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tv   U.S. Senate  CSPAN  January 11, 2011 12:00pm-5:00pm EST

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by 2013. one the very first countries in the world to do that. let me end then, peggy, by just saying this, that in the end, these are great challenges that we all face. but i am not an optimist. i think we should be optimist. i'm an optimist for this reason. every month around the world, millions of people are coming out of grinding poverty, poverty that their families have been in for thousands of years and coming connected. they are doing it in countries like china, vietnam, indonesia, and brazil. those people are becoming nations and manufacturing. they are already becoming nations and manufacturers. that a big challenge to western economies. but they also becoming nations of consumers. they are going to start to want for the first time in their family histories, good modern medicines and french and british pharmaceutical companies will be able to provide them.
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they are going to want for the first time in their family's history, pension, insurance, access to banking, and french and british bank can provide that. they are going to want more energy. the companies can provide that. they are going to want to buy luxury goods. here in paris, we have some of the greatest luxury goods companies in the world. they are going to want to fly on airplanes for the first time in their lives, i hope they fly on air bus powered by rolls-royce engine, and they want to come on holiday, and i hope they come to paris and london on vacation. these are reasons. the millions and millions of people wanting the kind of things that french, british, polish, and other countries are providing. that's a reason to end on an optimistic note. >> thank you very much, mr.
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osborne. now if i could ask mr. turmonte to come up. keep the time. >> tell me to stop the watch. thank you to everybody. it's a great pressure for me to be here again. this is on the economic policies for war to come. let me start with the gist of it. by the way, a very short this time. if i look back, back to three or two years ago, at the beginning of the crisis, i remember my initial position was quite radical. two nationalize banks.
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easy because of unnecessary, but this was the position. at the opposite, my impression was and is second path to finance ministers meetings with is to take part to some partners meetings of private banks, trying to share philosophies and technicalities and language and characteristics of the private sector. in the way of the process, becoming a blanch of the banking sector. and losing the very function and merits that should be distinctive. the long term action power. at the opposite, sometimes my impression is fear, submission,
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fellowship, and not leadership. for somebody was difficult to understand the difference between the cycle and the crisis, crisis is not a golden party that we can embed weather conditions. crisis is a radical change of social, moral, legal, political power. these crisis driving some dramatic change in the statue and velocity of the world. the impact on europe of the discovery of america was dramatic. but two centuries long. the economic discovery of the ending of the position is equally dramatic on europe, but it is only to decay so.
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crisis found government not ready and prepared. victim of the old magic tale of globalization. positive bites us. and sounding this ridiculous from a political point of view. just an example. first step, the position of government was some regulation on the financial world should be required. second step, this kind of regulation must be provided by the bankers. preparing their own regulation. third step, banks are imposing to the government their own law. and neither similar and exemplar in the case of public sector. first step that we asked, public
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debt was the medicine. second step today, public debt is the disease. right. obviously. but why only today public debt is a disease? and the next, we have now -- waiting for possible next step of the crisis which is the medicine, because of the end of the old one medicine. i am old enough to remember g7 and i am young enough to see the g20. g7 was political body. controlling 80% of the gdp unified by three cords,
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linguistic cord, and g20 is diverse. 80% of the world gpd, but it's not unified by the three old cords. not by the language, not by the currency, and not by the political movement. this is the reason why which kind of approach to the war changing more politics and if possible more legal morality, and this is the reason why three years ago, my proposal was and is working on regulation, drafting the deprivation on journalism rights.
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first lesson, in europe we are containing political borders while we have removed economic border. but risk is bodderless. and it's not possible for some countries to say like on the titanic, i am a first-class passenger. it's not possible because of the counterpart with in europe directing your banks. and it's not possible to say when businesses okay, okay, i received dividends and the other case to say limit the responsibility. it is bodderless.
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i'm not speaking only of -- i am speaking directly of counterpart related to banks. also related to banks are the great strong countries. second list, the bodder between public finance and private finance, because public budgets and private budgets will vanish. for many years, we were told to believe that the real risk for you come from public budgets. and it is an important position. but the region of this crisis was in the part of fear, credit cards and private devils. this mistake and abilities in our macroeconomic affairs. just to be fair, inflation, obviously, it's important to control the basket of goods. it's important also to control
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bubbles. and on this area, the so-called [inaudible] was not marginal. this lesson, the crisis is not over. it's like living inside a video game. the most appears, and you can track, you win, you have relaxing, and obviously not, more power than the first one. and which is where is next? everything is going well. are you sure? better to be careful. third lesson, we can't continue to act case by case, country by country, one by one, the active
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combating. let me tell the tribute to france remembering written by voltaire. it is where the king asks more money to his finance minister. and the minister come back a few days after with a tax on intelligence. everybody should pay because of intelligence. the king says minister, you are exempt. sometimes we -- this casting on the idea of new transaction on the financial sector, a good idea, but we understand we are the problems and compliance and some negative possible collateral effects.
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but where is the paradox? meanwhile we are trying to tax financial world, we are paying to the financial world in addition and very stupid tax. a tax with pay in terms of additional marginal interest interest. this is the reason why the pessimistic doom forecast on issues bonds, introduction of common bonds sharing solutions. it's not only a technical issue, remember the nation building in the u.s. side. obviously, a lot of things and the ask -- architecture must be more complex. if you are looking at the political map in europe, nobody -- no country in europe is working and doing deficit
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spending. it's the opposite. one country is strong, another country could be less strong, but then the new political philosophy is in the direction. let me con fruit. if you look at the geopolitical map of the world is it to see the competition is between continents, because continental blocks, and the reason for europe is then of the year of nation states. this is the reason why i conclude quartering the final pitch on european union, address it by winston churchill in zürich, september 1945. let europe arise. thank you. [applause] [applause] >> thank you, very much mr.
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tremonti. i would like you to step up and give us his views, thank you. >> thank you very much. [speaking native tongue] >> not be able to listen to the interesting thing, but my career will say right up to me. now i am speaking french. [speaking native tongue] >> translator: this is the first time i've taken the floor. thank you, eric. thank you for allowing me to continue the learning process. when i took the floor the first time around, i talked about the incompetency and the ethical issues of the markets, and focusing on the short term.
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the second time around, i spoke about activity and the capacity to react. the react to the tee also of democracy without which capitalism is a mere fiction. after the reactions of the governments to the crisis, we have to turn to the future. and we have to look at the world after the crisis. not the one that is trying to dis -- get all of the traces of the crisis to disappear as if it did not exist. but the world which is going to take stock and draw lessons. in the word of today, things are not reassuring. governments, as i said last year, have not been able to or known how to have tax or institutional reforms introduced to their growth plans which would have allowed them to take control of the markets again. and therefore, the result of this is quite clear for us.
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you could can see what's happened in the united states and in europe. in europe, the social costs are being reduced so that the credit rating agencies are satisfied. there's a short term and all of this is going to be made worse. between her -- the difference schools of thought, i think that the different issues are not analyzed in the same way. we are, in fact, coming out of the system despite the financial system, not because of the financial system. and therefore, it's a great problem to me that governments are continuing to turn to financial markets and depend on them for the next step. that is is what's happening. i think that this, therefore, will necessarily make social and labor issues more and more
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relevant. how can we avoid a political crises in the near future? and how can we find her policies that correspondent to the expectations of our citizens and population. therefore, we have to combine four distinct issues. the first principal is a principal of reality. yesterday, not so long ago, we said we had managed to get out of the protectionist attitudes of the 13th, and then there was a currency war. and then there was strategies that were exporters bias. which obviously would stifle domestic growth. nations tend to forget that their economies are interdependent. countries have been through crisis together, they seem to forget that it is an
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international crisis, and they define their policies without looking at the externalities that are going to be heard, affected, and have effect on other countries, and then they are amazed when there's a boomerang effect. how can one resist? people say there are new normals, new resilience, there's a new regime of hope. and in that, we can see that growth rate is structurally lower and the unemployment rate is either balanced and expectations of citizens will necessarily be reduced. we can say the crisis sorted sudden issues. but we will have mass unemployment for the first time since the 1930s. it has settled as -- on both
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sides of the atlantaic. this is something which is new and which is fundamental. and as i feel that unemployment is the greatest imbalance for a democracy in peace time. i think we have to look at things upfront. we cannot accept it. this is why the second principal is so important. this is a principal of hope. one tend to forget that for the rich countries what is similarity important is social protection and global or competitiveness that is generated from that if we have weaker hope, if it is concentrated by her fear and inward looking does not generate growth. citizens wish to get more from their environment from public goods, more education, more health, more decent jobs, more economic security, more political participation, and social capital. that is what they want.
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and those are the constant elements of well being. and therefore, it is in this way that the developed world can actually find itself and identify itself. therefore, we have to find a new policy mix, not merely mixing monetary and fiscal policies. a real policy mix which is a combination of policies of business, activities, and well being. we cannot concentration merely on eliminating the effects of the crisis because these effects indicate to us clearly how difficult our struggle was to avoid the long lasting pitfalls of the crisis. this brings me to the third principal, tran sen den si of the future. remember the future. that is one the commandments that i think we must never forget. how can unemployed -- the
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unemployed, how can those who's jobs on the line, how can they have that sort of hope for the future or member of the future? this obviously also has to be based on the metrics and on the measurement steps. this is the report that i sent and myself drafted and presented to the president of the french republic. the well being of individuals depends on their capacity to choose the sort of life that they wish to have, their future, therefore, this is why unemployment sector is much greater than mere loss of income. because it prevents people from choosing their futures, and this is why economic security is indispensable to well being. and measuring her sustainability is extremely important to better understand the future.
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it is not limited as many would like us to believe to measuring her public debt, and particularly gross public debt. we have to take all of the different capital goods that we convey to future generations into consideration. and this, therefore, should also be one of the principals that france should uphold during the g20 so that there can be new indicators for social and economic progress. for policies to achieve these growth objectives, it's got to be based on how the knowledge of what actually determines progress, and it is in that way is that it will be much easier to be able to invest in those factors, because the value of those investments would be recognized globally. therefore, we need to have difficult indicators, and we
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have to have global, public debate on these indicators. fourth principal, fourth principal is a question of semitri. it's the fight against what sort of global policy can we have in this area. we have presented a paper in another forum. we have salked about receive met tri. it means that the world avoids, it's not mere acaption. those would have a huge surplus
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should also adapt in acorn -- in a certain way. this is also the case for all of the economic policies being introduced and each one contributes gradually, then i think we would contribute jointly to a positive sum and growth rates work benefit. but we've also got to have symmetry in governance. i think the g20 that's representing 85% of the wealth and modern 60% of the population is still only representing 10% of the countries of the world. we should keep that in perspective. and symmetry should perhaps apply to other aspects as well to the world monetary system, and also balance and equitable share. but i don't want to over run, so thank you for listening to me. >> thank you.
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>> some reports of violence in sudan amidst a week-long vote for independent south sudan. it's part of an agreement that ended two decades much north/south civil war which killed two million people. we'll get an update on sudan at 1 p.m. eastern, live on c-span 2. >> there's a new way to follow congress. track the daily floor timelines, read transcripts, and find a full video archive of each member. congressional chronicle, part of c -- c-span's library. it's washington your way. >> we are welcoming back nina olson here to talk about your latest report to congress. this is your 10th report. part of this, you talk about the new health care law. is the irs prepared and what will be the role of the isr under the new health care law? >> guest: well, i think the
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irs is prepared as anyone can be. where parts of the law and the whole infrastructure is not yet created. the irs is currently doing a lot of serious planning about it. that was part of what we tried to cover in the report to outline what was going to be expected of the irs. it is going to be the interface for many taxpayers, for major provisions. for example, the subsidy to individuals to help purchase health insurance, the subsidy to small businesses to help their employees purchase to pay for health insurance for their employees if they need, you know they have a certain number of employees. on the other hand, it's also going to be the disciplinarian for other businesses if they are not covering their employee and a employee qualifies for the subsidy, there will be a penalty against that business. it will be a tax penalty. and then, of course, what we call the individual mandate
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which is basically saying if you are not -- if you are an individual and do not have health insurance either through your employer or you yourself purchasing them and you are not low income, you will have a tax penalty levy against you. that really puts the irs right smack in the middle of health care. >> host: the former irs deputy chief information officer was quoted saying this will be bigger than y2k for the irs to implement. do you agree with that? >> guest: i heard a lot of fuss about y2k was. i don't know how big it was for the the rest of the world or irs. i know -- i've been in practice since 1975. it is certainly the most major social program that we have under taken. and that really is my point. is that the irs needs to understand that contrary to what some people say about we're going to be hiring 16,000
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auditors and collection agencies, we need to hire the commensurate number of people on the social issues, on the issues of health need, as opposed to audits and collection. and so that does require the irs to get out of for this provision, it's collection revenue mentality, and enforcement mentality, and into more of a social program mentality. that's going to be the big change for the irs. it's one that's needed. because we are delivering so many programs through the code. >> what does that mean for irs agent and how people view an agent when you say things like they are going to be in charge of social programs and social benefits? to some that may sound like a welfare rather than irs. >>guest: well, we are already in
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charge. we have small -- we have business benefits, you know, we have all sorts of provisions that deal with industry and require great knowledge of the actual industry. we cited one in the annual report about needed to have harmonious dissods. these are skill that is the average irs employee does not have. but we are having to adapt to because of what's being given in the code. i think that's actually not a bad thing. i think that it is possible to on one hand collect tax but do it in a compassionate way, understand and listen to the taxpayer. on the other hand, there's programs that require because of the population, because of the subject matter of the program where you do need more skills. other countries around the world have dealt with this and they
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have actually hired different types of employees to deal with different phases of each program. and the irs is sort of behind on that. we need to adapt to that, and i personally think that health care is the wake up call to us. we should have been doing that all along. >> host: house republicans are concerned about how much this is going to cost. dave camp says about $9 million for the irs, cbo has put the figure for the irs from $5 billion to $10 billion. is that number too low, too high? >> guest: i have no idea. i say that because i have no idea how they arrived at the numbers. what we tried to do in the annual report is map out the steps and processes that the irs was going to have to go through and what interface was it going to have with the taxpayers. built into existing systems. do we need new systems?
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that is what the irs is doing -- really, a scoping effort. it is working closely with a jazz and other agencies to get a sense of how this might be implemented. host: we're talking with nina olson, the national taxpayer advocate. they have their national report for 2010 out to congress. "taxpayer advocate service -- your voice with the irs." this is volume one. it is quite thick. are there more? guest: we actually always publish two volumes. it is very important for taxpayers to understand what is going on in the tax agency. when we do a research study, we published it so everybody can read it -- publish it so everybody can read it. host: have these reports had an
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impact? guest: they have had an impact. i just got something in the mail last night. i noticed that, going forward, they are required to report the basis -- the cost basis and the adjusted basis in shares that you have purchased and whether their long-term capital gains -- and they are long-term capital gains or short term. from as a result recommendation several years ago. you can pick your -- look at your end-of-year report to see the base price and the stock price. host: the taxpayer advocate service is recommending changes to the tax system,
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including reductions in loopholes and deductions for mortgage and health insurance. ohio, leonard, a democrat. caller: good morning. out of curiosity, within the changing for health care and creating the amount of dollars that will be spent and the growth of the irs into the public, how will the smaller citizens of our country that do not file taxes because they do not make the money, they have been unemployed for many years, they are just barely surviving with their families -- how are we going to be able to qualify for this health care? instead of spending the $5 billion or whatever amount of money for government employment,
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how will we survive? guest: that comment raises lots of issues. let me speak specifically about those people who are not filing. those are the kinds of issues we are trying to figure out, whether we create a separate form for those people. without filing an income-tax return, they could still apply for the subsidies. many of these provisions still not -- do not go into effect until 2014. these are precisely the kinds of issues that the irs and others are trying to figure out. the other question you raised about government employees and programs put into the tax code, particularly something that we have talked about in this report -- the growth of what we call "tax expenditures." congress has a choice when they want to create a program between doing a direct-spending program or doing something called the tax-expenditure, namely putting
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that program through the internal revenue code and giving someone a tax break or actually paying money back for the internal revenue code in the form of a tax credit for coming in the health care reform, it is part of your insurance premium -- of a tax credit, or, as part of your health care reform, it is part of your insurance premium. it means that the code becomes much more complex and more confusing to taxpayers. it can make you feel disaffected. host: in this report, it costs $162 billion per year to prepare our taxes. the tax code is nearly five times as long as the bible. it says here that nina olson's office and did -- office did the word count and found that it is
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about 80% more than the word count of 2005. guest: the dollar amount -- we took the irs estimates and the omb estimates for individual and business income tax returns and said, how many hours does that take by the number of those kinds of tax payers? then we divide that by numbers of full-time hours of employment. then we do a statistical estimate of the dollar value on average for worker in the united states. in fact, what we estimate is that the average individual taxpayer spends $259 per year just on either income-tax preparing, purchasing a software package, their own expenditures for record keeping, things like that, which is up quite substantially from several years
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before. host: you estimated 6.1 billion hours spent preparing our taxes. the equivalent of 3 million full-time jobs. one publication notice that the country's biggest employer as 2.1 million employees. lizzie, santa clara, california, the republican line. caller: i am a very high taxpayer in california. i could not rely on and the information given to me by any officer of the irs -- on any information given to me by any officer of the irs to be correct. i am happy we have a congress that will not fund the irs to get the power to become the kgb of america. host: let's get the impact -- what is the impact of no
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funding? guest: i started representing people before i became the ira's national taxpayer's advocate -- the irs national taxpayer's advocate. they are wrestling with this gargantuan cola that congress has created and that no one seems to want to bring clarity to -- gargantuan code that congress has created and that no one seemed to want to bring clarity to. it is true that, over the phone, they say that you cannot just rely specifically on what the irs says. that is a sad comment on the complexity of the code putati. to call the irs the kgb, i find personally offensive.
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they are drawn to do their job. i think taxpayers and the irs need to really think about what their relationship is and -- we have to have a conversation in this country about what taxes provide the people. it is easy to say, well, someone else is getting a benefit i'm not. part of what the report is about is that we're all getting benefits. the irs does an extremely good job doing that. i have spent most of my waking hours helping the irs, sometimes brow beating the irs to do a better job. i think they do an extraordinary job, given what they are delivered. i disagree with the caller. host: nina olson, here is a treat. "it is a proven fact that a flat
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tax hurts the middle class. it cripples those near poverty level and it is a boon for the rich." guest: some of what we have said in the report has not been reported accurately, specifically what we said about tax reform. we say that you need to recognize that everyone benefits from the provisions in the code. the tax expenditures in the code -- number one is the exclusion from taxable income of employer- provided health care insurance, health care expenses, or long- term care. you can go down the list to retirement savings and the earnings on retirement savings. the home-mortgage deduction. certain medicare exclusions. the preferential rates on capital gains. the list just goes on. these are things that many
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middle-class taxpayers -- for health care -- low-wage workers often benefit from those things. if you really wanted to structural reform in the tax code, you have to start by saying, let's put everything on the table, including the sacred cows, and really go through the list. what really needs to be in the tax code? what is the compelling reason for this? many of these provisions have very good public-policy reasons, but the question is should bay -- they be in the internal revenue service code. i can tell you what happens if you put them in the code. i can describe what kind of torture we would give to taxpayers and two irs employees -- to irs employees. after that, you can talk about
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the rates. the need to raise or lower revenue -- do you need to raise or lower revenue? if you go to that issue, you will never get structural tax reform. everyone will start shouting. everyone will go to their dais. we will never get structured income tax reform. host: what if we eliminate that entirely? guest: that is a government decision. there has been a decision about the size of government. we have got thing comments about the national sales tax, value- added tax, tax consumption -- there is always one way to go. it has not gotten a lot of purchased in the congress. host: clearwater, fla., independent.
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paula dow much good morning. how are you guys doing? i have some questions -- caller: good morning. are you guys doing? i have some questions. the minimum requirement is income taxes -- that is basically what we pay. that would be the absolute minimum. my question is, for the upcoming gop takeover in the house -- is more of a theoretical question -- with estate taxes, debt reduction them and the settlement of debt, how will they factor in -- debt reduction, and the settlement of that, how will they factor in the extension of medicare, social security benefits? how do you view these tax changes -- preserve these tax changes to preserve medicare and social security?
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the only kgb police state that seems to be happening in the united states is the sb-1070 upholding of the law. host: we have to leave it there. guest: my position is described in the internal revenue code. i am not trying to dodge your question by saying it is not in my jurisdiction to comment on social security or medicare. i will say, in identifying the need for tax reform as the reformone most -- for tax reform as the number one need for taxpayers, we talked about taking on the tax code at the same time as social security and medicare. we actually came down on a different -- to a different approach. some of it was because i was
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listening to some of the dialogue. like i say, i have been in taxes since 1995 -- 1975. i have witnessed several major reforms of the tax code. when you talk about whether we need to raise revenue or should have less revenue or larger government or a smaller government, you never get to that type of tax reform that i think we need, which is really making the system itself much simpler. i really believe that we need to start by saying, what should be done through the code? what is the definition of a family? how should we recognize the cost of running a family through the internal revenue code, etc.? then, once you have decided on structure -- you can have parallel conversations. someone can look at what it is going to take to deal with medicare and social security. you bring those together at the
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end to have a dialogue. given the new tax structure and our knowledge of what we need for social security and medicare, here is where we have to raise revenue. can we do it by setting the rates in such a way that we would not have to raise revenue? that is way beyond me to say. i really feel that we have to focus on tax reform. that is a crying need that impacts every single taxpayer, whether their individual, business, small business, large business. tax-exempt entities struggle with this all the time. host: un -- you identified these positions, these 16,000 new allocated-agent positions as social workers, averaging 300 per state. where will they office? job description?
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guest: i did not identify 16,000 positions. we say the irs needs to think deeply about the qualifications and skills of those workers. that needs to be because of the -- be done because of the code we have now. one thing i am concerned about -- going back to your question of what has changed over the last 10 years, i have seen a real drawing-away of the irs. by the irs becoming more distant from taxpayers and consolidating its employees in large call centers and things like that, it enables the taxpayer to not feel any connection to the duty of paying taxes. i would like to see them in the community. when you go to the grocery
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store, your neighbor is an irs worker pd cannot call them -- and ira's worker. you cannot call them names. he would not do that with your neighbor. -- you would not do that with your neighbor. host: you're on the line. caller: i am a past tax preparer from h&r block. you had to have all of your credentials. there is a new program that requires all tax preparers to register and give what is called a p-10. as part of that program, i have taken a webinar class from the irs. it looked to me like they were laying more responsibilities on the tax preparers to question
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their clients over the information that they bring in. a lot of this surrounds the earned-income credit because there is so much money involved. there is a lot of fraud. it would appear that we have to do some really serious questioning of our clients. there is a $5,000 fine. there is possible criminal and jail penalties if you don't perform this duty correctly. host: all right. nina olson? guest: i am glad you raised that. in 2002, we reported to congress that they should enact a law to require the irs to regulate return preparers, requiring them to register so we know who is preparing returns.
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enrolled agents have already taken a test to practice before the irs. we now require the an enrolled agent to demonstrate minimum competency -- require an enrolled agent to demonstrate minimum competency, some base- level competency. we modeled this after the kind of training that h&r block did for their own employees. now, the irs has, in fact, finally implemented this. it took eight years to act on my recommendation, but i am glad that they did it. congress tried to pass some laws about it. we talk about putting extra burdens on preparers. we are looking at -- congress did enact a law that said for
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the end -- a law that said for the earned-income tax credit -- it is basically one of the largest anti-poverty programs in the government today. we have a high rate of error in that. congress enacted a law that said the irs could require the prepares to do some due diligence -- preparers to do some due diligence or get a penalty. there are rules for what repairs rs should berepare asking taxpayers. you see these people face to face. there is no better moment than, in the act of preparing the return -- than in the act of p
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reparing the return to ask to see certain documentation. that is far better than doing it in and auditing environment. this is an ounce of prevention. you're getting paid -- making a living off of the tax system. we do not want to place an undue burden. where we have demonstrated noncompliance, it seems to me that turning to the preparers who have that point-of-sale contact with the taxpayer, that there can be certain due diligence requirements placed on the preparers. host: let's go to another caller. good morning. caller: i think once you hit 65 -- the age where you draw social security -- you should not have to pay taxes.
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i would like to know what your opinion is on that. host: what would be the impact on that? -- of that? guest: i do know that, as the tail end of the baby boomer generation, we are big. we are turning 65 as we speak. it would have a financial impact. i think that sound principles of tax administration, basically -- the more comprehensive the base of income, the more reasonable the tax rate. if you exclude people over 65 from paying any tax whatsoever on their retirement or the money they are pulling at of savings or their capital gains -- out of savings or their capital gains, that mean that everybody else will pay a higher rate. i do think that is a question --
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questions.olciyicy those are not questions that i make decisions about. those are addressed in the congress, on capitol hill, but there are states that give exemptions to people over 65. there are tax expenditures. make no mistake. that is a break tha tyou -- that you get. host: "does the irs collect taxes on the billions of dollars accrued annually by private security -- private military security contractors?" guest: i am not aware of specific exclusions for military security contractors. the law -- if congress has
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passed a law that gives exclusions, then no. n offsethas a program. if we find that a military or other government contractor is actually getting payments for their services and yet they owe tax debts, we have a matching program. we will intercept that payment to apply it to the backs tax debt -- back tax debt. host: if i exchange a car for two motorcycles, i should not pay a tax because there is no gain. why do i have to pay tax when i change my time and knowledge, is what sometimes, for a few pieces of paper that are called american dollars? guest: there is a question that the court has said, roundly, has no credence.
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earnings are taxable. if you did what was called a like-kind exchange, it may not be taxable at the moment of the swap because progress carved out the statutory exception -- congress carved out a statutory exceptions. host: we have about 10 minutes left. caller: good morning. thank you for taking my call. if you're going to put yourself into social issues of people's lives such as health care, i would like to see congress enact a law that said, if you're a federal employee in the make a decision on t -- and you make a
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decision on taxes or whatever, that he become liable -- you become liable. guest: you may not know this. in the internal revenue service, there are several laws that old, for example, irs collection employees liable for their negligence. if an irs employee makes an error on their return or violates the internal revenue laws of either federal or state, the requirement is that they are terminated from employment unless there are mitigating circumstances. irs employees are held to a very high standard. i am not doing anything about bringing social programs into the code. i do not pass the laws. the irs itself is not making
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this up. the irs is on the receiving end of the legislation that congress passes. that is part of the problem. that is why we are trying to bring attention to this. what does it do not just to the irs but also the taxpayers when you pass these things? host: we have a caller from north carolina. you are on the air with nina olson. caller: i have a question to ask. if you are disabled -- disability, on disability, will you have are res on your -- a raise in disability or social security? you get a letter back from the insurance. your raise -- your insurance increase is higher than your raise. host: just a reminder to turn your television down. nina olson? guest: that is a sad situation.
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i am sorry about that. i am not sure there is anything that the irs or i could do about that, but i am sorry. host: next caller, on the independent line. caller: as far as an advocate, you are an advocate for taxpayers, correct? if the taxpayers were to be bringing up an issue over and over again, wouldn't you bring this issue to the irs or to whomever you report to in order to make these changes? guest: but we do -- we exercised our independent judgment as to the merits of that suggestion. if we find it meritless, then we would not raise it. caller: my question is on the death tax. it seems like this is double taxation. this is income that has been attacked before. -- taxed
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before. i would like to get your personal thoughts on that. guest: the complexity in the tax administration -- what congress has told me in the internal revenue code, the charge they have given me is to identify and assist taxpayers with the problems they have with the irs and to make administrative and legislative recommendations to mitigate those problems. it is within the tax administration, not policy. where is it confusing? where is it difficult for taxpayers to comply? that is where i would make recommendations. as far as the existence of whether we have an estate tax or what the levels should be, that is not my jurisdiction. i would be out of place to express my personal opinions on
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that. it matters not a whit in terms of my job. host: "why would you ask questions of the port and not of the rich who have more to hide? more loopholes and tax cuts, more opportunity to cheat?" guest: we did make a point of that. it discriminates against people who cannot afford expensive tax advice. i was speaking specifically about the earned income tax credit. the irs is bringing several prosecutions of the divisors of people who were participating in what we call tax shelters both offshore -- ubs is one example -- several tax shelters. we have an office of federal responsibility that can remove
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someone's ability to practice before the internal revenue service if they give improper advice. there is accountability at both levels. i applaud the irs that there is a higher percentage -- there is an increasing percentage of audits focusing on high-income returns. caller: good morning, c-span. thank you for being here. nina, i am disturbed by a lot of the answers you have offered. >> on violence there during a weeklong period of voting. >> the polling process is
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scheduled to last seven days and ends on january 15. thus far we are pleased with the high level of turnout and the cooperation of officials in both north and south sudan. the process has been peaceful with only a handful of reported disturbances in abyei and north of the 1956 north-south border. there is no reported conflict in the areas of southern sudan, other than in abyei. officials from the north and south should be commended for their collaboration and handling of this monumental challenging and historical task. as we all know, this referendum is a historic moment for sudan,
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for africa, and for the international community. the people of southern sudan are determining whether they will remain a part of a united sudan, or become an independent sovereign state. the referendum marks the last major phase of the comprehensive peace agreement signed by the representatives of the governments of north and south sudan in january of 2005. more critical work needs to be done in the coming months to ensure final implementation of the agreement. issues related to abyei, to citizenship, the boundaries, to wealth sharing remain to be worked out. but the sudanese government and
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people of the south have defied all of their skeptics in coming this far. just a few days remain before the polls close, and we are hopeful that the sudanese people will continue their efforts to ensure that the process remains on course. the united states is committed to doing everything possible to ensure that the referendum and the final implementation of a comprehensive peace agreement lead to an outcome in which the sudanese people can prosper peacefully under a single or under two separate states. as many of you are aware, president obama and his foreign policy team, especially secretary of state clinton, u.n.
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ambassador susan rice, deputy national security adviser denis mcdonough, and special envoy scott gration are putting enormous efforts into supporting the outcome, the successful outcome and conclusion of the current referendum. they have been aided and assisted by ambassador princeton lyman, and more recently ambassador dan smith who is working on the darfur issue. and i almost -- i might also say that wide we have focused very hard on ensuring the completion of the cpa, we have not taken our eye off of the issue of darfur. we have also in recent months
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significantly expanded our diplomatic presence throughout southern sudan. placing a very senior officer, ambassador berry walk leak is our general their come and substantially increasing our staff. as these elections move forward over the next several days, we have american officials located in five of the 10 southern states where they have had an opportunity to observe more closely the voting. we have also had officers traveling into the other states to observe the collection process. a successful referendum is in the best interest of sudan, of africa, the united states, and the international community.
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and we are committed to do as much as we can to ensure that the comprehensive peace agreement is fully implemented, and that whatever result will lead to a better relationship between the united states and the people of southern sudan, as well as the people of sudan who remain a part of the north. i will now turn over to my colleague, ambassador princeton lyman. >> thank you very much. as ambassador carson said, we are very pleased at the ability of the government of sudan, the southern government, and particularly i want to be credit to the southern sudan referendum commission for reaching agreement, making all the
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arrangements that will make it possible to have this referendum begin on time, january 9. and i know some of you are quite aware that for some time people have questioned whether that would be possible, whether it be possible politically or whether it was possible technically. and the fact that it had come off is a credit across the board. i am particularly impressed with the willingness of people in sudan to make a very tough decision. because to contemplate, split your country, to reach a decision to go ahead with that is a courageous act. second, i'm impressed with the international community and the role it has played. to make it possible for this referendum to take place, the work of united nations and its mission in sudan has been extremely important in providing technical and logistical support for the referendum, as well as
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for security. the american agencies working to make this possible, very impressive. you had the u.s. aid mission, you had the carter center, you had i our eye, all working out there, all knowing their jobs, working as a team to support the southern sudan referendum commission to make it possible. and chairman, the chair of the southern sudan referendum commission who had to pull the commission together, make them work as a team, work out the arrangements, work with the international community, and often a lot of pressures, criticism to say you can't really do this. and to pull it all. so a lot of people deserve credit. for making this possible. as assistant secretary carson has said, this is one big step.
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now the two parties based on the results of the referendum have to work out all the post-referendum issues which frankly were not addressed very far in the period before. the parties simply were either not ready or not in position to address them before the referendum. so we have big issues out there to be resolved, and besides passionate these are going to be tough negotiations. it has to do with the management of the oil sector, the finalization of some of the disputed border areas, questions of citizenship, working out banking and currency arrangements, security arrangements, international legal operations, debt, et cetera. these are all -- a lot of technical work has been done. there have been technical committees called cluster groups which have been working on all these issues, getting a lot of technical input both domestic and foreign. so a lot of work has been done
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on it, but the tough political decision of these issues remains to be done. now there has been in abyei some clashes recently. abyei has not taken part in the referendum, and nothing in these unfortunate situations is impacting on the referendum. nevertheless, there is a worrisome situation. darfur as you know was scheduled by the referendum also to start on january 9. it was to be a referendum in which the people of abyei decided whether they wanted to continue to be part of the north, which they are now, or become part of the south. and there was no agreement on voter eligibility. the referendum couldn't be helped. this remains an extremely important sensitive issue to be resolved in the future. this is also a historically
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tense time within abyei as the migration begins again because the migration has been fully worked out between the dinka and others, there's tension on the ground. some of the files we have seen, some of these clashes is a product of that tension. we are pleased that the government, the dinka, the splm are all working, meeting in abyei today and tomorrow to resolve these issues, bring things under control, work out the arrangements with this years migration, et cetera, and hopefully contain the situation. but the long-term resolution of abyei is a political position that have to be made. and, finally, on the atmosphere, i was visiting polling stations in north, all very well organized, no problems, no security problems, people walk in and out not feeling pressures
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one way or another. voting has been light in the north. probably as we suspected. in the south as you heard, a lot of people coming to the polls very excited. that's where the bulk of the voters are. and it's going very well. no problems at all throughout the area. we have people, and lots and lots of other observers in southern sudan. you have observer groups from of course the carter center, from the e.u., from the arab league, from the africa union, from other groups, and thousands of domestic observers. we watched in the north, northern polling stations as many as 10 observers sitting at each station. more observers in some cases than voters come in and out. but it was a good son. people are organized.
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they were eager to make this a success. so the mood in both north and south in the way the voting is going has been very positive. so let me stop there and ambassador carson and i will be happy to take questions. >> my question to you, the tension that was expected to the violence was expected, is that in any way the result of some sort of deal where the president of sudan, bashir, -- [inaudible] >> let me start, and we can both answer the questions. no. there was no deal worked out. i think that the absence of violence in the south is a
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reflection of the fact that both northern and southern leaders have all come to the same conclusion. that it is in their interest to see that the comprehensive peace agreement and the referendum in the south goes smoothly. i think that the vivid, a week ago, tuesday by president bashir down to juba was indeed an act of enormous political courage. he was met with thousands of people upon the street holding up boehner's expressing their desire for independence. but instead of being repelled by this message, he spoke very clearly that he would recognize the outcome of the referendum to
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vote, and that if the people of the south chose independence, the government of the northwood accepted and would and would work with an independent southern sudan as a brotherly state. i think there has been over the last year, a growing recognition among many people in the senior ranks of the national congress party that this outcome, this vote was inevitable, essential, and would, in fact, opened a new door for them as well as for the people of the south. >> can i just add to that quickly, there was a lot of concern that there may be problems with the freedom of people in the north. southerners in the north to vote. and that there might be intimidation, et cetera.
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that also hasn't happened. and i think it's because as ambassador carson said, once it was accepted that this was a process that need to go forward, that he didn't make sense to try to disrupt it or manipulate it, et cetera. there was no incentive to make it difficult for people in the north to vote. >> we know that there are many southerners in the north. while much less in the south. there's going to be an area where many people perhaps thousands, perhaps hundreds of thousands, are being rejected by either the north or the south. how do you deal with it? >> both parties have said in discussions that they would leave people status. they understand that that is not acceptable. but the exact process for citizenship frankly have not been agreed to by the two parties. a national congress party has said that they do not favor granting dual citizenship to all
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southerners for a variety of reasons. for southerners to have an option to choose to be citizens of the south, the south has to come into being and pass the citizenship laws. the south cannot confirm by law citizenship people come on people who don't live there. even -- so we need a period of time where all this gets worked out. in the meanwhile, the people in the north have said, look, southerners living in the north will be protected. their property will be protected, et cetera. but on the questions you raised, haven't citizenship works out so that people get choice, so nobody gets left with statelessness, that's one of the big issues that remain.
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>> the american rhetoric towards president bashir has certainly changed in the past few weeks. most relieved by the secretary herself. and judging by what you've mentioned today it looks like you are very pleased by the conduct of both sides as far as the referendum is concerned. my question is, based on these changes recently, can or should our house in can khartoum expect the invitation of the american incentives, incentives that were offered to sudan, to khartoum specifically asked for his removal on the list of states sponsoring terrorism and all the other incentives, the diplomatic relations? do you have a timeline for these incentives? >> yes, we do, and that is been communicated to the government. i think the first step would be on completion of the referendum, and the acceptance of the
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results that united states began the process of examining removal from a state-sponsored terrorist and that involves certain reviews and certain consultations with congress. but that would begin after acceptance of the referendum result. that would be the first step. the other steps involving normalization and finalizing that would all, we expect around july as the other elements of the cpa are fully achieved, agreeing on both referendum arrangements, resolving the transfer issue, et cetera. so one of the big process is to start right after acceptance of the referendum results, but specific as steps beyond that probably around more towards
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july. >> if i could just add to underscore one of the important aspects here, is that even though we have clearly indicated a willingness to remove sudan from the state sponsor of terrorism list, if the cpa is fully implemented, sudan must also comply with the criteria under the law for the removal of a state-sponsored designation. but it does, in fact, have sufficient time to do that, to a line it very closely with any possible independence for the south. >> could you be more specific? what criteria are you mentioning specifically? >> the state sponsor of terrorism law says that the government cannot be engaged in
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or support any terrorists organizations within the last six months. it cannot be officially dating, abetting, supporting international terrorists groups or organizations. >> ambassador lyman, further to your comment the cluster groups, could you say something about composition, becoming north and south, are they actively working now? is there a timetable for negotiations to resume a? >> the cluster groups are made up of northern and southern representatives. they are people technically qualified to deal with those issues, whether they're legal issues, economic issues, et
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cetera. some of the groups have made a lot more progress than others. the security group has made a lot of progress. the legal group looking at legal issues and progress. the economic group has not made a lot of progress except on a tactical basis. that is, they know the issues are. they have received a lot of help internationally. the norwegians have been particularly helpful on defining the issues, and possible ways of dealing with the oil sector. others have helped a lot on defining issues of currency and what that would mean for the two countries. so they are gathering a lot of technical information, but i would say that they need more political guidance to go farther than they have gone. and that timetable has not been set up your these all operate under the auspices of the african union high level panel, chaired by president becky and
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others. and the timetable that everybody thought we would have really with the reverend just didn't happen. so i know now we're going to have to see how the party set up anytime table. and we don't have it yet. >> the exchange of population which is going on, do you expect a major exchange after the referendum results come out? and will that create a different situation? >> there has been a steady movement of people coming out of the north going back home to the south. there are quite a few southerners, the figure varies but i don't want to put a number on it but it is a large number. about 140, 150,000 have in the last, i guess, since august
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moved to the south. some two abyei which is not technically in the south, but to other states in the south. were the seven government has just done is to try and make this a little more orderly. because some people have sold their property, quit their jobs and stop the buses were coming and they never came. so they sat there for a week or 10 days before the transport came. people got piled up waiting for the barges to take them down the river. the bigger problem, however, is the capacity of the south to handle people coming back. and this is as you know a poor region. hopefully most people will go back to where the villages and places they came from. but still the long-term capacity is questionable. the numbers that make up over time is hard to say.
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i've heard projections of 300,000, 500,000. but we don't know yet. people are making their own choices. the international community is working with the states in the south, particularly on short-term help, and mutual thing so people can get started here but the long-term i think is the biggest problem. >> is the u.s. joining hands with the e.u. which is planning a major -- >> we are, under the auspices, the u.n. operation, if they coordinate efforts among all the international agencies on how to meet the integration questions to the south. and we are working very with them. i've also met with officials in the north. they are now beginning to work more with people getting ready to go. the u.n. is also working, and
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the government of the north has now allowed for much more access to those communities so we can get a better sense of their timetable. >> i was wondering if you could expand a little more on that, the whole issue that, i become it seems if you're just doing this, this is the fate, it is happening and, i mean, i'm just wondering if everybody, not just the united states is creating a lot of expectation in terms of what's going to happen. and for some reason if it doesn't go through, is there fraud involved? i mean, what's going to happen in that term? and i'm just wondering if, if, not only great expectations but affecting the outcome in that way by already, you know, not just themselves but experts kind of like encouraging, you're encouraging somewhat.
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>> we are not encouraging a particular out. spectra talk about all of the insistence that would give to the country if it were to succeed. if the referendum were t go through. i feel, i'm wondering if you're creating a reality on the ground that is creating expectations? >> i don't think we're agreeing a reality on the ground in the south about their attitudes on which way to vote. i do think that people by and large think this is going to vote for secession and are doing contingency planning accordingly. that's true. but it's not because we are promoting it. all the indications are, but we have to see what the outcome is. i don't consider anything in this process -- first you have to get through the referendum. ..
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>> i will stay on as the government wants me to someday on. i will stay on. i think the u.s. is going to be heavily engaged. >> no, i think ambassador is
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right about all of that. it's not -- i think just remember that this is the last phase of a peace process that was signed in kenya in january of 2005, and people have been building up over the last five years to the point at which they would be allowed to participate in a referendum to determine their future. prior to the signing of that agreement in kenya in 2005, north and south sudan had been locked in a bitter civil war for the past two decades prior to that in which some 2 million people were killed. if there is an expectation about the importance of the referendum
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and the moment, it is the basis of the fact that after two decades of fighting and five and a half years of an interim arrangement that they now have a opportunity to bring closure to one of the darkest chapters in their history, but for those if the south who have suffered and have bled for years, decades of being second class citizens, and for those in the north who also want to bring an end to the civil strife that slowed down the development of their country and caused its international respect as a result of some of the practices that were carried out during this bitter struggle. this was an extraordinarily important moment for the people of southern sudan. this is an extraordinary important week for them, but if there is a sense of expectation,
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it is built over a period of some two and a half decades in which we can now be at the very cuff of seeing one of africa's longest wars and tragedies. the ambassador is right on what lies ahead is extraordinarily difficult and will require persist patience against two parties who were once bitter enemies, and now stand the chance of being two states to live with dignity and respect side by side, but we have to get through these issues, and we need people like ambassador lyman to help us and them to get through the complication of citizenship while sharing borders. the distribution of wealth and national assets, these are very difficult questions.
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they are difficult for a country that is losing a third of its population, a quarter of its land mass, and it's difficult for a government which is only five years old in the south that comes out of one -- one of the poorest regions in the world. difficult, we have to work with both sides. we do, in fact, have an opportunity to advance the cause of peace in the south of africa and sudan, but it will not end with this referendum on saturday. in fact, it closes one phase, and opens up a new challenging one. >> ladies and gentlemen, i'm afraid that's all the time we have available. >> it was postponed, is it postponed indefinitely? >> the referendum could not be arranged on time, and now the
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issue remains on how to go forward, and there's been no agreement on either side. they have been working hard on bringing sides together on this. the two presidents, presidents bashir and president kir of the south met twice to meet, but do you have an alternative solution, ect.? there's been no agreement. this issue remains out there, and it's an important one to get resolved. >> i thank you for joining us today, and that concludes it for today. [inaudible conversations] [inaudible conversations]
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>> well, good morning officially, everyone. i'm very happy to welcome you this morning to our program on behalf of the national press foundation. i'm linda topping steitfeld. for those of you ho are not
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familiar with us, we are based here in washington. we are independent, not affiliated with the national press club or any other organization. we don't take money from the u.s. or any other government. we'd like to take money from you if you'd like to donate. our mission is to provide information, resources for journalists to help them do their jobs better. i want to start by thanking the groups helping us today with that mission. our partners in this series of briefings are the center on congress at indiana university that does such a great job in educating the public about the work of congress, also "politico," and partnering on today's briefing is the regional reporters association. we are grateful for their help. in addition, we have funding for the program from the smith family endowment. we are very happy to have her
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with us. given the tragedy this weekend in tucson, i really appreciate that all of you are here. i know many of you as journalists had other things you could have been doing. we appreciate you being here. unfortunately, i'll note that several members of the original speaker lineup were called away to professional duties, so the second portion of the conference has been modified somewhat. i'm confident that this program will be useful for those of us who want a better understanding of the budget process and how it fits into the larger economy. if you are a c-span viewer, you will find two things on the website helpful to you. it's there you will find a red bar across the top of the home page
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with an alert about this program. click on the bar and takes you to the program where you find the updated agenda, and also a link to the pdf document used by our first speaker. if you access that document, you can follow along with the first presentation, so, we're going to get started with that. we're hepping with a primer on the federal budget. it's going to be delivered we one of the foremost experts on how that budget is structured and how it comes together. as we know, the federal budget is complex, and it's not a static document. it changes during the year and it changes every year. because it is so complex, it's ripe for misunderstanding. it's often used as a political tool, and those two things are related. when citizens don't understand the basic financial document that determines how we pay the
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nation's bills, it's a lot easier for politicians and others to sort of spin the budget, sound bytes and a lot of misunderstanding, and that can have huge consequences, and that is why we are here today. as jowrntists -- journalists, your job is to look at the budget through the eyes of the intended add yen and give them the information they need to make good decisions that greece the wheels of democracy. i will introduce josheph minarik. he is director of research for the nonpartisan committee of economic development. he worked with congressional democrats for five years on reforming the federal income tax. he's been widely published. he's testified before congress. in the early 90s, until recently, heavings chief economist of the house budget committee and then was director of the economic policy at the
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office of management and budget and worked on bill clinton's 1993 budget program and was a driver of the clinton administration program that became the bipartisan balanced budget agreement of 1997. those are strong credentials and honors this morning to have dr. josheph minarik. >> thank you, linda. i'm very happy to be here under what i guess are about as unhappy circumstances as you could possibly have. i'm going to try to do what i can to accomplish the goals that we all share which include having a strong and sound federal budget. i see in the room a few faces that look familiar. just to help me out, have any of
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you attended any of these earlier annual briefings in previous years? okay. we got a small number, so most of you are new attendees to these events. i guess one other question. how many of you have not yet as reporters covered a federal government? okay, so most of you have been through the budget and through the process of releasing the budget. not many of you have been to any of these briefings. what i'm going to try to do, ave an -- we have an hour which is not an awful lot of time. what i'm trying to do is move through your handout fairly quickly. please feel free to ask questions if there's anything you don't understand. you will have the ability, of course, to work with this document later on. i believe you got my contact information.
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i will be delighted to try to answer any of your questions later on if things should come to your minds at another time. let me start out before explaning to you, to the best of my ability what the federal government is and there when i say budget, i mean the book you'll be confronted with sometime early in february. i do have a couple of pages in the beginning of the handout intended to give you a sense that you should be scared out of your wits. when you think about the current budget situation, and i'm talking about you as citizens in the united states, not you as reporters who have to tell the story, there are a couple charts in the beginning of the handout, and if i could suggest that you look at the first one which is this thing, this is intended to
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give you a sense of just how rapidly the federal budget situation has decreased. if i could skip to the bottom line, back in september of 2007 under reasonable projecs of the way the congress and administrations behaved, we would have an anticipated that the nation's debt would grow to be 60% of the size of our economy. by the year 2022. now, there are reasons to look at the debt relative to the gdp -- sorry? >> [inaudible] >> okay. we are printing more copies of the handout for those of you who don't have a handy. the thing about debt is that you have to service it. you have to pay interest. the bigger the debt, the more interest you have to pay.
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the gdp is our collective income as a nation, so that's the resource out of which we have to pay that debt service. the bigger the debt is relative to gdp, the hardest it is to pay that interest cost and keep the united states government honest relative to its creditors. 60% of gdp is an arbitrary standard, but it is recognized for example, by the european monetary union up until very recently if you wanted to be a member of the monetary union, you had to demonstrate your debt was less than 60% of your gdp or you had a good plan to get it below that level. right now, there's no many countries qualifying for that if that standard were enforced firmly. it's also a reasonable level where when the debt gets higher than that, you start having problems. as i mentioned at the end of 2007 which is when the financial
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wave broke on the u.s. economy, the anticipation was that we were going to hit that 60% of gdp trouble signal in 2022. in the three years that followed, the federal government did essentially nothing to solve that problem, and meanwhile our economy and budget deuterated seriously. at the end of fiscal year 2010 which is back at the end of september of last year, the debt had already exceeded 60% of gdp, so, in other words, we had 15 years between us and the wall of debt back in the end of 2007. we moved three years towards the wall. the wall moved 12 years towards us so folks like me back in the end of 2007 said we have a
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serious problem. in 15 years, that's not much time to turn the country's mentality around and address the problem and deal with it. we now have no time at all. the debt, as you can see in that chart, a has just about gone vertical. it is rising extremely rapidly and we have very little time right now. we need almost immediately to begin to get a grip on this problem. that is not to say that you take pre-- action that is likely to stalize the economy, but it is that you get in serious discussion ease and begin to make plans as the economy improves to make changes throughout the budget to limit the growth of debt and turn it around and bring it down again. the second chart that you see will give you a pretty clear picture that by the end of this
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decade, we can anticipate that our debt will absent significant changes in policy, we can anticipate that our debt will have grown very nearly to 100% of gdp, the full size of our collective income, and to give you perspective, that is about where we were when we came out of world war ii. all of the progress that we made between the end of world war ii when the debt was approaching 110% of gdp and 1994 when it bottomed out at 24%, all that progress in reducing debt on the u.s. taxpayer will have been lost. at that point, you're getting to even more concern about the possibility of a crisis in the financial markets brought on by the inability of the united states to convince its lenders that it is a reliable borrower
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who can service its debt in the future. you should have, i hope, a little glossy pub collision of my organization, the committee of organizational development in which i climbed into your shoed and tried to write so future newspaper stories. what might happen if in fact we lose control of our debt situation. there's one story at the end where i tried to tell how we might, in fact, turn this situation around. i hope you have a chance to read it. i'd be interested in your comments and your reactions. that's to give you a reason why you should be here apart from the fact you're going to be working to cover this budget. beyond that, i'd like to talk to you a little bit about how the budget is presented, give you a head start at where you can look in the budget documents for the information you will need to report the story, and what i'd
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like to do if i can is to go through this document relatively quickly as i said. please feel free to ask questions if there's something not clear to you, and i'll leave as much time as possible at the end of the session so you can ask questions, and i'll try to get to your specific issues and concerns as much as i can. as i do every year, i will urge that you look at the book that is called the budget of the united states. that is one of five books that you're going to get or at least be able to access online when the budget is released. the statutory deadline for the release of the budget is the first monday in february which this year is february 7, however, there was a news story over the holidays that the administration expects that they are going to be a little late this year. this will be the first time in my memory that an actual budget
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is being released late. we can speculate as to why that might be true. some say it was because of the late con confirmation of the new omb director. it's possible the administration is contemplating a change in direction from what they original anticipated. i don't know anything for sure and have no stories to tell you, but in the second week of february you'll see a budget document. you are going to see before that, another document from the congressional budget office which is cbo's take on the budget outlook. this is a distipghtly different document, and what i tried to explain to you in the handout is the numbers in the cbo budget outlook and the numbers in the budget itself cannot be compared directly apples to apples. the reason is the budget is the
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president's economic and best of my knowledge tear program, and -- budgetary programs and presents an assumption that the president's program is adopted walk, stock, and barrel. however, the cbo document does projections on the basis that current law as of now is continued indefinitely, so the difference between the two is not only cbo's possibly different perspective of where the economy is going and how the costs of particular federal programs are going to change because of that. it is also because cbo assumes the law today without change. the president's budget assumes the law to be changed according to everything the president wants and presents in his budget, so keep that in mind when you look at the numbers from one document to the other, and that will help you to convey to your readers what those
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numbers really mean. cbo's document will be released probably sometime this month. i have no information about the particular date. next page in the handout. one of the things that is foremost on everybody's mind is what is the budget deficit going to be? looking at the budget as a whole, what you want to keep in mind is the significance of the deaf citer is -- deficit is it is approximately the amount of money the government has to borrow from the public to raise cash so that it can continue to fund its operations. i have a little explanation in there of the approximately part of the last sentence. the difference between the deficit and the amount of money the government has to borrow. we are in a time with the response to the financial crisis
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when the difference between those two numbers is, in fact, much larger than it had been historically. this is because of programs like the troubled asset program where the federal government bought private securities, and it is beginning to get a return on some of those securities. there are flows going in and out of the federal government in cash that affect the amount of money that the federal government has to borrow in financial markets. i've explained to you there in the very first table in the summary tables what's called appropriately enough s-1 where you will find the amount of the deficit, but then also going back to the last table, traditionally in the summary tables, last year it was table 114, and if you want to know how sick i am, i lived for table
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s14. it's the most exciting thing in the world for me. if you look at that table, you will see an explanation of how much money the federal government needs to raise in the financial markets. you'll get a history, a short history and projection of the amounts of debt held by the public which is what economists are concerned about. that's how much money the federal government must borrow in the financial markets. therefore, it's the indicator of how the frot affects -- federal governments affects the financial market and the economy. you'll also find numbers there for another number, another concept which is debt subject to limit. debt subject to limit is not something there economists -- that economists look at much, but it is something you will be concerned about, i assume many of you will be concerned about, over the course of the next three to four months. that is the amount of money the
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federal government is allowed to borrow. it extends beyond the money we borrow from the private sector and rest of the world and financial markets and includes the amount of debt within the federal government, the securities that are given to trust funds, notably the social security trust fund, but there are more than 100 trust funds within the federal government that hold special treasury securities. you take all of that debt together, the debt that economists care about which is the debt that is held privately plus the debt that is held within the federal government, and you get to the debt subject to limit. we anticipate that debt subject to limit is going to come very close to the statutory debt limit sometime between march and mai. the treasury secretary wrote a letter to the congress shortly ago explaning that we anticipate that we're going to run into
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that debt limit, and that the congress will need to take action to raise the debt limit. i can tell you from my own experience working with this issue quite closely when the treasury secretary says he's not sure exactly when we're going to hit the limit, and it could be any time within the two month band, he's speaking absolutely honestly. you don't know how numbers accumulate. you don't know what tax numbers will be, and you can be incredibly surprised in the tax season by the amount of refunds the treasury has to pay and the amounts of receipts it takes in. the one thing i will tell you is for people who owe money to the treasury, they are going to mail those checks on april 15th. they are going to mail them by the slow "usaest u.s. post office they can find.
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if you had to mail a big check to the government, you would take a vacation to key west where the mail service was by boat. go to the post office on april 15th, get a postmark, the mail would be careyed to a boat, make its way back north to the state of florida by boat island by island, and you would finance your key west vacation by the interest you saved on the float on the money because you were sending it in by mail. receipts, net receipts to the treasury are highly unpredictable. if you have a refund, you want to file early. if you owe taxes, you want to file late. one of the biggest concerns is that we could strike the debt limit significantly before april 15th, and we could be in a situation where the federal government is significantly short of cash.
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i'll just add for purposes of discussion right now that some people say playing with the debt limit is playing with dynamite. i can tell you that is not true. it's not playing with dynamite, but playing with plutonium. this is one of the most dangerous situations in federal government finance that could be imagined. all we need right now in a time when the federal government's debt is seemingly out of control would be a spark of concern in the financial markets that the federal government could begin to default, and the consequences for every american citizen would be enormous, and that's part of the story i tried to tell in that little document that you've received, and i hope that you take a look at that and might help you along with that understanding. let me move on from the joy of table s14 in the budget to some
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of the concepts that you're going to have to deal with and particularly for those of you who haven't covered a budget yet. some of these things seems like little things. you probably will want to understand them so you can make sure you keep your stories on target. federal spending is divided into two fundamental categories, and one of them is routinely subdivided. we talked about discretionary spending and mandatory spending. a subcategory of mandatory spending is net interest, interest on the debt. the terms discretionary and mandatory are terms of art. they sometimes are taken to convey meaning that they really don't have, but the simple story is as follows: discretionary spending is the spending that must be legislated annually
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through the process. a discretionary program, if there's no action by the end of the fiscal year, that program must stop in its tracks. there are strict limits on what an agency can do if it's not funded. this is what we call the quote-on-quote shut down of the federal government. mandatory spending is opposite. mandatory programs are created in law and they keep ongoing forever until the congress agent -- acts to stop them. the debt crisis throws everything out the window though. the mandatory program of which you'll all familiar with is social security. the nature of mandatory program is just like you understand of social security. the law creates a formula that determines how much money an
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individual or possibly even a bids is entitled to receive, and if you file for social security benefit, and you qualify, they calculate the amount of benefits that you are owed, and those benefits will be paid unless the law is changed. the other side of the coin would be a discretionary program and the program is an appropriation to build a bridge. if appropriations run out, and you don't renew the appropriation for the department of transportation, construction on that bridge will stop because the checks are not being paid to undertake that expenditure, so that's the difference between discretionary and mandatory. it is not intended to be an indicator of merit or an social securitier of the extent to which people ought to continue a program or ought to stop it.
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it is simply a question of how that program is created in law. now, a subcategory of mandatory spending is net interest. of all the mandatory programs, this is the most mandatory. you have to pay interest on your debt. if you don't, possibly in excess of what was reasonable, the consequences will be dire. that is a quote-on-quote default. when you look at those categories of spending, that will help you understand what we're talking about, and i cite in the handout a table in the supplemental tables in the budget that will tell you a little bit about that break down of spending. now, going beyond that, let's focus in on discretionary spending. particularly in the budget tables when you get deeper, you
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find a subject of december cession their spending. the current discretionary spending most commonly used is a distinction between quote on quote security spending and quote-on-quote nonsecurity spending fnlgt in the hand out, there's a history of how those concepts evolved, but what they mean right now, and i think if you look at the history, it will help you to understand this, but what they mean right now is for security spending, we include defense spending and also selected spended outside the pentagon that is pertinent to homeland security, and nonsecurity speaning as the name suggests is all other discretionary spending. this -- these concepts will be in play as you hear the debate on the budget this year because we have competing proposals for restraining nonsecurity
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spending. one side wants to roll it back to the levels of 2008, fiscal 2008, the other side wants to freeze it for three years. when you get to the security side, there's differing views to the extent of which in particular defense spending could and or should be restrained. when you look at discretionary numbers in the budget, you're likely to see them presented in the security and nonsecurity division. beyond that, there is a question about supplemental appropriations. you know, just to get you ahead start on this -- a head start on this, back in the old days when i was your age, a supplemental appropriation would occur when there was a hurricane or earthquake and the money that was appropriated in the corse
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-- course of the budget process turned to be insufficient because there were big unforeseen expenditures that needed to be made to respond to some kind of a natural disaster. in recent years with the military activities in iraq and afghanistan, we have gone through a cycle of e nor motion un-- enormous uncertainty with respect to the amount of money needed to carry on those war efforts. we have gotten into circumstance where we have had relative well-anticipated, but in their amounts uncertain, very large supplemental appropriations bills necessary to fund the war effort, so one of the things that you're going to be looking at as you look at the budget is the degree to which the funding that is in the budget for the department of defense reasonably could be effected to reflect the
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amount of money needed over the course of the year for our continuing but presumably winding down activities in iraq and afghanistan. that possibility of a supplemental appropriation is in the background of the consideration of the budget. now, one of the concepts with respect to discretionary spending going on in the next page of the handout that drives people crazy, and it's one of the reasons why many people will tell you that they find the federal government totally inpenetrateble is a distinction between the concepts of budget authority and outlays. it's really not all that complicated, but let me give you a little bit of background just so that you're, i hope, up to speed on this issue. if everything the federal
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government did took less than one year, we wouldn't need the concept of budget authority. you would take revenues in. you'd spend them. within a year, you would budget for one year covering everything you're doing. there would be no problem. you get into difficulties because the federal government undertakes long term activities that extend over several fiscal years. if you think about it, if you're undertaking a long term project, there would be ways you could legislate for that project that would be tremendously misleading and possibly get you into trouble, and as an example for you in the handout, i just wrote a story about the possible dialogue between you and a home seller and mortgage lender where you look at the cost of a house, the interest you have to pay on
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the mortgage, and you come up with a mind-boggling number and you say, i can't possibly afford that, anded lender and home seller says, well, look at it differently. we're in september, you make your first payment in more than a month from now. you only make two payments this year. look at the sum of the two payments, and it's very small. you can afford this house. go ahead and do it. what you need to do, however, is to take into account the entire commitment that is involved in signing that contract to buy that house. when you look at the federal government, there are a lot of things that are similar. you can buy an aircraft carrier. you're in the -- in the first year of the program of building the aircraft carrier, the amount of money you spend is going to be relatively small. you are drewing plans. you are having conversations
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with potential contractors. before how long, however, that starts to get extremely expensive. if there was not a way to recognize the total long term cost of that prompt, we could find ourselves starting all sorts of things, all long term projects that we could not ultimately afford, so to provide that control in the budget process, there is this concept of budget authority, and that represents the total amount of the cost of these kind of long temple projects like -- long term projects like building an aircraft carrier, and what that says is when you look at the defense budget, you see an amount of authority that is larger than the amount of outlays and that's because the spending of the aircraft carrier in the first years, the outlays, are small, but the authority has to be large. there's other parts of the defense budget and agency budgets where the amount of money spent does go out within
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one year, so defense man pour is an example. all the salaries get paid in one year, but you want to be conscious of this distinction between budget authority and outlays and that will help you in describing the federal budget i believe to give your readers and accurate picture of exactly what commitments are being made. some of you will probably find that when it comes time for the release of the budget, you are going to want to be able to know whether a particular project that is important to the geographic area for which you write is included in the budget. what you need to do to accomplish that is, i would suggest, and i am not the world's foremost authority on this, but you should get to know the folks and the appropriations committees in the congress who
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cover the areas where projects, and aassume in many instances it's highways, the people in the appropriations committees who work on those issues because they want to know what's included in the budget, and you can get information from them. you'll want to go to the relevant agency. for example, the department of transportation. see if you can develop a relationship with people who work there and will be knowledgeable about your particular project. see if the department is going to offer a briefing at about the time of the release of the budget to explain what the agency's budget looks like, and there's pitfalls and traps of which you want to be conscious of where there might be some happy talk in terms of trying to describe how much a particular amount in the budget can pay for. i have a page in the handout giving my best advice in the
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areas, but when you come dob to those questions, get to know folks in the agencies and folks on the hill and folks in the appropriations committee and authorizing committees to learn and have a leadership to be able to go to them and ask questions when the budget comes out. there is a concept which is pertinent to both discretionary spenting and mandatory spending which is the baseline. if you were to imagine a wonderful mythical world in which the federal government were able to do exactly the same thing year after year, the cost of continuing to do the same thing year after year would be what you paid for that activity last year plus an increase to reflect the rate of inflation for the next year.
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proposed freezes of federal pay aside, typically when you go from one year to the next year, federal employees get a pay raise as just about everybody wants to. this may not be true this year, but the cost of smies is certainly going -- supplies is certainly going to change, sometimes up, sometimes down depending on what it is you're buying, and there is a baseline constructed by cbo and omb. they are supposed to be the same. they often are somewhat different which is intended to reflect the change in the cost of doing the same thing year after year, so if you think about it given that the president is not going to propose to do the same thing next year that he's doing this year, the change in the president's program in terms of money can be expressed as the increase in cost of doing the same thing, the baseline plus or
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minus program changes. many people talk about the baseline and come to the conclusion that the baseline can drive policy. i've heard people complain that because the baseline includes typically an increase for inflation both in pay and in the cost of supplies, that it biases federal spending decisions upwards. the federal government, this argument goes as no right to expect the pay increase for inflation. obvious, most people in the private sector expect to pay increase for inflation, but the federal government has no right to expect for the inflation and make due with the same amount of money this year if notless, and therefore, the fact that we have a baseline that represents inflation biases these federal spending decisions. i've never felt comfortable
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buying that argument. it always sounds to me like the baseline maybe do it. what the congress ought to do, what its job is is to review the budget every year, look at the extent to which programs should be changed or even if the programs aren't changed, money can be saved, and appropriations can be chosen, therefore, on a reasoned basis with appropriate changes from year to year that economize on the use of the taxpayers' dollars. that is what we hired the congress to do. the baseline is a tool to give a sense where those numbers might go. it's not intended to tell anybody where they ought to go. when people make reference to the baseline, and in fact, when you look at that cbo document that i mentioned at the outset which is going to be released later this year, it is in a
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sense a baseline document. it tells you what the cost of continuing to do what we're doing now can be anticipated to be next year and the year after that and the year after that. that's a baseline, but it's not intended to tell anybody what we ought to do. the baseline holds true for discretionary spending. there is a concept of a baseline that is relative for discretionary spending, and there's a concept of a baseline for mandatory programs. however, the mandatory baseline program is not as discretional as the mandatory line. if you look at what social security is going to cost next year relative to what it costs this year, there's a lot more going on than just the rate of inflation. there is also the number of perspective social security recipients who choose to retire. there is the number of current social security beneficiaries
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who might pass away. there is an adjustment in benefits, the cost of living adjustment which may or may not be triggered for conder social security benefits. there is a question of what the earnings of new retirees is because people with higher wages get higher benefits than people who retire with lower wages. there is a baseline concept that applies to mandatory programs, but it is much more complex than that for discretionary programs. in addition to that, there is the question of proposed program changes in mandatory programs, and i've given you in your handout a very lengthy table. this is the table from the supplementary tables in the budget, and what has happened in the last couple years is there has been a combining of what
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used to be two tails. one is proposed policy changes for mandatory programs, and the other is proposed policy changes for revenues. the reason why those two have been combined, i believe, is that in many instances there are overlaps between the two particularly with respect to so-called refundable tax credits. the earned income tax credit, the child tax credits, the amount ofs those credits under the income tax law are paid to individuals without in excess of tax liability in zeroing out that if they meet certain conditions. those amounts of tax credits are considered outlays in the budget, not negative revenues, and so as a result when you propose a change in the child tax credit or the earned income
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tax credit and extended some changes in those credits in the current tax law as it was modified last month, then you have numbers that apply to both revenue changes and outlay changes with respect to a single policy and because of that, those two tables have been combined, so if you look at that table in the handout, you find it goes on and on and on and on and it's possible it will do so again this year, but if the question comes up, what is the president proposing to do with respect to med -- medicare and social security and medicaid, with respect in the income tax? will he propose to extend the tax cuts that were further extended back in december or propose a change? you're going to need to look at this particular table and i've tried to discuss in the handout a couple of things that can go
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on. if you're the president proposing the budget, and you want your deficit to look smaller, you may very well propose a bunch of polys with respect to mandatory programs that save money. you might propose targeted tax increases on people that many people don't like. there's a -- last year there was a proposed special increase for financial institutions for example. it may be possible that those policies don't have a snowball's chance in haiti of being enacted, but putting it in the proposal, the budget assumes the enactment of the president's program, you can take the revenues and make your deficit look smaller. the same thing, of course, can happen in a congressional budget resolution and has happened in recent years, so you can see those things going one way or the other. you'll find in the handouts
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descriptions in ways in which mandatory and discretionary polls -- policies can be made to look different as it comes out the door. i'm running slowly, so i'll try to speed up just a little bit. on the mandatory side of the budget, you will find that mandatory spending consists of a relatively small number of relatively large programs, so if you look at the mandatory budget and you look at the amounts of the programs, the mandatory programs in the budget, you will find the biggies are social security, med tear, and -- medicare and medicaid. once you account those, it's 70% of the total. there's a few dozen other programs that are smaller that divide up the remaining 30%. this is very much in contrast to the discretionary side of the budget where you got an enormous
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list of programs, many of which are extremely small, and for those much you who are familiar with the budget books and many of you might work with the online versions, but for those of us who spent years hauling those things around, the biggest, fattest book in the budget is a book that is called the appendix. that budget is solely about discretionary programs, and it runs typically about 1200 pages and goes on and on and on and on with descriptions of individual programs, individual line items in the budget. it is in effect the president's guidance to the appropriations completes. that's what that book is for. you want to keep in mind if you have that book and carry them around and you notice the appendix is large as the other books put together, you want to
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keep in mind that book is only about the discretionary part of the budget which is only about at this point i think it's roughly one-third of total spending. the other two-thirds are on the larger programs on the monday tear side of the budget, and they are explained much more briefly in the course of the budget. there is also a concept of a baseline for tax receipts. in effect, the baseline is what happens if you put the tax system on autopilot, you allow current law to continue, and the question then is is how much revenue are you going to collect? that is a nice, neat, understandable concept. the only problem with it is particularly in the last few years, in the last decade, really, it can be terribly misleading, and the reason is
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it's misleading is going back to 2001 is we have had enormous changes in policy enacted on a temporary basis. the tax cuts in 2001 were set to expire at the end of calendar year 2010. even though the people who enacted the tax cuts they had no intention of allowing that expiration to happen. the point was, that's the way to get the cuts through the budget and get them enacted into law, and we'll do them that way. we came to the end of 2010 and we were in a terrible situation on what to do with the decisions. those tax cuts and tax cuts enacted in 2003 and some in 2009, back in december, they were extended for another two years. if you were to look at the revenue baseline, it will show that at the end of the calendar year 2012, those tax cuts expire and revenues jump up to an
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extent that they will significantly reduce the amount of the budget problem. in reality, just as was the case in 2001 with respect to tax provisions that will expire at the end of 2010, nobodiments all of those temporary tax provisions to expire. almost everybody has a sense of extending at least some of them, if not all of them. a revenue baseline can be misleading. if you look at the baseline in the budget picture, the deficit will take a sharp drop beginning in fiscal year 2012 and then in the next fiscal year 2013. the problem is with those tax cuts expiring, you will have a significant economic dislocation and it will cause serious political problems to anybody who allows it to happen.
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keep in mind, the revenue baseline of all parts of the budget is the one where the baseline concept is the most negative and misleading in terms of results. i've got a couple more pages in the handout. let me say just one thing very quickly. part of the reason why we are where we are, part of the reason i think why the release of the budget has been postponed is that the president has got to figure out what to do with the recommendations of his commission. the complication with the budget commission recommendations is that you got bipartisan policy decisions to reduce the deficit all of which are extremely painful, all of which will cause extreme political difficulty to
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anybody who gets behind them in a very visible way, and the president's problem is if he comes forward with those recommendations in his budget, his base is going to come at him and say that he has given a lot of ground in what should be a very contentious budget negotiation if there is going to be any negotiation at all, and some people in his base will not want one. people on the other side say the president just gave us his negotiating position which is this bipartisan agreement, and now we want to find where his give is and have him come closer towards us with less revenue increases. the president is in a political box, and he has to figure out how to put deficit reduction on the table because frankly the rest of the world expects it, and if we don't make serious decisions in this direction as i cutted at the very begin --
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suggested at the very beginning, there could be significant financial consequences in our not too distant future. .. a way that keeps his political position sound and that is not going to be an easy thing to do. so that, to me, is one of the most touchy issues going forward. i've got a final page in the handout, which deals with the question of budget earmarks. i think that what i'm going to try to do right now is just to stop and i'll point that out to you. you know it's there. i'm happy to answer questions about that. but we're getting down very close to the end of the session and we have the moment of silence coming up and we're going to want to stop approximately on time for that. so let me open it up for questions and i'll be happy to try to help you out as much as i
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can. okay. >> i have a couple structural questions and i hope since the next panel is changed that you might be willing to go a little bit into their territory as well. the first one has to do with the proposals by the house republicans to cut back, whether a hundred billion or something else. do you see that coming in the context of the budget resolution and things like the budget function since the appropriation process seems to be completely broken? i wante to g your would be by budget functioned and secondly if the talk about seyear budget, if you take that seriously, if thatco would have any structural changes on the sr procesios that you have talked
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about.ges on >> abcaeight. i'm going to try to movee relatively quickly. in fact, the proposed hundred billion dollars cut in the budget is going to be on us mucu sooner than you might anticipate because we are funded, the throw government is funded on a continuing resolution. federa i forget even the date when itog expires, but it is not far inre. the future.that, so the first thing that this congress is going to have to do is finish the process of funding for sothe current fiscal year ot the discretionary side. how will they do that?al yr to be honest, i have no real idea. the simplest way to do it, given the what they have proposed is a cut in non security discretionary spending. the simplest thing to do would be to take all the non security spending lines and captain by the sameta percentage across thd board. he can do that.ercentag the reason why you can do that
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is that and keeping with the isscussion earlier there are a lot of activities and the the discretionary side of the budget that our long-term in nature. t many of those activities until e contracts. for those of you who believe in the constitution, the you thnstitution w establishes the sanctity of contract. if he made a commitment last year to build a building and the federal government has signedt l contracts you are on the hook for that building. you can't cut that part of thatt particular line in the budget. so you go through, and this isn't process. that particular line in the budget. so you go through, and this is the process, the kind of process that you go through every time you put together a continuing resolution for the federal budget. the first thing you've got to do is deal with term of art is anomalies. you have to go through all the parts of the budget where, in
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fact, you're already locked in. take them off the table, because you've got to meet your contractual obligations on those and then you have to work through everything else. and if you have a spending target and the spendi ining tar is a reduction of, say, 10%, once you take everything that's fixed off the table you might very well be looking at a reduction of, say, 15%. usually the next step is you look at some things in the budget and you say, holy cow. i am not going to cut that by 15%. and every individual can choose his own. by the time you get a room full of people and everybody takes the lines that they don't want to have cut by 15%, there's not much left. but first you -- then you exempt programs that you don't want to cut and the next thing you know, you're cutting by 30%, 40%, 50%. it is a very contentious process and it's the kind of process we go through routinely, as i say,
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when we do a continuing resolution now we're going to be in the process of trying to finish up the appropriations for this year and i suspect it is going to be extremely contentious and extremely painful. >> you mentioned the recommendations by the president's deficit reduction commission. what if any of those do you think actually have a chance of being adopted? >> well, the commission's recommendations include, for example, a package to fix social security. i've got a discussion in the handout which i didn't get to of why i would say that we need very early action on repairing social security's finances. my understanding from the discussions within the
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commission was that there was a fair amount of agreement on the motivation to do it. there were certain possible changes to social security that caused a great deal of heartburn on both sides. one where it seemed as though there might be a certain measure of agreement was increasing the cap -- the taxable maximum amount of compensation that we would be subject to the social security payroll tax. that's only one part of a potential solution. you've got to go a lot further than that. but people were able in that commission to relate to one another to some extent as to how you might be able to find ways to save money. there can be a reasonable amount of agreement for restraint on discretionary spending to the extent that you talked about it in concept and you don't start
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talking about specific things you want to cut. but it is likely that any proposal to deal with the budget problem if it comes to fruition, it is going to involve restraint, probably across the board. i shouldn't say across the board. it will probably involve restraint that will affect every agency, including the pentagon, and ideally it will be done on a relatively targeted basis at places where you can find savings that you can achieve. you might find, this is, i think, the wild card. there was a great deal of interest on the president's commission in a tax reform, which is to say and this kind of goes back to 1986 for those of you who are old enough that this means anything, we had a tax
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reform act that was enacted at that time and what it did was eliminate a lot of preferences in the tax law and to use that revenue to reduce tax rates. it is possible that even for some members of congress who are extremely averse to tax increases, that they may be willing to go along with a tax law reform, which raises some revenue but also reduces tax rates because it's the tax rates that affect the incentives that people have to work and save and invest. it is possible that if you take all the various parts of the budget and you put them together, with a tax reform, that provides some appeal to people, possibly across the board but certainly on the republican side, so that that gets you some revenue and
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reductions in the -- on the spending side, reduce outlays, and you put the two together and you get enough spending -- enough deficit reduction that you start getting the debt under control, that possibly could be attractive politically. it is -- one of the things that makes this difficult is that it always works best if you do the whole thing at one time, because that way everybody is making a sacrifice. if you try to target one part of the budget and you say, okay. we're going to start here and this is going to be our first piece of legislation, that is not going to be attractive to those who are losing, who are taking cuts in that legislation and everybody else won't be terribly motivated to pursue it anyway because it's not going to solve much of the problem. that's why we're probably going to look at if it is successful deficit reduction efforts are probably going to work through the entire budget including the revenue side.
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>> thank you very much. >> okay. >> thank you. that was a terrific stab at helping us start to understand this complicated issue. let me remind those of you at home in your offices watching c-span that the document we've been referring to is available on our website. that's national you'll find a red bar across the top of the home page and if you click on that bar, it'll take you to the program page. scroll to the bottom and you'll find this document. for those in the room also if you want to go back and print out a copy if you didn't get one, it is available. for those of you not able to stay for the rest of the morning's program, i'll ask you to keep your seats for a minute. our president barack obama has asked we as a nation observe a moment of silence in memory of the victims of this weekend's horrific violence in arizona. in addition to the grievous
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injuries to representative gabriel giffords and others, six people were slain outright. i'm going to read their names as reported in this morning's "the washington post". christina green, 9 years old. dorothy morris 76. federal judge john enrolled 63. fillies sneck 79. dorwin stoddard 76 and the last victim, 30. please join me for a few moments of reflection or prayer.
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[ moment of silence ] >> thank you very much. and now we'll move on. if you are here, come down to the front. we're going to move from the nuts and bolts discussion of our federal budget into a discussion of the broader economy. and to help us do that we're extremely pleased to have our next speaker, a reporter for "the wall street journal." he covers the federal reserve and the u.s. economy. previously he was with the "dallas morning news" a washington correspondent and before that covered the energy industry, technology, and business for the texas state house. he's also an award winning reporter. he has won awards from the society of american business
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editors and writers, from the associated press managing editors, from the association of consumer advocates and we are particularly proud to note that he is a winner of the national press foundation's thomas stokes award for best energy writing. he is a long-time friend of the national press foundation and we're very pleased to have him. if you are a fan of the national public radio show "market place" as i am his voice will be familiar because he is a regular there and also appears on other television and radio shows. so very pleased to welcome him today and thank you for being here and being flexible with our schedule. this is terrific. we have i believe a few open seats at the table, so if anyone who is sitting on the sidelines if you have an open chair next to you please raise your hand. i see one. if one person wants to move over to the table feel free to do that.
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would you like to stand or you wanted to use the computer? okay. i think it's right here. anna, are you in the room? can you help, i think we're going to load a, maybe a list of websites. we are pleased to be here at the woodrow wilson center for scholars today. they have these beautiful facilities including the computer and projector which are going to help with our next presentation. so our thanks, also, to the wilson center for their hospitality. and as our speaker sets up his presentation i will take a minute to welcome our paul miller fellows here this morning. this is part of a nine-month fellowship they have been awarded. these arl washingte all washing reporters who have not been in town all that long. they come to us one day a month to take part in the national
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press foundation's paul miller fellowships in which we try to help them become more familiar with the agencies and institutions that make washington work. this is part of their fellowship this morning. in addition to a pretty diverse range of other journalists and interested parties from around washington who braved the cold weather to come out and join us this morning. we're very pleased about that. looks like we're getting booted up here. one more note. our previous speaker has made a point of saying that if you need to contact him with questions,
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you want to do an interview and didn't get something this morning please feel free to do so. his contact information is also on our website. national and many thanks to him. >> should any of you have occasion to want to interview lee hamilton our director in bloomington, the contact information for the center is also in the press foundation materials and also on our website which was up there previously, center on
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>> i will go ahead and get started. while we're pulling up the presentation, some of you can share. i actually have some printouts here at the table. i thought it would be useful to start off since we're talking about the context of the budget to discuss something very much in the news and will be for the next few months. the budget in the context of the debt and the debt ceiling and the effect of the debt ceiling on the u.s. economy and that entire debate and we are really just now starting to see the debate pick up obviously about what this means for the economy overall if we were to have a default on the debt. obviously it's only a threat right now from people looking for spending cuts but it is a serious threat and one we've never actually faced.
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so the -- i'll pull this up. this just for the basics to start off with a rundown of what the u.s. debt looks like. as you know we're heading just above $14 trillion of debt ceiling at $14.3 trillion. and you can see here that we've actually run through from the -- you can run the debt back to
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1789 if you wanted to. there's always been some debt in the u.s. except for 1835 when andrew jackson was able to eliminate it entirely. there's always been some fairly low level of debt and as the economy went into the '70s we started seeing a creep up into the '80s. you can see on this chart what happens when policies aren't quite in sync as they should be with taxes. and here you can actually see from the last 110 years we are running through basically even on revenue versus spending and there are dips here and there. but you notice right here in the 1970 period that you go into deficits and this is what happens when you lower taxes significantly without having the
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spending cuts to deal with it and this is what happens when you actually make the proper tax and spending changes that you need in the late '90s and the economy goes into surplus and then again when you are running two wars and lowering taxes and paying for social programs and then of course you have this big drop with the financial crisis when tax revenue plummeted and spending went up with the stimulus program and we're starting to see the -- obviously we hit bottom but with the latest deal in december to extend the bush era tax cuts the deficit is still over a trillion dollars for the coming year and that's how you get into a figure like this where it just -- it clearly is unsustainable. now, there is a difference between -- you've probably heard a difference between the debt held by the public and debt held by intragovernmental accounts,
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debt held by the public about $9 trillion. that's people, regular people, investors, includes foreign investors. about $4 trillion out of that $14 trillion is held by foreign governments and foreign investors. so that is a significant figure when you consider that about half of that $4 trillion is held by china and japan. japan obviously had surpluses and bought up debt until its downturn from the u.s. and china is still buying it and is a leading buyer of u.s. debt. a few points to run through on this debt ceiling debate that we're going through now. the u.s. dollar as you know is the world's reserve currency. there is a reason that the u.s. is able to borrow to the extent it can right now because people see it as a safe haven during
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crises and flock to the u.s. dollar because it's the safest place to hold money just because of the reputation of the u.s. government and the might of the u.s. government and there's an expectation that the u.s. is always going to pay it back. if you were to look at the entire volume of $100 bills in circulation, some are between 2/3 and 3/4 of the physical bills are held outside of the u.s. that's kind of an indication of what people think of the dollar everywhere around the world and that's why the u.s. is able to borrow at such a large extent. the risk though is that you keep borrowing and don't pay it back and there is nothing wrong with short-term borrowing as long as there is a long-term plan to pay it back afterward and that is reel it big issue right now. interest rates are really low, for the u.s. government to borrow at ten years the yield a few months ago was 2.4% which is
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obviously a historical low but there is a reason it's advantageous for the government to go and borrow at that rate, build the economy back up. this was all the money borrowed during the stimulus program was done at very cheap, low rates. that's done to fill a hole in the economy whether in the 2001 recession, when the tax deal came out and the stimulus package that sent checks to everyone. same thing in 2003 and then in another plan sending money directly to people and the big one of almost $900 billion in 2009. the problem is if there is no long-term plan to pay it back you run into the unsustainable deficits obviously and there's been a study that looks historically over centuries at governments that keep borrowing money and don't have a plan to pay it back. once you get at the point of
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about 90% of your total gross debt to gdp, the u.s. economy gdp is about $14.5 trillion and we are basically over that point now, it's been shown countries that are borrowing at a level that high end up having slower economic growth and nobody knows the exact reason why this happens. it all depends on each individual country and their own circumstances there but there is a sense that if you are borrowing at a level that high your growth patterns go somewhere from being -- possibly growing at 3% to 4% per year down to 1.5% to 2%. that is one of the risks we face now. as you see higher debt investors will eventually decide you don't want to make your debt on this particular government. this is what greece went through. greece was well over a hundred percent of debt to gdp and the borrowing costs for the greek government went through the roof
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and you get to the point where you can't actually sustain the current budget because you're spending so much just to service the debt that you've got that that's when you get to the point of a default and investors then will charge even more than they've been charging before. so the u.s. right now as i said, we're right around 3.5%, interest rates have gone up. as the economy has gone up. there is some fear that if you don't do anything about the deficit and the debt and leave this problem festering that investors will eventually start questioning the ability of the u.s. government to pay it back and you look at 4.5%, 5% borrowing costs, 6%. the reason this is just not for the government borrowing because it obviously affects how much the government is going to be able to do in other programs if it's spending so much money servicing debt but also beyond that in the idea of how these
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interest rates flow through to the rest of the economy and the market place the ten-year treasury yield is known as the benchmark rate and that flows through if you're ever looking for a mortgage it's often tied very closely to the ten-year yield and with some premium that borrowing costs in every other way are tied to the ten-year yield whether for corporations or for consumers. investors can turn quickly and fiercely so they can decide and we never really know when investors are going to decide that the u.s. is not going to borrow, be able to borrow at the pace that it did before. and a crisis can come up suddenly. we've known for years that greece was borrowing more money than it should have been borrowing and we've known that its gdp, debt to gdp ratio was going over a hundred percent but only until investors as a group obviously decide that this isn't sustainable. do you have that sudden and
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fierce crash in that market? and nobody ever really knows. we learned through this latest financial crisis even though we knew back in 2004, 2005, 2006, that the housing market was going into an unsustainably high level for prices it wasn't until 2007 that investors started to take note and then obviously suddenly in september of 2008 there was the very sharp reaction to what was happening there. raising the debt ceiling is certainly a contentious issue but kind of an oddity for governments around the world particularly the u.s. it doesn't really make sense why an elected body should be able to go and make decisions on taxing and spending separately from the debt ceiling.
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there are no other countries in the world where you actually set a separate vote for raising the debt ceiling because just like we saw in december lawmakers came together and made the decision to increase spending and lower and keep taxes lower and didn't really do anything about the debt ceiling at the time but that decision alone is the effective decision that you're going to borrow more than you would have otherwise and postponing a decision like this on the debt ceiling for such an odd circumstance just exacerbates the problem because it allows it now to be used as a political weapon of sorts. for those of you who follow congress closely and were watching the federal reserve chairman on friday speaking before the budget committee he was obviously to talk about the state of the economy and the state of the recovery but he also spent a fair bit of time
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talking about the debt and the deficit. there were a number of reports that have come out in the last few months but from private sector and from the debt, the deficit commission looking at this issue and i just wanted to run through a few of the points that chairman bernanke brought up because they really highlight i thought fairly succintly some of the problems we're seeing right now in the economy and in this debate over the budget deficit. you've all heard the difference between a structural and a cyclical deficit because there is no problem during a downturn of the business cycle in borrowing that's never really an issue. financial markets give plenty of leeway for the u.s. government to go and borrow in large sums during a downturn because the economy is weak. you're basically filling a hole in the economy and there is nothing wrong with that.
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the entire purpose is to get the economy moving again. the structural issue is what we're dealing with now when medicare and medicate expenses are growing unsustainably social security is obviously has its problems and the defense budget is what, a quarter of the federal budget, almost a quarter of it. you're looking at this problem and you have to do something beyond the cyclical issue. the fact that tax revenue has gone down during this cycle and is going to come up is not the entirety of the problem. the cbo has its estimates and one of the things the chairman ran through were the implications if nothing were to be done about the debt and deficits. he says diminishing confidence on the part of investors it will be brought under control will lead to sharply rising interest rates of government debt and
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potentially to broader turmoil. higher rates would drain funds away from private capital formation and increase our foreign indebtedness with adverse long run effects on u.s. output, income, and standards of living. so the beginning part of the statement is self-explanatory. the high rates of government borrowing draining funds away from private capital formation, that is a really important point here because when the government is borrowing money and interest rates on government debt go up people are still going to trust the government more, the u.s. government than corporation in terms of borrowing costs so as investors keep putting money into u.s. treasury bonds as the value of those bonds is dropping, the yields are rising, corporations are going to be crowded out from being able to borrow. and individuals will be crowded out from being able to borrow because investors will focus on safer government debt than they
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will on corporate debt. that creates all sorts of problems for the economy if borrowing costs, not just the cost of capital but also the availability of capital for business that will severely slow down the economy. then obviously the foreign indebtedness with $4 trillion out of the $14 trillion held by foreign investments and governments. you have a number of issues with trade flows and the balance of power right now that you're seeing in this debate over the yuan and doing something about trade with china. the final point here i want to bring up from the fed chairman and what his warning to congress was, doing nothing will not be an option indefinitely. one thing he points out here, the prompt adoption of a credible program to reduce future deficits would not only
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enhance economic growth and stability in the long run but could also yield substantial, near-term benefits in terms of lower, long-term interest rates and increased consumer and business confidence. that is actually something that was debated in the early 1990s when president clinton was trying to come up with a plan to bring down the deficit and some would call it a deal but an understanding he had with chairman greenspan is that once you are able to bring down the federal deficit and give investors confidence that the debt is not going to come out of control, then long-term borrowing costs for the government come down and as treasury yields come down and those borrowing costs come down, corporate borrowing costs come down as well. so the agreement between the white house and republicans in the '90s that brought the budget into balance was actually a very important factor in the boom of the 1990s and that really sharp
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period and strong period of job creation that we saw then over the eight years of the clinton presidency you're looking at about 23 million jobs created in the eight years following that and the bush presidency about a million jobs created so there is a fairly stark difference there obviously between the two climates that we saw. i want to pause there and first go to some questions that people have so we can talk about the debt and then i'll go into some of the other metrics of the economy that may be useful. yeah? >> do you know how much of the increase in the federal debt over the last 20 years can be pinned on the tax cuts? >> well, you can actually see in looking at the federal deficit what happens when you have tax
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and spending programs that aren't paid for. as you can see the u.s. went into surplus in the final years of the 1990s and once 2000 hit -- you had a combination of two things. first the economy weakening. it was a milder session but nonetheless a recession. unemployment went up to 7.8%. for eight months to have a recession is actually pretty mild and not that bad in terms of how recessions go. putting in the tax cuts at the same time as you begin fighting two wars, obviously creates a big hole in the budget and that's when you got from an annual surplus into annual deficits, $400 million and you can see that the debt goes from about $6 trillion up to 9 or 10
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trillion over that period. a large part of that was due to having tax policies that weren't somehow balanced out with spending policies. >> when chairman bernanke is talking about structural problems as opposed to the need for raising revenue, also the fiscal commission's proposals for tax reform, my understanding is they're talking mostly about spending cuts, not talking in the aggregate, actually significantly raising taxes in the u.s.? >> the fiscal commission is actually talking about both spending cuts and raising revenue somehow so you can raise revenue. the big problem with the tax code is there are so many deductions built in that you can't really measure it in the simplest way so if you were to remove say the mortgage interest tax deduction that's the most common one that's discussed. then all of that would become --
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so that affect obviously the tax base but that would lead to higher revenue. so you're not necessarily directly raising the tax rates. you're just removing a deduction. they are talking about raising tax revenue in that sense by removing a lot of the deductions and what chairman bernanke has been urging lawmakers to do is to -- it's not really the role of the federal reserve being independent to look at that issue and so he is saying somehow figure out either spending cuts or revenue increases to deal with this problem and it's not just about the cycle for the economy. when the economy is weak, the tax revenue goes down substantially because people are making less money. when the economy improves, it goes back up. but the structural problem is the fact that even when the economy improves, you're not dealing with the underlying deficit and it just keeps going out of control until you find some way to cut spending.
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>> have you charged your battery recently? i wonder if anyone's modeled for 1950 or '60 tax systems because as warren buffet pointed out we basically have a regressive tax system now. if it were truly progressive how much of this void would be filled if we had a rational tax policy for instance. >> rational is in the eye of the beholder. you also had an incredible post war boom there that you're not -- you don't have the same kind of growth in the economy that you had back then so it's hard to make those comparisons. it's true what warren buffet said that when you get down to it, the wealthiest people in america are not necessarily paying the 35% income tax rate. you're often looking at the 15% capital gains tax rate because people who are at that level are
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taking in a lot of it through investments, through partnerships that are set up, through special investment vehicles that allow them to draw at the lower capital gains rates rather than the higher rates and so that's part of the discussion that the deficit commission started in some small way but i don't think they've done enough of that looking at that looking at the disparity between what should be the progressive tax rate in what has been designed and what we're vooeg right now. >> do you see any indication that there is the political will within the congress to have a rational discussion about tax reform? >> there is the will to have a discussion, whether it's rational is another issue.
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there is i think a recognition from everybody on both sides that the current approach is not sustainable. once you at least get to that recognition you can start discussing the solutions but i think in every circumstance we've seen from the government when you have a problem you've known about for a very long time it usually takes a crisis before it is somehow dealt with. the crisis whether it's security or financial markets or in this case the debt is usually something that everyone will talk about until the crisis comes and having the discussion now from the deficit commission and from all these other commissions at least presents some bit of a playbook that you can use when the crisis comes. it's possible that there could be some miraculous coming together from democrats and republicans where they decide to deal with the problem. this was done in prior governments, through a government shutdown. maybe that will be the avenue to do it. for all sorts of political
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implications there. the government shutdown isn't seen -- is seen as more of a political exercise by financial markets than the more serious scenario, a default on the government debt and that means the fall on the government debt just to be clear, treasury secretary timothy geithner sent his letter to congress last week warning about this because there's been a lot more discussion from a lot of the tea party members coming in saying that they will, they're fine with the default on the government debt if that's what it takes to deal with the debt and to bring down government spending and so the treasury secretary laid out in this letter that it's between the -- the u.s. will basically hit the debt ceiling sometime between the end of march and the middle of may. and the reason, he says, that he offers this kind of a loose timeline, one you don't know how much tax revenue is going to be coming in over that period and that could extend the moment of
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not being able to go and issue more debt. but once you actually hit that ceiling, the treasury is legally in theory prohibited from going out and issuing new debt to be able to pay back existing debt holders, issuing new debt to fund the government, and that's when investors truly get worried. there is going to be some point before that happens when the warning signs go off on wall street where people say that the politics are actually affecting the underlying problem here and there's not going to be a near-term decision to raise the debt ceiling. so the reason there is so much latitude is because there is a huge number of government funds that the treasury secretary can tap to deal with keeping the government open. you can actually hit the debt ceiling and not be able to go and issue new debt but then the
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treasury department has money on the books of the federal reserve so it can actually tap down an account that it has at the fed and use some of that money. there is a retirement fund with $90 billion. you can pull that out. the exchange fund, $20 billion in that. something called the federal financing bank with $15 billion. so you can start drawing from all of these accounts just to keep the government operating and avoid that meltdown moment. everyone in financial markets knows that even when you get past that normal point where you think the debt ceiling is going to be hit you have some bit of latitude, probably a matter of weeks and even during that period there are other things you can do to deal with the problem and at some point the
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debt ceiling has to be raised in the next five or six months and if that is the moment that leads to some kind of negotiation, whether the $100 billion in cuts that republicans, incoming republicans have been asking for, or something more long term, then that's the opportunity here. as the fed chairman has said and a lot of other people have said it's not the short-term borrowing that is the issue here. it's the long-term borrowing and even if you were to continue at trillion dollar deficits for a year or two that is actual noit seen as a big problem by investors who are looking at u.s. government debt. it is still the safe haven and still the reserve currency and if you don't deal with the problem of three or five or ten years down the line, then that's when if there is no long-term plan to deal with it then that's where the real crisis is.
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>> one of the suggestions in terms of raising revenue and it's a perennial question is addressing the mortgage interest reduction that's been brought up again this year. what is your sense, given the still fragile state of the housing market with the proposals not to do away with it all together but proposals to lower the cap on it and tinker with it in other ways? do you think that has any chance at all of getting anywhere? >> well, the notion of lowering the cap on the mortgage interest deductions actually one that i think has some potential for traction. instead of allowing somebody to deduct all of their mortgage interest, up to whatever their highest tax rate is 35% maybe doing that at 28%, that is really the equivalent of the discussion of whether to raise taxes on middle class families or the highest income families and the housing, people in the
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housing market say that getting rid of the interest, mortgage interest tax deduction would be devastating to the market and if you were to do it right now it probably would be. one of the problems and their point is correct that people who have bought into the market have bought in with the assumption that this deduction would exist and so in some ways, people who are buying a house think it's like -- it's a great benefit but that's in large part been built into the cost of housing. so people who are going -- most realtors are sitting down with you at the table and saying here is your bottom line cost after considering the interest deduction. that's probably not going to affect people who are buying houses at a million dollars. there is some discussion about maybe putting the cap at mortgages at $500,000 so that would create some problems for people in california, new york, d.c., some of the high cost housing markets but it's not going to really block out that many people in the middle class. so that is probably going to be
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accompanied by some other discussion about the extension of the bush era tax cuts. but until you start with this idea of zero based budgeting we started to hear from the deficit commission, really starting with the blank slate and saying we're not going to include any deductions then you can get to the point of having tax brackets from 8% at the low end up to 22, 25% at the high end if you remove all of those deductions that affect everyone. the same thing is going on in the debate about corporate tax rates. you can reduce the corporate tax rate from 35% down to something else. maybe 25% by removing all the deductions but you already have disparities built in because of the existing deductions and a manufacturer may be paying 10% or 15% in taxes because of their deductions whether it's for investments or equipment into something else and a financial company is probably going to be
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paying 35% so a lot of this benefit would end up going to financial companies and there is a whole other set of politics involved in that. >> there is obviously a lot of talk during the stimulus about how i think most economists seem to agree the stimulus helped prop up the economy for a long time but now that there is this political consensus formed around the need to cut spending is there any role for short-term spending in the future from this point on to continue helping to prop up the economy? the only short-term spending would be tax cuts disguised as short-term spending and that is what we're seeing now with the tax cut extension and the reduction in social security payroll taxes. that's, when we talked about stimulus in the past decade or so in 2001 to 2003 and then in '08, people were getting checks from the government and that was just -- that was stimulus.
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republicans liked it because it was also a form of a tax cut and for whatever reason it doesn't make sense in terms of arithmetic but put something as a tax cut you don't consider the debt implications of that and we've seen in the '80s and the beginning of this past decade what happens when you don't actually account for tax cuts in the budget and you end up building larger and larger debts. there is some potential to offer additional stimulus in terms of sending money to certain segments of the population through what can be called the tax cut but you're not going to see any big spending programs coming up. >> since january of 2007, what have been the biggest factors in driving up the debt and the deficit? what exactly has the increase -- i'm picking that four-year
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period because there is so much political dispute over the past few years on whether the deficit increase is due to the -- some people blame the stimulus exclusively and some people -- that's why i'm thinking january, 2007, to today. that is a good question because we can actually look at -- we were running a deficit going into 2007 and so you could see, though, that the debt was at what, roughly $10 trillion when at the end of the bush presidency and we've added $4 trillion since then. the key factors in that huge difference are primarily the fact that the economy has been very weak which means lower tax revenue. that started, you can see the point where the recession started, this gray shaded area
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is the recession and when that started in 2007, december of '07, tax revenue started weakening and you could see the accumulated debt taking off. how we got from $6 trillion up to $9 trillion is the effect of two wars and tax cuts that weren't offset by spending cuts and spending programs like the medicare/prescription drug act. that wasn't paid for. and people knew at the time that it wasn't paid for but there was some expectation just like in the '80s that it would lead to a much stronger economy and you did have a stronger economy in the '80s. i don't know if it's as a result but accompanying this and so at least you had a recovery back then and you had pretty decent economic growth after some of the tax cuts in the beginning of this past decade but it wasn't great by any means. the average growth in the
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economy in the 2003-2007 period was about 3% a year which actually is considered average on par just to keep enough of the economy growing strongly enough to keep people coming into the labor force and keep unemployment steady. but unemployment was low out of the last recession. it was about under 8% and so getting unemployment down to 5% wasn't that much of a problem. [ question inaudible ] >> the weakening economy is the primary reason because if you actually look at the total cost of the stimulus, just the stimulus, the january, 2009, february, 2009 package, that was less than a trillion dollars. so you're talking depending on how you account for it somewhere around $900 billion and we're looking at an increase into the debt of about $4 trillion over
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that past few years here. so the bailout actually is probably going to turn out to be a profit for the u.s. government. we heard a lot about $700 billion being spent and at the time even the bush administration was accounting for maybe $250 billion out of that $750 billion being expended and that was what their baseline calculation and certainly been coming down as that money has been paid back by the banks, all the big banks have paid it back and most of the smaller banks are now on the way to paying it back now. and the outstanding program of course is general motors and that stock needs to be sold off and aig, which surprising most of us, looking like it's going to be able to turn a profit for the government once all of that stock is sold off. >> would you comment on the
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impact of the tax structure and the mobilization or rather the moving of american industry overseas, moving actually corporate headquarters and manufacturing plants? >> well, the impact of moving manufacturing plants overseas is obviously a jobs issue and if you are removing those jobs, steady jobs in the u.s., then all of the tax revenue from those workers and the steady jobs is going to be lost and the revenue from those businesses. companies moving their operations overseas to avoid u.s. taxes, that's a much different issue. and there is a figure for this from the irs and the jao and a lot of people have looked at it. i don't know the exact figure. but it's not something that is the underlying, a huge issue in
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the trillion dollar deficit that we're looking at but it is certainly billions of dollars, tens of billions of dollars that could be had. but you're also seeing right now a much different argument about the variations in corporate tax rates abroad versus in the u.s., canada, the uk, number of other countries are lowering their corporate tax rates and this is becoming a competitiveness issue and now we're starting the debate in the u.s. it's probably not going to be resolved in the next two years but a debate about whether the u.s. and corporate tax rate needs to be brought down to deal with that issue as well. but the point is certainly correct that some of this money is being held offshore and there have been -- it's kind of complicated how the proposal would work right now but there are some efforts to bring some of that money back to the u.s. that's been sitting in accounts abroad and tax it or avoid taxes on it just so the money can come back in and perhaps be used as capital to create jobs here in
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the u.s. >> could i ask a question? when they get to the point on the hill when they're staring the crisis in the face, and have to do something, is there any out that is going to resemble what the british model has been which is sort of a fixed formula for cuts and revenue enhancements? have you heard that talked about? is that something that might happen here? >> i've not heard any specific discussion here about how they'd actually go about doing it. only that if you were to come to the point of a crisis, and we actually -- the interesting thing about this moment is we have at least several months if not years of preparation for what you would actually cut and there is some understanding that you have to do further cuts in the defense budget and secretary gates is already working on that
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and announced some of that last week so you have more of the frame work here rather than looking at a model like that. it's hard to draw a comparison like that. you can almost look at the states individually and see the individual states and what they would have to cut to make those comparisons to what's being cut abroad -- pension funds, retirement benefits, for public workers. those are the things states will have to do and make a decision on obviouslyobviously, because it's harder for states to borrow money in perpetuity but i haven't seen any discussion on the hill about what to do on the crisis moment. and when you look at the september 2008 moment, nobody really knew what to do and when you hear chairman bernanke talk about how they came up with the $700 billion it wasn't quite out of thin air but the original plan was to buy mortgage assets
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and they were looking at a housing market in terms of total assets of maybe about $14 trillion and that's the size of the economy and they thought maybe 5% would be enough to do it. but i remember in the days leading up to that moment somewhere between september 15th when aig failed and the end of the week when lehman brothers and the end of the week people going to the hill, we had figures of maybe $250 billion, $300 billion is what you would need to stabilize the financial system and nobody really knew. secretary paulson when trying to deal with fannie mae and freddie mac asked for what's popularly mocked as the bazooka to say give me a blank check to deal with them and if i have the ability to use it, then financial markets won't expect me to have to use it but that
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turned out to not be the case and so i don't think there's anymore blank checks in that sense. >> how significant is the decision to raise the debt ceiling? i mean, just because the congress decides it's okay for the government to be completely overleveraged doesn't really make it okay for the government to be completely overledveraged and that u.s. investors will have confidence in the economy. so, how -- just because congress says, okay, you can raise the debt ceiling, that averts the crisis? how does that work? >> i guess you're looking at short term and long term crisis here. if you don't raise the debt kreeling that's a short term immediate crisis an all of the affects you would see from a long-term crisis happen right now because if the government can't borrow then -- legally can't borrow then you ur just stuck and then if the government can borrow then but that's a
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warning to investors that maybe the u.s. can't sort out the political problems in dealing with this just like other countries in europe have dealt with this politically and managed to do it though obviously with a lot of trouble and difficulty in the uk and greece and spain and it lain ireland and all these places, and if there is a signal to investors that maybe the u.s. won't be able to deal with this then the cost of borrowing almost immediately goes up. and so, then you not only have as a result of that default by the united states, not only a higher cost of borrowing but compounded the problem because you will be paying more to borrow just to service the existing debt even to raise the debt ceiling. i think the latest discussion is somewhere around $16 trillion so that you can at least get through the next 2 years and whoever wins in 2012 can deal with the problem next. but even if you get to that point, and you have gone through either a default event or
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something close to a default event you have to do more cuts because you're just paying more interest to whoever bought the debt and probably countries like surpluses like china and sending more money abroad in that sense. so your question is more if you get passed that moment and do raise the debt ceiling then you get back to the discussion we're having -- we've been having all along about how do you deal with an unsustainable budget deficit? somehow you then have to either raise taxes or cut spending to deal with that problem. because otherwise you'll just end up in another event. and the risk is that nobody really knows what the point is where investors and financial markets decide the u.s. should not be seen as an outlier in terms of borrowing. advanced countries can develop more than developing countries at 100%.
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right now, there's actually a distinction if you were to look at the debt held by the public, that $9 trillion figure, and the overall total debt at $14 trillion. the debt held by the public is the one that the congressional budget office actually uses for accounting purposes on the deficit. and we're right now i guess at roughly 60% of gdp so we're not that bad off. if you're doing a global comparison you'll probably use the broader $14 trillion figure and puts us at 100% of gdp just somewhere between 95% and 100%. and that's where in other countries you have seen weakening economies as a result of it. but the u.s. gets -- because it's the reserve currency, because it's the strongest country in the world and the largest economy, it's given some latitude to be able to go and borrow more for a longer period
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because of the expectation it will come around. >> this is a topic of great debate, but what is the risk of t china holding so much of our foreign debt? >> that's a very good question. there are i suppose economic implications and then political implications of this. the political implications are being tied to one country, certainly, a large country with a big force in the world. that's something that you just have to assess how's that affecting diplomacy? how's that affecting all the decisions of the government outside of economics? and it's never a perfect pa parallel but if you look at the u.s. dependency on oil and you can see how the u.s. dependency on saudi arabia and on middle east countries may have affected foreign policy over the past four decades and that's certainly played a part.
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you can debate how much the u.s. would have gotten involvemented in iraq but you wouldn't have had a global coalition in 1990 and 1991 if there weren't all that oil there and the dependency for u.s. consumers and in the same way the u.s. is highly dependent on china both for the products and for buying the debt and if china weren't buying all that debt you could reason that possibly other people would make up for it and buy that debt but by having such a buyer in the market it's certainly keeping the borrowing costs down. you don't see very much likelihood of the big holders trying to depend -- uk, anybody using it as a weapon because it's -- it becomes almost like a grenade on themselves. if you were to try to weaken the u.s. economically by using that as a weapon, then you're -- the value of your own holdings go down, as well. so that's a hit to yourself but i suppose there's some theoretical point where you could get to that doesn't matter
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if you hurt your own holdings but there's very clear mutual interests involved in having that trillion dollars on china's books. >> given that we basically have two choices, increase revenue or cut expenses and on the cutting expenses side of the equation, i forget the exact statistic but the mandatory programs i think you said was about 70% of the budget or so. so, we're left with the 30% or so that are discretionary and those discretionary programs we count on for education, housing, health care for all the people who are coming out of the recession. can you address the likely impact on states across the country that are already having problems when the aide for the most vulnerable residents is perhaps cut if that's what's to happen? >> we are already seeing that to
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some extent. the federal government has been able to borrow for two years. the stimulus money was designed specifically to go to states and that's -- i don't remember the exact figure but if you look at maybe $100 billion, $200 billion of money going directly to states through various programs, and that was used to fill the gap in those state budgets, you are actually starting to see the very early stages of recovery in state budgets from after hitting their bottoms. you're seeing to some extent sales tax revenue go back up and property values in some areas are starting to rise. at least stopped falling so a stabilization is important there and dealing with the gap of the federal government to kick in to cut the spending and that now in every budget cycle in the states you are seeing that $20 billion in california and texas needs to be cut and those are large programs and that's probably going to some extent push more
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people -- the weakness in the economy is already pushing more people on to medicaid, for instance, and that's creating another problem for the longer term piece of it, whatever figure it is, 60%, 70% of the budget. and so, any lawmaker when you're going out and doing interviews says we need to cut the department of education or we need to cut x part of the budget, you really have to turn around and ask them, how much are they talking about and ask them for specifics because until you get to social security and medica medicaid, you are not dealing with the underlying issue. social security you can deal with on its own adjusting the retirement age and the level of benefits based on income but medicare is -- there's some hope that what happened in the health care law will change the cost structure of health care but we have no evidence and we have plenty of people here who can talk about this better than i do but until you actually see some
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improvement in that sense, you have to go back and say, what are you going to cut in the real meat of the budget when you get into medicare, social security and defense to deal with that. but there are other implications and all of that feeds back in if you're weakening expenditures at the state level, there are federal programs for people to apply for whether it's food stamps or any other kind of welfare program that we have. and that raises the cost of the government so it's a shifting sof soof some cost in that sense. >> on this shifting the age of retirement, that's probably a typical one where people like us can certainly imagine working to 70s but the guys that built this building probably couldn't. i haven't seen any discussion of a two-tiered approach for this, for instance, manual labor
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retiring in the 60s and the rest of us who wear suits can carry on until our 70s or whenever we want. has there been any discussion of that that you're aware of and how would that fix the problem? >> i have seen only some sideline discussion of it. not really in circles on congress. the deficit commission did try to design an approach to raise the retirement age for looking maybe 50 years down the line, and so, not necessarily doing it for any one immediately and so, unfortunately, because the manufacturing base declining and construction base and all of the people who have been working those hard jobs you're talking about are in diminishing numbers in the workforce then you're -- if you were to postpone a decision to raise the retirement age you would affect fewer and fewer of those people but that's something i have heard but i haven't actually seen any meaningful discussion about how to include that in policy beyond an income test or something like that.
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i wanted to run through a couple of things on the federal reserve, the people here who are paul miller fellows for the national press foundation going to the fed this afternoon. you'll hear a lot about the fed and its ability to expand its balance sheet and one of the things that you're hearing a bit about right now given rand paul is kind of the leader of the anti-fed movement in congress and he has a new role on a subcommittee of the house financial services committee that is pushing this measure to audit the fed, to add new oversight to the fed, to do a lot of things for the fed and the reason for this is in large part because of the fed acting what some people call as a fourth branch of government. central bank has a number of roles. it was actually first designed out of crisis 1913 to deal
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with -- to serve as a lender of last resort for the economy and for banks so that you don't have runs on banks, you can have stability in currencies. we have had -- this is the fed now is in its third it ration as the central bank of the u.s., the first ration and the central bank were so contentious in terms of federal power centralized in one place they were eliminated and wasn't until woodrow wilson in 1913 that you had the fed created and there is certainly a movement now among conservatives in congress to try to what they say is rein in the fed but i wanted to talk for a minute about some of the things the fed does beyond just the normal sense. monetary policy is the first one we hear about a lot, moving interest rates to influence the economy. the fed brought interest rates down to zero in december of
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2008. and what happened after that is, i think, the greatest source of contention about the fed, whether it should have been given all of the power to do what it does. what the fed normally has the ability to do is to go out and buy treasuries and it's got as the keeper of the u.s. currency and the value of the currency, it can adjust the amount of actual money in circulation and what it did at the end of the 2008, once it had conducted monetary policy, brought rates down, is looked for unconventional tools to improve the performance of the economy given that we were basically falling into a deep dive. and so, late '08, early '09 you saw some big announcements and these are on the chart of the
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federal reserve balance sheet a little under $900 billion before the crisis and then you see it go up to over $2 trillion now. and that is money that you hear about the printing press. this isn't money that's actually being created but the fed has the authority, it is given by congress, the authority to go and create money electronically to buy assets and what it's done is buy treasuries on the open market and buy mortgage-backed securities and the purpose of doing these things is to lower interest rates. everything the fed does in monetary policy is to usually affect the interest rate channel of the economy by lowering rates or somehow improving demand in some form and so buying mortgage securities, lowered the interest rates on the securities and that's part of the reason why you had mortgage rates come down to 4.15% or 4.16% as the recent
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low and buying treasuries does the same affect and what the fed has done is gone from buying short-term treasuries, just basic government debt, that it does in the normal process, to buying longer term treasuries, all the way out to structured in the five to seven-year period and going all the way well past ten years so the idea is to when you hear about quantitative easing is to remove treasuries, super safe government debt from the market and force investors do go into other things like the stock market and a number of things and we have seen that, the performance of the stock market since the fed started discussing the latest round of quantitative easing has been pretty significant. the other end of it in terms of improving other parts of the economy like employment, you haven't necessarily seen. so i just wanted to run through this. you can actually see various --
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i don't think this graph goes back any further, but the fed getting above $2 trillion and the fed balance sheet is probably going to peak as we go through, they're still buying treasuries for about six more months. obviously it will go above $2.5 trillion, closer to $3 trillion. and people talk about monetizing the debt and that's what we get into. i want to tie this to the issue of the debt because the big fear is that if the government doesn't do something about the deficits, then the fed bought up the debt from the government and as you have more money and the -- as you have more money in -- sitting around in the economy the fed balance sheet up to $2 trillion creating money and putting it out in the economy. the problem is the economy's so slow that money isn't really moving around and it hasn't generated that much economic activity. once it does start to generate
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economic activity in the form of loans from banks, then you have the classic problem of inflation, too much money following too few goods and at some point whether it's three years down the line or ten years down the line all of that money can lead to serious inflation and that's why you've heard about how does the fed pull this back? and somehow over the next whatever it takes decade or so, once the economy has fully normalized they have to get the $2 trillion down to a more normal level of maybe a trillion or less and that's the challenge they'll be facing how do you support the economy in the short term as it needs it by putting whatever you can out there but also withdraw it in the long term and that's why we actually seeing so much more discussion about the fed balance sheet because interest rates at zero taking the front seat in terms of how fed the influencing the
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economy in a more normal period, say, back in the 2001 recession and the aftermath, the fed brought rates down. you can bring them down from 6% down to 2%, and then leave them there for a while and then as the economy recovered, they brought them back up. back up to 5.25%, i believe. and the fed has a number of other roles that you will -- those of you going over today will hear about. it has supervision, bank supervision, overseeing the banking system, and also, in payment systems. it's responsible for making sure money moves around the country properly and that's why you have the 12 regional federal reserve banks working with the board of governors in washington. there are probably a lot of questions that you can come up with for the fed so if we have a couple minutes if there's any pressing ones that you want to
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ask feel free and i'll try to answer them. anyone? anyone love hearing about the fed so much that you want to -- >> i got -- >> and this may be a very bad question but i feel like in the last couple of weeks so i heard some discussion of getting the fed out of the business of keeping unemployment rate low, and i don't fully understand what the discussion is or what the practical application would be. do you have any thoughts? >> yeah. so the fed coming to monetary policy given a dual mandate in the late '70s and that's because instead of just -- a normal central bank, so if you look at the european central bank covering -- created in '99, covers all of europe, they have a single mandate to keep prices stable, so the federal reserve is normally looking for and the central bank normally looking far inflation of about 2%.
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sock where between 1.5% and 2% and that's an ideal rate. you might wonder why don't you want prices to be stable near he ze ro and then no inflation and you run the risk of deflation and if people aren't expecting any inflation in the economy then you have less of an incentive to go out and invest and less of incentive -- more of an incentive to hold on to your money because there's a chance that prices could start dropping and you want to actually -- to save your money and once people start saving their money with the expectations of deflation, consumer spending goes down, the economy ends up being weak and you run into the trap that japan is in right now where you just can't restart an economy and get it growing again. and so, there's been so much economic research on this issue that something around 2% is seen as the ideal level of inflation. and inflation is used in so many central banks as the single mandate because it affects
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both -- employment is almost like a secondary factor here. if you were to have stable growth in the economy with inflation at 2%, that means you are not overheating, you are growing at a good pace, you've been able to -- and the whole point of a central bank to provide some kind of stability to the growth in the economy. otherwise, you'd have market forces throwing things up and down pretty rapidly and more severe bubbles than you before so the fed has been charged with not only inflation but also with employment because there's some fear that if you only focus on inflation then you're only dealing with a kind of a mechanical issue of just looking at the economy and bringing the interest rates up and down just to deal with inflation and there's a time when you might actually leave monetary policy looser, interest rates lower to try to spur more activity in the economy and consider what really
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matters to people are jobs. and the course of the labor market. and so, the movement now is created i think in part out of fear that a balance sheet of this size is going to lead to hyper inflation. we only really have the history of germany to know how hyper inflation works in a clear sense like that. hyper inflation can work. zimbabwe is an example of an economy that has been growing, was growing and the government basically took over the central bank and started printing more money to the point where i think you had 278 million percent because the government creating money for its own needs and that's drawn as a parallel to the risk to the u.s., so obviously they're completely, completely different situations we're facing now. so the movement to remove
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employment from the advocates of that, whether it's paul ryan or ron paul, ron paul actually wants to remove the fed entirely but he supports the single mandate idea, is to really make the fed focus on just one thing that those people think the public should care about is keeping a stable value of the dollar and very low inflation and the counter argument usually from more liberal members and democratic members is that you want some focus on employment, as well. interestingly, on friday, the fed chairman basically pointed out that there wouldn't be that much difference if you were to focus only on inflation because the fed right now trying to fight a deflation threat and keeping interest rates low and trying to stimulate the economy to prevent deflation and so price stability is being attacked in that sense. so very long answer to a complicated problem that they're running through right now, but for the near term i don't think
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it would have any practical affect to go to the single mandate for the u.s. fed. >> i apologize to people who have remaining questions. we have to draw things to a close. i suspect we can address those questions individually. i want to thank you very much today. we have a small token of appreciation from the national press foundation which is the host: we want to welcome back representative donna edwards >> we want to welcome back representative don edwards democrat of maryland. thank you talking to our viewert this morning weekend in tucson and where you were when you heard about it.
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guest: i was at a retreat with my district staff, preparing for the upcoming congress. it was really quite sobering. host: how did you hear about it? guest: we heard a notice from half-hour blackberries. at first i had thought that it could not be true. she and i share a seat on the science and technology committee. she was a friend. it was just really devastating to hear. host: the blackberry message, was that from the capitol police, something that all members of congress heard about at the same time? npr was an
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we tried various things for different reasons. we waited to hear from the capitol police to get some clarity. it was devastating. host: when you finally got word from the capitol police, how did all of that work? guest: that was about one hour after the incident had been reported. they wanted to be sure they had the most accurate information to report to us, which they did. they wanted to make sure that we were taking care of our own security as well. they mentioned that they did not believe it was part of any bigger conspiracy or plan and it was important for them to give us that assurance as we were
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concerned about our colleagues. host: there was a conference call on sunday with members of congress and capitol police. i understand there were hundreds of people on that call. were you on that? guest: yes, i was. i understand there were about 800 of us. both political leaders, speaker boehner and speaker pelosi, led the call. host: what did they say? guest: they call for prayer and support for our colleagues, an
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expression of support and coming together. i thought that was important for all of us to be on the same page. we are still people. despite the politics, we are one big family. i think that was important for both of our leaders to share with us. host: there will be additional security briefings happening on monday for congressional leaders. what do you want to hear? guest: i would like to hear an update on security in capitol hill. i feel really safe and i am here. i know they do an excellent job. there have been a couple of times where people have come into our office and they have responded closely. of course, my district is right outside of washington, d.c. so we get some local visitors and sometimes people are not always
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happy. so i am looking forward to hearing an update about capital security but also suggestions for ways that we can protect ourselves, our staff, and our constituents when we are in our congressional district. i know i have a full schedule in my district and i intend to keep that. host: have you ever asked for capital protection in your district in the past? guest: we have had them come out to our office to help us look at security issues in our office. this was some time ago so that we could have the right security in place. we have also consulted with them when there had been a call, e- mail message or something that seems out of the ordinary. we consult with capitol police on those issues. we have been in touch more
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often than is necessary with our local law enforcement in the two counties i represent, and they have been incredibly responsive at town hall meetings, for example, where there could be the need for more security. host: so you have received threats in the past? guest: we have. last summer at the height of the health-care debate, it was unusually heated. we had a couple of town hall meetings and asked for support from our local law enforcement at those meetings. that was useful to us. helpful and necessary. host: going forward, do you think you will rethink public events in the open, security for them? guest: gabi giffords was doing
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exactly what all congressional members should be doing, out in the community having a conversation with their constituents. i intend to meet my own schedule. we will take whatever recommendations are necessary to ensure safety is there. it is important for us to be out there with our constituents, for them to have access to us as well. i hope that as we go forward, we put this into the context in which is appropriate, and where necessary, call on the assistance of local law enforcement, strategic and other force. host: let's get to our phone
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calls. fort lauderdale, florida. melvin, democratic line. caller: after the shooting, they should have put up systems to identify the individual. he should not have been able to buy a gun. it is unfortunate that he was able to shoot the congresswoman and kill those people but he a similar thing in than the virginia tech thing. host: you are referring to his mental state? caller: yes, the school identified him as a troubled person. they were afraid of him and put him out of school. host: we need to clarify for our
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viewers. under federal law, when it comes to mental state, a court has to show that they are mentally unstable or that they have been institutionalized for them to be prohibited from buying a gun. someone could have sought an evaluation but one was not done, so there was no official about the wish of of his mental state. caller: that is correct. it raises -- guest: that is correct. it raises the question of the obligation of the school, actively making and a violation after they have determined it is not appropriate for this individual to be on campus. not lot actually allows for that. i guess the question is what we
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will now begin to think about, in terms of opening up the door and availability of school systems and others to actively seek those evaluations, which would tput on a different track for him to get a fire arm. gabi giffords and i share a lot of ideas but we also differ on other issues, like gun-control. our concern, of course, is with her and the victims, but it is an important avenue of exploration for us, to look at our obligations and requirements, to seek the kind of evaluation that would enable us to deter individuals that should not possess firearms from getting them. host: you served as the co-chair
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of the democratic campaign committee program. some have said when it comes to legislation to ban assault weapons, which some plan to introduce in the congress, perhaps as early as this week, that the politics is just not there. there is a lot more red, a conservative, moderate democrats, republicans have taken control of the house, so what is the reality? guest: it is a tough environment but it is an important debate for us to have. the expiration of the assault weapons ban in 2004 has left, as we can see, many of our communities vulnerable. it is important for us to debate that and allow the american people to participate in this
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conversation. this is not a conversation about banning hunters from engaging in an outdoor sports activities. this is a conversation about assault weapons with ammunition that is intended to do harm and kill innocent people. host: orange county, california. independent line. caller: of course, my prayers go out to the gifford family. she was a blue dog democrat. i would vote for her. it depends on the policy -- i am not one way or the other. one time i voted for clinton, another time for bush. i hope she recovers. we pray for her every day.
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and that said, it is a mental illness that caused this. we have evidence with the virginia tech massacre. he had problems. we had fort hood. this person was kicked out of school because they thought he was a threat. we should probably make laws to address this issue more. more and more teachers can tell they have a problem, but they are ignored. when that person at fort hood made his speeches, they ignored that. i think the democrats had a similar map with targets, like sarah palin did, and i would like to apologize for her. obviously, she did not intend that we should shoot.
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i am from florida. maybe we would have oranges on our map. of course she did not want anybody to be shot. she has been unfairly targeted. host: we will leave it there. in the "the new york times" this morning, she sends an e-mail to glenn beck -- host: what is your reaction, what are your thoughts on this back and forth with sarah palin? guest: irrespective of whether the rhetoric contributed to a heated environment in which this
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crime would be committed or not -- it is important for us to examine our rhetoric. examine the way we engage in politics and discussions of policy. words have consequences. i think each of us have to look inside ourselves and examine whether our words have contributed to an environment in which people cannot express themselves civilly without engaging in violence, or believing that violence is an alternative to respectful policy discussions. sarah palin has to do that, has to do that, we all have to do that. host: so do you believe that she's shares some responsibility?
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guest: in the past two years, the decibel level in our political discourse has gone over the top. i think each of us feel that. we feel that at events where people are acting in a way that is completely disrespectful. we have to look inside ourselves and ask, am i doing something that could be heard in the wrong way or that may enable people to use that as an excuse for bad behavior and disrespect? i have to check myself because the passion i feel about an issue may not be the passion that should be expressed in a political environment. i know that i have done it. sarah palin needs to do it. glenn beck needs to do it.
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as leaders, we need to engage in a way that is respectful of each other's and the constitution. host: sherry hall on the independent line. caller: two questions. do you believe the growing economic equality in the u.s. has anything to do with the increasing uncival tone? and if there was one thing that you could change about congress, what would it be? -- uncivil tone? guest: the past decade we have really seen stagnant wages and growth that has not crossed every part of the economy, every person in the economy. i think that these are big pressures on people now.
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economic trouble is not something that is new, not an excuse for an environment that is intolerant. at the same time, as members of congress, there are things that we can do, not necessarily to agree with everybody on their policy issues. i may not agree with speaker boehner on every issue, but we have to respect him. we can have policy differences, but it is not personal. those are things that we have some control over in the congress that would enable the nest to get our point across in a way that the american people can appreciate. if we are modeling the kind of behavior in congress that is respectful, we have a better opportunity to share that with
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our young people, to share with our constituents. host: what would you change about congress? guest: when you look back at the institution, and other institutions around the world, it is an amazing place where we have been able to debate and create policy. those are good things. if i could change anything, i think we would have a higher level of intellectual engagement. everything is done in this 24- hour news cycle, and sometimes it is important to step back and take a breath and look at the real facts and act on that. not just because it happened to be the last thing you see on the news. host: there has been a call for republicans and democrats to get together for a bipartisan retreat. democrats were supposed to have
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their own, republicans as well. have you heard anything about the prospects of that? guest: i have heard about it but nothing more than that. let me say this. there are important and critical policy differences from the republican majority and democrats in congress. it is critical for us to have these discussions to enable the american people to understand what the discussions are. i do not want to do anything to sugar coat the idea that we cannot engage in debate where sometimes people will come out on top, and there will be other opportunities where we can work together. it might be a great idea for us to get together to discuss these ideas but it is also important for us to meet with others along
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the same lines to develop policy and engage with republicans on the other side. that will allow the american people to make decisions about the views that they share. host: next phone call is from andrew in virginia. caller: we have heard in the years that we have not had any acts of terrorism since 9/11. i disagree with that. most of the time, people associate terrorism with ideological ideas. we have a very fundamentalist religion in america and it is individual selfishness and self absorption. if i want to own a gun and shoot down other people and spend the rest of my life in jail, that is
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my business. that is the freedom we seem to believe in. we are not willing to limit gun laws, not willing to have a discussion about this kind of terrorism. so i want to ask the representative, are you willing to help change the discussion on terrorism, would you agree there are terrorist acts going on in america all the time? guest: i do not know about that. what i will say is as i travel across the country, we have terrific people in the country who have good ideas and who want to share them, who are working hard and are taking care of themselves and families. our job as legislators is to enable the foundation for which that can happen. i do not know if it does any good for us to place labels that
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have the potential to alienate people. i want to have a conversation about how we can enable people to take care of themselves and their families, get a job that allows them to get up in the morning and feel good about themselves, pay their mortgages, respect seniors as they age. we are preparing to have another discussion about health care. health care needs to be provided to all american people so they have access to quality care. creating jobs for american people in this country which are not outsourced to another country. important policy debates. we need to engage in those, not for ourselves, but for the american people. host: congress will return this week and have a vote on repealing the health care law. the chamber of commerce is for repealed. they have said they are able to
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prove this law is not creating jobs because of the expansive provisions requiring employers to have insurance for their employees. do you have data otherwise? how confident can you be that this is actually creating jobs, or will? guest: in the state of maryland, the governor and health department has a report that says not only are we creating jobs related to the federal health care reform, but we will also save, over 10 years, $800 billion as we implement health care reform. i know that is what our experience is in maryland, and i believe that is the experience across the country. the congressional budget office released a report last week that said the new law would save $230
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billion, well over the estimate they gave to us as we were moving reform through congress. when i talk to our small businesses, many of whom are members of local chambers of commerce, they were glad to receive a tax credit last year for providing insurance for their employees. this year on january 1, it became 50% tax credits. that is good for small businesses. i am not sure if the chamber is speaking to all of its members but i have talked to members in my state, my congressional district, and they are pleased in the direction we are going on health care reform. host: alan, an independent in alabama. go ahead. caller: i have a two-part question. when did the politicians of this
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country become above the law? i do not care if they are republican or democrat. if you think about sarah palin, a young man was prosecuted for invading her female-mail. host: are you finished? caller: no, i am not. as a politician, you should tell the truth. shame on jon kyl, john mccain, and sarah palin for using that rhetoric to get elected. these people should be banned from our political process. guest: this investigation is ongoing, the motivation in two- tiered loughner. i am looking forward to law
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enforcement and prosecutors to shed some light on what motivated him. -- of jared loughner. it is important dial back the level of rhetoric in this country. congresswoman giffords had a sense of being targeted -- in the cross hairs on the fairpac web site, which i believe has now been taken down. apart from all of this tragedy, we have to change the political dialogue in this country. we really must. we have to do it for our constituents and for ourselves as legislators, to enable us to engage in a way that we can make good policy for the american people. we cannot do that way in -- that
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when everything is at such a decibel level that it does not allow you to think. that is the responsibility that i bear and that sarah palin bears. host: we are going to draw from, north carolina -- durham, north carolina, on the republican line. caller: i send out my condolences to those involved in this tragedy. we need to put aside our differences. you keep saying you are going to ban this, that we cannot have this type of weapons. as law-abiding citizens, as a citizen in the security field, if you keep banning weapons, how am i going to be able to make an income and support my family? i am putting my life on the line. host: caller, what do you do, specifically? caller: i am and armed security officer. you can profile everybody.
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until somebody attacks on the threat, that is the only time you can take charge beauty in bed every weapon in the world, assault weapons, slingshots, -- you can take charge. you can ban every weapon in the world, assault weapons from a slingshot. guest: the gentleman is an armed security guard, licensed, gone to a background check. he should be able to possess a weapon, as he does come in order to do a job. our law enforcement are armed. they go through background checks. they go through training. they're out there to protect us. not everybody is like that. i think that we do need to examine the ways in which we can make sure that people who are mentally unstable, who have
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a history that can be demonstrated, reported, and about a week, are not able to possess weapons so that -- and evaluated, are not able to possess weapons so that things do not happen like what happened in tucson. host: convicted felons or those convicted of domestic violence crimes. unlawful users of or addicted to controlled substances. dishonorably discharged. it mentally defective or institutionalized. illegal or unlawful aliens. renounced u.s. citizens. our next caller. caller: i want to change the tenor of the discussion. it has not been shown that people with mental illness are any more likely to kill people that are people without. the best criteria for dangerous
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is a previous history of -- dangerousness is a previous history of dangerousness. host: have you read about the things that mr. loughner said and did? do you make of them? what is your psychological analysis? caller: he sounds like he is dangerous because he made threats. host: would you have reported him to this date for evaluation? caller: yes. i had a patient who i told he could not come back because he would not go to the psychiatrist. guest: that is an important consideration. under the law, there is an opportunity for those in a position, whether at the university or community college, a parent, a relative -- they can
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make a request for a psychological evaluation and determination. it is not a mental illness, per se, but there is a procedure that can be gone through. there can be a court order in place that prevents the person who has demonstrated to be dangerous to himself or to others not to be able to possess a firearm. i know that the law that one senator had passed regarding domestic violence offenders is one on which i worked really hard with him, long before i came into the congress. it has prevented literally thousands of domestic violence offenders from purchasing and possessing firearms. host: here is a tweet from american hero who writes, "the second amendment says the right of the government to be armed shall not be infringed." guest: these are important constitutional considerations.
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it is why we have a process where we can pass laws in congress and the court can review them and make sure they're in consideration of the constitution. but the reality is that we do have the ability to regulate the availability and distribution of firearms. that does not mean that it is an unlimited ability, but we do have that capacity under the constitution. i would hope we use that to the fullest to prevent tragedies like those -- like the one that occurred in tucson. i know we can do that. there is no reason that this gentleman should have been able to go into a walmart and buy an extended clip of ammunition that allowed him to fire repeatedly and kill and injure in the way it did. should not happen in this
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country. host: congresswomen edwards represents the fourth district of ohio. caller: the really think that sarah palin, glenn beck, rush limbaugh -- do you really think that's their opinion, glenn beck, russ limbaugh -- that sarah palin, glenn beck, rush limbaugh had anything to do with this? why did they go so far to regulate things they disagree with? guest: at no time have i suggested that sarah palin, glenn beck, or anybody had anything to do with that. what i did said that a separate and apart from this tragedy is that it is akin -- incumbent upon all of us to consider what we say and how we say it. that is not somebody limiting my speech. that is me looking at what is appropriate for me as a
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lawmaker. host: i think the caller might have been referring to legislation put forth which makes it a federal crime to say something or use symbolism which would incite violence against a member of congress or a federal judge. we had a caller earlier this morning react to that setting that is not the correct thing to do. members of congress should be on our level. if you make that kind of law, there are no longer on the people's level. we should be able to savings -- say things and be critical of members of congress. guest: we do have laws on the books regarding threats. a threat is an assault. it requires proof and it requires intent. it is important for us to look at -- if we look at anything prospectively that might need to be changed, we have to do that in consideration of what other laws are already on the books
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and enforce them. we have to be careful on treading on the ability of any of my constituents from saying things, even shouting things out to me at town hall meeting. that is the essence of democracy. we all know that there is a line that can be crossed when that shout-out becomes a tangible threat to the life or safety to anybody who receives it. that is a different kind of line. i do not have any fear of going to a town hall meeting or a coffee conversation with someone who expresses, in a passionate and loud way, their thoughts and feelings. i think people should be able to do that. host: how do you -- do you fear for your staff's safety? guest: i do not. we have an obligation to be
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vigilant, to monitor our mail, our e-mail, our telephone calls, to make sure we can a follow up on anything weppears out of the ordinary -- anything that appears out of the ordinary. we discussed this as a staff. we have a series of meetings with constituents, a town hall meetings, a copy conversations, greeting people -- town hall meetings, coffee conversations, greeting people at the grocery stores. we will continue to do that. we will do what it takes to make sure that we are safe, but we're not going to go overboard so that it prevents us from reaching out to constituents. host: a caller from maryland on the independent line. caller: good morning. i want to clear something up. when you are talking about
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assault weapons -- the salt is actually covered. a gun cannot assault anybody. you are talking about rhetoric -- how people need to watch how they speak, be respectful to the constitution in the manner that they speak. when our politicians going to start being respectful to the constitution in how they act, in the laws they pass? the second amendment has "john not be infringed." where does it say that the government -- the lawmakers are exempt from "shall not be infringed"? the other thing i want to mention is that the information i saw earlier -- that you guys read about the "washington post " where they got their information -- their information is wrong. violent crime has gone down considerably recently, especially in d.c.
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you may even be able to find somewhere where a recent poll shows that it was down to the lowest it has been in over 40 years. there has to be a correlation between people arming themselves and the crime rate going down. that is shown all over the country, not just in d.c. the other thing is -- host: we want to get a reaction from the congresswoman. guest: first of all, i think all of us -- as we can see, this debate about the application or not of the second amendment is an important one to engage. i look forward to that. i also believe that we have an obligation to protect, to make sure that citizens are safe in all of our communities. and georges county, a county that i represent, we have already had 10 -- prince georges county, a county that
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i represent, has already had 10 homicides this year. with respect to the crime rate, we know there have been variations in the crime rate over periods of time. experiencing a good period right now does not mean there aren't things we need to do at this time. host: to that caller's point, there is a graph of when the handgun ban aand tri -- and trigger-lock law became effective. new can see that it goes down or when that ban was overturned -- you can see that it goes down when that ban was overturned. there was
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containment taking place on gang violence. we cannot go from a correlation of what is happening with the gun laws [inaudible conversations] [inaudible conversations] >> all right, good morning. thank you for your attention today. i'd like to take the opportunity to thank the citizens of tucson
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and everybody else in the country in the world who's been sending us their thoughts and their scarce. it's very much appreciated. i just don't want to get to them onto this but i had to put out of work for the people in the hospital, everybody in the entire hospital from every aspect of the health care system has done a great job. and i just couldn't be more proud of a group of unified people. we're going to do a couple things. i'm going to update you on the patients we have the hospital. i'm going to introduce two additional positions who are going to make a statement at this time. first of all, we are currently at six patients to remain in the hospital. one in critical condition, three in serious condition and two in fair condition. one of the patients is undergoing surgery right now. the other is either surgery today. additional surgeries are planned for the rest of the week, but everything is currently going well with other patients and
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their processing is expected. so far no issues or problems that this time period. i know you are here one night at a date on the patient who is in icu and that is the congresswoman. >> i'm going to update you on congresswoman giffords studies. unhappy to say she is holding her own. her sadness was the same as yesterday. she is so following simple commands. we been able to back off some sedation and she's able to generate strong breaths. she is breathing on her own. the only reason to keep the breathing tube and mr. protector airway so she doesn't have complications like pneumonia. now, at this point i'd like to take you through, if i could, i would like to come at a step-by-step i did when we first talked about her operation and her immediate perioperative repair. but i can because this is the face of the care worth so much after her and we would
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constantly say it's week to week, month to month. i know everybody wants to hear the results every day, but as long as we don't backside and as far as she holds her own, that's good. that keeps us hopeful. we have to play this according to her timeline, not her spirit we have to avoid frustration and so after her family without, with the doctors will feel and of course all of you will feel. she's going to take recovery i don't pay for i'm very encouraged by the fact she has been so well. this kind of injury recited a couple times. a penetrating injury to the school really is survival, let of a recovery is abysmal. she has no right to look this good and she does. we're hopeful, but it went to -underscore the seriousness of this injury and the fact we have to be extremely patient. >> as you know, congresswoman has been is an active-duty and is an astronaut and the
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resources of the entire military has been available to us. earlier on in this process will we take you what i did was took advantage of that scenario and situation mas to be able to come here and give me a little consultation and advice about what we could do in addition to what we were doing. these are world famous people. first is dr. james echo n., retired united states army. he has served with distinguished honor entering the war in iraq especially, probably the most experience with penetrating trauma in the united states and currently he is the chief of surgery in fairfax. then dr. jeff hwang, to duty as well. it's about the most common and well known narrow and sensitive in the military in the country at this time. weird both are at the university of health sciences and the
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military medical school. colonel lang was on his way to afghanistan when he got that mission aborted and was able to come here and give us an in-depth view into the consultation on the congresswoman. they looked at all the information that is available to us and i make a quick brief comment and we will not be joined questions and answers, but they have a prepared statement and will make a comment or two. >> it's been our privilege to consult on congresswoman giffords case at the request of her physicians. everything we stand reflects the highest quality of care. giffords and dr. the most intervention saved her life. her care is equally outstanding, providing the optimum environment for bringing healing. we've also been inspired further the immense strength of marc and
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her staff. we enjoy the rest of america in hopes and prayers for congressman giffords and her family. >> i'd like to take a moment to reiterate a very important point that dr. lemole was trying to share with you. and this is indeed a very serious injury. make no mistake, she was shot. the bulleted into her skull. the bulleted traverse through her brain and exit out the back, leaving behind some fragments and some bone. so she is critically ill. the good news is that she is in fact thriving under these very good, excellent care at the university of arizona. however, it is going to be a process now where recovery is very much dictated upon her own recovery. and that's going to be a process that's going to take some time. so it will be day by day. with all the support she's got here at the hospital from the medical and nursing standpoint
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as well as support from the community at large both here in tucson and arizona in the united states, we are all very hopeful. i want to reiterate she is in fact very critically ill from a very serious injury. >> thank you. this unfortunately is a devastating problem. health care is the the number one cause of the years of life lost. it outdoes cancer and anything else you can think of because it affects the young as well as the old. and there are many people injured in this unfortunate circumstance and people injured every single day. however i know that we have one particular person there were always very interested in. however, there are many sides to this story are human beings evolved in us from every aspect. so with that, we have several additional people were going to make available to the staff here. angela robinson and penny wilson who were daughters of ms. stoddard who was discharged
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yesterday and also bill holman. or has been is surgery now. if you'd like to talk to them, they'll be available here. i'm going to coordinate that appear with their po officer. so, we'll go ahead and excuse the physicians out of here, but will go ahead and start with mrs. stoddard's family. what we can do is you can see a statement if you like or we can streak all into questions and answers. >> i guess, thank you for being here. we've been rather hesitant to discuss this. i think my first statement, our first event as a family as we speak for your red staters' four sons are sisters. i think our first statement with the two complement the hero that lay in her father and we are just blessed that he is walking with the lord now, but what a
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way to go. as a hero, he has lived that kind of a life and i also think at this time we would love to say that it just brings the hero out in all of us at times of tragedy. differences don't matter and families, whether you are divorced, single come in between. as a school counselor in a families have to come together no matter what and this is a time we all just join him for the good of all and find the hero in every single one of us. we've seen each persons possibility qualities rise to the top and make the next arrangements and go step-by-step with what happens next with dad. >> and we are just very appreciative to everyone who has stepped forward during the tragedy and as we've gone forward, they are so people to thank. there are people on the scene
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that sat with her parents, prayed with them, hulled them, help them as well as everyone else. there are volunteers that are organized as well as unorganized volunteers that stepped in just immediately. the hospital staff, fbi, everyone has been extremely helpful and we appreciate that. her mother is doing quite well actually. she has a lot of strength and courage that she will go forward. she has a long road ahead of her, but her condition is good i think. she's resting and we just appreciate everyone. thank you. >> i'd like to introduce bill holman and she's going to make a few comments as well. >> my wife susie was the procedure christina taylor
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cream. we've been here since 2006. my wife and i were fortunate to be able to take two years of a car over the country to pick a community we wanted to be part of an tucson is the one we selected, feeling it was one of the most natural melting pots of america that we could ever find. it's been a very, very great community to s. so this is extra shocking because of that. i have to say my personal experience from initially getting the call and saturday from an anonymous woman on the scene for letting me know that susie and christina had been in an accident. i've done in the emergency room care in one of the first people and that was a minister who had heard the news that walked in off the street and not part of the staff who was there comforting people. i was later they're not been a particularly religious, and was told by a woman who said a prayer that sense has made me feel was particularly influential in getting my wife's
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amok that first day. she was operated on saturday by the time the surgeons. she had been hit three times by bullets. thankfully spine and oregon's were all intact. her biggest issue on an ongoing basis is a ruptured hip which is being addressed in an ongoing basis as we say here. thursday was involved from day one, including those good people in the emergency room who have dealt with this incredible chaos. but look to the feelings of all of us who are so unknowing and so scared as to what we're going on. to every nurse, every orderly, every doctor that we've met so far, i'm so impressed with the quality of care were getting from the institution and the quality of people in the care they take and sensitivities of those of us going through. susie is going to be fine long-term. i'm not sure she's going to be quite effective with all of her physical activities for a while. she'll be in a locker for these
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three events in serious physical rehab after that. but she's a tough, strong woman and a survivor. the greens very much remain in our prayers every minute. your dear sweet friends of ours who have been from the get-go trying their best to take care of susie despite the loss that they personally suffered. the graciousness that the couple has shown given the tragedy they've experienced is unlike anything i've ever experienced. and beyond the safety of my wife and those of their big guns i most pray for john and roxanna green. >> this is a difficult moment for these family members, but will open this up for a brief period of questions and answers. [inaudible] >> for a jury, there's an entry
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and exit. which is which we can't say for sure. we always want to be a little nebulous about that, but we do think from the expertise they are giving to us, he probably went in from the front and came out the back. [inaudible] >> yes. [inaudible] >> absolutely, she did feel that way. he heard the shots and covered my mom with his own body and protected her and save her, yes. mom definitely felt that way. >> i think further of that is because as dad lay dying, mom didn't know she had been hurt. she thought she was holding him
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in her legs started hurting and it wasn't until they got to the hospital she even realized she had been shot. [inaudible] >> a beautiful way to say goodbye and go home. [inaudible] >> susie and christina were holding hands and mind to wait and shake gabby's hand. they were there because my wife is very at this in any community that she lives in. and she had become in the greens moved to town about a year after we did, roxanna reached out to the community for help with vb centers and your workers and other such things and susie answered the e-mail and mailing up and became quite good friends. and that process to the green
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children have been at our house and were inspired and grand parents with kids that are buried yet, so we intend to enjoy little kids when we get a chance. susie and christina are generationally apart, but very much birth of a feather. when christina was elected to her student council and started to express interest in government and the notion of helping people, my wife had been a social worker in new york and chicago. and susie started looking for an event that she could share, as they have done many number other things. gabby's event made most sense for my wife's personal preferences as well as the fact it was a magnificent chance to provide a positive public female role model for little christina pierce of the a family together, holding hands and most of what susie has shared with me about the specifics are on the edges of a morphine induced haze, so
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there hasn't yet been a clear, precise discussion. from time to time in moments of discomfort, things come out. she is recalling and remembering and having flashbacks of uncomfortable moments. i don't feel prepared today to put together a cogent timeline of exactly what occurred. i hear her in her semiconscious ramblings, screaming out christina, christina, let's get out of here, let's get out of here. she keeps talking about the holding of hands and the realization she was on the ground and the bleeding was perfused. her memory seems to end there. [inaudible] >> one of the first good impressions i got from this institution was when i was pulled aside by a social worker, who rightfully identified the toughest issue that was likely to be faced by susie was dealing with what happened to christina. and again, my wife has worked in
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and with families who have dealt with terrible tragedies that are prior social work and career. and in her clearest headed state, she is quite understanding that this was the act of a man band from plaintiffs no good for anybody. unfortunately we're all human and we have dark moments were the inevitable occurs. it will have this as an ongoing issue to deal with. what i wanted to make sure everyone knows this to the extent of my setzen is it not been induced by anyone who's involved. and certainly not by the queen's parents. the warning after the accident, roxanna sent a lengthy e-mail and john and i have been playing television, but we got together and we cried for about 10 minutes. [inaudible] >> i'm sorry, yes. susie had a breathing tube removed late saturday evening.
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the very first thing she asked, she grabbed my hand, looks me in the eyes and said what about christina? we were advised the exact right thing to do, which happens to coincide with 40 years of knowing her and knowing there is no other way we to do with her was to tell her the exact truth, which was done. i was initially very happy. she was full of morphine and it may have softened the burden somewhat. she's only kind of coming out about this very slowly and i don't know for sure all of what is truly been observed at this point. >> in all likelihood, she and christina were holding hands when they were shot? >> yeah. [inaudible] >> were not going to answer that at this time. god takes care of that.
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>> could you tell us about your parents lives together before this went on? >> well, they married 15 years ago. they were sixth-grade boyfriend and girlfriend and they had a wonderful, loving life together. it was quite a blessing for them as well as the extended family. they were very happy. >> how many years ago did you say? >> 15 years ago. they were sixth-grade girlfriend or boyfriend. speak >> both of them had been married 40 years to wonderful other made and when their mates died within a year apart, my mom -- i mom moved back to tucson. one was in washington and one was in oregon. they we've met and married shortly thereafter and it's been a blessing for all of us. [inaudible] >> in tucson.
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[inaudible] >> their cousins. they're both very good friends with each other's -- with dori's cousins. caroline and jack. caroline and jack reintroduce them and they decided to be boyfriend and girlfriend again, for the rest of their life. [inaudible] >> worse is yours. -- we are sisters. penny wilson. >> by angela robinson. >> and you are both dorwin's daughters? >> i am claiming them as my daddy. ideal mac
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>> they will be available for further detail and question means. [inaudible] >> mom has been very aware of what has gone on from the very beginning i think. [inaudible] >> achieves very grateful, very aware of what is going on and the kindness and just the huge outpouring of support for everyone. [inaudible] >> dorwin was a busy little guy. he took care of anything that was broken, was going to break. he was always thinking about how to fix and repair and help
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anyone and everyone that he could. he was always available for that. >> i'm getting a signal, so we're going to have to set. i appreciate everybody's cooperation. obviously took a lot of courage for family members to do this, so thank you very much. [inaudible conversations]
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pockmarked >> and now remarks on the u.s. business community from the head of the u.s. chamber of commerce, thomas donohue. this is a half-hour. >> somewhat like an obituary, but i appreciate very much your being here today and good morning, ladies and gentlemen. let me thank margaret and the national chamber foundation and other staff who organized this event and thank you all for coming. at the outset, i'd like to express on behalf of the united states chamber of commerce are shock and our sadness over the tragic shootings in arizona. under any circumstance, the violence, injury and loss of life that occurred as an outrage to all of us. we are especially offended by
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the fact that this rampage was directed at our democracy it tells, striking down public servants as well as free citizens who had come to engage in a dialogue and express their views. we are praying for the full recovery with congresswoman giffords and others who were injured and our hearts go out to the families of those who lost their lives. while the new year has begun on this side note, i can report when it comes to the nation's economy, we began 2011 in better shape than we found ourselves last year. the state of american businesses is improving. last year, we worried about a double dip recession. today we are cautiously optimistic that the recovery wi


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