, so you would have some productivity gains, correct? in one sense, this is a misleading thing because you tend to favor immediate expenditure items like reducing payroll taxes or unemployment insurance as that money goes out immediately. this chart has some misleading characteristics to it. if you are looking at a longer time, is that correct? >> the question you ask does influence the answer we can provide for you. i think the primary difference between what this chart looks like and what a charge over five years will look like is the one that the chairman pointed out, that infrastructure spending would move up. if we look back at our table from the report last january, most of the other items have roughly the same ranking of cost effectiveness over the five-year span. >> one thing that is really important, i think, as you note in your report on page 25, as a result of your ongoing review and relevance for research, cbo has reduced the lower end of its range of estimates of the short- term effect of changes in fiscal policy on output and employment while leaving the upper end ranges unchanged. basically, you are experienced -- your experience perhaps with the first stimulus make you less optimistic about how large the short-term benefit would be from spending, barack -- borrowing and spending today. >> it is not so much our experience with the recovery act as a review of the literature and evolution of the economic literature. there is new research based on the experience of the past few years, but most of the research we and the others are employing over the last few -- that some of that is based on the stimulus, i would hope, which did not achieve the goals we hope for in the amount intended. i was in evergreen, alabama, and an african-american stood up at the town hall meeting and said, as my granddaddy always said, "you cannot borrow your way out of debt." we are in deep debt today, and we are making proposals to fix our debt crisis by borrowing more money. didpresident's proposal call for a tax increase. to pay for this $450 billion increase, did it not? >> we did not study the economic effects carefully, but, yes, you are right about the. >> an increase in taxes has some negative effects on the gdp growth, does it not? >> yes, the amount depends on the nature of the tax increase. they said we did not study the economic effects. >> with regard to your letter that the 10-year stimulus package would have a net negative on growth over 10 years, i recall asking secretary gunnar about that, and he seemed to be surprised, did not think it was possible how you could spend $800 billion and not have improvement over 10 years. do you still adhere to the view that there would be a modest gdp reduction as a result of the stimulus package that did pass? >> what the letter said was that the effect on the level of gdp at the end of the 10-year window would be negative. >> there would not be as much gdp growth at the end of the window as there would have been without the bill passing? >> let me be clear -- the cumulative growth of gdp over the 10 years was positive. what we said was there would be a big boost to the level of gdp in the first three or four years, and then relative to what would have happened without the law, the effect would go back down below zero, so the level of gdp would be a little lower at the end. the level of gdp as lower at the end that has the net negative effect -- >> in the next 10 years, since you are carrying that any stimulus value as long since gone, it will be a continual negative of some affect. >> yes. >> you noted the effectiveness of deficit reduction. you released a report earlier this year, the macro economic budgetary effects, and i concluded that a set of policies that would reduce the deficit by $2 trillion over the next 10 years would increase long-term economic growth by as much as 1.4%. is that still your view? >> yes, it is. again, it would raise the level of gdp at the end of the decade by something between 0.6% 1.4%. >> in the abstract, lower debt helps an economy be more vibrant and would improve gdp. >> yes, that is right. >> one of the things that the united states has worldwide is our currency is a reserve currency throughout most of the world. is that an advantage for our economy? >> absolutely, yes, senator. >> i just looked at this week's -- i do notadline" know if you have seen it -- the world's next reserve currency, and on the cover is the chinese yuan. it says expect it to be widely used alongside the weakening euro and dollar as a store of value. would you agree that that is not a positive development for the united states economy? >> i am sorry, i would not make predictions about how quickly the u.s. dollar might be supplanted as the reserve currency, but certainly if the u.s. dollar were supplanted as a reserve currency, that would be costly for our economy. >> and part of that is a concern of our debt -- at least in trade deficits, but specifically as to our debt, the american debt is a factor in the world wide concern over the united states dollar as a reserve currency, is it not? >> yes, absolutely. >> fixing that would help strengthen our currency? reducing our debt would improve the accountability of united states dollar as a reserve currency? >> yes. >> senator conrad suggested this, and i think it is good. some of the things that benefit the united states economy as a result of the dollar being a reserve currency -- >> one thing we have seen very clearly in the last few years is that in moments of great worry by investors around the world about the safety of a different investments, they come to the united states with their money, viewing us as a safe haven. additionally, a lot of transactions are conducted in dollars. that demand for our financial asset helps to keep the united states financial system at the center of the global financial system, even when our own financial system is struggling as it has over the last few years. that is, as you said -- we risk losing back advantage if we allow our debt to continue to rise relative to gdp. >> and we have the ability to print more dollars within a limited range before adverse impacts occur, but if that goes too far, that, too, can be part of the devaluing of the currency and the loss of confidence in it. >> yes, if our inflation rate returns to the levels it was at in the beginning of the 1980's, for example, that would also weaken the dollar's role in international financial transactions. >> thank you for asking. i think it is important we get that on the record. >> thank you very much, mr. chairman. i appreciate the debate you guys had a little bit earlier before we started the hearing. i thought it was interesting listening, but, first, i will make a couple of statements and then ask some specific questions. we can argue the recovery bill added debt. so did the two wars. so did the unpaid tax program for millionaires and billionaires added debt and paid for. we will pay for it now and pay for it forever at the rate we are going. i like debating history, but that is irrelevant to where we need to get going here. i appreciate the debate, but where we are today is we have an economy that's we could argue is that recovery bill happen, would we have more unemployment. every month, we can argue with the number is strong enough, but if i had been here in 2009, when i got sworn in a month and a half later, we have had a positive job increase every single month. it could be varied, but we could argue that without that short- term recovery bill, that number could have gone the reverse. we do not know that. that is the great mystery of the work you have to do as an economist and someone who works with all these numbers. but the fact is i could predict that by 2008, we were averaging less quarter 500,000 or 600,000 jobs lost and month. now at least we are in positive territory. we would argue that 9% is a rate we do not want, which i agree, but it is actually somewhat stagnant right now, which is a good sign. it is stabilized. we get our 9% is not something we want to stabilize on, but the fact is it is not going this way. i would argue the automobile industry was the walking dead two years ago or driving dead. today, the american automotive industry is thriving. "wall street journal" had a great article. "automobile industry imports jobs from china." that is a reversal. we had more activity. they're the strongest company since 1998 profiting. we could argue the theory of what could have happened, should have happened, whatever. the fact is here we are. unemployment has stabilized. gdp is not where we want it to be. we have importation of jobs from china. some of the processing that has been going on in china is moving back to the united states. wage rates go up. fuel costs are high. better to do it here. you can look at pieces and fry your own conclusions, but we are where we are. we have to get the unemployment rate down. we have to get consumer confidence higher. let me take off on the issue -- i agree with the chairman in regards -- and of course, he hit my issue, energy. yours is now recognizing in a robust way the power of energy and the development of energy. you mentioned in your testimony fuel costs have a direct impact to consumers. also development of domestic supply, as you just heard, had not only an effect in the jobs and oil patch states, but a ripple effect as you build roads and infrastructure in schools and hospitals and facilities that service this industry. i guess i would love if you could just add a little bit to your comments around energy -- i agree. the pentagon was built in nine months. disneyland in california was built in one year. a whole city, when you think about it. can we do this? when i was mayor, we opened a $100 million-plus convention center in about a year from the date of idea to completion, which involved bonding, voter approval and construction. anything is possible if we want to do it. tell me some thoughts on the energy sector and what we can do. obviously, i am bias. i think we should be opening anwar. are are one -- there are hundreds of thousands of opportunities in the country long term. give me your thoughts if you could. i did not mean to go on, but we spend a lot of time talking about what could have happened, should have happened. we are where we are. democrats and republicans are to blame on both sides. hast, president -- everyone. it is time to get something done. that is what americans are saying to me every day. energy is one of the great opportunities. if i could just say one more piece, from economic security or national security, they have enormous resources spent overseas to protect oil flow when we could be spending it here in this country building our economy up. >> our focus in this testimony was on the short term over the next few years. we know about efforts the federal government might make to encourage investment and energy, that those effects are likely to not have a big impact on the overall economy in the next few years, partly because -- and you mentioned this in a way, talking about your experience before coming to the senate -- state and local officials have a very important role to play in deciding what companies are able to do. the federal government can open up certain areas that are now close, but it cannot just easily sweep away all the other factors that affect the pace of energy exploration. second, even if the decision were made and all the approvals were granted to begin drilling in a certain spot right now, that takes some time to happen. at the moment, most rigs that are designed to drill, for example, deep waters offshore, are committed to be somewhere in the near term. if more space was opened up for further exploration and drilling, then over time, of course, that would lead to more drilling in those places, but not -- seem to have a magnitude in the next few years to affect the overall economy. that is not to say those things are good or bad to do. lots of other factors can weigh on the decision, but the focus here was on the short-term impact on the overall economy. >> right, but i would argue that just the idea of development, just the -- i will tell you in the two years since i've been here, there has been renewed interest. loan industries have hired well over several hundred employees. or shell, who is in the process of finishing the ship that has been constructed in the last year-and-a-half. it is built in louisiana, being shipped now. these are hundreds and hundreds of jobs, well-paying jobs. i would argue how we define short term -- we have to be careful that -- do we want, for example, energy production -- it to be happening? yes. but three years ago, north dakota? i will tell you, my mother would drive from minnesota to carson city, nevada, where she lived. she would find a place to stay, hotel. she went there this summer, no such luck. she had to keep driving. she is in her 70's, and driving late at night is not the is note best thing to have her do. in two and half years, the short term development in that state is an example. i did not mean to get on my energy plant. -- energy rant. energy is a short-term and long- term opportunity that we have underestimated in this country. we continue to spend billions which countries that hate us before we get energy supply to this country. it makes no sense to me. the federal treasury is reaping the benefit of developments with hundreds of billions of dollars that are idle. maybe we will have a broader discussion. the chairman triggered me. we do not want to be number 3 in energy production. we are going to be no. 1. let me and the there. -- we are going to be number one. >> it has a huge budget implications. senator? >> i have to hop in on the energy bandwagon. there is no mystery to me while -- why we are not creating jobs. take a look at our military environments. do you want an answer for why we cannot build the pentagon in 8 months? do you think we could build the hoover dam again? why earned we drilling in anwar it? government regulation. we are killing ourselves. we are doing it to ourselves. when i take a look at your testimony, with all due respect, i could not disagree more with your conclusions. my own experience in making those investment decisions -- if you allow business owners to keep more of their money, it will invest it. is it true that what happened with the stimulus dollars is that consumers, with their fears, they just deleveraged? isn't that correct? >> we expected some of that money to be saved. we cannot track those particular dollars. >> we can see that we already did a payroll tax holiday and extended unemployment benefits. it did not work. we have another trillion dollars in debt coming on board this year. what kept businesses from investing is the end result of all of those debt and deficits. when the government spends more than it has, eventually the government is going to tax you more and create inflation. that is why the business community is not investing. don't you basically agree with that conclusion? >> i have written that uncertainty about future government policy and future tax and spending policies and future regulatory policies are a factor restraining business decisions to hire and expand. we do not think that is the principal factor. for example, surveys of small business people done by the national federation of independent business shows that the main difference in the obstacles is a weakness in demand for their products. >> because everybody is afraid up a european and asian and that the exact same things can happen in the night -- a european invasion and that the exact same things happening in greece can happen here. i do not think we are acknowledging things in this country. let's start out by not achieving the growth targets. i do not know how you came up with the targets. i am assuming you used similar estimates that the economy would grow 1.3% and we will not achieve that growth. for every juror 0.1% in the everyh will add- -- for 0.1% in gross we add $2 trillion to our debt and deficit. >> we have a wide band for each of these because we recognize the uncertainty of the analysis we are doing. >> there are significant risks. why is that? are we afraid to a knowledge it. all we are doing in the super committee is trying to come up with $1.20 trillion in reductions in growth and spending. >> people are talking about the rest. they have not reached agreement in the -- people are talking about the risk. they have not reached agreement in the super committee. my sense is that people are talking about it allots -- . about it a lot. >> let's go into the cbo projections. according to cbo, only 3.6 million people will get into the exchanges. how did you come up with 3.6 million people? what economic model came up with that number? >> we use incentives for households and businesses to get insurance coverage through possible avenues. other people who build models of the health insurance market have reached similar conclusions two hours about the effects of health legislation, including the actuaries at the rand institute and other places. it does surprise many people that we do not show large losses from a insurer- -- employer sponsored insurance programs. >> have you seen your predecessor, douglas colts and again -- the colts it can -- at d seen your predecessor's analysis? >> we have seen the analysis. for most people, they would get no or smaller subsidies than they receive through the tax code. >> your analysis would increase our deficit over the next 10 years by $500 billion. i saw that and i called doug and i said that was a pretty good announces, but you are still wrong. let me read you through what the decision factors are going to be. according to cbo in 2016, the average cost of family coverage would be $15,000. that is $2,100 more expensive than it would have been if we did not have the health care law. employers will be taking a look at, i can pay $15,000 or i can pay a $2,000 penalty. with the health care act, i am no longer throwing employees to the wolves. i am giving them the opportunity for subsidies. we have had the mckinsey study that shows that 50% of employers are planning on dropping coverage shortly after this health care act takes effect. when that happens, 180 million people -- 90 million people. that will cost us over $400 billion per year. is that pretty accurate? >> you are right. employers who put their workers into exchanges would not be throwing them to the wolves. employees would be forgoing a large tax subsidy. the majority of workers who would have employer sponsored health insurance without that law would be eligible for no subsidies through the insurance exchanges. there is no reason for the firm to put them into the exchange. that is against the interest of the workers. >> but it is in the interest of the employer. the decision is $15,000 or pay $2,000. the surveys show that employers are going to drop coverage. how can you deny that and totally understate what our true risk to the debt and deficit are going out 10 years? we are misleading the american people on this. >> i have to disagree with you. i do not think you are -- we are misleading the american people. it is not true that for most workers they are eligible for substantial subsidies through the insurance exchanges. >> the average cost of subsidies in 2021 will be $7,000. the eligibility is -- >> a minority of workers. we have read that survey. when cbo estimated the effects of adding the prescription drug coverage, we estimated. shortly after we did the estimate, there were surveys in which a lot more employers said they would drop coverage. at the end of the day, fewer employers drop coverage. >> i understand. 50%. that is 90 million people. you are going to stick to your 3.6 million. do you think that is a good estimate? >> we are always adding new estimates and taking on new information. we have estimates of the effects of the policies we are talking about today. we are not averse to changing estimates when there is new evidence. when there is new evidence that we find compelling, we will add it. >> it was a valuable exchange and we need it. the country needs it. it is important to have this debate. senator whitehouse. >> if the debt of our country is so important -- and i think it is pretty widely believed around the senate that it is -- and its bad debt, which is so important, can be reduced from two sites -- two sides -- it can be reduced by spending less and revenue increase. if that is the fact, that the debt is so important and you can reduce its either with increased revenues or with spending reductions, in that environment. , why it's so important that the highest income americans -- why is it so important that the highest income americans pay lower tax rates than regular working americans actually pay? to illustrate the point that the highest income americans pay lower tax rates than regular working americans pay, i look at the irs data for the top 400 income earners, who earned over $250 million each. four rhode island, that equates to wear a regular taxpayers -- for rhode island, that equates to where the tax rate increases as your income increases and you hit about $40,000, which is a truck driver's average pay in rhode island. then you go to the far end where the people made over to our good $50 million -- made over $250 million. why do we have this tax code where super high end income owners are paying such low tax rates? >> you asked the question as if i said it was important. i never said what you are asking me to justify. on a factual matter, by our estimate, the average the road tax rate as a share of income rises as one moves up the income distribution. we go up to the top 1% and estimate the top 1% has a higher tax rate. whether it is hire enough for your preferences, i cannot judge. economists think that tax rates effect people's behavior. a higher tax rate on income from labor and capital affect how much people work and save. in setting a tax rate, there are multiple objectives. >> before hundred highest income earners paid only 18.2% and the year before that, it was only 16.7%, which equates to a hospital orderly in rhode island. if you look at the building big enough to be its own zip code, they were at 14.7% overall and their doormen and janitors paid higher tax rates. how does that square with your figures? that is actual irs reported dollar numbers. >> bill so it confident they are reporting accurately. there is some -- i am confidant they are reporting accurately. i know from the folks who looked at their data that incomes at the top have changed over the last few years. maybe that is what changes in tax rates in the last few years. maybe the irs is looking at certain taxes i do not know. i am happy to look into that for you and see if we can explain the differences. >> here is what interests me. we just went through a fairly considerable exercise here and the senate trying to pass jobs legislation. we had the president's our original jobs bill. that was filibustered. we went through different elements of it until -- elements of its. they have all been filibuster. it was paid for. it would not add to the debt in any way. it would not require additional contributions from americans making more than $1 million per year, only over $1 million a year. over that point, it got a filibuster. is there an economic rationale for stopping those jobs bills in order to protect the over $1 million income partners? does that work -cb- is there -- is there an economic rationale for stopping those jobs bills in order to protect the over $1 million income earners? >> if we analyze it, we would find that those bills would square out in the next few years because of the stimulant of the facts of the additional spending. that would probably outweigh the negative effects of the higher tax rates over the next few years and over the longer term when the disincentives would be a drag on the economy. you weigh that off against distribution objectives in the long run. >> let me close by observing that there has been a certain amount of criticism of the reinvestment act for only having stopped the employment crash that president obama inherited without having recovered from it. it would have been better if we would have recovered from its more rapidly. we were at 700,000 to 800,000 jobs being eliminated every month when the president took office. just to bring it home to rhode island, for the 11,000 families that had a member getting a paycheck because of the reinvestment act -- a 11,000 families that at that paycheck -- the grocery store, the toy store and the mechanic -- they were all able to go and pay for goods and services. we were glad the reinvestment act took place. those 11,000 families would feel that they had one heck of a worse time without it and so with the communities around them that did not receive the benefit of their income as they went around and spent it the way people do. 11,000 people with that paycheck instead of not israel. we should not underestimate that. thank you. >> senator widen. >> thank you, chairman. i thank you. dr. elmendorf, in the super committee, one of the issues in play is the prospect of pro- growth tax reform. you and i have talked about it before. i want to walk you through a different aspect of it. it goes through the heart of the debate about the stimulus, particularly the stimulus right now. over the last five years, i have had the chance to work with two colleagues on the other side of the aisle that call themselves conservative. two democrats and two republicans have worked on this over the last five years. i want to talk about the stimulus to give effect of what would happen -- the states elective -- the stimulative affect of what would happen in 2013. under the legislation i put together, a bipartisan effort, if you are a couple that mixed $50,000 a year -- a couple that makes $70,000 a year, you would get a permanent tax relief of $4,000 a year. that comes about largely because what we do is triple the standard deduction for those families. a couple against $10,000 gets triple to $30,000. for a couple making $60,000 or $70,000 a year, it puts half of their income off-limits from taxation. my sense is that that would be, based on your analysis on page 26 of the report, a pretty good stimulus for the economy if that was to be enacted so it applied to 2013. do you want to walk me through that because it applies to of the things you have said in terms of business decisions and the demand for their products and greater demand. greater demand leads to production and hiring. that is economics 101. there is a significant stumulatve effective in cutting income taxes permanently poor folks in those kind of income brackets. they could also do it for folks making $30,000 or at $35,000. why don't you give me your assessment of the stimulative effects? >> we have not analyzed the stimulative effects for households. further down the income distribution for the less wealthy households, the more is committed to being spent. four other households, additional income would raise their spending. we would have to keep track of all the aspects of your proposal. the channel you describe is certainly one that would take effect. >> i appreciate that. it isn't fair comment. you are absent -- it is a fair comment. this is something that has not gotten much discussion in the overall debate about tax reform. part of it would be my fault because i should be mentioning it more often every time this topic comes up. it has not been particularly controversial. i do hope, in light of your answer and what you say in outlining the options on page 26, that people see this as an opportunity for real stimulus that would not raise the deficit, but would generate more revenue. as you know, that is something that your companion organization found with the legislation i authored. any sense of what families making $70,000 would do in terms of their purchases if their taxes were cut in half? i am talking about 50%. my sense is that they would go out and make those kinds of consumer purchases that had a big economic multiplier. let's have you analyze this in terms of the areas you have looked at, which is the lower income bracket than i am talking about. let's say $30,000. doesn't the evidence showed that they go out and make purchases in consumer durables that have pretty good multipliers? >> their interest in doing large-scale purchases depends on their expectations going forward. the permanent features which amplify defects -- the effects on the purchases you are describing. the uncertainty about what will happen with u.s. fiscal policy and what taxes people will face and what government program benefits might become is a component of the uncertainty that is deterring spending. a large portion of the uncertainty people face is their future income. the uncertainty about government policy is important to the extent to which that can be resolved through any actions of the congress or be reduced. the actions of the congress. that would be a good thing for the economy. >> i am glad you mentioned that with respect to judgment of the individuals. individuals, like businesses, are in the general mode of being cautious. they do not know what is going to happen. they look at another proposal that is temporary in nature. people come up to me and say, all of these temporary ideas. what is going to happen when everyone is done with the temporary idea stempel everyone goes back to fighting. they see the economy not building a sustained recovery. the point you have made today needs to rein loudly in this debate about tax reform -- r9nrg loudly in this debate about tax reform. put off limits from taxation 50% of what households make is a chance to change behavior. people will see is not just another temporary proposition. this is helpful and i will try to get your message to be super committee. with your answers, i will try to highlight this as we go into the last days debating the opportunity for the super committee to pass pro-growth legislation. it is exactly the kind of timetable you identify. thank you, mr. chairman. >> i want to thank the senator from oregon. i want to say publicly that the senator from oregon is one of the most constructive members in the body and i appreciate the extraordinary amount of work that the senator has put out on the major controversies and challenges facing the country, whether it is tax policy, health care policy, trade policy. it really is quite extraordinary that the senator who does not have the staff of the chairman of the committee has put out very significant plans in a bipartisan way that are really well trott -- well thought through. i just want to say that the senator deserves all of our commendation for producing really solid work, and big amounts of it. senator? >> thank you, mr. chair, and thank you, mr. elmendorf. i appreciate the work here to out-analyze the strategies for increasing economic growth and employment. i was looking through to see if there were any specific analyses in addressing the retrofit. i do not think there is any here. i looked at a strategy for creating jobs and i thought they were at the top of the list. there is a long time read that you have for infrastructure, the construction is flat on its back and ready to be put back to work, that virtually all of the materials that are necessary for energy-saving retrofits are manufactured in the u.s., so there is extraordinarily low leakage. i thought all of this was a analysis that was behind cbo's analysis of this piece of the puzzle. i did not see that in here. maybe i am this-remembering -- mis-remembering that as a strategy. hazmat cbo looked at that issue? >> i do not remember -- has cbo looked at that issue? >> i do not remember looking at that. but the factors you described are important factors in this analysis. whether the workers are available, the extent to which certain sorts of products are imported or not can matter. the factors that you described sound like the sort of analysis that we do, but i do not remember that particular piece. >> ok, thank you. if the cbo has not analyzed that, my request in whatever fashion is necessary that you take a look at that. because it is certainly -- we're looking for specific strategies that maximize the bang for the buck in terms of job creation and i would like to know if that is a strong, cost- effective strategy. let me go on to a macroeconomics concern that i have. this is and less about the things we can do in the next year or the year after that it is about trends over the past decade and what might possibly happen over the next 10 years. what i see happening in oregon is a tremendous amount of jobs going overseas. a piece of this is, whereas we envisioned china coming in and the wto would increase barack ability to sell products to -- would increase our ability to sell products to a growing middle class in china, we did not account for a growing experts that would compete strongly and in some cases undermined american manufacturing, ranging from currency to direct loans and grants and subsidized loans and a subsidized utilities and so forth. we have a tremendous amount of the chemistry that has shut down across the country -- of industry that has shut down across the country. combine that with computer- controlled robots, if you will, for building things. i was fascinated to go to a shop that makes knives in oregon. in some cases, you have people feeding the blade into a machine. in other cases, you have a mechanical arm bolted to the floor that is picking up a blade and grinding it in a bunch of different ways and dropping it into a bucket. no human involved at all. as that technology becomes cheaper, it poses a fundamental question, which is, when you have machines that increase productivity by a factor of 5% or 10%, a gradual changes, then wages went up in the post-world war ii timeframe. but when machines completely begin to replace the worker, it fundamentally changes whether or not there are jobs that create a living wage opportunity for american families. combining the loss of jobs to china and the loss of jobs to not just enhancement of productivity, but full replacement of workers, poses challenges to us in how we have living-wage jobs. i wanted to throw that out there. i realize you were doing more short-term, but how this might feed into the longer-term. >> as you said, in general, automation has raised productivity in a way that has greatly enhanced at the american standard of living. but it is also true that certain sorts of changes can change the distribution of output in a way that may take it away from some people and give it to others, essentially. in fact, the leading explanation that economists offer for the widening of in comes through much of the distribution of over the past several decades is a shift in technology that have benefited certain people and disadvantaged others. those sorts of long-term trends pose a very large challenge for public policy. if you are interested in ensuring that the distribution of the economic pie happens in a certain way, if you are interested in assuring certain people can make a living, even if certain skills they have are no longer demanded by businesses, that is a very difficult problem to address. in addition to the work we do on short-term economic issues, we have to address long-term economic challenges as well. the u.s. spends are rather small share of its gdp on retraining workers and relative to many countries in europe, for example. at the same time, evidence on the effectiveness of these retraining programs suggest that not all of them worked very well. it is not a magic bullet. i do not think the analytic community has a magic bullet to offer you. -- house to offer you a magic bullet. but that does not diminish the significance of what you are saying. we're talking about more work in education and training, and that is one way that one could proceed. also, one could change tax policy to raise money from certain people and not from others, as your colleagues sought to do. there are various ways, but i do not think any of them are straightforward. >> i would like to see working families purchase homes now when the prices are low and when the interest rates are at historic lows, helping to absorb this huge surplus of housing that we have and to empower a new generation of homeowners. any thoughts on this? oh, i'm out of time. >> we have been giving everybody a and additional bit of time. we have been giving everybody a couple of minutes over the time. >> thank you, mr. sherer. -- mr. chairman. >> you raised another issue that is not very straightforward for me. in the housing boom, some people ended up being able to borrow money to buy houses that they could not sustain the ownership of, that they could not sustain payments on their mortgages. some of that is because of economic problems and the loss of jobs and income that ensued. but some of that, most analysts think, was excessive exuberance in buying houses and borrow money that was just too much of a stretch for some people. there is a widespread view that the standards for who will be able to borrow so much money against the house will be tougher going forward than they were during the boom years. at the moment, they even seem to be tougher than they were before the bone, and analysts worry about that. an administration efforts to work with fannie mae and freddie mac, partly to insure that the standards in mortgage lending are not higher now than they were in what looks to be a reasonable and stable time frame before the boom. beyond that, there are other policies that you and your colleagues could consider to help homeowners in general, or to help potential homeowners in a more targeted way. >> i will be quick in my response to allow my colleague to get into his questions. i do think that i would emphasize less the exuberance factor than the predatory factor. when ordinary working families went to the originator and the originator was being paid undisclosed bonuses, or kickbacks, to steer them into subprime loans, that was a big problem. when the originator was filling out the loan amount and it was a liar loan, that was a problem. the when there was a pre penalty and the home water did not understand because they trusted their originator that meant they could not get out of this predatory loan without paying into a huge share of the house, a pound of flesh, if you will, we have ended all of those practices that should not have been allowed in the first place. but i am concerned about throwing the baby out with the bathwater. i would attribute most of the bubble to the low-cost teaser rates that started in 2003. you could almost track the growth of those loans with the growth of the bubble. we do spend about $100 billion a year on interest subsidies. very little of that goes to working families, very little. indeed, because the deduction is higher in the interest cost than an ordinary family in the home. in addition to that, shouldn't we be doing matching down payment grants for folks who can seize this opportunity and whose income does allow them to take a vantage of these lower interest rates read then having them sit empty? that little bit of money, $2 billion to $3 billion that we are spending compared to home mortgages, would be a huge help with the factors in helping with the restoration rates of our children in high school, reducing the non-public assistance and so forth. >> i understand the issue, senator, and i do not think we have analyzed the policy, but we can talk about whether we have the tools to do so. >> thank you. >> very thoughtful questions, senator. that was good. senator quds. >> thank you, mr. chairman. mr. elmendorf, i'm sorry to have missed your testimony earlier. i look forward to reading it in full. there is a topic that we have discussed on the energy committee a number of times. senator bingaman and i sent the cbo office a letter requesting how the cbo scores and use two different instruments, one energy savings, purchase contracts, of which i have some experience in the private sector, and at the public sector at the county level that i was responsible for. something i think both omb and the department of defense are looking at more closely. i did get a response in july to the first question. i want to thank you that. as i understand it, the cbo continues to view if there is a mandatory expense because when there is a mandatory omb, the budget is viewed as budget neutral because it saves long- term contractual money. maybe it is something that underscores, but does not cost. in what was like are reasonable. i just wanted to signal a persistent enthusiasm for working with it. i happen to be in the a state where we are proceeding with deployment of a number of technologies where that could be of real interest for relevance. sorry we did not respond to the letter completely. i confess i did not realize it was an outstanding request. i would be sure to work on it when we go back. we will check and see where or what happened on the energy savings purchase contracts, are remember knowing a fair bit about this, but less at the moment. there are a couple of issues. how much money is the government raising on balance. the second issue is how the estimates work. the contracts themselves, as a cost. the savings can be realized to the extent that appropriations actions reduce the funding to purchase power. those things are kept track of separately. there are other cases where this diversion comes up. we try to offer an assessment of what the savings would be, recognizing there are reported in somewhat different places. so, that is nothing that we directly control, from the congress's point of people. we try to provide information so people can see the whole picture. i think we tried to do that in a letter about purchase contracts, but i do not remember the details. >> s someone in their first year as a senator, i'm trying to keep my eyes on places where there are for a -- from a broader view real opportunities for savings, but we do not pursue them. if i have identified something where i could contribute a more detailed conversation, i would be grateful to learn about it. i am concerned long-term, there is an opportunity to improve the purchase price for federal entities for energy, and the deployment of new technology. to more questions. i was struck on the range of to military effects of policy options that you laid out today. there were patricians scored flow. your analysis showed a very negligible gains in to look of output. i wondered if a repatriation policy or more tightly articulated with mandatory either hiring policies or infrastructure investment, would you predict any greater impact on the economy, or would you continue to score it at the far below end of potentially beneficial undertakings? >> it the policy could be written in a way that it created additional incentive for referring to invest, then it would have a higher cost effectiveness performance. but i have not thought about if it was feasible to do. the companies that have a lot of earnings overseas not yet repatriated also have a lot of assets in the united states, usually. they are not constrained by having those funds -- by not having those funds available. how what would construct a lot to link -- a law to link that to higher rates of hiring, we could probably better talk to our colleagues on committees who are much more experienced than we are in that sort of issue. but the reason it gets a low performance by this measure is that we think the companies to bring the money back, it does not change their decision whether to hire an extra worker. if it could be reported in a more reliable way, it would make the policy more effective. >> there is a policy that attempts to do just that. which i have so far not supported out of skepticism about the mechanism and its effectiveness. there is another method used to repatriated tax revenue as a way to fund the infrastructure bank. my core concern is there any way to give the punch ability of funds to demonstrate a reasonable way that those repatriated profits are being deployed, the court criticism of the previous opportunity? i appreciate that you may have covered this in some detail already. a quick reference to what you might see that three most effective economy strengthening fiscal policy measures that you think could come and bipartisan support. >> it is that last clause. senator, about -- i i am probably the least politically knowledgeable person within 5 miles of this building. all we can do is offer our analysis of what we think is more less effective by this measure. and as we talk about the various criteria about how you can evaluate this criteria, but i cannot apply of criteria of a political viability of that. >> recognizing that difficulty, earlier today, we announced an introduction of a bill, and one of the many features is extending -- expensing provisions for small businesses. that also scores on a broad range and i may miss the previous testimony. is part of a concern about the range of its effectiveness the duration and the length of the period for an extension? 01-year or a two-year extension of depreciation provisions being less effective than a longer-term extension? >> i would emphasize first the uncertainty, the state of the business cycle. and the low rate of utilization of this capacity. along the cost which would spur some investment but how much might be limited by the fact that businesses have capital on hand that they are not now using. it is hard to know how much difference that makes. analysis of past variations in this sort of provision of the tax code has reached varying conclusions about how effective these policies have been. i think this is a case of policy where short-term is better than long term. one looks to a permanent change in policy is more effective at altering behavior, but if they view this as a truly temporary measure, that could spur more reaction such as a store with low prices just for this weekend might get customers into the store for just this weekend. it could accelerate the business investment spending, people doing things next year might do it this year if the policy was in effect. that is complicated, but over the last decade we have policies like this on a number of vacation. -- of occasions. it is less uses 01-time thing and more of the revolving nature of our tax code. -- less as a one-time thing and more of the revolving nature of our tax code. i think the uncertainty we have is not easily addressable due to pad -- particular changes in the provisions and reflects the difficulty of judging how businesses will respond under the circumstances. >> thank you for your testimony. >> excellent question. thank you for your answers, director elmendorf. just on repatriation, there's not much of a mystery, i do not believe, because we have done it. we can now go back and look at what happened. it is very clear what happened. the 15 companies that were the biggest repay creators -- repatriator to backs,, soda companies, those corporations that count and then -- that accounted for more than half of all the incomes repatriated reduce their income -- their work force by 21,000 jobs after the tax break that was predicated on them creating more jobs in this economy. what they did do, they did not hire people, they laid off people. what they did do is accelerate stock buybacks and increased executive pay 30% a year between 2004 and 2006, and interestingly enough, the accumulated offshore funds at a faster rate than before the tax break. i just say to my colleagues who are intrigued that this idea, corporations that use offshore tax havens get the largest benefit. after the 2004 tax break, a substantial share of the repatriated funds came from tax havens. boy, is that a surprise. i tell you, if we get in the habit of repeating the repatriation gimmicks every few years, what incentive does that provide companies? about as clear as it can be. it is a huge incentive to take jobs overseas. take jobs overseas, safe and secure in the knowledge that congress will answer the siren's song to allow these repatriated holidays, bring the money back, at a fraction of the normal tax rate -- talking as low as 5%, 5.25%, instead of the statutory rate of 35%, and that they will be able to convince congress that if you just allow us to do with this one time, home oil -- only maybe we will do it again in a few years, then we will bring this money back at a fraction of the normal tax rate, just-in-time to lay off some more people and increase executive pay and have some more stock buybacks. my goodness. i mean, fool me once, fool me twice, fool me three times. at some point, shame on us. for buying the siren's song. but of all the things i have seen -- and by the way, we talk about being worried about the deficit? the joint committee on taxation said it will cost the treasury $79 billion over 10 years. so it adds to the deficit, it adds to the dead, the companies to repatriate our very concentrated in tax haven countries, and they bring the money back and lay off people. there is a brilliant game. had to the debt, have further job loss, create additional incentives for companies to move jobs overseas, so that they can set themselves up for that as repatriation holiday in which they come back here at a fraction of the normal tax rate. my goodness. i hope we do not fall without one again. i think the director. >> thank you, mr. chairman. >> on c-span's wrote to the white house, chicago mayor and former chief of staff rahm emanuel will be the keynote speaker at the jefferson-jackson dinner the morning, iowa. -- des moines, iowa. live coverage tonight at 8:30 p.m. eastern. >> there is a story i was told from inside the administration that when obama was given the first budget and there were 6000 or 7000 year marks in it, his first instinct was to veto the budget, and he was told by his lobbyists said there is no way to do that with the democrats. had he done that, he could have been the tea party. he could have rallied the reform movement that breaks out all over the world because of the frustration with the way democracy does not function. >> a harvard law professor on money and its influence on washington sunday night on c- span's "q&a." >> tuesday, marco rubio talked about a jobs bill he introduced. during a breakfast interview with politico's mike allen, he said he is hopeful but joint super committee can come up with a plan bulls can agree on by the deadline next week. this is about 50 minutes. [captions copyright national cable satellite corp. 2011] [captioning performed by national captioning institute] >> good morning. thank you for everyone out there. i would like to thank bank of america for continuing to support these conversations, and i would like to recognize some special guests. we are fortunate to have some student interns from the urban alliance high school internship program. this is a d.c. non-profit that connects local young people with companies in the area and three of our students are interns at bank of america. this is a great program that helps the community and there is more information on your chair about being involved. as you came in, you might have gotten one of these cards, very exciting, "baby's first book" -- the right fights back. it is the first time we talked about it. we have fantastic interviews with candidates. we go behind the scenes with all the advisers and give you a sense of is going to be running these campaigns. you can also go to political. -- politico.com. thank you for being here, i will bring you into the conversation, but let's start with senator marco rubio. good morning. [applause] >> senator, as soon as you leave here you will make some news. you and fellow freshman senator chris collins, a democrat of delaware, will go out and talk about what you call a real job creation plan. what is different here? >> the frustrating thing is we fight on things that we agree on. there are significant differences between republicans and democrats, and a lot of it is ideological, and that is why we have elections. we are not going to come to an agreement on that. >> you are giving up all ready? >> there are some things we are not willing to agree on. that is why the job is called the agree act. we went through everything that has been proposed, and we tried to identify things that were all -- in all of the plans. will it save us,? now. it will pass things we agree on, and secondly it will send a message that we can still get things done in washington because one of the things that is having a dramatic psychological impact on consumer confidence is the inability of this process to function. we will try to move the ball forward. >> i do not want to induce a rick perry moment, but do you know what agree stands for? >> the acronym, now. -- no. i also did not come up with it. i know what is in the bill. >> there are parts from the white house, apart from gop plans. what is something that the white house will love? >> i think all of it is things he is supportive of. for example, 179 provision which is a provision that allows small businesses, is not limited to small businesses, but allows them to write off 100% of the cost of capital purchases and investments they make in their business, even things they lease. that is said to expire. that is important for businesses with tax uncertainty. i think everyone will like that. there are things about immigration and the country quotas that are in place that i think hurt us in terms of attracting high-quality immigration. no one will be able to look at it and say there is not something i do not like, but it shows there are things we agree on, and the things we agree on, whenever that stands for, we will be able to work together on. >> you are trying to put a crack or a thought on washington gridlock. you look at this with a fresh eye. clearly, short-term political gain is part of the reason for gridlock. what else? >> part of it is a significant ideological difference. we cannot understand that. that is not just in washington. that is in america. the constituency in san francisco will have a different opinion than someone out of northwest florida, for example. what happens when someone from nw florida comes to serve in the halls, and someone from san francisco service? they will have a difference of opinion. they will reflect the people that sent them here. there are choices and consequences. in the end, i think all americans generally want a country that is compassionate and prosperous, and finding what the government role should be at achieving those goals has been at the center of the debate. >> there is one thing every person is interested in, and that is the super committee. was it a good idea? >> i did not vote for it. ultimately we have a responsibility to do our job. we wanted this job. everyone of us ran because we wanted to. that is why we have the process. thate basically conceding this republic cannot deal with the most pressing issues. secondly the super committee will face the same challenges that the congress faces in a significant ideological difference of opinion. those big issues is what the election needs to be about. >> this to the committee will succeed or fail? >> i do not want to say they will sell. i would love nothing more than two wake up and see -- >> not what you want to see. >> these guys have worked hard and i do not want to diminish what they have put in. i am hopeful something meaningful will happen, but i would not put any money on it. let's wait and see. >> you are a bit of a bridge. you were the ultimate state government insider in florida yet you manage to capture the energy and imagination of the tea party. people in this room did not think you were going to be the senator. >> a lot of people did not think that, and on sundays and neither did die. the insider/outsider way is not a way to analyze. do people want to do something or be somebody? there is a fundamental difference. we are all guilty of wanting to be liked. there are times where you have to make a decision. m i in this to make a difference, or to use this as a catapult for something else? i think in politics of the last 20 or 30 years we have had people involved because they want to be liked. i felt that was one of the fundamental things that plagues the process and the party. iran because i wanted to make a difference. -- i ran because i wanted to make a difference. >> how did you make the original connection with a populist movement? what specific issue or language work for you? >> i wish i could tell you it was a brilliant calculation, but it was not. when i got in the race there was no one else saying the things that i felt. early in 2009 president obama was elected and they moved rapidly on things like the stimulus plan and to the health- care bill. there was a counter reaction. there was an expansion of the government that people were not comfortable with. our campaign gave voice to an alternative. i wanted to be an alternative. it was at a time when the republican party was debating about whether republicans had to elect people that were more like democrats. that never made sense to me. these were things i was able to articulate. >> are you saying moderate republicans are the equivalent of a second democratic party? >> the term moderate is used as a label. very few people fit into these labels we like to create. there has to be a voice for limited government. the republican party does well when it is a legitimate voice. it does not mean no government, but a proper role. that is where the republican party draws its strength turned >> how durable is the -- strength. >> how durable is the tea party? >> it is a movement, and not just a moment, but a sentiment that found its way into a moment. it is not new. it just did not have social media. >> in four years will we be talking about the tea party? >> they will continue to be a factor because the constitutional limited role for government that is believed and will not go -- go away. i do not think it will ever become an organization. it draws strength from the fact that it is a legitimate grass- roots movement made up of people who shared differences of opinion, but ultimately they are able to find commonality. >> the one argument i have seen for the idea that the tea party would not less, and some of you have heard me express this, but whoever becomes the republican nominee will almost by definition have found a way to bridge the establishment and the tea party. i wonder if this dilutes the tea party. >> i think they will be held accountable as members of congress are now. where did you campaigned on, and are you doing it now? -- what did you campaigned on, and are you doing it now? >> playbook is big on birthdays. senator, you are the second youngest senator. >> by six days, yes. >> you are 40. what kind of culture shock was there for you? what do you see in a place that is much older and seniority- driven? >> there is this old jokes, and i was told when i got here -- one week ago -- one year ago this week was orientation. it is hard to remember this is where important things have happened. one senator said to me i know you are wondering how you got here, but six months from now you'll wonder how they got here. by and large, i have not had a single negative runyon. -- run-in. most believe in what they are fighting for, but some are wrong, in my opinion. ultimately, if you meet pretty pleasant people. when you talk to people, there are a couple of people -- it cost to let you see there is something special. i am still getting to know all of these folks. i am generally impressed with work knowledge. i am also disappointed by the lack of urgency. >> what did you think of seersucker date? >> wine was fedex -- when was that? i may have missed it. i am not acer soccer fan. -- seersucker fan. >> one of your interest is human traffic. >> against it. >> right. [laughter] i am interested in how it got on your radar. >> i have always been aware of on it, but there was a cnn special in march or april that brought to light the issue. >> this was the one about craigslist? >> no, this is when demi moore when somewhere in africa. we realized it was a problem domestically. it is not just the sex traffic. there are also all sorts of forced labor. i've been semi-aware of it. i have been shocked by the prevalence in a 21st century and how in some ways our laws are helping to contribute. so, you look at it domestically. for the plays a big role. internationally, it has become a big issue. i adopted a passion for it as a human right to issue. i hope it is something i can help or to eradicate, because 50% of the battle is just been aware. >> 1 fax surprises you? >> in this city, there have been diplomats that have brought in workers that they do not pay. we have a couple of incidents going on as we speak. there are members that live in this city the have a slave living in their quarters. >> what can congress do? >> we have this reauthorization bill. the important thing is it becomes a victim? centered. -- dictum--- 16-centered . i think that is important. calling attention to it. we do a review of all countries and press the agenda. it starts with our own example. we have to show that we take it seriously as a domestic issue. i will freely give a speech about -- frequently give a speech. i think we have to hold ourselves up to higher standards. >> in a recent visit to the texas/mexico border. what did you learn? >> there are four key sectors were people enter the united states, and one is the al pesto border sector. on one hand you are impressed by the progress made. the old fence was a barbwire, and now there is a more impressive structure in its place that has anti-tunnel features. you can see where the construction has helped it more -- make it more secure. you also see the challenges. there are areas harder to secure. it is kind of breathtaking to realize you are inches -- we stood on this side of the real grounded, and on one side is al pesto, texas, when of the safest cities in america -- el paso, texas, one of the safest cities in america, and on the other side is one of the most dangerous to read what is contributing to this is people not finding opportunity -- dangerous. what is contributing to this is people not finding opportunity. that is the problem. >> you said the republican is to be pro the republican party needs to be pro-legal immigration. >> we have a problem. americans are very open. immigration is something we have bright about. only recently has it become difficult to embrace. in the early 20th-century there were seven-times, but by and large it is something we have prided ourselves in. it has only gotten worse, it exacerbated by the downturn in the economy. unemployment and government spending makes people more upset. there is almost the sense of we are taking advantage of. it is never that simple. >> that clearly has happened. >> it has, but that is not the calculation most people have. for the most part they are driven by a desire to provide a better life for their children and grandchildren. it is the story of my family. the question is how do you do that in the 21st century and a weight that is conducive to a process that is controlled and orderly? that is why we need a legal immigration system. we are not in favor of amnesty. what are we for? i hope we can enter the conversation. there are things we can do to improve the legal immigration system and would help to deal with the illegal immigration problem. >> what is the biggest thing that would help? >> we do not have a workable visa program that takes into account the needs of the 21st century. a guest worker program that adjusts to economic needs. why can we not provide a system whereby people apply in their home country region there is a willing worker, a needed job -- country -- there is a willing worker, they entered the united states, they return home when they're needed. that would make us more secure and cut down on over-staying. >> what is something your party could do to do better with latino voters? >> the number one issue in americans with hispanic descent is the same thing nationally, the economy, and unemployment. >> the party took a dramatic downturn from where president bush was. what accounts for that? people say if he did not the better we will not have another republican president. >> i do not do the calculation. to cyd the hispanic community, it has different needs in different parts of the country. there is commonality between border region voters in central florida and mexican americans in the southwest, and there are also differences. at the end of the day what really drives people and brings people to the united states is the desire to provide a better life for their families. which political party will have an economic agenda that offers not? republicans will have to make a better case that the american free enterprise system is the best system in human history to allow people to provide for themselves and give their children better opportunities. the rhetoric on immigration has hurt. it is hard to get people to listen to the argument if you think people are not friendly to your argument. ultimately, will will help the republican party do better among all americans is a vigorous, thoughtful defense of the free enterprise system. >> let's look abroad. what happens when castro dies? >> hopefully, a lot of good things, but we do not know. we have never really confronted a situation like this. time is not on their side. they are trying to institutionalize and protect economic gains. it is really become a communist military dictatorship where the government is really in business. >> they can sell cars, buy houses? >> it is really said. it is like throwing crumbs off the table, and saying we will allow you to eat the crumb, but not the loaf of bread. people are allowed to buy and sell property. it does not get to the fundamental issue which is political freedom. the people can choose any economic model they want. they can choose a western european model, an american model. it is up to them. my fundamental concern is not the economic model the shoes, although i would have suggestions, but my -- model they choose, although i have my suggestions, but they have no system. if the political openings come, and people in cuba have a voice, they can choose the system for themselves. that is what we should be a voice on behalf of. >> should the u.s. normalize relations? >> no. any relations with cuba is all on their terms. no relation with their government -- resistance to the island drives hard currency. the administration concedes ed as a part of a balancing act. -- him that as a part of a balancing act. it keeps themselves in power. u.s. tester -- you asked what happens after tester disappears. is there are still sanctions, which will have more in interest. you have to the political freedoms. you have to join the rest of the western hemisphere. into that, and you will have a friend in us. -- you do that, and you will have a friend in the. >> i'll bring you in on the conversation in just a second. senator, you carve out a policy that has been strike as a porsche-style -- bush-style hawk. if the u.s. had credible evidence the there was going to be a major attack on civilians, should the u.s. intervene? >> i think the evidence is there. i do not think there is an act he is not willing to take to place himself in power. foreign policy is complicated because no two situations are alike. you outlined syria against libya. they are different. libya had an organized rebellion. they were harmed. they were making progress. at one point, before making tremendous progress and were on the verge of toppling the gaddafi regime, and specifically asked for a no fly zone. you do not have that in syria. quite frankly, i do not know if we want that in city -- syria. when of the things the president assad regime is using day know how to crush a violent uprising. what they do not know how to deal with is a peaceful moment. that is hard to advocate for when i'm sitting in washington, d.c., and they are getting their heads cracked open in syria. use all the arab league to taking measures. turkey has been very forceful. the question is a difficult one. i do not know if there is a situation -- there are differences of opinion. i do not know if there is a military engagement the u.s. could get involved and that could prevent it and syria. >> use all the south carolina debate. rick perry said he would start -- >> i think the concept is that everything needs to justify itself. everyone would agree with that. when has there ever been a good idea to throw away money? >> you have an interesting idea about foreign aid. >> we do not have a choice. everything that happens in your day-to-day is deeply influenced by what is happening around the world. europe may seem very far away to some people. but retirement is invested in things that are impacted by europe. the u.s. does not have a choice but to be involved around the world. many of these countries, the only thing they know about the united states, is that we provide anti-hiv medicine. we're not just a smart people, we are not just a hard-working people, we are blessed. with that comes an obligation. i think we have to live up to that obligation, would then our means. that is why foreign-aid is so important. if you are not giving foreign aid in egypt, as an example, what did they care what we think about anything? >> do we have a question? >> this is like a talk show. >> good morning. i want to talk briefly about aids in the united states. it provides aids drugs to people with low income. florida has the longest waiting list for this program. recently, in your office approved -- has been approached about shifting funds. given the recent studies that showed that treatment not only saves lives, would you be in favor of shifting funds? >> first of all, we are talking about shifting a lot of money from one budget to another. i would take to make a commitment that will have to come back to you. i will go look at that more carefully. it is something that we care about. it calls attention to what i think is one of the fundamental issues we face as a country. that is the balancing act as a people. we want prosperity and we want compassion. how do you accomplish both of things? we are too compassionate of people to allow people to die or allow people to suffer because they cannot afford to access to life saving medication. the fundamental question, a lot of people do not do that. we will take very seriously. at the fundamental level, it is this the proper role of government? for things like this, and it is. these programs all have to be created with a night on the fact that we had about an economy that can afford these things. we have to have enough prosperity so we can afford to pay for these things. i think hiv is an example of something we have made tremendous progress in as a nation. it was a crisis when i was growing up in the early 1980's. basically, it was a death sentence. today, you have people live of normal and meaningful lives with hiv. not just to dances and the medications, but access to a very expensive -- not just to access to the medications, but access to a very expensive regiment. >> back in florida, republicans hold strong majorities in both chambers of the state legislator, a strong majority of the congressional legislation. everyone who looks at the presidential race says it is a tossup. >> the republican party has done a better job in florida. at the macro level, when it comes to voting for president or governor, people are a little bit more open-minded. if you are a party line about her -- voter, you're probably not as well informed about a legislative candidate. florida has a lot of people who are registered democrats who have voted for republicans in the past. you see this back and forth between george w. bush and barack obama. it is a tossup state. it is a purple state. it is a place where all the national issues are front and center. that is one of the reasons i thought a florida should be early in the primary cycle. >> i least 50-50 given the circumstances. >> what will the nominee need to do to get florida? >> are the same things to when it nationally. that is a testament to florida's microcosm. provide a compelling vision of how we will make things better. they can be better. the 21st century can be the american century. do it in a compelling way, in a positive, optimistic way. people believe that things can gets better. they are looking for someone to show them the way. i think it is important for republicans to provide a very clear contrast. >> you touched on some of those things when you gave a major speech at the ronald reagan presidential library. >> i grow up in the era of ronald reagan. i was in third grade when he was elected. i was in high school when he left. it has a major influence in my upbringing. just to be there and see some of these things. it is pretty impressive. meeting mrs. reagan was very impressive. one of the great thing about them was their marriage. we were at dinner and my wife was with me and mrs. reagan turns to her, you know, ronnie used to send my mom flowers thanking her for having me. he had written over 700 love letters. i thought, i am in a deep hole. >> tampa is going to be home of the national republican convention. how's that going to be? >> it also includes st. petersburg. it is a great place to be. a lot of entertainment establishments. i encourage people to go out into the gulf. the beaches are really nice. it will be a little warm, it is late august. hopefully, the miskitos will not be a big problem. -- mosquitoes will not be a problem. >> what do i do at night? >> it depends who you are. there is a lot of fine entertainment establishments in the downtown area. people have fun there. >> what is the state house that has the world's largest wine collection? >> i have only been there a couple of times. >> where should we go? >> pimm he has a restaurant right near the airport. -- he has a restaurant right near the airport. >> when we are in tampa, it might be that you would have a big contract with you. are you prepared to be president? >> i am not running for president of the united states. i am a united states senator. let me say something about the presidency. what you want a president is the ability to analyze situations and make decisions based on sound judgments. on foreign policy. you're trying to figure out which one is better and which one is worse. many of the decisions of the processes are similar. when you look at the big picture and analyze how that decision will be looked at 10 or 15 years and now, this will be viewed -- you have to be able to analyze things like that. it is the kind of quality i am looking for in our nominee. >> you said you do not want to be vice president. why not? >> i am focused on my job in the senate. what is wrong with the u.s. senate office? i ran for the u.s. senate because i wanted to be a u.s. senator. i want to do the kinds of things i am working on now. i want to be a voice for florida. i am learning how to do that. why have we come to believe that being in the senate is no longer a meaningful place? >> it has been hard. some days are tougher than others. it is hard to realize that you are not around on tuesdays and wednesdays. i have to figure that out. >> what is the age range of the kids? what kind of considerations? >> that is a good question. we have very deep family roots in miami. i like connecting with people, i like going to grow is to restore. -- i like going to the grocery store. on the other hand, i still believe, my number one job is still husband and father. i have to get those things right. it is hard to do when you are not there. >> how often do you go to church? >> i tried to go every day. i do not always go every day. one of the great treasures of the catholic faith is the ability to go to mass every day. i do not always make it. they always have a confession every day. obviously, on sundays. we have also established a relationship with a non catholic church. we tried to go there from time to time. >> what kind of church? >> they are aligned with the southern baptist convention. it is really nondenominational. they do a great job of teaching the written word. >> you said you established a relationship. >> we started going because we have friends that are going there. the pastor is very good. at the end of the day, our faith has been a source of strength and a source of clarity. when your perspective is eternity you get a better perspective on what matters and what does not. >> [inaudible] you mentioned your trip to el paso. the difference between -- the difference in economic conditions. it also reflects the war on drugs in mexico. right now, the mexican people are considering whether it is worth conducting this campaign at all. >> i think mexico deserves better. mexico deserves to be prosperous and to provide great opportunities for its people. you cannot do it when drug gangs run portions of your country. they are paying a very high price. it is very similar to what you saw happen in colombia. on the other hand, we shouldn't care -- we should encourage -- anytime you talk to the mexican government or the people, they will remind you that these drugs are headed to american cities. in order for us to have a moral standing on the issue, we have to do a better job of addressing the domestic issues that we face in terms of consumption. i think mexico deserves better. one of the great development will be if mexico can emerge from this. we would hope for that. i think that is what the mexican people want. we should be helping them in that regard. >> good morning. thank you very much for hosting this. i am a sophomore at the george washington university. are you intending to wait and -- weigh in on the senate race in florida? >> int is an interesting race that continues to develop. i am not going to get involved in the primary. my hope is to help the republican nominee because i want us to get a majority. i think we can do a lot more if we were in the majority. i do not intend to get involved in the primary. we have really good candidates running. we will see how it plays out. >> you are one of the few people -- you have pitched a book. what is going on? >> people will want to have to read it. some people are interested in my background and how that helps me arrived at some political conclusions. what have you -- what has surprised you, what has disappointed you? what most concerns you? my answer is going to be, you have to read the book. >> your biographer -- that the book is out next year. what is it like to be written about? >> i will tell you what i read it. >> what do you do to succeed in washington? >> it depends on what you want to be. there are a lot of ways to be involved in the political process. you can run for office. they're all choices that come with consequences. i got involved as an intern in the congressional office in 1991. that is how i got involved. i ran for city commission. it developed from there. there are different ways of looking at it. one of the people i really admire is jeb bush. go into business and be successful at something else, and then go into politics. i kind of did it the other way. the benefit of being involved early is a certain level of idealism and drive. life starts to wear on you. it does not mean that you cannot be idealistic at 60. certainly, i think time develops people in that way. on the other hand, there are benefits to life experience. there are benefits of having been a ceo of a business. having raised your children. it really depends on whether the time is right for you. i would encourage people to get involved in the political process. we have elections in this country and we have arguments and say nasty things to each other, but those same issues are resolved and the other parts of the world. the way they resolve them is through civil war. i would much rather have that than someone shooting at my house. >> what about the scrutiny? >> if someone does not like you, they write an ugly article about you. if someone does not like you in some countries around the world, the decapitate you, or blow up your car. >> it is painful and the moment, it must be. >> it is part of the deal. when you sign up for bid, it comes up with all these things. you wanted to be fair and accurate, but it is part of the deal. there are other things i could do with my life and my time. but i want to do this. i want to make a difference. this is the price of admission to the stage. i am blessed to be honest. at the end of the day, people are smart. >> as we say goodbye, i want to ask you about music. is it true that you like rap? >> at the stopped in the 1990's. i get in trouble when i talk about that. maybe i should not listen to that anymore. the music is good. i will tell you what i've developed over the summer. my wife likes country music. i listen to it. it is all right. i can listen to it. what i don't listen to is classical music. nothing against it. i will probably get to that 0.1 day. >> hang out in the senate, you will get there. >> use that it gives you in trouble. >> people listen to some of that clerics in the song. should you really be listening to that? -- of the lyrics in the song. should you really be listening to that? if i limited my music to conservative artist, i would not have much to listen to. >> we are appreciative to bank of america before making these conversations possible. to you for coming out so early. thank you for a great conversation. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> with a deadline is days away, congressional negotiators on the debt reduction committee did not appear close to agreeing on how to reduce the federal deficit by $1.20 trillion. one cut that does appear likely, getting rid of a missile defense shield program for defending europe. legislation to raise the nation's debt ceiling requires the 12 member bipartisan group to report a deficit-cutting plan by wednesday, november 23. the deadline is effectively monday so the cbo can measure the effect on the debt and deficit. if the committee fails to reach a deal, a series of automatic cuts would go into effect. you can follow continuing coverage here on the c-span at parks. -- networks. >> condoleezza rice, a george mcgovern,book tv brings you the miami book fair international. live this weekend on c-span2. you can also look online at booktv.org. >> nationalism, tribalism, religious fundamentalism are far more powerful than ideology. we are not immune in this country from these forces. when the melting pot has been thrown out, what holds us together? >> from new york city, the national book awards. find a complete schedule online. every weekend, on american history tv, the people and events the document the american story. he began his, career in 1971. three years later, he would write president nixon's letter of resignation. from lectures in history, university of albany professor on emancipation during the civil war. look for the complete schedule at c-span.org/history. >> martin o'malley held a news conference monday to talk about jobs, the economy, and the role of states. this event is 50 minutes. >> good morning. welcome to the national press club and today's news program. i am ed lewis, a member of the newsmaker committee. thank you for being here. this might be a good time for everyone to put their mobile device on a vibrant, if you will. this morning, we are fortunate to have as our guest the governor of maryland, chairman of the democratic governors' association, martin o'malley. with the 2012 election around the corner, we hope he will share a few notes from his election playbook on the role democratic governors will play in their party's resurgence next year. first elected in 2006, he was reelected last year with 56% of the boat, a 13% margin over his opponent. under his administration, maryland has cut nearly $7 billion in spending, at the same time, the state has made huge investments in education. maryland is one of only eight states with a aaa credit rating. this year, maryland ranks 10th in new job creation with an unemployment rate below the national average, and maryland public schools have been ranked best in the nation for three years in a row. as chair of the dga, he is what the clinton for stemming the tide after a number of games by republican governors in recent years. compared to his predecessors, he has seen as more aggressive towards republicans and is a staunch report predicts supporter of president obama's agenda, including the american jobs act. in june, dga announced it had raised $11 million in the first six months of 2011, with $8.6 million cash on hand, a record called for the dga. especially in an off-election year. most insiders believe governor o'malley would be a shoo-in to win reelection as dga chair this december. i just discovered that as a former mayor of baltimore, he appeared as himself in the movie "latter 49." >> a hard roll. -- "ladder 49." >> mr. lewis, thank you. thank you to everyone here at the national press club. thank you for being here this morning. it is great to be with all of you. i wanted to talk to you a little bit today from a democratic governor's perspective, about the pace of our nation's job recovery, the governing choices and economic policies that democratic governors are making to tolerate that jobs recovery. each of us has a role to play. i'd also, the very different set of courses that i see being made by many republican governors. let us jump in here, shall we? over the last five years in our state, in the state of maryland, we have been focused on creating jobs and improve the conditions for job creation with performance measures, making our government work more effectively, with openly setting public goals and transparency. we measure our progress towards achieving those goals. we -- building on the strengths that mr. lewis can be mentioned, and the better decisions of our state to pass, we have been able to make progress, and even in some very challenging economic times. how have we done that? by choosing a balanced approach. a balanced approach that includes a mix of cuts, revenues, and strategic investment in that better future that we prefer. strategic investments in the very foundations of our economic strength, like public education. the progress that we are making in the 20,000 net new jobs created so far this year, progress we're making in maryland's public school being named number one in america three years in a row. that never happened before, but it happened in the middle of this recession. progress in driving violent crime and homicides to their lowest close since the 1970's. and progress in protecting our aaa bond rating. across the country, democratic governors in the toughest of times, are balancing budgets, making tough choices, creating jobs, and moving forward, and doing it all at the same time. as governor bashir recently said in concluding what i believe was a near-perfect campaign in kentucky, he said the closing days of that winning campaign, "true leadership is having the courage to make the right cuts and the good sense to make the right investments." last week in ohio, and the last week also in kentucky, about a month ago in west virginia, we saw that the voters sent a very powerful message, and it was this. knock off the narrow ideology and put job creation first. in kentucky, steve howe bashir ran a near perfect campaign. how did he do it? he focused on the choices that we must make together in order to create and save jobs and expand opportunity. that is also what governor thompson did in west virginia. his opponent talked about peripheral issues, like health care lawsuits. -- tomlin did in west virginia. his opponent when into peripheral issues, like can do business opening ceremonies, challenging the sincerity of gov. bashir's religious beliefs. but they stayed on job creation. the state focused on the things that could leaders do, regardless on partisanship, to make the tough and right decisions. ohio voters overwhelmingly disapproved governor kasich's overreaching anti-union ideology by rejecting senate bill 5. have taken away public bargaining rights from public employees, including moms and dads who have served all of us as firefighters, as police, as teachers. more people turned out to vote against senate bill 5 than turned out to vote for the governor to begin with. i believe the voters were saying, enough already with the anti-union ideology. what does that have to do with creating jobs and expanding opportunities? voters told us that they want their leaders to bring people together to create jobs and do things that work, and that is what democratic governors are doing in every part of our country, making the tough but right choices now to create opportunity and jobs. recently, we called a special session around job creation and broad democrats and republicans alike in on a package that included tax credits, job training, regulatory reform and support for small business. he is a man who has a business approach to making government work. he put forth a serious job creation initiative called building delawares future now which calls for additional investments in the job priories supported by democrats and groups across the country called infrastructure. north carolina passed a ready set go initiative designed to make sure people have the skills they need to fill the new jobs being created by the new economy in north carolina. there are two economic models at play here. if there is anything we should have learned from the administration from george w. bush, it is the trickle-down economics does not work. triple down -- trickle-down economics does not create jobs. it does not grow our middle class or expand opportunity. trickle-down economics does not create jobs. trickle-down economics does not grow our middle-class. trickle down economics does not expand opportunity. yet, the struggle goes on between two competing economic models. one that has been proven to work in every generation, versus one that brought us record debt and record unemployment. 1 that bill largest and strongest middle-class in the history of the planet, versus one that brought us declining middle-class incomes for the first time since world war ii and nearly drove our economy into a second great depression. these two fundamentally different sets of choices are playing out not only in congress, but of course, in statehouses across the country. let's go back to ohio as an extreme example among money, where governor kasich is making deep cuts in economic priorities, like public education, even as he cuts taxes for these states -- the estates of debt millionaires and -- dead millionaire's and billionaires, hoping that they will reach back from the grave and create jobs and expand opportunity for those of us who are still living. by their own trickle-down theory, the massive concentration of wealth should have brought about better times, and not economic disaster. if their theory worked, millions of jobs should have been created now by this concentration of wealth, the greatest concentration that has ever happened to one sliver of our population. there should be jobs falling from the sky. we created only 1 million jobs during the bush administration. during the clinton administration, we created 23 million jobs. i report, you decide. which one is the more effective model? and they succeeded in accomplishing their mean very well and we have to give them a hat's off for that. that was the extreme concentration of wealth, but it brought about near-disastrous economic results for the 99 percent of us. it has been a failure for america, america's economic growth, and we are still recovering from the losses of the bush decade and there failed trickle-down economic model. president obama and democratic governors reject their model. it is not fiscally responsible. it is not good for our country. we believe in a different model, a more effective model, and more traditionally, if you will, an american model. this puts jobs first and recognizes, to create jobs, a modern economy needs modern investment. that is not a democratic or republican idea. that is an economic truth. that is an historic truth. that is an american idea, and one that we have proved out time and again as a people. we have a long way to go before we recover all the we have lost in the last decade, but we can make our economy stronger, and we can make our country better. last month, our nation achieve the 13th month in a row of positive job growth under president obama's leadership. that is 13 months in a row, which is the longest stretch of consecutive, positive job creation that our country has achieved since 2005, 2006. meanwhile, the private sector has gone for 20 consecutive months in a row of net-positive job growth. last month, under president obama's leadership, we drove home foreclosures down to their second lowest since we had seen since november 2007. in july it was a 44-month low. because we are starting to make better choices for people, our economy is starting to get better. bank failures are down, corporate profits are up, but better is not good enough. we have not regained all that we have lost in the bush recession, and to many citizens are still hurting and searching for work. the truth of our situation is, we will not move beyond our current job creation and employment difficulties simply by cutting. it is not possible. if it feels to you that every month our economy is taking two or three steps forward and then taking one step back, that is because every month, for every two or three jobs created in the private sector, our public sector is eliminating a job. in absence of a more balanced approach, the absence of moderation and measure in the public decisions of our national endeavor is forcing counties, cities, forcing states to slow down our jobs recovery with never ending layoffs and job eliminations. if our public payrolls were bloated, perhaps we could all chalk this up to some sort of right sizing, but in most places, they are not. how much less public safety do you think would be good for baltimore or newark? how much less vacation do we -- education do we need as a nation? for the last decade, we have been severely undercapitalized in the great job generating an opportunity expanding opportunity of america. we have been under investing in job creation and opportunity expansion. others may want to talk about the morality of an economic system and all economic systems are political. others may want to talk about the morality of an economic system that is rigged to concentrate so much of our nation's wealth in the hands of so few. but i'm just as concerned about how these portraits russians -- have these poor choices keep us from investing in our country and the better opportunities that we all want for our children. under president eisenhower in the 1950's, our country invested 12% of federal non- defense spending in our infrastructure. today, we are at just 3%. when it comes to research and development, we are investing 60% less than we were when richard nixon was elected president. in the last 10 years or so, we have seen our ranking and a percentage of our people that have college degrees actually shrink among the nations of the world, declined, from first place, to around 11 or 12. and it is not what other countries are doing to us. it is when we are not doing for ourselves. no one is going to do these things for us. no one is going to make these national economic investments in education, and innovation, and infrastructure for us. the american society of civil engineers recommends we should invest $846 billion over the next decade to upgrade our roads, bridges, and tunnels. ending the bush tax cuts for millionaires and billionaires, returning to clinton-era tax rates, that is to say, for the highest brackets, would allow us to make $400 billion of that $800 billion in needed investment. to govern is to choose. democratic gov. ed believe there -- governors believe that there are, in fact, some challenges that are so large, we can only hope to accomplish them by working together. creating jobs, spur innovation and how we feed, fuel, and heal oure'll -- people, expanding in this economy, expanding public education and public safety, making college more affordable, rebuilding the 21st century transportation infrastructure, cyber infrastructure, around king childhood poverty. -- eradicate in childhood poverty. these things will happen by themselves. we must do a thing as we did before, together, and we must do them ourselves. i appreciate your time in coming here today. i think you for your interest -- thank you for your interest and your important and courageous decisions of many of the states. it is my honor to have served them this past year. i am proud of each one of them. they are all making our country a better place. i will be glad now to open it up for questions. >> thanks. perfect. >> please give us your name and affiliation. >> we are the news service of the peace center of the state. -- q center on the state's -- pew center on the states. i am curious how you think the super committee has worked, and what appears to be no compromise at this point, factors into your call for more investment. the opposite seems to be being discussed. >> questions about the super committee and the important work they are doing? i hope all of us will make progress in bringing us together in this time of tremendous division and polarization. what we need is a spirit of compromise and moderation, and an ability to adopt a balanced approach. when 55% of our debt is driven by bush-era tax cuts that primarily benefited the very wealthy, that balanced approach must reasonably include an on doing, reversal, if you will, and end the ongoing self- inflicted revenue wound. there was a little bit of talk from our friends in the proud party of lincoln, further examination from that first overture, as late as it was, appeared to be more of a shell game than a real step towards reversing the damage of those bush windfalls for the wealthiest of our citizens. i spoke earlier this morning with chris van hollen. maryland is very proud to have congressman van hollen on that committee. he continues to work. there is that sequestered limit. hopefully, they will make progress. " we all need to stay with this. we do not have another congress right now. as frustrated as we get, as this progress breaks down, this is what we have right now. we have to try to pull things together and make progress with the national interest at the forefront. but we are steering between -- let me stop there. i do not want to filibuster questions. >> politico. you know in wisconsin they are pursuing a recall of scott walker. are you supportive of that? have you spoken to them about pledging resources towards accomplishing that? >> there are a lot of people that would like to recall gov. walker in wisconsin. as an organization, we have not had a conversation about it. i will tell you this. we have an opportunity to replace and reminded and the logical governor with a -- replace a narrow minded, ideological governor with a democratic governor then get things done. if we can do that, we will get it done. the wisconsin recall could soon be coming up on our horizon. i do not want to get too far ahead of my colleagues, but what i think i can safely say on their behalf is, if the recall goes forward, if successful, the dga will be there. as we were in ohio. >> press first of india. i believe you are traveling to india this month. has your schedule been firmed up, and why are you traveling there? >> yes, i am traveling to india with a number of businesspeople from maryland, traveling with katie o'malley. she will be doing lots of work on rule of law, something she has taken on as first lady. i will be traveling there primarily to promote maryland as a destination for foreign direct investment into maryland. we have an astounding work force in our state. we have more ph.d.'s per capita than any other state in the union, and we have strengths that are well-suited to india, health care, like science, -- life science biotech, and i.t., given the concentration of innovation assets we have in our state. nih to john tompkins, national -- from nih to johns hopkins, national security administration -- all of these things, along with the food and drug administration, make our state a powerhouse for innovation and life science and i.t., and also the national institute of standards makes us pretty much the in disputed at the center -- epicenter for cybersecurity. so we hope to build on those strengths and advertise them and recruit investors from india to invest in maryland. i am traveling there the friday after thanksgiving. i will be there for roughly one week. >> [inaudible] why should we take that seriously, given the success republicans have had in statewide races? >> the question is, with the race is coming up next year, there are 11 races the chair. -- 11 races that are up next year. next year is also a presidential year. we have our work cut out for us. these are not easy times. everybody would like to see the jobs recovery happening a lot more quickly than it is, and i think no one desires that more than the president and democratic governors, but the truth of the matter is, this is a very challenging time. a lot of people are hurting. there are no easy solution or answers. the races coming up next year are not only important in the traditional way of looking at the horse race, which 1 foot red, blue, but there are also important battles that are being played out -- and every campaign is different. in the past, places like ohio, florida, wisconsin, have played important roles in the ilec for a college meth. -- in the electoral college math. in all three of those states we have a tremendous amount of buyers remorse with voters who elected a new governor of a new party, thinking they were sending a strong message for job creation, but instead what they got back was a lot of it impractical and extreme right wing etiology, whether it is -- ideology, anti-union -- ideology, whether it is anti- union, cutting from seniors and college students to kill tax cuts for the wealthy -- -- fuel tax cuts for the wealthy. the dga and the contrast they provide, leadership by example, will also play an important role in this presidential race. we are very excited about the potential in indiana. speaker gregg, i have met with him. he is a dynamic person with a fear this commitment to public -- fear less commitment to public service, and ability to speak honestly about these complex issues. we also have our vice chair beverly perdue, who is up for reelection in north carolina. in washington state, we will be having a governor's race. jay inslee has created a book on creating jobs in this economy. in new hampshire, and john lynch, retires one of the most popular governors, and that is after eight years. usually, they get sick of anyone after five or six. there will be a race to fill his seat. in vermont, they would like to -- they like to elect their governors on two-year cycles, like congress. so that one will be up as well. montana, brian schweitzer, will be completing his two-term limit. our attorney general candidate there we are very excited about. there will be lots of things going on in the dynamic of the presidential race. it is not the largest year, but it is an important year. some of the most important work that will be going on, as far as playing into the presidential race, is contrast of democratic governors that bring people together, that make the right decisions to invest now, and republican governors that are giving us trickle-down economics and some pretty mean spirited narrow minded right wing ideology that never created a single job. and that will be the choice. and it might also be a choice that finds an echo in the national campaign. >> governing magazine. >> one of my favorite. you believe governing can actually work, don't you? government can work. >> you have been having a gas tax increase in maryland. is that something that is going to be palatable to residence? also wondering, do you see that working at the federal law will -- level where leadership on both sides seem to be opposed to a gas tax? >> question is about the gas tax and the possibility of raising it in maryland. for those of you who may have missed this, we had a blue ribbon commission to look at what we are investing in our infrastructure and to make recommendations for what we need to do in order to invest at l.l. -- invest at a level so that not only our bridges to not fall into our rivers, but also that we are building up a common platform of hours. -- ours. one of the hardest-hit sectors in our economy is our construction industry. . the blue ribbon commission came back with a increase. we are considering that. whether or not we are successful with bringing people together to make more investments in our infrastructure at a healthier level for economic growth, economic expansion, job creation, is going to depend on the dynamic that takes place. i am one person, one leader in this government. we have to figure this out. tougher to ask people to do in the middle of a recession, and to ask them to pay more for anything. i think among the various taxes out there, you would be short pressed to find one that is more unpopular than a tax on gasoline. having said that, in our state, and each state is different, we have a flat tax on half a gallon of 23 cents. when gasoline was $1.80 per gallon, back -- $1.08 per gallon, back in the 1970's, at 23 cents was on. since then, our transportation network, infrastructure network, the amount of land consumed, has greatly increased. the gas tax on a gallon has not. even as the price of gasoline went up, recently two or $4, the gas tax stayed at 23 cents. however innovative you want to be, in terms of financing for these things, public-private partnerships, there is no way, no matter how clever you are, to build a $90 million bridge for $10 million. he might be able to push up bond payments, you may choose to toll part of it, as my predecessor did in the icc, but there is no way to build a $90 million bridge for $10 million. you get what you pay for it. we have to have this conversation and figure out what to do. will the result be some sort of hybrid? it could be. what we need to the knowledge is -- acknowledge is that we need to invest more in our infrastructure than we were in the 1970's, and no one else is going to do this for us. yes, sir? >> since you answer that tax question so well, the other day, there was an article in the washington business journal speculating that maryland has lost jobs because of its tax rate to virginia. a northrop grumman, other companies. i wonder if you could address that. what are your plans to keep improving the education system in maryland? >> let me talk about the tax question. the question was, with maryland's progressive income tax, do you see that as anti- competitive and perhaps driving people to virginia? the second part was when are we doing to improve public education? on the first score, we put in place in our state a progressive income tax. the lower taxes for 85 -- income taxes -- for 85% of residents. we increased taxes for 15% of residents. we went from having a flat rate, if you will, to having been graduated, the more you earned, a slightly greater percentage you pay. there were many dire predictions at that time. the woodrow wilson bridge would be clogged with millionaires, packing up the family moving to virginia. that did not happen. in fact, the latest census results, i think we ranked no. 1 or near the top of the country. a number of millionaires on a per-capita basis that we have in our state. as far as job creation, depending on the period of time, if you look at net new job creation this year on the calendar year basis, compared to our neighbors in virginia -- and we are glad to have virginia as a neighbor. you want strong neighbors. if you are going into a mall, you want it to be vibrant peer you what the other stores to be attractive to people. we like the fact that we have a strong neighbor in virginia. but in terms of maryland's competitiveness, what we offer, so far this year, maryland ranks 10th in net new job creation among the 50 states. we are roughly in november, october, whatever the latest month was. virginia ranks 49th, i believe, on the year. their unemployment is a little lower than ours. ours is a little bit higher. together, we make a tremendous region. so, we continue to compete. we never like to lose a headquarters to virginia, but at the same time, there are not many things, in terms of economic strengths, but i would -- that i would trade virginia. our tax code is more favorable when it comes to new investments and advanced manufacturing, the sort of things. we have the best schools in the country three years in a row. our colleges have become more affordable in the past few years while there's have become less. innovation assets we have in i.t., like science, by attack, -- life science, biotech are superior to those in virginia. they do have a lot more land than we do. i would like to have more land. other than that, there is not a lot i would trade with virginia. they are good people and we are glad to have strong neighbors. >> what are some of the lessons from the 2011 cycle? wins and fet will take into -- wins and defeats that you will take into 2012. >> winds and defeats that you will take into 2012. biggest lessons. the biggest lesson is, people are pragmatic. people are not fundamentally ideological and their approach to the balance required to make our economy chug and expand opportunity and create jobs. the lesson in 2011 is, -- and i will speak -- my perspective of why i am here. if you look at kentucky, that was a state that president obama did not win, yet, our candidate won by a huge margin against a long serving senate president. you look at west virginia. again, a state the president did not win, but our candidate prevailed, even after weathering a huge barrage of out of state rga dollars, talking about obamacare, obamacare, why didn't you stop obamacare? the voters are paying closer attention than perhaps many pundits gave them credit for, and they do not like over reach, they do not like ideology, and they do not like mean-spiritedness. they want us all to bring people together around jobs and job creation. a similar lesson, they taught us in the midterms, and that was, having failed to explain the fiscal imperative an economic imperative of health care, they thought we were overreaching as a party and pushing something that was in the wheelhouse of our care and compassion philosophy without regard to the primary concern that moms and dads have right now, which is keeping a roof over their heads and food on the table. that is the lesson. the voters are paying attention and they do not like this sort of narrow minded, mean-spirited ideology. it may excite the tea party crowds at the republican debates, but it is not what mainstream america wants from its leaders. >> last week we also saw a defeat for democratic candidates in mississippi, louisiana. you are not going to become texting -- the contesting next year, but what is this plan -- what is the plan for democrats to rebuild strength in the deep south? >> repeating the question, what to do about the deep south, how do we rebuild our party in the deep south? i do not care whether you are from the south or the west, north or east. i think everybody wants their government to work for the taxes that they pay. you look at the good work that mike beebe is doing in arkansas. in fact, i think he was on the cover of "governing magazine." he is an effective governor. gov. beebe me k-12 with the -- communicates very directly with the people he serves and make government work. beverly perdue, governor produced in north carolina, has been fighting a courageous fight. it appears for approval numbers are reflecting the public's approval of her fight to defend education for all of north carolina's children, and therefore, the quality of north carolina's workforce. some states we have tougher times than others because of registration, the strength of the current republican party in those states, but the key to turning around -- not turning around, but winning in 2012, is the key to governing successfully for our country, and that means making government work, be open and transparent, set goals, stay focused on job creation all the time. and i think that can work in any part of our country. i think you will also see, in a country that is changing demographically, becoming more diverse commack as she has -- the verse, as she has fortunately, in every generation. that diversity brings us economic strength and creativity. i think he sees growing numbers of latino families who are coming into our country and making this american dream work and believe very much in our country's future and the message of democratic governors, which is jobs, opportunity, and making the tough choices now. i did not answer your school question. we have a number of things on our website. if you go on to maryland.gov, we have 15 strategic goals for our state, spanning four big categories. health sustainability, security of our people, and the skills of our people. all four of those endeavors are about job creation at their core. all four of those endeavors are related to one another. our goal of improving student achievement in our state can be found there along with the plan for doing that. things like continue to make investments, not only in the operations of our school systems so we can keep and retain great teachers, but also school construction, where we have invested a record amount in the past four years as a state. it is the skills to compete initiative, where we are pushing for not only careers in technical education in our high schools, but also for greater access and our community colleges. 40% of new jobs created in our state will require only a certificate or two-year degree. we are also adopting, unlike our neighbors in virginia, the common core curriculum, so that our children can be patched marked on their performance in -- benchmark on their performance in science, technology, engineering, and matt, against -- mass -- math against kids around the world. maryland was the lone state that saw improvement in our nape scores in our recent standardized testing. we have been able to triple the number of teachers in secondary schools that are now certified to teach in size technology, engineering, and meth. -- math. we've increased 23% the number of children taking ap exams and passing them. we are also working in a fiscal, financial literacy component, as well as an environmental literacy component to our school curriculum. those are some of the things we are doing. in areas where he struck out is -- dropouts are a problem, has been, we are doing some innovative things, especially in baltimore city, where they brought their dropout rate down by a greater amount on a year- to-year basis than they ever have, with a combination of things like twilight schools, other things. it is all on the website. maryland.gov. click onto the tab on skills and education of our people. we believe very firmly that education investments are economic investments, and the more our citizens learn, the more they will earn and produce. so the delivery plan is there, as it is for the cleanup of the bay, reducing greenhouse gases, improving public safety. >> questions? i have one last question. based on what you have done in maryland, do you have advice to those on the super committee, in congress, who are trying to cut spending and raise revenue? >> and vice to those on the -- advice to those on the super committee would be, -- advice to those on the super committee would be -- i do not know. that is a great question. what comes to mind is, we cannot give up, they cannot give up. the second thing, all of us need to put the national interest at first. the people will sort out the politics. we are all servants here. they make the decisions, but they defend -- depend on us to make the right decisions, especially in precarious times like these. mr. lewis, you mentioned in your remarks something about me taking a more aggressive posture towards republicans, members of the party of lincoln. i think our country desperately needs the party of lincoln again. i would like to think, in some ways, i am taking a much more understanding approached to my republican colleagues. i think we cannot allow ourselves to believe that any one party has all the answers. we need each other. we are a part of an ongoing story here. we need the party of lincoln to re-emerge. we need that party of fiscal responsibility to re-emerge. that part of security to re- emerge. we have to recognize the unity that is, and find ways to put together in a more understanding way. whatever the current detour, rough patch that their party is going through with pandering to the tea party, trying to one of each other in these debates about who was more in favor of portraying prisoners -- torturing prisoners, there are a lot of good people that are republicans who believe in fiscal responsibility, that believed in the great and caring nation that our parents made and built for us. we need to find that goodness. we need to have that understanding to not ever allow ourselves to become a victim to our own political quackery. we have to find a way to work in the middle. hopefully, they will find a way to undo that self-inflicted wound, revenue wound, of the bush era tax cuts. we will find a way ourselves to make medicare and medicaid more effective so that we can save dollars and care for the citizens who need it. my advice would be to search for understanding in one another, look for the part of the good intentions in one another and to never give up. >> if there are no more questions, thank you for coming out. that concludes our program. >> mr. lewis, thanks a lot. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> president obama wraps up his nine day trip through asia pacific region this weekend. he gave his speech from indonesia. the president also talked about the importance of the region to the u.s. economy and why america must invest in high-tech manufacturing. after that, the republican address from a member of the joint committee on deficit reduction. the panel is negotiating a plan by next wednesday to reduce the nation's debt. he talked about the party's commitment to cutting spending and changing the tax code. >> today, i'm speaking to you from indonesia as i finish up my trip to the asia pacific - the region where we do most of our trade and sell most of our exports. and over the past week, the progress we've made in opening markets and boosting exports here will help create more jobs and more growth in the united states. here in indonesia, i was proud to join leaders from some of our nation's top companies as they announced trade deals that will support nearly 130,000 american jobs and potentially increase u.s. exports by up to $39 billion. boeing, for example, will sell more than 200 planes to indonesia that are built with parts from suppliers in more than 40 states. and a deal to export ge engines will support jobs at plants in ohio and north carolina. these agreements will help us reach my goal of doubling american exports by 2014 - a goal we're on pace to meet. and they're powerful examples of how we can rebuild an economy that's focused on what our country has always done best - making and selling products all over the world that are stamped with three proud words: "made in america." this is important, because over the last decade, we became a country that relied too much on what we bought and consumed. we racked up a lot of debt, but we didn't create many jobs at all. if we want an economy that's built to last and built to compete, we have to change that. we have to restore america's manufacturing might, which is what helped us build the largest middle-class in history. that's why we chose to pull the auto industry back from the brink, saving hundreds of thousands of jobs in the process. and that's why we're investing in the next generation of high- tech, american manufacturing. but building an economy that lasts isn't just about making things it's about opening new markets for people to buy them. after all, 95% of the world's consumers live outside our borders. and as the fastest-growing region in the world, no market is more important to our economic future than the asia pacific - a region where our exports already support five million american jobs. this is why we recently signed a landmark trade agreement with south korea that will support tens of thousands of american jobs. and it's why i traveled here this week. in hawaii, i hosted leaders from across the asia pacific, and we agreed to make it easier for american companies to do business overseas. i also worked with president medvedev of russia to pursue trade that would increase exports and jobs for american manufacturers and farmers. and working with other leaders, we made progress toward our most ambitious trade agreement yet - a partnership with pacific nations that holds the potential for more exports and more jobs in a region of nearly three billion consumers. we may be going through tough times, but as i've said time and time again, the united states still has the world's most dynamic economy, the finest universities, the most innovative companies, and the hardest-working people on earth. we can compete against anybody - and we can win. as president, i intend to make sure that happens by doing everything i can to give american workers and businesses the chance to succeed. >> i am pleased to have this opportunity to share a few thoughts with you today. like so many americans, i am deeply concerned about the two biggest problems facing our country today. first, the economy has hit a wall with unemployment sitting stubbornly at 9%. after three years of failed stimulus programs and government takeovers, americans are rightly asking, where are the jobs? second, out of control federal spending over the past three years has resulted in record breaking deficits of 15 trillion dollars, which grows daily. if we do nothing, and allow the status quo to prevail, we do not have to look far to see what the consequences will be. across the atlantic, we're watching a fiscal disaster unfold in europe with riots in the street and imminent bankruptcy. sadly, this is the inevitable result of an extended period of inadequate growth and wildly excessive debt. i'm concerned that this administration and many in congress are pursuing the very same policies. with job killing taxes and regulations and regular -- record-breaking spending, this administration has put us on a path that leads to europe's destination. the good news is we're not too far down that path. we still have time and opportunity to avoid the financial crisis here as -- crisis europe is struggling with today. i have the good fortune of sitting on a committee that has the opportunity to make progress on both of these two priorities, restoring economic growth and bringing our deficits under control. the best way to revive the american economy is to reform our broken tax code. we should seize this opportunity to throw out this unfair monstrosity and replace it with a system that will lower tax rates for every single american, simplify the code, and get rid of the special-interest tax breaks and loopholes that made the tax could be 70,000 page mess that it is. our tax code has to go. every deficit commission that has looked at the crisis has come to the same conclusion. pro-protracts -- pro-growth tax reform is part of the solution. that is why republicans have come up with a plan that replaces our current tax code with a simpler version that will encourage small businesses to expand, hire new workers, and encourage creative hard-working americans to open new businesses. furthermore, the job creators across america will know that they will not be subject to the biggest tax hike in american history, which is currently looming a mere 14 months away. we republicans are so committed to this job-creating tax reform and reaching an agreement with our democratic colleagues that we have offered to use this tax reform as a way to generate revenue for our deficit reduction. in addition to kick starting our economy with tax reform, our proposal will curb the deficit by cutting spending. after all, the problem is not that americans are under-taxed, but that our government over- spent. that is why we have proposed cutting spending by $750 billion over 10 years. let me be clear. we have identified several trillion dollars in sensible, responsible spending reductions that would actually result our fiscal crisis, but in the face of intense democratic opposition we have scaled back our proposal to just $750 billion, less than 2% of what our government is projected to spend over the next 10 years. surely our democratic colleagues can agree that a bloated federal government that has grown by 25% in the last few years can tighten its belt by 2% over the next 10 years. the hour is late. by law, our work on this committee must be completed this coming week, but i remain hopeful that we can meet our goals and i urge our democratic colleagues to join us in this effort. we have what is truly a once-in- a-lifetime opportunity to pass legislation that will generate millions of jobs, create a fairer tax system with lower rates for everyone, and put our government on a path toward fiscal sanity. we do not have to follow the path that europe is taking. we can learn from their mistakes. we can continue to be the land of unparalleled opportunity and prosperity, and the 21st century can be another great american century. the american people will make sure of that if we in washington will just let them. thank you for listening. >> on "road to the white house," chicago mayor and former white house chief of staff for president obama, rahm emanuel, will be the keynote speaker at the iowa democratic party is a dinner. congressman leonard boswell and i would democratic party chair will also speak. live coverage tonight at 8:30 p.m. eastern on c-span, c-span radio and c-span.org. >> there is a story that i was told from the administration that when obama was given the first budget and there were some 6000-7000 earmarks, his first impulse was to veto the budget. he was told by lobbyists that he could not do that. i think if he had vetoed that, it would have ended the tea party. had he signaled his fundamental desire to change the system and change the way washington works, he could have continued to rally the reform movement that now breaks out literally all over the world because of the frustration with the way democracy does not function. >> money in the influence on washington, sunday night on c- span's q&a. >> on friday, the house fail to pass an amendment to the u.s. constitution requiring a federal balanced budget. the vote was mandated under the debt limit law passed in august, the same law that created the joint deficit-reduction committee. but two-thirds majority vote in both house and senate is required to pass a constitutional amendment, and then it must be approved by three-fourths of the states. here is some of thursday's debate on the amendment. this is an hour. the speaker pro tempore: without objection. mr. nugent: mr. speaker, i rise today in support of this rule. house resolution 466. the rule provides for consideration of what may be the very single most significant piece of legislation that i've had the opportunity to vote on since coming to this body over 10 months ago. this rule is what allows it's house of representatives -- allows the house of representatives to move forward and vote on h.j.res. 2, a balanced budget amendment to the united states constitution. my resolution that we're considering here today suspends the rules and allows the house to vote on h.j.res. 2. i'm sure that some of my colleagues may be concerned we're moving to consider the balanced budget amendment under the suspension of the rules for fear it would somehow limit debate. i agree with them, amending the united states constitution is not to be taken lightly. this is why the rule provides for five hours of debate on this vital issue. because you see, mr. speaker, what we're doing here today is something that should be discussed. something that must be discussed. we're fundamentally challenging the way washington works. as you know, it's about time. it's about time we had real conversations about how our nation spends its money. it's about time that we made the federal government budget the way i did when i was a sheriff of a county in florida. it's about time that we balanced the federal check book the way american families -- checkbook the way american families do every day. it's about time. that's what i think and more importantly that's what the majority of the american people think. as a matter of fact, we're here today -- the fact that we're here today is a failure of leadership. for decades washington politicians have kick the can down the road -- kicked the can down the road. choosing deficit spending over fiscal responsibility, choosing frivolous pork projects, wasteful programs and easy answers over making tough decisions and cutting back. the republicans did it when they were in power and democrats did it when they were in power too. nobody is blameless in getting us to where we are today. but the days of finger pointing are over. we don't have the luxury of time to look back and play the blame game. we need to move forward and find a solution to get us out of the hole that we're already in. a balanced budget amendment is a vital part of doing just that. yesterday the united states surpassed $15 trillion in debt. let me say that again. we're now $15 trillion in debt. while recognizing this sad landmark, i can't but help think about the fact that this didn't have to be the way it is. in 1997 the house of representatives passed a balanced budget amendment. unfortunately the senate failed to pass this amendment by one vote. one vote, mr. speaker. one vote that was separate -- that would separate us from a road of fiscal responsibility to where we are today. so here we go again. 14 years later, having the same debate. i can't understand today -- i can't stand here today without thinking about my three sons, with a debt of $15 trillion, each of my boys owe over $48,000 in debt, in national debt. it means the children and grandchildren of each and every person in this room owes $48,000 to the federal government. $48,000 that they didn't spend, that they didn't ask for and that they were now saddled with from a government of excesses. only one senator stood between where we are now and $15 trillion in debt and where we could have been. so today i stand up in support of this rule and support h.j.res. 2. i stand up for my kids, my future grandkids and for all americans who are saddled with that $48,000 in debt, from the day that they're born. i stand up for congress, a second chance. i stand for giving congress a second chance, a chance to get it right this time. unfortunately i understand the democratic leadership is whipping against this. mr. speaker, i don't know how else to say this, this simply baffles me. thanks to the whipping efforts of the democratic leadership, there are members in the house who voted for the balanced budget amendment in 1997 who now say they're going to oppose it. in fact, two members of the democrats' three-person leadership team voted for the 1997 amendment. i've only been here in d.c., like i said, for a little over 10 months, but all of the inexplicable things i've seen since coming to congress, this just stumps me more than just about anything else i've seen here. what could these members have been seeing between 1997 and today that makes them say, yeah, today that makes them say, yeah, you know what?

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