tv Politics Public Policy Today CSPAN August 5, 2014 11:00am-1:01pm EDT
their businesses out. i think they will. i think a lot of that will come with the purchase of a module racking company that solar city recently purchased. investments in those types of technologies. >> ethan, maybe on your sort of overall outlook, you basically said you are bullish on what's possible in terms of added solar capacity. 2%, 18% by 2013. within the solar community i think that there's a lot of thinking about how to get to those kinds of growth rates, that kind of level. how do people outside the solar industry look at the potential bullish nature of solar -- the ing ra ing ra incorporation of solar? how does -- it doesn't have to be u.s. dependent. how is that potential for solar
to reach those kinds of levels changing the way that people are thinking about the electricity or the energy market systems that they are being incorporated into? >> that's a good question. look, it's a cliche but this is truly disruptive technology. we have -- we built an electric system that is hub and spoke, that's been around for a while now and is centrally controlled. with exceptions, relatively manageable. the sheer nature of distributed power, whether that's pv or maybe it's microwind or other things, is -- that creates challenges. that's a change. then throw in the fact that there is the unpredictability about when you get the juice. that creates further uncertainty. look, the answer is that -- i think your program is great and
people are trying to think about where the utility fits in everything. there's a lot of smart thinking and reconsideration going on. there's some people who are saying, i know where the utility fits. it's where it has always fit. this is a fad and it's going to come and go. there's people involved in the constructive conversation about what happens next. there's some people who frankly just hope that things aren't going to change. or feel strongly that things aren't going to change. our view is that they will because the technology costs keep coming down. particularly in a global context like i said when you talk about new markets where you are not talking about pv really competing against the cost of electricity that's coming into someone's house. you are talking about pv being the first power that comes to somebody's house or hut or whatever it is versus nothing. and that's the competition that increasingly they will win because of the cost declines.
there's a lot of different reactions. i think this is part of a much larger kind of conversation that's going on around rethinking how electricity is delivered, consumed and generated. obviously, the epa rules in the u.s. will have an impact on that. there's a very interesting time. it's not just because of renewables. the rise of natural gas and the implications of that are fundamentally shifting these things. this is one of the wild cards that's involved in that conversation. >> to that point on the technology side, when i talk to folks in our systems integration program, for example, they basically talk about the complexity that ethan is referring to, which is what happens when you go from having these very centralized nodes where decisions are made to having not just one or two orders of magnitude but several orders of more decision nodes that are involved in the system.
what's interesting about that question is that the kinds of decisions that need to be made in the policy and regulatory sphere about who gets to play and who gets what kinds of benefits from the role that they are playing there. and so, you know, i think that when you have the opportunity to have, you know, a few orders of magnitude more players involved in this, you have a lot more stake holders you are taking into account. that's one of the things that the public is very interested in getting involved in that way. i think what that does and what we have seen in so many other industries is that it tends to benefit consumers. because you are creating the potential for much more innovation by increasing the number of people who can get involved and be innovators and be part of that system. so that, you know -- i don't want to draw too many -- too close of an analogy to other
areas. we certainly have seen in general that when you have more competition in the market, when you create those additional opportunities for innovation that in general, consumers end up benefitting. >> i'm not a huge expert on the innovation side of solar. i have applauded some of the things that solar world has done in terms of investing in r & d. moving up its panels to 280 watt and further. i guess broadly, i think seeing is the trade world, i think moving the innovations forward, he personally r & d, especially with the work you are do, i think it's extremely important especially if you want to see this industry grow. >> we have 15 minutes left. i'd like to open up to sort of question and answer.
please wait for a mike if you don't have one in front of you or use the mike you have in front of you. state your name and affiliation and to the extent you can put your question in the form of a question, we always appreciate it. we will start right here. >> thank you very much. my name is saide. i'm from san francisco bay area. i have a very small energy company. one of the biggest problems we had -- or we have now is, of course, financing. we could have done that better. i know all of your company in solar city have done a great job. in california, the success is only for may ga projects. but common people in california, solar city is doing a good job but it's not enough. somehow, we should have this
opportunity for other smaller companies to install small systems and plus like solar farming project that some people have in farm areas, two acre or five acre land and they want their own solar farm and sell it to the utility companies. they are not very successful in that because financing. and also, we have explored market and overseas market there say gre is a great potential for american products. so how some of you can help a small company like us, we do have very good connection in overseas for very good project in private sectors. i would like to know how i could utilize your experience to promote our business. thank you very much. >> maybe that is not a company specific situation. >> one program that we are
supporting at the u.s. department of energy right now is a project that's called the solar access to public capital working group. so that working group was originally led by some folks at the national renewable energy laboratory. it's a big consortium of i think over 300 organizations now that include folks in the finance base, developers, some sof the big rating agent sigcyagencies. what they have done is they have taken a look at, you know, what it takes to really understand what a solar investment looks like, to really start to characterize what the risk for that looks like and to develop standardized templates for contracts, for ppas, for leases to start to expand the baseline information about what solar deployment characteristics look look. that way we can start to have
better products out there. again, both in the forms of whether third-party finance, loans, insurance projects, operation and maintenance products. again, they have worked together to try toing agate a lot of information and best practices so the finance community can better understand what a solar product really looks like. i think to a certain extent, you know, they can look at it and say, well, you know, we don't know how risky this is so we're going to charge a high interest rate. that can be very difficult. or they can say we're not interested, it's too complicated. this is really an area where i think we have tried to play an important role in increasing market transparency and help them understand what it looks li like in the field and feel more comfortable getting involved from a financial perspective. hopefully that will benefit businesses across the u.s. by having access to that capital.
>> first a point of clarification. my company is sole systems. full discloser. my advice, i would say, one, when we began, we focused on a very specific part of the market that was called -- these things called solar interval credits that we built a business around. you want to work on something that's very specific that you can build expertise in very quickly. my second point is maybe you don't want to work cross markets. maybe you want to work hyperlocal. that's a good strategy. because original nation of solar assets in the king in the solar industry right now. with the cheap capital there's a search for good products. you can leverage your local connections and your relationships. i would highly recommend it. i think that's where to go, whether it's your friend that
owns a store nearby. if you don't want to stay in the united states, your best bet is to utilize opec. they have done tremendous work in the solar industry. it's a bridge between one country and another. i think you have a good advantage there. the import export bank is another one if you were utilizing equipment in the united states. my guess is you don't want to rely on equipment in the united states unless you have a competitive advantage. >> we will run short on time. what i'm going to do is take three questions. please try and keep them brief so we can get them in. we have two on the wall over here and then you, sir, in the blue shirt. >> julia piper. wonder if you can address what's going to happen with disposing of the panels. i under they have long lifetimes but what's going to happen in addressing climate change, low carbon energy. is there an environmental issue
being created? >> as mentioned before, china will be a biggest market for solar. in question will be, we talk about the trade issue between u.s. and china. is there room for american company to do business in chinese solar market and opportunity for cooperation, especially in disattribute bu d. in future it will come from solar distribution. installed in the first quarter of this year, what's your opinion? thank you. >> thank you. i'm from george washington university. as we mentioned, solar is booming. my sense is that's largely it's
out of the early adopter market. people who are -- have the means to typically more affluent households able to afford solar up front now or single homeowners. so wondering what the panelists think about the strategies and policies necessary if we are going to get to 18% penetration rates by 2030. there's been estimates that say roughly one in ten americans are able to put solar panels on their own homes because they have a roof that's suitable, they have the money, they are not renters, low-income people, they don't live in multi-family units. interested in hearing your thoughts on that. thank you. >> maybe what we will do is start with ethan and you can address the component pieces of a couple of those that you want to and kind of go down the line. >> that's a lot. try to make sure i got all of them down. maybe the first one i will address first. frankly, it's the thing i know
least about. and don't have a good answer on. it's a very good question given the volumes that we're projecting. we do generally assume a 20 to 25 year life cycle for these systems. you are right, once that -- once the systems start to need to be retired, there's question what happens next. i don't know the answer at this point. the china question is a really interesting one. to give more background, china really has been for several years the largest manufacturer. but then last year was the largest demand market. and but the vast majority of the new projects that got built over there were large scale projects. as was noted, there's ambitious goals over there to do distributed solar. frankly, that's more challenging because it requires individual systems being put on individual roofs or backyards or wherever
it is. it involves individual transactions that have to take place. it's a very good point about perhaps there is an opportunity to share knowledge. i know the doe has been involved in the u.s. china cooperation program for some years. i don't know if those are one of things they have been talking about. probably should. i think that's an area of potential cooperation. i think i got your question, which is about opportunities for solar for lower income residents. it's a good question. i would say that we're crossing over to a period where, you know, if you are in the right market it can -- like i showed on our chart, you can reach -- you can be a so-called socket parity right now. but that still means you need 15 or 20 grand to get this up on your roof. part of what uri are doing and what others are doing is trying to make financing more available.
i think some of that is starting to happen. i always it fascinating when i go out to california, which is that there is a living and breathing solar market out there. you turn on the radio and there are ads. those are not aimed at just high-end consumers. everybody listens to the radio. it's a market that's trying to get to that. but i will say that at least in the past when we have looked at the demographics of who adopters are, it's typically more palo alto than east palo alto. i don't know my geography out there. it's been more towards the higher end. but that's starting to shift to some degree. >> so on the disclosure materials, i should say that we have tremendous amount of resources that we put into our national laboratories. they are doing a lot of work on testing what's -- testing what's being fielded. they have a qualification plus program that we put together. in general, when you look at most solar panels that are being sold today, they are made of
glass, silicon. these are things i don't think we have to worry too much about. the car industry, it's one of the largest recycling industries out there. i think when these things reach their end of life that we will certainly see some industry popping up around all of that. i know that there are a number of manufacturers who have take back programs where they will bring back modules, whether a faulty one or one that's reached its end of life and that they are looking at incorporating the costs to a certain extent. i would say that that's something that we are addressing and thinking about and that we will continue to be addressing over the coming years. on number two on the distributed energy in china. we have programs where we are working with a couple of cities in china that i'm aware of, energy efficient, renewable office has a specific grant where they are doing work. i agree, we certainly have taken
a look at some of the soft costs. in fact, i think one of my analysts was there in the past month taking a look at how deployment is happening in china and trying to understand that. yeah, i'm just going to say i agree, i guess. then on a needs point. i feel luike he's throwing me a softball here. also, right now i'm doing some work in conjunction with hud, housing and urban development to help meet the president's climate action goal. so those are all things that i think are really interesting areas of opportunity. denver housing authority i think recently did 660 units of low income housing as a couple of megawatts. i think they did it in less than two years, which is really exciting from my standpoint. yeah, in the business innovation space, i feel like increasing access is important. there are people trying to figure it out.
we see people in the finance base who are interested. those are folks who are used to doing complex deals and are willing to take on some risk. i feel like all the conversations i've had with folks in the low income space have been positive. if anything, they -- they are people who want to get things done and they will figure out how to do it. it's been great. >> pollution and solar panels. i agree with ee lalaine. i think recycling programs will go. we have heard of a couple. many of our investors have a disposal fee in anticipation of actually taking the panels and doing something with them. people will do something about them. can u.s. businesses work in china? i think that was your question as i understood it. sun power, is actively working in china as we speak. i'm sure we will see others move into that space as well.
it's an industry that's going to explode. it's exploding now. and then finally, the strategies for getting the 18%. i think bottom line is that the lower income folks in the united states that want solar either can't afford or can't get credit or don't own their home. what elaine was pointing out is that solar is becoming effectively a commodity that you can sell in markets through virtual net metering, local legislation or if you wanted to you could sell it through regional transmission organizations on the grid. you can't sell it at the same price. you can do that now. i think the ability to turn solar energy into a commodity that people can buy, trade, etc. is one of the innovations we haven't seen yet but will emerge in the next five years. we are seeing parts of it. in d.c. there's legislation that will enable homeowners to buy solar. i think that's a big innovation. it's an important one.
>> not a lot to add to the austere comments of my fellow panelists. disposal and recycling, standards will be built around. that's an important thing that the u.s. government does. in terms of opportunities for u.s. companies to operate in china, i hope that does expand. i know there was an enormous project that first solar was trying to do in mongolia, one of the biggest ever in the region that was under china. it fell through. i'm not sure why but i hope non-tariff barriers don't become a factor inhibiting u.s. companies from operating there. in terms of expanding solar to more roof tops, i'm not the great technical expert these folks are. it's always innovation. i believe that one of the biggest factors of innovation is
innovation that happens on the shop floor. manufacturing ties into innovation and brings long-term benefits that you know were going to happen like the intel story. thanks. >> i don't think i have too much to add. i want to make one -- we're closing. i want to add a little bit -- one counter point on the trade issue because i think it is so important and it is so complex, at least in my view. there are a lot of nuances to it. one thing i wanted to say is, we have tracked the solar industry globally for ten years. what happened over the last five years, frankly, i think was more complex than any one market sort of proactively planning to flood another. what happened was, the market became vastly overcapacity. what we had was a lot of different players and countries sort of desperate to sell everything that they had, that they were producing into any
market. now, i'm not a lawyer. i don't know if -- what that represents in terms of the question of dumping. but i think that's important to note is that we really went through a very tough period for solar equipment manufacturers. this is not uncommon with new industries where you see boom bust circles where the industry gets ahead of itself and built more capacity than needed. we are starting to come back and see manufacturers who won't produce unless they can make a margin on a global market. i wanted to add that sort of piece of clarification on that point. i think the other thing is to keep in mind, as i'm sure the economic implications are really interesting in the u.s. i think there's -- there are a lot of folks in this country who are now involved actively in installing. i think a lot of them, if would you ask them, just want to get their hands on the cheapest equipment that they can. they think that will give them the greatest opportunity to
install the most. i think there's an argument to be made from the environmental standard is that's good for the environment. but now i think on the flip side as i mentioned earlier, in the long run we're going towards a larger global market. the question is do we want to create systems where we create little areas where every country has an opportunity and some protections to build their own manufacturing capacity so they can be part of that larger pie that i showed a bit earlier. i wanted to add that. my two cents because it's an interesti ining topic. there's many different ways to look at this. >> one of the things that hopefully keeps people coming back is that we allow you to leave on time. i wanted to say, aside from all of these wonderful sort of market and technical insights and policy insights, i was telling these guys before the session, you know something is happening when all of a sudden
people walk into your office with an ipad case that is powered by solar or on my camping trip with my family, i have numerous solar power generation applications when i go to rei to buy our gear. it's not a tremendously powerful intellectual insight but it does something about the socialization of solar and the reaching affects of your daily life. that's my non-technical contribution to the conversation. i wanted to thank all of you for spending your morning with us and telling us about what you are doing and helping us understand what's happening out there on the frontier of solar. we know more than when we started and hopefully will keep looking for ways to explore it going forward. thank you very much for joining us.
a reminder that if you missed any of this live program, you can watch it again any time at our video library. that's cspan.org. more live coverage in about 35 minutes from now live from capitol hill a discussion on the role of navigators, in-person assistance and brokers and helping americans purchase health insurance policies as the affordable care act continues to be implemented. that's live at noon eastern on our companion network cspan 2. african heads of state are in washington, d.c. for a summit held by the obama administration. today the focus is on business
as the group hears from the heads of ibm, coca-cola and walmart as well as vice president biden, secretary of state kerry and later president obama. you can see all of today's summit live on our companion network cspan. today is primary day in four states including kansas where republican senator pat roberts is squaring off with a physician milton wolf. in the fourth district, former congressman todd tiart is vying to get his seat back. for more on that state's primary, we spoke to a reporter from the topeka capital journal. >> let's begin with this senate primary. pat roberts, the incumbent who been in congress since 1980 is facing a tea part challenge. who is challenging him and what's the prediction? >> this u.s. senate race has been a slug fest. the incumbent is defending
against wolf's tea party insurgency. it's been a volatile race. i would imagine that roberts will win this primary. but one interesting point to follow is whether or not that margin is thin. if it's thin, it might suggest that roberts is vulnerable. >> okay. so the role of the tea party in this race -- i want to show ou viewers this citizenship fund that invested $75,000 to broadcast -- to broadcast a kansas cable television link to senator pat roberts. here is the ad. get your take on it. >> snar pat roberts doesn't think he should have to live under the sament laws as the rest of us. he takes a special exemption from obamacare. he wants special treatment. when congress realized how bad obamacare really was, they asked for a special exemption. congress got it.
roberts took it. that's wrong. on august 5, vote dr. milton wolf to send a message. repeal obamacare, end the special exemption. tea party patriot fund is responsible for this message. >> are the issues being debated in washington and being advertised in this race having an impact on voters? >> i think so. if you did some poling, you would learn in kansas that the affordable care act is highly unpopular. so one thing republicans can do in kansas is simply run against obama and the aca and they will get traction. so that's why this campaign ad has come into the mix. i should add that factually, their ad is challenged. perhaps misstates what roberts' experience is.
>> whin what way it's not corre in. >> it asserts that roberts took an exemption to obamacare and that's in fact not true, that the senator and his staff have received their health insurance through the affordable care act through the exchange as they are required to do. >> this has been -- >> the ad is wrong. >> this race has been described by "the washington post" as one of the most colorful in the nation. what's been happening? >> yes. so roberts has been emphasizing that he wants to convince voters that wolf's character can be defined by the fact that wolf posted to facebook a few years ago x-ray images of dead people accompanied by undignified remarks that were described by wolf as humor. there is now an ongoing state medical ethics investigation of wolf. on the other hand, wolf, who is a distant 'cause to president
obama, says that roberts' 47 years in washington transformed him into a defactor senator from virginia. roberts owns a home there but is a legal resident of kansas. wolf thinks that roberts is out of step with his constituents. >> as you said though, the voters going to the poles today in kansas primary. it is looks though right now that senator pat roberts could beat back this challenge from tea party challenger martin wolf at this point? >> the thing you got to remember is that republicans have won every u.s. senate race since 1932 and it's very difficult for challengers, democrats or republicans or otherwise to take on these incumbents. >> why is that? >> well, i think you know congress generally is unpopular. people like what they know. they like their guy, their person in the house or senate.
so i would have to just -- you would have to lean from day one to the incumbent. senator roberts has been around a long time, has made a lot of friends and apparently a few enemies. i would just have to assume anything could happen today. the voters decide. it's the greatest pole we have. i would have to assume that senator roberts would prevail. >> what about -- there's a couple of house primaries that people are watching. you have the house district the 4th district there and the 1st. the 4th, who is running? >> yes. you have the incumbent mike pompoio. he's challenged by former u.s. representative todd teahart. they have deep pockets backing them up. it's become a very vicious race. what's been interesting is that it's become a bizarre grudge mat match. todd is largely funded by a
wichita oil man who lost a previous congressional campaign to mike and formed a super pact this year to help todd in his attempt to reclaim the seat. >> what about the 1st district in kansas? what are you watching for today? >> yes. u.s. representative tim heuell's camp is there. he has a primary and general election foe. his reversal of fortune happened. so there are outside groups upset with his votes on farm policy. he was kicked off the house agriculture committee by speaker boehner. so the opponents of his camp have aired uncomplimentary aedu
against him. alan lapolice is now against him. >> those are the races to watch out of kansas today. one of the four states holding a primary today. let's fast forward to this fall. the governor's race there. what's the latest for governor brownback? >> i think national political writers have been drawn to this grace. nobody would have predicted his re-election would be a struggle. he will win his primary. but a point of interest is how deeply and total novice, jennifer wynn digs in. this will set the stage for the fall with when brownback will go against a democratic nominee who is the house democratic leader in kansas. the poling isn't very robust here. i would say a layman would suggest that this is a tossup three months out. >> tim carpenter, thank you for yr time. >> my pleasure.
"the new york times" reporting that a united states army major general was killed today by an afghan soldier shot at close range at a military training akad mee. an official of the american led coalition and afghan media reported tuesday the officer was the highest ranking member of the american military to die in hostilities in the afghanistan war. the coalition official who spoke on condition of anonymity would not release the name of the major general. we are sure to hear more about that when the pentagon holds a briefing today at 12:30 eastern time. we will cover that for you live on cspan. up next, nsa commander mike rogers discusses cyber security challenges at a recent event hosted by bloomberg government. he talks about an interview earlier this year with edward snowden who he says is articulate but clearly arrogant.
his remarks are 45 minutes. thank you. thank you, josh for that introduction. hopefully this microphone is working. admiral, have a seat. congratulation opens your new position. 60 days you have been in the job. you are courageous enough to sit down with me today. i know everybody is excited and interested to hear what you have to say. you are taking over the agency at a critical time for the country, a very critical time for corporate america. as we see, of course, ed snowden's revelations and an increasing number of cyber attacks happening to u.s. companies. let me start by asking you, how do you think business and the nsa can best work together to try and solve some of these cyber threats that exist right now? >> well, first let me start off by saying, thank you for taking the time.
bloomberg government and all of you taking time from your day for a discussion, this idea of cyber security. i thank you for your willingness to do that and engage in a dialogue. i apologize that was a couple minutes late. it took an hour and a half to drive down today. when i do it in the morning every day, we normally manage to do it in 25 minutes. i apologize to keep you waiting. the first point i would make is, i am with you today really in two hats i ware at the commander of the united states cyber command as well as the director of the nsa. the things i try to highlight are, first and foremost, cyber security is something that is foundational in the world we are living in to your ability to execute your business or your mission, whatever that is. your failure to do so successfully has the potential to directly impact your ability to execute your mission, your
corporation's reputation. we are seeing that play out over the last several months in some very visible ways in the corporate sector. i try to tell business seniors, just as i try to tell military seniors, you must own this problem. you cannot say to your chief technical or informational side, hey, this is your problem, go deal with it. it's not something that i need to focus on. i have the same dialogue with senior operational commanders in the department where i try to make the point, this is not your it and your computer people. you have to own this problem as a leader. you have to drive the change that brings this into our culture. we have to consider this every bit as foundational as we do our ability to maneuver forces in using a military construct as we care about low gis mickgistics,e about our infrastructure. when i look at the problem, i'm
struck by a couple of things that i try to highlight with my business counterparts. traditionally in my experience -- you take that for what it's worth. >> we have been focused on the attempts to prevent intrusions. i have increasingly come to the opinion as i have done cyber for about the last decade or so off and on with the department of defense, i am coming to the opinion that we must increasingly spend more time focused on detection and what do you do when they get in. because i wish that we lived in a world where we can guarantee no one is going to access or gain entrance into our systems. that is becoming increasingly difficult. i urge just as we have done within the department, you need to spend time asking yourself, what do i need to do to max miedz my detection capability so i find out early if someone is there and then what do i do about it. >> what do do you about it?
do you go to the government, handle it on your own? >> there's a couple issues. there's a corporate responsibility to ensure the well-being of your corporation and its ability to execute its mission. clearly, i think when you find something that's beyond the scale of your ability as an entity to deal with, there's mechanisms for you to reach out and say, this is an area i need help. from a governmental perspective, clearly there's areas of critical infrastructure whereas a nation we have a vested enter in ensuring uninterrupted operations whether that might be in the financial sector or power sector, fuel, transportation, air travel. there's clearly sectors here that are of increased critical importance to our ability as a nation to function effectively, which is one of the roles for the united states cyber command. even as it is tasked to operate and defend networks within the department of defense, i have also been tasked to be prepared
when directed by the president or the secretary of defense to provide capability to support civilian teammates in trying to deal with many of these challenges, particularly those working in critical infrastructure. to do that, we have to partner closely. our primary partners in this in the government being the department of homeland security and the federal bureau of investigation as well as those key corporate entities who potentially are receiving attacks or attempts to intrude in the system or deny their ability to operate. >> if i'm the ceo of a major technology corporation and i see a threat that i think might be coming from a foreign entity, do i deal with that on my own? do i call the nsa? do i call homeland security? >> first, the department of homeland security is within the federal government for dealing with the security of networks outside the government.
what i would urge any corporation would do, i would urge you to reach out to the department of homeland security and share what you are seeing. the moment on the hill in congress, they are debating is there legislation that we could enact that would, in fact, provide a means for corporations to do that. that's in the process right now. i am on record in my confirmation hearing two and a half months ago. i was asked and i said, i believe legislation is necessary. that we have tried to do this on a volunteering basis over the last few years. while that has generated increased cooperation, when i look at the number of incidents that are volunteer reported versus the number that i believe are truly happening out there, there's a big delta. so i am a proponent of legislation which would set up a structure for the corporate
world to share information and for us on the government side to share information with our corporate teammates as we try to deal with this. because coming together as a partnership is where we can be very powerful. as commander of the united states cyber command as director of the national security agency, i do not have knowledge of private corporate networks. that's not where i'm focused. that's not my role. my role, i'm out in foreign space trying to figure, what is going on in the cyber arena? what's coming at us? what do we need to be concerned about? that's the nsa hat. nsa brings great knowledge of in our information assurance mission where we are tasked within the government to help develop capabilities to assess networks, their vulnerabilities, help to generate cryptographic standards as well as provide capability to support others in identifying malware and other
challenges so s associated with defense of their network. u.s. cyber command brings a very operational capability. teams organized equipped and trained to operate in this space, identify problems, help in the defensive side as well as potentially work an offensive piece if we are directed to do so. you bring all that together with our partners at the fbi, the department of homeland security and the capabilities that many corporate entities have -- i spend some of my time getting to know corporate counterparts and in many instances i am incredibly impressed by the level of effort i see by the came built of those organizations have and by their willingness to work with others. i would like to see us expand that to much more -- a broader segment of industry in the corporate world. >> the technology is pretty incredible. you alluded to this.
let me ask you about new reports that show the nsa is using facial recognition technology to monitor people. how does a program like that work? >> well, i'm not going to get into the specifics in an open forum of what we do. that is my greatest challenge as the director of the national security agency. in order to execute our mission of foreign intelligence, i have to be very, very mindful of my ability in large open forums to talk about the specifics of what we do. in my confirmation hearing i was also very explicit about i believe that as the director of nsa i need to be more transparent. while i can't get into the specifics of the how we do it, i need to be willing to talk in broad terms about what we do and why we do it in a way that perhaps traditionally we were not as comfortable with. >> can you tell me what the goal of a program like that would be? >> we use facial recognition as a tool to help us understand these foreign intelligence
targets we work, counterterrorism is another big area. this has had more impact in the counterterrorism arena than anywhere elsewhere we see entities do our signals intelligence capabilities. and we will know them digitally if we will. we want to see if we can understand them more broadly to help enable our broader efforts to bring them to justice and to forestall their ability to conduct attacks against ourselves and our allies and friends in the world around us. do not -- if i could finish one thing. we do not do this in some unilateral basis against u.s. citizens. we do not access -- at one point i saw someone say, they must be accessing department of motor vehicle data. >> you don't, actually. that surprised me. >> we don't. no, we don't do that. we have very specific restrictions when it comes to
u.s. persons. we have to operate under a legal framework. >> you don't have access to driver's license, you don't have access to passport photos. you would think -- >> we're talking for u.s. persons. >> you would think the nsa would have access. >> we are talking about for u.s. persons, we don't do this for u.s. persons. why? our mission is as the nsa is very explicit. foreign intelligence and information asur hans. foreign intelligence -- we have to do anything involving a u.s. person, we have specific legal constraints we must comply with. we just don't unilaterally decide, hey, today i'm going to go after citizen x, y or z. >> there are people you know you want to target? >> there are. let me finish my thought before i forget. in the digital age, we will encounter american persons in the wilderness out there so to
speak and we have restrictions about what happens once we do encounter u.s. persons. we have to stop what we are doing. if we come to the realization that somebody that we are monitoring that we're tracking is a u.s. connection that we were unaware of in broad terms, we have to stop what we're doing. we have to assess the situation. if we think there's a legal basis to this, then we have to get a legal authority or justification to continue. it was interesting to me -- we have heard this interchange with our gentleman in moscow over the last few days. the part that i thought was interesting was -- as he was talking about, hey, i reached out to nsa and told them i had concerns and we came back and said, i haven't seen that, i haven't been able to find that. the one thing we have been able to find, the one thing we have been able to find referenced his annual training. you know what that annual training was about that we make
every employee go through? safeguarding of u.s. persons information. that was the training that he was going through, the course that he had completed, that all of us have to. that course generate ad a questn in his mind. that's a good thing. i tell the work force, you need to ask if there are things you are uncertain about. that's why we have feedback. that's why we have collaboration mechanisms. it's important that each of us meet our expectations and our requirements and our duties. that's the only way this will work. >> so then -- we will take the bergdahl case. we are sending five members of the taliban back. can the nsa track them. >> that's not something i i'm going to get into. >> i'm not asking necessarily to talk about him. >> i tend to be a very direct person.
>> that's good. we appreciate the directness. i just wonder, can the nsa at least -- these are foreigners, known threats. can known threats. can we track them overseas? >> do we have the means to track individuals with foreign intelligence, yes. am i going to sit here and guarantee every -- we can track every individual constantly? no, you're not going to hear me talk about that. again, oftentimes part of the dialogue i've heard, wow, i wish we had the breadth of capability. at times i hear. does nsa control the internet? i'm like, what? do you really believe that? that is just not the case. like i said, we operate under the rule of law. as the new director, i've been in place 60 days, as you heard in the introduction. what i tell the work force is we have an important mission. it matters to the nation. it matters to our allies and our friends. what also matters is that we do
it right and we do it correctly. the nation has entrusted us with a great responsibility. we are not going to let them down by abusing that trust or abusing those resources. . now, a broad dialogue about what we're doing and why is a good thing for us as a nation. i don't question that for one minute. as much as i'm proud of being a flag officer in the united states navy, i'm also mindful i was a citizen in this nation before i ever started this journey in uniform. when it journey is over, i just want to go back to being another citizen again. and i have no intention of compromising myself or what i believe in, in the excuse of my duties. we're just not going to do that. there's nothing worth that in my experience. >> you mention ed ed snowden. what harm has he done to country and your agency to date? >> i have been on record when asked, i'm watching foreign nations, groups, individuals
cite his disclosures and saying we need to change the way we operate. the americans have insight here. we need to do something differently. >> so you think that potential threats are operating differently because -- >> i am watching those foreign intelligence and counterterrorism targets. i'm not going to make a blanket statement again. everybody is changing everything. but i'm watching them highlight the revelations, talk about their implications to them and what they do and how they communicate. that is unsettling to me as an individual charged with generate knowledge and insight that helps this nation understand the world around it and increases our ability to forestall attempts on the part of others to do harm to us, our interests, and our allies. that makes the job harder. >> any idea how many documents he took? >> we have a fairly good idea.
again, i'm not going to get into specifics on all this. because i'd be the first to admit one of the things i try to tell the work force out there is this is not what is going to define us. we cannot go into this hunched down crunch. we have an important mission. we have to keep doing the mission, and we have to do it right. that's what matters to me. we'll have a broader dialogue as a nation, and that's a good thing. we'll play one part in that dialogue that will involve many, many people and many, many perspectives. that's exactly the way it should be. but for us as an organization, i need you focused on the mission and doing things right. you negotiation lknow, let me t on the outside. that's what they pay for me. imagine if you're in this workforce, every review from the outside world to date has come to the conclusion there has been no systematic violation on the part of the national security agency. it is executing a series of laws and policies that have been put
in place in accordance with this governmental structure that we call america. now, we can have a debate about is that poll sit best one? are those laws where we want to be? i think that's a very fair debate. but for the men and women of the national security agency, i think the greater majority of them find themselves at times very confused and perplexed. hey, the outside world has looked at us. it has assessed us. it has come to the conclusion that we have not knowingly in a broad scale attempted to circumvent law or violate procedure. and yet, i go home and my family asks me, hey, what are you doing with my phone? hey, i go to the grocery store -- >> that's handy. you can keep track of your kids, right? >> i go to church. i watch a workforce trying to deal with the fact, hey, look, we're doing what we think is something that's important. we're doing something we think
matters and increases the safety of our citizens. we're doing it in a way that complies with law and policy. wow. why is it all my friends and neighbors are looking at me so differently now? we used to call ourselves the silent service. if you go into the national security agency, you will find a black wall in which 173 names are carved. a week ago yesterday we added two new names to that wall. that wall is 173 people who have given their lives as a part of the nsa team in the defense of the nation. one week ago today we added chief petty officer christian pike and air force staff sergeant richard dixon who died in afghanistan. on that wall we said they served in silence. that is the culture, you can argue if it's good or bad, but it's the culture of the organization. hey, we do things that matter, but we do that them a way that
doesn't compromise what we do or bring attention to ourselves. it's not about us. it's about the mission. >> one person did not adhere to that culture. did you watch ed snowden's interview? >> no, to be honest. i was traveling. i've seen clips of it subsequently. >> you've seen some clips. so what was your impression of him in those clips? did he seem prepped? did he seem coached? what's your thought? >> i don't know. that's not my place. i thought -- again, i think he's an intelligent individual, articulate. he seemed fairly arrogant to me. clearly he believes in what he's doing. i don't question that. i don't agree with it. i fundamentally disagree with what he did. i believe it was wrong. i believe it was illegal from my perspective. he stole sensitive information that he had been entrusted with. he abused the trust of his workplace colleagues in doing so. >> do you really believe he
fundamentally believes in what he did, or do you think he could have been working for someone else as a double agent? >> could he have? possibly. do i believe that's the case? probably not. >> are you looking into it? >> i would caution everyone. we have to set up processes that will deal with this issue in the long run. that's the way we need to go. as citizens, we're free to express our opinions. that's a real strength for us as a nation. the challenge in my mind is we cannot function as a society if every one of us unilaterally decides i'm right, everyone else is wrong, and i'm going to disregard the law and decide what i'm going to agree to adhere to or not adhere to. >> i spoke with your predecessor just yesterday on the phone. he expressed the concern he thought ed snowden was at some point, it's a question of when, working for someone else, possibly the russians. he might be working for them
right now. do you think that's a theory that's important to explore right now? how did he get out of the country? >> my comment would be, be part of the dialogue. if you believe in this, use the power of the law and the structures of our society to make your case. the answer is not for any one of us to unilaterally decide that i'm the all-knowing oracle who knows everything, that's i'm in the best position to decide what is right or wrong. be leery of a society in which everyone unilaterally can do that. we love to quote the constitution. that document provides a framework for us as to how we're going to organize as a government as well as how we're going to settle disputes through this framework we call the law. i urge all of us as citizens, use that framework. if there's something that you feel strongly about, make your case. make an argument.
articulate your view point but do it within the framework we all have to use if we're going to exist as a society, if we're going to function as a nation. beware of the chaos associated with all of us unilaterally deciding what we want to do, what we don't want to do, what laws we're going to obey, what laws we're going to choose to disobey. that just comes across to me as incredibly arrogant. but that's just my opinion. >> you talk so much about the culture of the nsa. there's certainly a culture in our military. how is it that a guy like ed snowden gets essentially kicked out of the cia? there was a derogatory report written about him of concerns he was trying to break into systems at the cia. then he winds up working for the nsa. i mean, in terms of background checks, what's done? what needs to change so you don't have another edward snowden? >> i mean, clearly we need to look at it. the flip side, though, is i
don't want to go too far in the other direction. what do i mean by that? you already have members of the workforce saying, let me understand this. i haven't done anything wrong, yet you're taking increased security measures. why am i paying the price for this? >> you're doing this right now? >> right. why should i be questioned because of the actions of one individual? so it's always about trying to find that balance. now, at some point i hope in our time we're actually going to talk about cyber security. >> we will. of course we will. >> we are rapidly running out of time. [ applause ] >> but -- >> got to love that part. always direct. >> it seems the one agency is not necessarily talking to the other. couldn't you have learned this is a guy who's got something on his record? >> don't get me wrong. clearly we wish we had known that. on the other hand, again, he was a contractor. he wasn't an employee of ours.
he had access to our systems. don't get me wrong. we granted him access. >> are you 100% confident you have no edward snowdens in your ranks right now? >> would i ever -- i would never tell you that. my question would be, what idiot would say something like that? >> so what have you changed? >> there are few certainties in the world. so how about that cyber security? >> we will talk about it. i have one more question for you, though, on ed snowden and we'll move on. >> in terms of amnesty, would you consider amnesty in exchange for him turning back all the documents that he took? >> that's not my decision, but in the digital age we're living in, the idea of controlling once it's out there, i think, is very problematic. >> do you think it's out there? do you think basically is may have been turned over? >> certainly doesn't have the control i wish it had. >> could it be in the hands of the russians or the chinese or
any other foreign -- >> there could well be aspects of that. >> i promise we will talk about cyber security. so this is -- you know, ed snowden, the target attack ebay the other day coming out the telling the world they needed to change their passwords. we're living in an environment where cyber security is front and center on everyone's mind. yet, it's not, right? because we take a lot of things for granted. is there an equivalent of a cyber 9/11? i mean, do we need to be incredibly individual tant when it comes to these attacks? what really worries you in the cyber world? >> i clearly hope we don't need a 9/11. remember, 9/11, almost 3,000 u.s. and other citizens of other nations died in one day. i don't think any of us ever want to see something like that again. i certainly hope it doesn't take
a traumatic event. and i'm not trying to argue it's got to be loss of life, but if you look at impact, look at cost, i sure hope we don't have to get to that kind of level to urge us to step back to say, wow, perhaps we need to do things a little differently. what i'm hoping is clearly all of us see what is happening in the world around us. the level of sophistication, the volume, and the focus of this effort is increasing across our entire society. we experience it as private citizens. i think i read something like 27% of americans now within the last two years have experienced a personal data compromise. if you look at the numbers for us as individuals, if you look at what we're seeing in the corporate world, if you look at what we're seeing in the u.s. government, then particularly what we're seeing is directed against the department of defense, the level of effort, the complexity just continues to grow.
doing what we have always done, i would argue is not really going to get us where we need to be in this world that we can see unfolding in front of us. we can either recognize this and drive ourselves to change or we can just sit back. it reminds me as a navy guy you always used to joke when you're swimming in the ocean, you just have to make sure you're faster than the guy next to you when it comes to that shark. >> that's a very important point. >> that's not the attitude that i hope we have. i see some. because for some, you know, it's a very business-case analysis. what's the risk versus what's the cost? and i think for some the assessment has been perhaps i'm not large, perhaps i'm not in a core market segment, perhaps i have enough capability. i can afford to continue what i'm doing. i can afford to deal with the risk. i'll mitigate it if we have to, but i don't want to put the time, the energy, the resources, the money upfront, if you will.
don't get me wrong. every entity has to decide what's right for them. i understand. i'm not going to argue, hey, this is the right level of investment. we have tried to work within the government on developing standards, if you will, partnering with others that we have tried to patry eiey eied t. these are standards we believe we would urge you to adopt. if you do that, it significantly increases your ability to forestall penetrations. it significantly increases your ability to deal with penetrations should they occur. so we're putting collectively a lot of work into it. but we clearly are not where we need to be today. >> the hackers are sophisticated, right? and think about what you have in front of you. you've got to stay in front of all these people around the world that are trying more and more sophisticated means to break into systems. how do you recruit the very best talent to help you do that? i mean, you're competing with, you know, the likes of google.
you're competing for these math me tigss, these engineers, and they have the opportunity to go to silicon valley and get stock options. why do they come to work for you? >> i think it's the same reason -- the argument i've made with our leadership is, look, we are never talking about nsa. even in the military, u.s. cyber community. we're trying to attract those same kinds of people. we're never going to compete on the basis of money. if that's the metric, we're just not going to be the place to go. where can we compete? hey, we're about serving something bigger than ourselves. we're about an ethos of right and wrong. we're about doing a mission that's important to the nation. we're about doing some things that quite frankly you can't do legally on the outside that will really challenge you, that will test you, that will give you the opportunity to use cutting-edge technology and apply it in a way that will help with the defense of the nation. that jazzes most people. the positive side for us is not
running into problems either under u.s. cyber command or as the director of the national security agency in terms of attracting quality people who want to be part of the team. and don't get me wrong. it's something i pay lots of attention to. i am very mindful. we have a lot of technology. but if you ask me where do i thinking the true value resides, it's the people. that's where we get the true value. and it's not just their gray matter. it's here. it's their heart and their dedication and their willingness to work some incredibly long hours if that's what it takes. this is a culture about mission and doing the right thing and doing it for the right reasons. i am proud to be director of nsa. i am proud to be the commander of u.s. cyber command. i tell the workforce i believe in nsa. i believe in cyber command. i didn't have to take this job. i did it for a reason. because i believe in the mission of the team. i believe in the men and women who execute it. and i thought particularly as i was joining the nsa team, hey,
we're in a tough spot right now. ic walk away and just say, hey, not my problem. i don't need the heartache. but i said to myself, what kind of leader would you be if you did that? you spent your whole adult life working in this field. now it's payback time. you owe. so that's why i stand before you, sit before you. >> we appreciate the transparency. let me ask you, you know, i talk to a lot of tech ceos on bloomberg tv. i've heard a lot of frustration from the tech community regarding all these revelations and the spying that has come to light. the concern is that we're getting ourselves into a somewhat protectionist environment. cisco, for instance, right now is at risk of losing its china contracts over cyber spying. so what do you say to ceos like john chambers to make them feel as though, you know, we are
still moving forward as a global economy despite these concerns about one nation spying on another and the other nation spying back? >> well, first, i certainly appreciate the concern. and i don't push back arguing, boy, who are you to think that? far from it. hey, he, like many others, have a responsibility to their organization. i understand that. i don't question the concern at all. as we work our way through this, the points i try to make to my corporate counterparts are, look, what we're doing is the activity that almost every significant nation state on this planet does. it attempts to gain insights on the world around it. it attempts to forestall threats to its citizens. i don't care if it's china. i don't care if it's russia. i don't care if it's us. fill in the blank. every nation tries to do that for the well being of its citizens. now, varying nations have varying degrees of capability.
we clearly have amazing capability within the construct of the u.s. government to help generate insight and knowledge of the world around us and to help defends our citizens. you have seen some of that play out. what hasn't played out in ways, to me, is so -- i appreciate the technology. now talk to me about what are the constraints in place to ensure this isn't misabused. we haven't had any discussion about that. talk to me about the laws that are in place to forestall your ability to use this illegally against our citizens. talk to me about the protections you have put in place to make sure your work force can't abuse this authority. talk to me about why do you feel you need to do this. why is it in our best interest? that's the kind of broader discussion. >> why is it in our best interest? it's a matter of national security. >> right. my comment would be because it's a matter of our security as a
nation. one of the challenge of being one of the largest, most powerful nations in the world is there are a lot of people out there who don't have our best interest at heart. there are groups and individuals out there who if they had their way, we would no longer exist as a nation. now, i'm not one who's going to sit here and overhype the threat. in the name of this threat, we have to make dramatic changes and curtail our rights. if we go down that road, in the ends, they have won. if we change who we are and what we believe and what we represent in the name of the security, they have won. i have always believed that. i can remember in '06 having a conversation with -- i worked for chairman of the joint chiefs of staff at the time and said, hey, sir, you know, i think this is an important role for you as a chairman as the principle military adviser to the u.s. government. you know, we do not want to destroy ourselves or become something we aren't in the name of security. that's not a good thing for us. but in the trying to achieve that level of security, we do
have to acknowledge that threat exists. it's not something we're making up. we have lost and our allies have lost literally thousands of citizens in the last decade from individuals who have and continue to attempt to generate threats to take down our citizens, to -- if they had their way, and sometimes very spectacular ways, we've been very successful in forestalling much of it. much of the things we have forestalled as citizens you will never, ever know about and you will never, ever hear about. that is the nature of intelligence. it is the nature of our business. >> if the chinese don't trust american tech companies and american tech companies don't trust chinese companies, are we on the verge of seeing some kind of protectionist trade war as a result of spying? >> is it possible? yes. in the long run, is it likely? i don't think so. but i could well be wrong. >> in the long run, why not?
>> because i believe in the end competition and the quality of what we do and the value of -- what our corporations offer will win out in the end. it's not by chance that the u.s. enjoys such a significant advantage in this market sector. it's because of what we're able to produce. i believe in the end the value of what we produce will stand for itself. >> the doj indicted five chinese officers on accusations of cyber espionage recently. did the nsa play any role in that? >> yes, but i won't get into the specifics of what we did. >> does it seem like a tit-for-tat scenario? that's what the business community is worried about. >> no, i mean, it was -- again, what is the framework we use to resolve issues like this? illegal framework. not just one nation talking about what you're doing and another nation talking about you're doing that. that's why we have courts. that's why we have the rule of law. and ultimately, if it proceeds
to a trial, a judge and a jury will make a decision. that's the way our system works. and with that i apologize, but i need to go. >> we have 40 seconds. >> that's 40 seconds over. >> what can you tell american citizens right here today that are worried that they will never be fully anonymous or have a right to full privacy again? >> in the digital age of the 21st century, we as a society have to come to grips with what does privacy mean in the world we're living in today. that's a much bigger question than what's the role of the national security agency. because in the world we're living in, increasingly by choice and by chance we are forfeiting privacy at levels that i don't think as individuals we truly understand. and it is so engrained, whether it's the cameras that are out on the street, whether it's every one of your personal digital
devices that are constantly asking you, can i share where you are, whether it's, you know, the questions that we get asked in trying to do business. hey, give me your social security number. hey, give me your zip code. hey, tell me how often you shop with me. we're in the world of big data. like it or not, we're in the digital age in the world of big data. and we increasingly as a nation -- and it's not just us. we have to come to grips with what does that mean and what are we comfortable with? we have framed this debate way too narrow from my perspective. this is much bigger than the national security agency. this is a much broader dialogue i think we need to have. and that's what john podesta has been doing with the white house. you saw the president's remarks on the 17th of january where he said, hey, we need to think about this more broadly. that's an important question for us as a nation. what are we comfortable with? the idea you can be totally
anonymous in the digital age is increasingly difficult to execute. it's just hard. >> all right. >> thank you very, very much for your time. >> admiral, thank you for your time. great to have you here. the associated press is reporting that a u.s. army two-star general was killed in an apparent insider attack by a member of the afghan security forces. u.s. officials spoke on condition of anonymity because they weren't authorized to discuss the information by name ahead of the official announcement. the attacker, the ap says, wounded approximately 15 people of which roughly half were americans, one official said. we expect to hear more about that in about 15 minutes or so at 12:30 eastern at the defense department briefing that will be life on c-span. members of congress are reacting on twitter to today's news out of afghanistan. california congressman and 26-year retired u.s. marine colonel paul cook tweets, my thoughts and prayers are with the victims and families of those who were attacked earlier today in afghanistan.
north carolina representative mark meadows it writes, very sad to hear reports of two-star american general killed in afghanistan, highest ranking to die in the conflict. and representative david mckinley writes, the united states army major general was killed today by an afghan soldier. he directs his followers to read more about the attack app "the new york times." today's pentagon briefing coming up at 12:30 eastern. that'll be on c-span. in the nation's capital, african heads of state are in washington for a three-day summit held by the obama administration. today focusing on business as groups hear from the heads of ibm, coca-cola, and walmart. s susan rice speaking now. they will hear later from secretary of state kerry, the vice president joe biden, and president obama. all of that live today at 1:45 eastern. our coverage is now live and will resume live later at 1:45 over on c-span.
while congress is in recess this month, c-span's primetime programming continues at 8:00 p.m. eastern tonight with the western conservative summit in denver. saturday, robert gates, condoleezza rice, and madeline albright on the situation in ukraine. and sunday on q&a, ronald reagan biographer edmond morris. the senate finance committee recently held a hearing with economists and professors on the u.s. tax code and the current system of international taxation. deputy assistant treasury secretary for international tax affairs robert stack was among those testifying at the hearing. ron widen just sitting down is the chairman of the committee. and oren hatch, the ranking member.
the finance committee will come to order. the u.s. tax code is infected with chronic diseases of loopholes indiand inefficiency. they are a significant drag on our economy and are harming u.s. competitiveness. the latest outbreak of this con today onis the growing wave of corporate inversions where american companies move their headquarters out of the united states in pursuit of lower tax rates. the inversion virus now seems to be multiplying every few days. medtronic and many more deals
have either occurred recently or are currently in the works. medtronic with cavidien was record-breaking when it was announced in june. but the ink in the record books had barely dried when abbvie had announced on friday to acquire shire for almost $55 billion. according to the july 15th edition of "marketplace," and i'm going to quote here, what's going on now is a feeding frenzy. every investment banker now has a slide deck that they're taking to any possible company and saying you have to do a corporate inversion now, because if you don't, your competitors will. the congress has been aware of
the add version virus for a long time. in fact, it passed legislation purporting to solve the problem a decade ago. but the underlying sickness continues to gnaw away at our economy with increasing intensity. the american tax code is an anti-competitive mess. accountants, lawyers and fast-buck artists looking for tax shelters feed off of it. this mess is driving american investment dollars overseas. and according to the joint committee on taxation, it is costing american taxpayers billions. on a bipartisan basis, the finance committee must respond now. first, let's work together, colleagues, to immediately cool down the inversion fever. the inversion loophole needs to
be plugged now. second, let's use the space created by the immediate steps to it apply the indisputable, ultimate cure comprehensive tax reform. now, i've got nine long years of sweat equity in the cause of tax reform. with former senator gregg and current senators begich and coates, we have produced which still is the senate's only bipartisan federal income tax overhaul in almost 30 years. now, i'd be the first to say that senators here have differing views about how to go about enacting tax reform. let's, however, recognize that what really counts is that the finance committee isn't back here once again discussing inversions a decade from now. comprehensive tax reform has to happen soon.
the outbreak of inversion showed that without curing the disease once and for all, the illness is going to keep plaguing the american economy. it's going to get tougher to create those good wage red, white and blue american jobs. our cash base is going to keep eroding. cash piles overseas there grow. investments will be driven elsewhere. now, the finance committee invited a number of ceos from the inverting companies to join our discussion today. none accepted our invitation. i hope that these executives will soon change their minds and be willing to answer questions that finance committee members have about this issue. the fact is that without immediate comprehensive tax reform, an antidote to the inversion virus is needed now to protect the american economy.
this wave of inversions may be good for shareholders and investment bankers and private equity firms. yet, the barrage is bad for america. america's free enterprise system is at its best when there is a level playing field. and inversions bestow tax savers on some parties that further distort the free market. absent tax reform being enacted immediately, colleagues, what happens if the inversion virus leads to 20 more inversions over this summer? many inversions to this point have happened in the medical field. but "the wall street journal" just reported that there's evidence of inversion spreading to manufacturing and retail. how many more infections can america's economic body endure. globe markets are expanding. stockpiles of cash sitting overseas grow at record levels. foreign competitors get more
aggressive at chomping at the bit to get a deal on the backs of the american taxpayer. the time for action is now. our committee needs to move on a bipartisan basis to close the loopholes that are fuelling the growth of the inversion virus. then the finance committee needs to cure the disease once and for all with comprehensive tax reform. i just want all colleagues to know that i am going to be working with each of you on a bipartisan basis to accomplish both of these tasks. let me recognize my colleague and friend, senator hatch. >> thank you, mr. chairman. i appreciate you holding this, today's hearing. i think we can all agree that addressing the shortcomings of our international tax system is a critical step on the road to tax reform. as we ask reforms to our tax code, our primary goals should be should be to make the u.s. a better place to do business and to allow american companies more effectively compete with their
foreign counterparts in the world marketplace. sadly, when it comes to our international tax system, much of the attention gets placed elsewhere. for example, in 2013, the oecd launched its shifting of beps project. while we appreciate of bringing tax authorities together to discuss and work through issues, many of us have expressed concerns that the project could be used by other countries as a way to increase taxes on american taxpayers. the issues with the negotiations on the beps project are complex and can have far-reaching and negative consequences. while i think we should be willing to work through these issues until an international consensus is reached, we should not be rushed into accepting a bad deal just for the sake of reaching an agreement. i think we're right to expect that the treasury department will represent its employers and workers in the beps association while discussing with congress
while the discussions proceed. hopefully, in the end, the focus of these discussions will return to base erosion principles, instead of ways that foreign companies can raid the american treasury or american businesses. of course, while the beps negotiations are important, the most high-profile international tax system today happens to be corporation inversions. it seems every day we're hearing about a u.s. multinational opting to invert to a foreign jurisdiction. as i've said publicly on multiple occasions, i'm greatly concerned about these corporate inversions. ultimately, the best way to solve this problem would be to reform our corporate and international tax system in a manner that will make our multinationals competitive against their foreign counterparts. that would mean among other things a significant reduction in the corporate tax rate and major changes to make our international tax system more competitive.
over the past few months we've seen a handful of legislative proposals to address the issue of inversions. most of them are punitive and retroactive. rather than incentivizing american companies to remain in the u.s., these bills would build walls around u.s. corporations in order to keep them from inverting. i think that's not only stupid, but i think it's going to -- going to result in results that nobody wants. this approach in my view completely misses the mark. while it may put a stop to traditional inversions it could actually lead to more acquisition inversions as u.s. multinationals would, under this approach, become more tractive acquisition targets for foreign acquisition reversion, the result is the same continued stripping of the u.s.-act base. it reminds me of an old joke. a drunk is looking for something understand a street light. a police officer walks up to him and asks, what is he looking for. the drunk says my keys.
the police officer helps the drunk look for a few minutes and finally asks did you lose your keys here? the drunk said, no, i lost them across the street. the officer responds then why are you looking for them on this side of the street? and the drunk replies because the light is better over there -- over here. once again, the ultimate answer to this problem and the only way to completely address the issue of reversions is to reform our tax code. however, as i've also said publicly, there may be steps that congress can take to at least partially address this issue in the interim. while i don't support the anti-inversion bills we've seen thus far, i personally am open to considering alternative approaches. although i do have a few stipulations as to what
proposals are considered. for example, whatever approach we take, it should not be retroactive or punitive. and it should be rev knew neutral. our approach should move us towards or at least not away from the territorial tax system. and should not enhance the bias to foreign acquisitions. most importantly, it should not impede our overall progress towards comprehensive tax reform. toward that end, it should not be inconsistent with our house colleagues' approach. i think there's a growing concern among some of our friends on the other side of the aisle to use corporate inversions as a political wedge issue in this election year. in fact, i was recently the recipient of a very politically toned letter from treasury secretary lew on this issue. i hope that's not the direction we take if we want to accomplish something on this issue, we're going to have to work together. as you can see, mr. chairman. we have a lot to discuss today. i want to thank you for holding
this important hearing and i'll look forward to hearing from this very distinguished panel. >> thank you very much, senator hatch. and let me just reiterate i'm very much interested in working with you and our colleagues on both sides of the aisle to address both of these issues. the immediate challenge we're facing with this growing inversion virus. and then, of course, the ultimate cure which is comprehensive tax. i look forward to working with you and our colleagues. we now have six witnesses. our first witness is mr. robert stack who is the deputy assistant secretary for international tax affairs at the treasury department. our next witness will be mr. pascal saint-amans at the center of tax policy and administration of economic cooperation and development. the third witness, dr. desai a professors of finance at harvard business school and professor of law at harvard. a fourth witness will be dr. peter merrill, a doctor of the economics and statistics group at price waterhouse. our fifth witness will be
dr. robinson at the tuck school of business at dartmouth and the final with it knopf will be mr. allan sloan, the senior editor at large for "fortune" magazine. our thanks to all of you for coming. it's our custom that your prepared statements will be made a part of the hearing record in their entirety. if you could use your five minutes to summarize, that would be helpful. i know senators have many questions. we're going to have votes at 10:45. this will be a bit of a juggling act. we will try to handle this as well as the chaotic senate schedule allows. mr. stack, welcome. >> thank you, senators. chairman wyden, ranking member hatch and distinguished members of the committee, i appreciate the opportunity to appear to discuss these important international tax issues to which your committee has devoted substantial effort i'd like to
begin by describing the work we're doing in the g-20 base erosion and profit shifting or beps project. then link that discussion to consideration of the need for international tax reform, as well as measure, outlined in the administration fy-2015 budget proposals to address u.s. base stripping including through so-called inversion transactions. in june 2012 at the g-20 summit in los cabos, mexico, the leaders of the world's largest economies identified as a significant concern the ability of multinational companies reduce their tax bills in high-tax countries by shifting income into low and no-tax jurisdictions. the result was the g-20 oecd beps project. and the beps action plan endorsed by g-20 leaders last the beps action plan outlines 15
specific areas where governments need to work to change the tax rules that encourage companies to shift their income at the expense of the global tax base and our own tax base. the beps project is expected to release the first set of recommendations this fall and is set to conclude its work with final recommendations at the end of 2015. the united states has a great deal at stake in the beps project and a strong interest in its success. our active participation is crucial to protecting our own tax base by stripping by multinational companies. because the united states provides a foreign tax credit to u.s. companies for taxes they pay overseas, the united states also has a strong interest in rules that enjoy a broad international consensus. in addition, as home of some of the world's most successful and vibrant multinationals, we have a stake in insuring that companies play by tax rules that are clear and administrable and companies avoid time consuming expensive tax disputes. failure in the beps project
could well result in countries taking unilateral inconsistent actions there be increasing double taxation, as well as time consumer tax disputes. the treasury and the number of expensed tax disputes. beps project has had a promising beginning and area where is work has been done to resolve gaps. i've outlined those in my submission. as the work moves to 2015 there is more that can be achieved and also several areas where we must guard against bad outcomes. and echoing senator hatch, those outcomes would include international norms because they're vague and easily manipulated by tax authorities. or international norms that could erode the u.s. tax base or increase double taxation. the united states needs to remain deeply engaged in moving the beps project to a successful conclusion between now and the
end of 2015. while the international discussion over beps are ongoing it's worth acknowledging steps the united states could take today to inform our own tax system to improve competitiveness, secure our tax base and reduce incentives for profit shift big u.s. firms. as the president has proposed, we should reform our business tax system by reducing the rate, broadening the base and imposing a minimum tax on foreign earnings but such would only be a start even with low rates, u.s. multinationals would continue to aggressively seek ways to lower the tax bills by shifting the income out of the united states. so what tools do we have at our disposal? the administration's fy-2015 budget contains a series of common sense proposals to protect our u.s. tax base which can be enacted as part of reform or in the contest of our current system. they're outlined in some detail
in our budget and in my written testimony but let me highlight two here. one proposal would strengthen our interest stripping rules and level the playing field by eliminating the ability of u.s. subsidiaries by deducting a disproportionate of the united states. it is especially disconcerting to observe among the foreign multinationals that can most aggressively take advantage of the deficiencies in our interest-stripping rules of the so-called inverted companies, that is foreign parented companies that were previously u.s.-parented. a second deal in the budget would deal with inversions. in secretary lew's letter to congress, i want to emphasize the serious need for the united states to address the potential loss of federal tax revenue from corporate inversion transactions and the need to enact our budget proposal or a similar one aimed at curbing them. once companies invert there is a permanent loss to the u.s. income base since it is safe to assume these companies are not
coming back to the united states. these inversion transactions are on the increase. indeed, we're aware of many more in the works right now. letting our corporate tax base erode through inversions will worsen our fiscal challenges over the coming years and will reward countries that practice race to the bottom tax competition in an effort to lure away our large u.s. multinationals. as the secretary indicated in his june 15th letter, congress should pass anti-inversion legislation immediately with an effective date of may 2014. thank you for the opportunity to speak to you today. i look forward to answering your questions. >> thank you very much, mr. stack. that's very helpful. our next witness will be mr. pascal saint-amans. we welcome you. >> thank you for the opportunity to testify here today. the oecd was founded in the aftermath of world war i and the
leadership of the united states. it's a country-drive organization with 34 countries u.s. being the largest member and playing a key role. and it works by consensus. it does a lot of work on tax and in the tax area, we do consult extensively on the project related to project shifting we have consulted society, businesses or stakeholders. in this project, we have issued a number of discussion drafts, more than 3,500 pages of comments have been received and has been taken into account. we have conducted five public consultations as well as webcasts which have been looked at by more than 10,000 viewers. in the area of tax the oecd facilitates corporation between tax and its countries to eliminate double taxation. taxation is at the core of each country free to set up its
corporate tax system the way it chooses. but as a result, there are risks of double taxation which are not conducive to cross-border investments. since the 1920s, a common set of standards has been agreed and the oecd has abated this work since the 1950s. in particular, we have have come up with a model transaction and transfer pricing guidelines. these rules have worked well, but they have also not kept pace with the economy changes. as a result, they have been good at eliminates double taxation, but they have also facilitated unintended double nontaxation. this is an issue for most governments across the world for many reasons. low taxation in itself is not a problem. on the contrary, the oecd favors low income tax and this is an issue for as long as countries decide to have corporate income
tax, the corporate income tax need to be paid by all taxpayers. and there is a need now to, one, make sure that the rules make sense. the current rules are redacted through organization and easy to through globalization and there is a gain through artificial settings. there is a divorce now between the location of the activity and the location of the profits which can be booked in a jurisdiction where absolutely nothing is happening. as a result, the sovereign right of countries is undermined. this is a global issue. this is not an issue targeted to u.s. companies. u.s. companies only account for less than a quarter of the fortune global 500 companies. so it's a global issue concerning u.s. and non-u.s.
companies. second, there is a need to level the playing field. and an uneven playing field between companies is not conducive to the right relocation of capital. companies are at the domestic level are at a competitive disadvantage because they cannot use the loopholes in the international tax framework. three, there is a need to reduce uncertainty. uncertainty is bad for companies. is bad for investment climate. and there is increased uncertainty because of these rules not making a lot of sense. a number of tax administrations are trained to dispute the position of companies which are legal. and a number of companies are walking away from the consensus, from the common interpretation of the rules and that results in uncoordinated unilateral measures to corporate tax base but that increases uncertainty. and, therefore, we need to address the serious risk for businesses. the response from governments has taken place in the context of the g-20 which has called to
address the issue of base erosion and profit shifting. we have brought all the g-20 and the oecd countries on equal footing to find ways to address this issue of the tax framework by consensus, in two years' time so principles can be agreed quickly to reduce the risk of uncertainty. we need a principled approach and a cost-effective approach to limit the compliance for companies and reduce control. this is not a revenue exercise and should not be, but the useful exercise for the common principles to be more accepted by ensuring consistency in the cross-border environment, increasing such requirement and transparency. the objectives are to secure the consensus, thereafter, reduce uncertainty and improve the way we can solve disputes. we have come up with an action plan of 15 measures which i describe in my written
testimony. some of them are about neutralize hybrid mismatches reducing tax or transfer rules. in conclusion, i would say the issue of base erosion and profit shifting is widely shared across countries, and here in the u.s. in particular, we are aware that you're planning to address the u.s. tax system. and we hope the work we're doing at the international level with your support and the engagement of the u.s. treasury can be useful to promote growth and jobs here in the u.s. by fixing some of the issues by the u.s. tax system. the work we hope is particularly timely and we hope it will inform you of your debate. we, of course, will be available to respond to your questions and further assist. >> thank you, mr. saint-amans. let's go to dr. desai. welcome. >> thank you. it is a pleasure to appear before you today to discuss international tax reform. i'm a professor of finance and a
professor of law at harvard law school. recent merger transactions highlight long simmering problems with u.s. corporate tax particularly with respect to international provisions. my comments attempt to outline the origins, the range of alternative solutions guidelines for evaluating reforms and some reforms that should be avoided. the last 12 months witnessed remarkable wave of merger transactions that facilitated the expatriation of u.s. corporations. such transactions reflect the effects of policy, and the changes structure of multinational firms. from a policy perspective, the transactions highlight the increasing costs of employing a worldwide tax regime when other countries no longer retain such regimes. and a corporate tax rate that stands well above rates employed by our oecd countries. from a firm point of view, the transactions highlight the increased mobility of activity
in today's economy. growing decentering of firms where world headquarters have been split up around the world. and the growing importance of nonu.s. markets for u.s. firms. rather than question the loyalties of executives, it is critical to understand the underlying and secular forces. inversions are merely the most visible manifestation of these developments. in addition to inversions, these decisions are giving rise to entrepreneurs that anticipate. merger patterns that affect domiciles in the united states. the importance of offshore cash for u.s. corporations. investment patterns by u.s. and foreign companies. profit shifting activities that are not value-creating and the consequent negative impact on all the distortions on the u.s. labor force. while it's attempting to limit the more sensational effects and characterize them as paper shuffling this would be
essentially missing the forest for the trees. reform should be focused exclusively on advancing u.s. welfare with particular attention on reforms that would improve american wages. these goals are mistakenly thought to achieve by lilting the foreign activities as foreign activities can be viewed as diverting economic activity away from the u.s. in fact, it suggests the opposite. indeed, american welfare can be advanced by ensuring that investments in the u.s. and abroad are owned by the most productive owner and the american firms flourish abroad. a goal now adopted by most comparable countries. while the developments described above have crystallized the case for international tax reform with an increasing attention on switching territorial regime. some proposals including those with alternative minimum tax on foreign profits are tantamount to a back door wide world regime with even more complexity than today's system. revenue consider, should be considered large by given the very limited revenue provided by current international tax rules and the remarkable complexity and distortions required. more properly, the corporate tax is ripe for reform.
in addition to international rate action the form should address two other major developments in the corporate tax arena. the growing prominence of non-c and the condition junction between profits. a useful blueprint for reform would include moving to a territorial regime unencumbered. considerable rate of 18% to 20%. better alignment of book and tax reporting of corporate profits. and by some taxation of non-c corporation business income. this combination of reforms has the potential of addressing significant changes that will address u.s. welfare. more fundamental reform s more preferred if feasible. legislation that is narrowly focused on inversions or specific transactions runs the risk of being counterproductive. leading to several unintended consequences. for example, rules that increase the size of the foreign target
to ensure the tax benefits of an inversion can deter these transactions but can also lead to more substantive transactions. more substantive transactions are likely to involve the loss that demand the location of mor firms will be paired with larger that demand more activity abroad including headquarters functions. similarly specific targeting may lead to foreign firms leading to some transaction toss avoid those regulations. while it's tempts to address specific transactions in advance, it is useful to recall that the last wave of anti-inversion legislation likely spurred these more recent transaction and reduced the prospect of reform in the intervening years. members of the committee, i adviser the foresight in the issues. i'll be delighted to answer any questions. >> thank you very much, professor. we now welcome dr. peter merrill, and look forward to your comments.
>> thank you. thank you. i'm principle with pricewaterhousecoopers. the focus of my practice is economic effects of tax policy. i'm appearing today on my own behalf and the views i express are my own. i've been asked to compare how the u.s. rules for taxing international income compare with the rules of other countries. my testimony, i will focus on two features of the u.s. corporate tax system that fall far outside international norms. the high corporate rate and the worldwide system of taxation. these features of the u.s. tax system may get more difficult for u.s. companies to compete in global markets. u.s. multinational faces ever growing competition from abroad. in the last 15 years, the number of u.s. companies in the forbes global top 500 list has dropped
by a third from 200 to 135. the loss of global market share by u.s. companies is due to a variety of factors. the out of step u.s. tax system is seen by many as a hindrance rather than a help. the top u.s. corporate statutory rate including state tax is 39.1%. this is the highest rate among major economies. more than 14 points above the average for the other oecd countries and almost 10 points higher than the average for the other g-7 countries. after the tax reform absent of '86, u.s. had a relatively low corporate tax rate. however, since then, the other oecd countries have reduced their rates by a collective average of 19 points while the u.s. federal corporate tax rate was increased in 1933 to 35 whereette has remained since. while it's widely recognized that the statutory corporate tax rate is high, studies show our effective tax rate also is high
by international standards. in addition, the u.s. has a worldwide system under which foreign income earned by foreign subsidiaries of u.s. companies is subject to u.s. tax when received by the u.s. parent. unlike the united states, and all other g-7 countries and unlike 28 of the other 33 oecd countries, they have adopted territorial tax systems. as a result of these trends, u.s. multinationals increasingly face foreign competitors that are taxed under territorial systems within the. oecd, 93% are foreign competitors on the global top 500 list were based in countries that use territorial tax structures. the significance of this is that foreign competitors of the u.s. multinationals can invest their foreign profits at home, without an added home country tax.
turning to recent reforms in 2009 three oecd countries adopted territorial tax systems. the uk, japan and new zealand. the uk adopted territorial system was the first step in a multi-year package which included lowering corporate income tax rate from 28 to 21, with a further reduction to 20 scheduled next year. the british government articulated the rationale for these reforms as follows, quote, the government wants to send out the signal loud and clear that britain is open for business. in recent years, too many businesses have left the uk, amid concerns about tax competitiveness. it's time to reverse this trend. that is why the government is prioritizing corporate tax reform. closed quote. japan's adoption of the 95% dividend exemption system had been advocated by the ministry of economy, trade and industry to encourage a repatriation of foreign earnings. in addition, since 2012,
japan's corporate tax rate has been cut five points to 35.6%. and prime minister abe's cabinet has recently approved a phase reduction to below 30%. and also to 2009, new zealand switched back to a territorial tax system after a 21-year period which it operateded under a system without deferral, there by bringing new zealanded tax system back in alignment with international norms. in closing, the combination of our high corporate rate and worldwide system creates an incentive for u.s. multinationals to reinvest foreign earnings outside the united states. according to a recent study co-authored by tyson, former chair of president clinton's council of economic advisers, switching to a territorial system, even without reducing the u.s. tax rate, would on an ongoing basis reduce annual repatriation by $100 billion a year and create 150,000 new jobs
per year. reforming the new u.s. system to align with international norms would enhance the ability of u.s. companies to compete abroad and create jobs at home. thank you, i'll be happy to answer questions. >> dr. merrill, thank you very much. dr. robinson. >> chairman wyden, ranking member hatch and distinguished members of the committee. it is an honor to appear today to testify on the important topic of international corporate taxation. i'm an associate professor at the tuck's school of business at dartmouth college. i teach financial accounting and taxation and my research centers on multinational corporations. it is clear that reform is needed. the international system is one of the most technically complex areas of the u.s. tax code, but raises little revenue. my testimony summarizes in my view what the academic literatures in economics, finance and accounting collectively offer in terms of evaluating the range of alternative solutions.
the top u.s. federal corporate income tax rate is 35%. this is the highest rate of all oecd countries and far exceeds the 25.3% average. proponents of adopting a territorial system in the u.s. often cite competitiveness issues. a common assertion is that u.s. firms are at a competitive disadvantage because they face larger tax burdens, operate in under a worldwide system than their competitors operating under territorial systems. generally speaking, this is because u.s. firms face a high home country tax on foreign profits, whereas, their competitors face no home country tax on foreign profits. yet, no country operates either a pure worldwide or a pure territorial system. when loopholes exist that facilitate the indefinite deferral of the home country tax on foreign profits under a worldwide system, the pendulum
swings back to a pure territorial system. likewise, as eligibility for the foreign dividend exemption under a territorial system is appropriately restricted, the pendulum swings back to appear worldwide system. this means it is possible for a well-designed territorial system to be at least, if not more, as burdensome as the poorly designed u.s. worldwide system that we have today. evidence suggests that u.s. firms are adept at indefinite deferral. one study finds that financially unconstrained u.s. firms shift as much income as firms operating you said territorial systems. also, there is no evidence that the global tax burden of a firm depends on how foreign tax burdens are taxed in the home country of its parent. there is some evidence that certain location differences globally impact, depending on the home country. for example, a firm resident in home country x realizes a larger reduction in its global tax
burden by operating in source country a than a firm resident in home country y, also operating in sour source country a. whereas, the opposite may be true for these two firms when operating in source company b this suggests that the burden of an international tax system depends significantly on anti-abuse provisions that selectively narrow or broaden the tax base with respect to certain types of income earned in specific locations, rather than whether the tax system is worldwide versus territorial. similarly, other research shows that decisions about headquarter relocations, tax haven operations and ownership structures depend on the existence and strength of anti-abuse legislation. maintaining our current worldwide system with deferral or introducing a territorial system leaves the need for anti-abuse provision that is are difficult to administer and enforce. another consideration is eliminating implicit costs.
avoiding repatriation, which triggers the home country tax on foreign profits under our current system prompts firms to allocate economic resources in an inefficient manner. examples include making value decreasing foreign acquisitions or the inability to respond to domestic investment opportunities. maintaining a worldwide system, but eliminating deferral, would greatly reduce these costs. adopting a territorial system may not. firms operating under territorial systems face implicit costs when attempting to circumvent anti-abuse legislation, which serves as a backstop that otherwise impose as home country tax on foreign profits that have not been subject to robust tax system abroad. to my knowledge there is no estimate of these costs, but my expectation is that they would be greater than under a worldwide system without deferral. my overall assessment is that our international tax system can be adequately reformed.