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tv   U.S. House of Representatives  CSPAN  August 15, 2011 12:00pm-5:00pm EDT

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their memoirs to find of what in america, there is a debt happened at that meeting. another question, please. how about down here? ceiling and there is a doubt the can you stand up and wait for ceiling for presidents. when are we going to reach that the microphone? thank you. doubt ceiling? >> do you think that the upbringing has handicapped him >> i wanted to continue with the in any way? personality issue. it seems to me much greater than everyone spent bringing both enables and in the standings -- not getting mad in public or being afraid to appear as an and limits things. angry black man. >> handicapped in the sense that as i look a great leaders through history, alexander the his grandparents, from kansas, great, julius caesar, cleopatra, certainly, robert schooled him how to behave, moses, lyndon johnson. unlike my own grandparents, indeed all people who were because my grandparents were comfortable with their aggression. it seems to me that barack obama african-americans. his grandparents were kansans. is very tied up in his own his mother was in indonesia. identity as a nice guy. i think it has handicapped him, he was a nice muslim boy, a not in a pejorative sense, but christian boy, healthcare is a in a behavioral way, he became nice thing to give -- all of these programs -- to give to people.
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but unless one is comfortable the guy at the harvard law review by doing the same things fighting, maybe even dying for as he did as -- that he is doing what one believes in, there as president. seems to be a limit for what one he had to be diplomatic and can accomplish. to do that, one needs to be smart to get to that position. comfortable saying i have a nasty side. i am not afraid, when i have it is a handicap. it is a handicap for me in values, but i want to uphold, to business. be nasty to those who disagree. i could not often show my true feelings to a client, collie, to a competitor, because i always >> anybody want to respond to had that thing. that? >> there is no question the angry -- fox news -- come on. most forceful president, the one how would abraham lincoln have that we consider to be great presidents, had in many cases, handled fox news, ronald reagan? it is cacophony in this country. not in all cases, and ability to channel would you label their we are not about sensitive aggression. but i will give you an example solutions. we are about who has the noise of the person considered by historians to be the greatest of the day. president of all.
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abraham lincoln. abraham lincoln did not have an we have to all sit back and aggressive bone in his body. deliberate and be more honest. he was ambitious, very he is an honorable, honest man. reflective, and he put the i think america would do itself greatest priority on try to bring the country back together. an injustice by not reelecting him. so there is no single model for but that is my own view. [applause] presidential success. >> thank you for your comments. >> people who really know obama, ilec the image of how when abraham lincoln -- i like the that worked with him, people who had a lot of dealings with him image of how would abraham describe him as the most lincoln have handled fox news? ruthless man they have ever met. this is a man who will, once you more question from the audience. in the back. are no longer going to be able to help him -- we could point to >> mr. brand touched on it. jeremiah wright, among others -- you are gone. but you have mostly been talking his counsel, who was an early about how barack obama has been supporter, had been a clinton- defining himself. and took the risk of becoming an historically, barack obama is unique in that he has almost obama guy by becoming part of
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the council. been defined as much by the he was cut loose without a opposition as much by himself. second of to the horror of a lot of people in the white house. he has been tried to present he is a man that actually has a himself as a very diplomatic lot of steel in his skeleton. figure, but at the same time people say that he is a secret muslim, a secret communist who hangs out with anarchists. how else could a black man get to the place where he is without that? while that anchors >> and perhaps we are seeing conservatives, there have been a lot of people, especially in that in the campaign against the afghanistan. osama bin laden. obama was always saying we >> how can you truly be funny needed to get out of iraq and go the night before at the white into afghanistan. house correspondents' dinner? but i think people bought into his timing was amazing. he was nailing joke after joke the opposition rhetoric, thinking he is a total of, he is knowing that the next day could be the most fateful moment -- going to get us out of all of fateful moment of his our wars, and they are presidency. >> we have another question. disappointed when obama's says that he is going to do what he let us go down here. says he would do. thank you. >> national director of the how do you feel the opposition rules about campus network. i graduated in 2008. narrative has affected the perception of barack obama? thousands of young people in our >> we have talked about that a
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network worked hard to elect bit. to what extent has the mitch barack obama. i think a lot of us believed we mcconnell position that i would were working for a movement. do anything to not get him elected again -- all of that -- in a lot of ways, the movement was led by obama, a new kind of has that been either good or bad for him? government -- governance. >> i would like to draw a parallel to what happened to tons of young people believe harry truman after the 1948 that organizing for america represented a new way of doing election. truman and herod the presidency governance, and locally, across upon roux about's death. the country, you could get a he won the election by a narrow sense of the public interest. margin. republicans were so embittered, now the that have not worked out in large part, because they had the way that we thought it taken the high road on foreign would, despite being thrilled policy. that health care passed, that no they were so sure they were grants were extended -- a lot going to win they did not want to spoil the ground of foreign of the things that were policy they thought they were accomplished in the past few years -- i think people are going to have to dress themselves. weighing that against their disappointment with ofa. the morning after the election, republicans made a collective while young people will likely decision, we are going to come out for barack obama in destroy this presidency. 2012, how can you ensure that he they used the soft on communism gets the same support with you?
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charge against him. >> let me ask you a question. when china went communist in the young people who organized 1949 and the korean war began, for obama in 2008, if they are they essentially destroyed disappointed, who would they crewman's presidency. vote for? there was no ban on truman >> i am hearing people considering whether or not to running for election again, but come back to the campaign. he was so unpopular, he could i think a lot of them are, they not have gotten the nomination, still believe in obama, but even with his own party. there is certainly some disillusionment. >> so is about the youth vote. so this unrelenting opposition, unfortunately, sometimes works. bill? and it has worked pretty well >> in these economic against obama. and i say this despite the fact circumstances, it is harder to that i said earlier -- and i run as an incumbent as opposed still think -- he had done as to someone with a blank slate, well as at about anybody could upon whom people like you can project their own ideals. have. given the head when that he had been dealing with -- hurricanes to govern is to disillusion people. that is the way it goes. -- he has still done remarkably well, but that does not mean it the case he will have to make is is going to go away. better made than somebody else. >> another question down here please. it may well be the kind of campaign he runs is a campaign please stand up. thank you.
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> i listened to mr. brandt'd's of a president in the middle of the war. you have to stay the course. victory has not yet been achieved. >> george bush in 2004. discussion about both houses and >> at least you know me, we are immediately went to the idea moving the country in the right that you could get 12 votes, but direction. you only needed one to break a if you throw me out now, we are going to lose all the progress filibuster in the senate. then i heard george talked about we made. >> another question. how shrewd and ruthless obama is. can they get a microphone over here, to the gentleman in the what i want to raise is the white shirt? please stand up. prospect that obama needs to raise $1 billion. >> thank you. obama needs to make the a.i.g. one of the major bonuses look like they are high- responsibilities of president is minded when they are perhaps the stewardship of foreign policy. two specific questions. legal but unethical. how would you assess his that citizens united is a change handling of the palestinian- in the playing field. israeli negotiations? with 59 votes, you do not really secondly, the arab spring? feel you have all the democrats
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because they can go get money. >> who would like to take that? lyndon johnson did not need to argue as hard against money. >> george, you can take that. is it not the context that is >> i actually think foreign policy has been his strongest trapping this presidency, rather point. he has handled two wars, a third than the failings of his personality? >> lyndon johnson did not need that was sort of laid on his table. to worry about running against money quite so hard, partly the most vexing relationship that u.s. has had in the past because he always said texas oil money behind him. but he had something just as with any of its " allies close tough, which is the southern vote in pakistan. conservative midwestern -- "allies" in pakistan. domination of congress. when johnson came into office, and his conservative coalition was formed in 1937 -- 37 in response to the supreme court obama made a few rookie packing bill, and stayed in mistakes, maybe, in 2009, but i power a quarter century. roosevelt never got a single am not going to lay that one on him. major domestic bill through that is a situation that no congress after 1937. american president can possibly no real major legislation passed simply work his will on. until johnson came into office. the arab spring, he was always a
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step behind. every president has huge i do not think he quite grasp problems facing them. what a world historical moment this was, and that there was an just to go back to a point, audience in the arab world paying close attention to what about being comfortable in your he was saying. personality, not afraid to be i think his country by country ruthless, i will tell you what choices, some of the tough the rules listed for lyndon choices -- do you put s johnson. i was just listening to a tape schmidtaleh out in yemen, for something i am writing now. everyone knew that if you denied him a vote, he would never stop mubarak -- do you push saleh out trying to pay you back. there is a crucial moment in the in yemen, mubarak in egypt, has finance committee. it happened to be 9-8 against him, and he has to change this vote. been good. he has got five minutes to call >> to add to that, to go back to the finance committee. he calls the democrat of ohio what i said in the beginning, if and he says, i cannot do that. you look at things in historical my company needs this tax break. context, you could say, how big he says, i will lose faith. is the arab spring going to
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appear 100 years from now? and you have to hear his voice on the tape. in a historical context, perhaps the thing that will be dominant, you saved my face today, i will most significant about his foreign policy, is that when he save your face tomorrow. came to office the u.s. was the >> you are absolutely right. the context is widely different. subject of anger and contempt throughout the world. money makes it different. somehow, he has brought the u.s. interest groups make it back into a position where different, media makes it different. everyone is cooperating and but some things are permanent, still we are in a leadership you are talking about how to use power. role. one aspect of using power is in a broad sense, that could be the most significant thing. instilling fear. >> another question down here obama has this ruthlessness, but please. he uses it with the wrong people. it is more the people who work >> as i look around, i might be for him, who are his allies at one time or another who can tell the only african-american male here. [laughter] you, he will cut you off if you let me just say this. stopped being useful to him. barack obama is a type. do you think john boehner is he has been trained by his afraid obama, mitch mcconnell? is joe lieberman of rid of parents and grandparents, as i obama? was trained by my parents and >> should they be? grandparents, not to get to a
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>> yes, absolutely. agree with the white folks. that is just the opposite of i asked david axelrod about this what we want to do. when i was writing a piece about we want to be participants in obama's first year. american life. i thought there was a missing if i were angry and bitter and element of the year. walked around the crown and all letting potential friends and day, i would not have many enemies know that there would be friends or business partners in a reward for being a friend, and life. a pen in the league for being an so we are trained in the largely enemy. if you cannot do that, there is professional white world to no price to oppose you. behave a certain way. i learned that from my mother. democrats opposed him on health care bill in ways that are he learned it from his mother terribly damaging to him, and and grandparents. republicans have been nothing so we can get angry. my wife can attest to that. but opposed to him. perhaps for other reasons that we talked about earlier, perhaps but in our public persona, we it is deep within him. are trained -- our behavior is he does not seem to want to be to be upright but not up tight. seen as punishing people, and you have to be willing to punish to be real not phony, but to people. i think it has been a missing also listened and try to convey weapon in his arsenal. it sounds crude talk about politics this way, but this is that we are not going to jump part of what it is about. you. i asked a number of senators, is
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i say, let us hug em, not mug obama appeared on capitol hill? they said, absolutely not. em. >> as opposed to the former i am 1000% a supporter of the speaker of the house, for example? president. nancy pelosi? i was four years ago, and i am >> she was feared. now. he can learn -- they all learn lyndon johnson was feared. on the job. andrew johnson had to be taught >> we are going to be wrapping how to read by his wife. it up, so if you want to include let us get real. a final thought. not every president walks in and >> this will be my final has a bed of roses. thought. obama faces a challenge that lincoln did not have a bed of lyndon johnson, franklin roosevelt did not have to deal roses. george washington, they wanted with. we have gone beyond the days to make him a king. when bipartisanship was at all he could have been king george. possible. he said no. partiese 1960's, both included liberals and conservatives. so it was possible for civil rights legislation, to find a coalition from both parties. the democratic party had all
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those democratic, southern conservatives. but it also had liberal democrats. the republican party had northeastern liberals and midwestern conservatives. but with the passage of civil rights, more precisely, when lincoln -- lyndon johnson and the flag of the democratic party to support reforms, he gave the 07 conservative the right to leave the democratic party, and they did. the stock then became the center of gravity for the republican party. we have achieved a point now where it if you are a conservative in this country, you are republican. if you are liberal, you are a democrat. there is effectively no overlap. with the result of the parties said to themselves out. add to this the perfection, if you want to call that this, of gerrymandering with computers. every seat in the house is safe for incumbents.
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republicans in congress do not need to worry about a challenge from the left. they are looking at the right. the days when you could reach across the aisle to look -- to form some sort of consensus, they are gone for the time being. some states are appointing independent commissions to draw up congressional districts, and that will dilute power of party to some extent, but you cannot expect the of party to go along with you. >> and that is a subject for another panel. this has been wonderful. i know for a flock -- fact bob caro will not be writing a biography about obama. george, it could fall on you. >> my boss already did it. i cannot show him up. >> under any circumstances, i
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think the by ratification of our presidents is in extremely good hands. stay tune for what happens next thank you all for coming. [applause] thank you for coming. there is a coffee break out in the garden. at 4:30, we have a panel on new media. so please come back. >> president obama sets out today on a three-day bus tour through minnesota, iowa, and illinois. he will talk about the economy and jobs. today he stops in minnesota and then drives south to iowa where he will hold another town hall this afternoon. on tuesday, the president will hold what the white house is billing a ruble economic forum in illinois. he will be joined by agriculture secretary tom vilsack to
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announce opportunities in that area. he will wrap up with two town hall meetings in northwestern illinois before returning to washington. on thursday, he flies with his family to martha's vineyard for his annual summer vacation. live coverage of the president this afternoon from canyon false. it is a official white house tour, not a campaign stop. c-span2 will be live at 2:00 eastern with a look at the future of social security and possible changes to the program going into the 2012 elections. you will hear from but was halted a skin -- douglas holtz- eakin. tonight on "the communicators," legislative efforts to deal with cybersecurity.
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that is tonight at 8:00 eastern on c-span2. with the recent focus on the national debt and deficit, we give you an historical look at these issues. the annual freedom fest " tackle these topics at the annual retreat in las vegas. this summit looks at whether we are headed for another french or american revolution, and looks at the economy. we will hear from john mackey, frank trotter, and some others. we will show you as much of it as we can until we have live coverage of president obama in minnesota >> we are delighted tou here, and we're on to talk today about the american versus the french revolution.
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to get this discussion started we will talk to tom palmer, who was with atlas international, and he has been reading numerous books, and coming up to speed on the french revolution. he is well vers in the american revolution. tom, what have you learned that you can share with our audience regarding your views of the american versus french revolution? >> before we get started, this guy has an eye that, a computer, and he is better prepared than anybody else. >> life is unfair.
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i would like to start by taking issue with a remark that was made by john adams on stage here, and it is common among anglo saxon speakers. is mistaken that somehow bastille day, today, is a bad day to celebrate. i think it is a great day to celebrate, the tearing down of the best deal, and the liberation of the small number of prisoners who were held there. seven people at the time. what happened later, which recall the french revolution, was a disaster, and it was a disaster because of economic policies that could have been avoided, and our good friends who were friends of thomas jefferson, they moved to america, and their son set up
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the dupont company. he said to not do this. it had to do with monetary policy, which matters a great deal. a little bit of background. the dominant interpretation of the french revolution is either a marxist, a clash of protective forces, the feudal system versus the rising capitalistourse policy. this is ruish. it has been established this is false on every count. there is nothing to be said for that interpretation. no good historian today -- and it persists. we still hear this language read the other is the conservative interpretation. it is also mistaken, the one with an associate with john adams, that somehow it was a mistake talking about the rights of man. in fact, most americans were enthusiastic about the origin.
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it started in a fiscal crisis, as did the american revolution, a lot of debts and a call for new taxes to pay them off. the french king them had bankrupted itself in 1786. it was declared to be insolvent. they had already paid out to tax revenues. they said, where is the money going to come from? they found they could not get anything done. finally, in 1788, the call for the meeting of the state's general for the nextear, the first time in 175 years that the body was to be convened. when they met, they made some decisions that were quite right. the third estate among the three said we are the assembly of the nation. we do not want to be coved in this medieval fashion anymore. the fundamental crucial mistake was not repudiating the debt, and it is what we're on to face, coming up right now, with the debt ceiling, a similar
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question. i think they should have said this is not our debt. we're not responsible for this. the consequence was that they could not find a way to raise taxes and they could not repeat that, partly because it was a widely held, so be quite so many people were owners of government that, and did not want to lose the rents that would accrue. they've made a catastrophic decision. the nationalized theands of the church, which is not exactly what we think about churches today. these were state-favored institutions, and said they would seize these lands and auction them to pay off the debt. they issued the interest-bearing loan that they replaced the old debt with this new loan that would be use to buy the church lands picnic the scheme -- church lands. the scheme was a big mistake.
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here is what edmund burke had to say and i have never found a conservative who will cite for a cricism of the revolution who understood burke. he said, and read it carefully, this audience will understand what he is saying. most readers cannot comprehend lives. "industry without vigor, congress expiring, revenue unpaid, people impoverished, a church pillaged, a state not relieved, anarchy made the constitution of making them, and everything human and divine sacrificed to the idol of public credit." people read this today and have no idea what they're talking about. he means the national debt. national bankruptcy is a consequence, and the crown all, the paper securities of new top
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during power, the discredited paper security of impostures -- impoverished supporters held at as the support of an empire. in lieu the two great recognized -- today people think he is talking about birds or lizards -- species -- gold and silver. the lasting conventional credit of mankind, which disappeared d hid theelves in the earth from whence they came. when the principle of property was systematically subverted. he understood theconomic foundation of what was the turn out to be a disaster. it was not that they started with bad principles, as many conservatives misunderstand. it was a big mistake to challenge the market, to
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establish representative government, but rather, they started out very early on by is destroying their own monetary system. this was a catastrophe. bad money drives out good, because they traded at a fixed ratio, in order to pay a debt in either gold or paper, as paper was the proceeding because they were pting more of it, i paid in paper, not in a bowl. gold was court said. -- gold was hoarded. there was a currency shortage because the notes were only issued in large nets. they had to issue small notes. this may sound familiar to some of you, and i would like to read one of the arguments, a poor, 1791, another issue of the paper currency. they should make up for the scarcity of cash, and revive
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trade and manufacturing, by reviving circulation, which has languished because of the means to sustain it. can you say stimulus, quantitative easing? this is the essentially the same thing. the economy is languishing because there is not enough monein circulation, and samuel dupont said moneys the medium of exchange. what you need is production of wealth. money is not wealth. it is a medium of exchange. wealth is good and services, which ultimately exchanged against each other. e consequence of this was accelerating inflation, more inflation, the collapse of the monetary system, skyrocketing prices, and price controls. that is of course the solution, price controls. people clamored for
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controlling prices. you'd see the consequence of these disasters policies. 1793, the law the maximum is installed, and in all the histories of the french revolution i've read, most of them mentioned this on one page, as a passing sort of thing. when are the guillotine's established in leon? for the purpose of be heading speculators. people who are not bringing brad to the market. they have the bread. they know what. if we chop off the heads of more bakers, there will be more red. unassailable logic. this accelerates the total social economic collapse. the root of this was bad economic policy. it was largely an economic terror, and it was not
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inevitable tt they do this. they should have gone their house in order early and saiwe are going to cut spending, which is what we should ask our congress to do, because we are not at -- not that far off from the same fiscal problem. its a very hard thing to do, and i think holding out the possibility of repudiating the debt or restructuring it has the colleted it restructuring its day, is much better. i will mention parallels that she's given us pause for concern. first is the immediacy of many of our economic leaders. timothy geithner, who is a smart guy, i saw him on television saying, if we do not raise the debt ceiling and allow more borrowing, the credit markets will downgrade our bonds. they will find out we are spending more money than the treasury is getting in. they do not kn that?
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i think they know that already. i do not think that is thought to have big impact on the willingness of people to lend money to our government. the second thing is we have institutional rigidities. everyone gets a subsidy, no one wants to lose it. on the tax side we have another problem. two major features the remind me of the pre-revolutionary situation in france, homeowner'' mortgage interest deduction. this is one cause that contributed to the fiscal crisis. everybody got to get a bigger more and more money going out. this is a big problem. and that particular tax privilege or tax preference has pushed us in t wrong direction. the second one that is pushing us toward socialized medicine is in on taxability of your
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insurance, so that everybody gets it from their employer. this is not the case before. this goes ck to world war ii, insurance is not a taxable benefit. you do not shop around, and the consequence is it has put in a set of things that is moving us to a single-payer system, which means the state, rationing, favored people get treatment, on favored peoe did not. we need to address those on the tax side to avoid these incentives that are pushing us more and more towards the control of financial markets and heal care. long and short-term i'm a big fan of the principle of the french revolution, but the economic policy was a catastrophe, and this is the primary reason why it went
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wrong, and there are important lessons there for the and i did states today. thank you. -- for the united states today. thank you. >> thank you. it would be a good thing that the u.s. repeated that because it bring fiscal sanity back into government, and it would demonstrate once and for all that treasury securities are not the safest investment. they are the true job bonds of our market. it is a tragedy that joe bonds refer to private corporations who are trying to hire workers and trying to create a profitable business and they get the shaft compared to the
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treasuries. there's a lesson here, and i would like to get a comment on someone on the panel who would like to comment, and that is the u.s. also heavily into debt, both the state and the federal government, they also inflated their continental dollar, not on the same level as france, but they still went in that direction. however, the hamilton plan, which is often criticized, turned out to be very successful. it was oversubscribed, and basically, a hamilton plan was to take all the state debt from the states so they did not ha to repay that and addedt to the federal debt that they owed to france and other foreign countries, and get it was
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oversubscribed. why was it oversubscribed by investors? because in the hamilton plan, they had a tax system, mainly to tariffs and to excise taxes, and what is known as a sinking fund, to deliberately paid off the national debt by i believe 1812 or around that time, and that is when they did in fact pay off the debt. my question to you is, do we really need to go toward repudiation or could we adopt a hamilton type of plan? some of you are having a sinking feeling hearing about the scori, frank, what would you think about a plant like that to solve our problems? >> i have been trying to put out your dollar out here, and i am not sure that the treasury will
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be able to do that. a sinking fund is one way to repudiate -- to bring that under control it assumes at some point that you actually have the renue to do so. at this point, unfortunately, the numberi've seen, i add the numbers, does not give me that in a warm feeling that is an easy or something that does not produce revolutions in the street along the way. that is one of the issues with all the spending cuts and we all saw at the madison courthouse on a pretty minor issue, and you take good additional revenue, and good tax revenue, to establish a fund, it makes it difficult to do. >> your bank came through the tarp crisis quite nicely.
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you're not forced to take part money and you were financially sound througut that time period. why was that? why were you not attempted to engage an easy loans? how did you escape from that question are >> if it was tempting and we joke about it today. you're just trying toet this into the subprime loans. but they took a look at the market. several things that people talk about, all the liquidity in the market, with the foreign governments buying debt, pushing down the real interest rates o there, people who felt forced to buy these mortgages and establish them, you can imagine the committees sitting around, why we cannot get enough deal here, put the money into these. they will pay off. we cnot take the opportunity to do that. we are a private company and did not have to worry about the quarterly earnings. i like to see our government but the brakes on and stop doing that as well.
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>> doug casey is here with casey research. we're delighted to have him. what you think the government should do to solve its debt problem and now, a $14 trillion deficit that seems to be growing higher, higher taxes, cutting government spending, off what combination would you like to see? >> i want to complement,. that was a fantastic, accurate, sound presentation. >> let me get to the microphone. >> i hate these damn microphones. they sound like you're speaking into a 55-gallon barrel. but i want to complement tom on the presentation. i do not have anything to do with anything that tom sadr
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ank said. but what do we do about this debt? it is going to result in the overthrow of the current civilization heren america. such as it is. my recommendation that we be defaulted on. i would recommend many years ago, when it was a much more manageable problem that it is now. i will give you three reasons why the u.s. government, which i do not think should exist -- [laughter] but nonetheless it should default on the dead. number one, it would punish the people that were stupid enough to lend it money and make it possible for them to do all of the destructive things that have done. [applause] and i'm very sorry for the people that have pension funds and people that their banks would not be able to pay them back or anything like that. that is just tough lot. i would say, actions have
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consequences, number one. i like to punish the people that have lent money to the government. i cannot think that anything is owed to them because they were lending to the wrong kind of borrower. number two, if you have to default on the debt for moral reasons. otherwise, it is an albatross around necks of the next generation and generations after that. it is turni them into service. you cannot do that to people that are yet unborn. people that are alive today, who lived above their means because of that debt and other debts, let them pay the piper. not the people in the future. that is the sec reason. moral reasons. the next generation. and that third reason is that the u.s. government defaulting on its debt might make it impossible for the u.s. government, if it is going to exist, which is no guarantee it will, certainly not in its present form, to borrow again.
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that is the third huge benefits. i see these three big benefits. [laughter] some will say, we do not want to overturn the basis of society. maybe we should pay it off. well, i understand. it may be possible. look at china. 30 years ago, it was nothing but poor, ignorant, starving peasants. there was nothing in china. and now the place is blossoming. ju as many countries around world, not just china. but i do not think that as possibleor it to be turned around here in the united states. it is not possible to do in the next 30 years what china did in the last 30. why do i say that? you would have to overturn the whole government in this country anyway. all the regulations in this country make it so hard to produce, only an idiot, i would think, would set up a business
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in this country without looking at another country where it is much easier, ok? regulations are choking this country and their cars are getting worse, not better. that is not going to work. the taxesn this country are brutally high. only an idiot would set up a business in this country without investigating what they could do in another country. and the taxes are going higher in this budget. and there is no saving, no building of capital in this country. why? because of inftion and the artificially depressed interest rates. the is no capital to do anything. let's just borrow it from the chinese. so you cannot pay off the debt. it is not going to happen. i'm very gloomy about the political future of this country. [laughter] i think we will not have a second american revolution but something that resembles the french revolution. and i amot looking forward to the revolution. every revolution, at least for a
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generation after word, it is worse than what they overthrew. i am so glad for the french. it was wonderful that they read the age of regime. except it was worse for the next 20 years, robespierre and then the poll in. and the same thing with the american spirit there was no reason to kick the british out. 3 percent taxes, that is what they were extracting. but this country would have been much better for having the gigantic, prosperous version then turning into the behemoths that it has today. i do not even approve of the american revolution. [laughter] look at what happened is with idiots. right after the american revolution, this of the alien and sedition acts and so forth. i do not approve of rolution, contrary to what chips said, but
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we are going have one. and financially, they are primarily economically based. americans are so drugged up on prozac and watching the whatever that show is where somebody sayings. what the was that called? [unintelligible] of course company when they cannot buy things a walmart anymore because it is too expensive and the chinese will not lend us money anymore, this place, it is going to be a disaster in this country. do i care? well -- i will be watching this on my widescreen from some place that is comfortable. and you can people can watch it out your front windows. [laughter] [applause] >> there is an old saying on wall street, no one is so
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bearish as a sold-out world. -- bull. i wod like to return to a little more sanity with hearing john mackey, who happens to be one of those idiots to does run a major corporation in the united states. [laughte and very successfully, not because of, but despite government regulation. john, give us your perspective -- obviously a default on debt could have major repercussions for the u.s. economy and your business. is there in your view a way out of the government to maintain some kind of stability and get backo fiscal sanity? or does it matter to you? >> one thing i love abo freedomfest is that when i come there, everywhere else, i am like this radical guide.
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[laughter] and i am like the one same person here. -- sane person at the show. [laughter] i wish you could see all the cool stuff tom has got here. he is showing the deficit over the next 70 years. i love dogs. he is such a funny guy. i always love listening thim because he is just got such a great sense of humor. but it is not too late now. cannot cross the point of no return yet. but the problem is we are approaching aeriod we can handle the deficit that we have right now but can we handle the deficit that we will see in the next 30 or 40 years? not unless there are fundamental changes that occur.
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today, it is a spending problem. the government is out of control. makes promises it cannot possibly keep. there is just no way debt -- we're not going to pay all the entitlements that -- we are not going to do it. there is no way. there are not enough revenues. you can demagogue about taxing the rich, but if you just look at the statistics, there is not enough money there. ey are going to cut spending. somehow or another. we have not yet passed the point of no return. if we do >> we leave this conversation now. you can find it at c-span.org. we take you to canyon falls, minn., for a live town hall meeting with president obama.
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♪ [applause] >> hello, a canyon false -- canyon falls. hello, minnesota. [applause] what a spectacular setting. it is wonderful to see all of you here today. thank you for showing up. what an incredible setting. everybody, feel free to have a seat.
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we will be here for a while. a couple of introductions i want to make real quick, although these people do not need any introduction. the outstanding governor of minnesota, mark davis, is in the house. [applause] two of the finest senators in the country, amy] are and al franken are here -- " car -- klobuchar and al franken are here. tim walsh, keith ellison are also here. [applause] the secretary of the department of agriculture tom vilsack is here. [applause] and i want to thank the mayor of canyon falls for organizing perfect weather. robbie robinson is here. [applause]
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so i am very pleased to be out of washington. [applause] [no audio] >> we are having some problems
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bringing you the feed from minnesota of the president's minnesota tour today. as we try to fix the feed, we want to let you know he is setting out on a three-city bus door to talk about the economy, jobs. today he is in cannon falls, >> think about it, over the past six months we have had a string of bad luck speak. there were some things we could not control. there was an arab spring that promises more rights and more democracy, but it also drove up gas prices. did you have the situation in europe where they are dealing with all sorts of the
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challenges. we had a tsunami in japan, and that broke supply chains and created difficulties for the economy all across the globe. there were a bunch of things taking place over the past six months that were not within our control, but here is the thing, the question is how we handle these challenges? do we rise to the occasion? do we pull together? do we make smart decisions? what has been happening over the , and a littles bit longer than that if we are honest with ourselves, is that we of a political culture that does not seem willing to make the tough choices to move america forward. we have a willingness to play partisan games and engaged in brinkmanship that not only cost us in terms of the economy now,
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but also it will place a burden on future generations. the question is, can we break out of that pattern? can we break out of that pattern? think about it, we just went through the debacle with the debt ceiling, entirely self- inflicted wound. it was not something that was necessary. we have put forward a plan that would have stabilized our debt and deficit for years to come. but because we have politics in which some folks in congress, not the folks that are here, but some in congress, would rather receive their opponents lose week ended ofwhein, treating more damage and
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uncertainty in an economy that was already weak. we cannot have patience with that kind of behavior anymore. i know you are frustrated, and i am frustrated also. we have got to focus on growing this economy, putting people back to work in making sure the american dream is not just there for this generation, but the next generation. [applause] >> another way of putting this is we expect the political representatives to show the same level of responsibility that all of you show. i do not know most of you, but i can guess that you are all working hard, managing your budgets, putting something away for your kids' college education, maybe for your retirement.
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you are at the local church working at a food pantry or doing something to help out your community. you are following through on your responsibilities, and that is true all across the country. people are doing the right thing. if you could do the right thing, then folks in washington have to do the right thing. [applause] if we do that, there is not a problem that we face that we cannot solve. think about it, it the biggest challenge right now is getting people to work. biggest challenge is getting the economy growing as rapidly as it needs to grow. it has been growing. we have been able to reverse the recession. we have added over 2 million jobs in the private sector over the past 17 months. [applause] but we're not growing it as fast as we need to to drive down the
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unemployment rate in a significant way and give people confidence. degummed here are some things we can do right now. -- here are some things that we can do right now. we can renew the payroll tax that put $1,000 in the pockets of a typical family so you have more money in your pockets to meet your obligations and also means businesses have more customers. it means they might hire a few more folks as a consequence. all we need to do is renew it. it is already in place. if we of certainty next year that the syntax that will be in place, that will make businesses make decisions to hire people and open up and make investments congress can do that right now. congress right now could start putting people to work, rebuilding america. one of the biggest things that
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cause this recession was the housing bubble and all of the subprime loans that were going out and getting packaged in wall street and folks were making millions and billions of dollars off of them and the whole thing came crashing down. no one has been hit harder than construction workers. for us to say at a time when interest rates are low, contractors are begging for work, construction workers are lining up to find jobs, let's rebuild america. we could be rebuilding roads and bridges and schools and parks, all across america right now. we could put hundreds of thousands of folks to work right now. there is a bill sitting in congress right now that would set up an infrastructure bank to get that moving attracting private sector dollars, not just congress that -- not just public dollars. congress needs to move.
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right now we have veterans who have taken their place among the greatest of generations and made extraordinary sacrifices. i need these young people -- meet these young people -- [applause] i mean young people 23 and 24- years-old. they are in charge of platoons, making life or death decisions, they are in charge of hundred million dollars worth of equipment, and they are coming home and cannot find work. we said let's give tax breaks to people firing our veterans and let's put them back to work in use their skill to get this country moving again. congress could do that right now. trade deals. they have not always been good for america. there have been times where we have not gotten a fair deal out of our trade deals. but we have put together a
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package that will allow us to chevy's andng some shed thes ford's to korea. that is something that congress could do right now. patton reform is something that a lot of folks to not talk about. -- patent reform, if we could reform how the system works, we could have of entrepreneurs creating businesses like microsoft right now all across the country, but we have to make those investments. congress could make the decision to make it happen. there is no shortage of ideas to put people to work right now. what is needed is action on the part of congress. a willingness to put the partisan games aside and say we will do what is right for the
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country, not what we think will score political points for the next election. [applause] now, we also need to do this in a way that allows government to live within its means. like i said, everyone here, you make responsible choices about what you can afford and cannot afford. america needs to do and can do the exact same thing. there are programs that do not work, so we should stop funding them. there is red tape that needs to be cut, we should cut it. the fact of the matter is that solving our debt and deficit problems simply requires all of us to share in a little bit of sacrifice to be willing to do a little bit more to get this country back on track.
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that is not too much to ask perry and basically what we need to do is cut about four trillion dollars over the next 10 years. that sounds like a big number. it is a big number. you know, if we were able to come as i propose, cut about two trillion dollars in spending, if folks who could best afford it, millionaires and billionaires were willing to eliminate some of the loopholes that they take advantages of in the tax code and do a little bit more, and if we were willing to take on a long-time cost of health care, if we do those things, we could solve this problem tomorrow. i put a deal before the speaker of the house, john painter, that would have solved this problem. he walked away because we cannot
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ask anything of millionaires and billionaires and big corporations in order to close our deficit. warren buffett had an op ed he wrote today. he said we have to stop coddling billionaires' like me. [applause] that is what warren buffett said. he pointed out that he pays a lower tax rate than anybody in his office, including the secretary. he figured out that his tax bill, he paid 17%. the reason is because most of his wealth comes from capital gains. you do not get those tax breaks. you are paying more than not. i may be wrong, but i think you are less wealthy them warm bucket. that is just a guess.
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the point is, if we're willing to do something in a balanced way, making tough choices in terms of spending cuts, and also raising revenue for folks that of done very well, even in a tough economy, then that we can get control of our debt and deficit, and we can start investing in things like education, and basic research and infrastructure that will make sure our future is bright. [applause] it is not that complicated. but it does require everyone be -- being willing to make compromise. i was in michigan the other day and i said i do not know about how things work in your house, but in my house if i said we have to cut back, so we're going to have you stopped shopping completely.
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you cannot buy shoes or dresses, but i am keeping my golf clubs. that would not go over so well. the point is something to happen in washington where we think the kind of compromise that we do every day in our own families with our neighbors, family, co- workers, that somehow that has become a dirty word, and that has to change. that has to stop. [applause] so here is the bottom line -- obviously with the market's going up and down last week and the downgrade all lot of people were feeling anxious in distress and feeling like we have been working so hard over the past 2.5 years to get this economy back out of recession, and some folks are worried we might be slipping back, i want all of you to understand that there is
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nothing that we're facing that we cannot solve with some spirit of america first, a willingness to say we will choose country over party. we're going to choose the next generation over the next election. if we're willing to do that, then i have absolutely no doubt that we can get this economy going, put people to work again, small businesses can start growing again, but i will need your help to make it happen. you have to send a message to washington that it is time for the games to stop. it is time to put country first. [applause] it is time for the games to stop. some folks asking me, why don't
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you call congress back? i said i do not think it will make people feel real encouraged that we of congress come back and all they're doing is arguing again. what they need to do is come to cannon falls, go back to their districts, talk to ordinary folks, find out how frustrated they are, and hopefully when they get back in september they will have a new attitude. [applause] , but i want everyone to understand that i am not here just to enjoy the nice weather, i am here to enlist you end up fights. we're fighting for the future of our country. that is a fight we are going to win. that is a promise that i make with your help. thank you very much, everybody. [applause] thank you.
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so everybody has a seat. here is how we are going to do it. i am going to call on folks and we're going to go girl, boy, to make sure it is fair. i have a couple of daughters, so i know sometimes. all right. right here. go ahead. we have a microphone. introduce yourself. >> first off, president obama, i want to say as a young voter thank you for helping me to believe it will be good someday. i of a question, i promise. my question is, how are you going to use renewable energy to create jobs in the future? >> this is a great question, especially for rural communities all across america. tom boesak, a former governor of
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iowa, and those a little bit about agriculture. when i put him in as the head of the department of agriculture, one of the first things we talked about was how can we mobilize the incredible resourcefulness and hard work of rural communities all across this country, not just to create jobs but when back energy independence. as a consequence, we have put billions of dollars into energy research and to help move in a direction of greater reliance on that fuels that are home grown. so let me give you a couple of examples. one is biofuels. a lot of folks here are familiar with corn-based ethanol, but a fact of the matter is we need to start taking advantage of a whole range of biofuels.
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using step that we do not use for food to create energy- 00-- using stuff we do not use for food to create energy. we are making incredible progress on that front. one of the things i know we are doing is we're working with the department of defense to start saying let's run some of these -- let me just say this, the department of defense uses a lot of fuel. the question is can we get trucks and jeeps and in some cases even fighter jets running on alternative fuels? this is important for the national security and also can provide an incredible boost to communities all across minnesota, all across the country. the other thing that we have to do is look at things like wind
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power and solar power. and the next generation of electric vehicles. when i came into office there were talking about the liquidation of general motors and chrysler. a lot of folks who said -- said you cannot help them. what i said was we cannot afford to lose up to 1 million jobs in this country, particularly in the midwest, and we also cannot afford to lose leadership in terms of building and automotive industry that we used to own. so we turned around automotive companies. they are now making a profit for the first time in decades. they are gaining market share for the first time in years. what we said was if we are point to help you, then you also have to change your ways. you cannot just make money on suv's and trucks.
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there is a place for those, but as gas prices keep on going up, you have to understand people will be trying to save money. what we have now seen is an investment in the electric vehicles, and then we put investments in something called advanced battery manufacturing, because those electric cars, how well they run depends on how good the batteries are, how long they can run before they get recharged. we only have 2% of the advanced battery manufacture and market when i came into office. we are on track to have 30% 50% of that market. we are bickering -- making batteries that go to electric cars made here in the united states of america. it creates jobs, and it creates energy independence, and also improves our environment. that is the kind of approach that we have to take using the
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private sector, understanding what ultimately the private sector will create jobs, and also understand the government can be an effective partner in that process. nowhere is that more true than in rural america. requested. gentleman right here. -- great question. you can borrow my microphone. got it? ok. >> mr. president, i am gary evans. r. brown of broadband company. i have a couple of questions -- messages that i hope you'll take back your colleagues. -- i've run up broadband company. tomorrow we will cross 60 employees -- 100 employees. we are making the investments in this country. my first message is help the job creators. do what it takes. secondly, it was already apparent as the debt debate went
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on that the mood in america had shifted again toward skepticism. and i am hoping that you and your colleagues will do everything possible to make certain that confidence is restored to the country and that we have a bright future. i appreciate what you did during the stimulus act. thank you. >> thank you. [applause] we were talking earlier about rural america, despite all its advantages, especially its people, a disadvantage is it is spread out. population density is not as great. as a consequence, when we have seen these investments in wireless and broadband and all of these new technologies that are stitching the world together, a lot of times world
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-- rural america is left out. and that is why when we came into office, one of the big investments we said we were going to make was and broadband technology so that we can connect every single town all across america. we want 98% coverage when it comes to broadband in the same coverage when it comes to wireless, because what that means is if there is a small business and cannon balls that has a great idea, you do not have to just confine your market to cannon balls, you can start selling in rochester, and then you start selling in the morning, and then you start selling in new york, and maybe start selling something in paris. there are incredible opportunities in terms of business growth, but it requires a connection to all of these wider markets. the days are gone when any business will succeed just by selling reichardt -- where they're located.
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that is why we have made such a big investment in this. i am pleased to see it is working. in terms of boosting confidence, i think people would feel pretty confident if they felt like their leaders were working together. and that is my belief. i also think they are looking for practical common sense. i know it is not the election season yet, but i have to mention that the debate that the other candidates were having the other day, when they were asked to reduce the deficit, reduce the debt, would you be willing to take a deal where it was $5 in spending cuts for every $1 of increased revenue. who would take it? everyone said no. they said how about 10 to one?
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$10 of cuts for every $1 increase in revenue. are you saying that none of you would take it? everyone raise their hand. none of them would take it. think about that. that is just not common sense. ronald reagan, george h. w. bush, bill clinton, the last time when a balanced budget, all of them understood you have to take a balanced approach to solving the deficit and debt problems, the same way a family would. if you knew you had to cut down on your budget, you would not stop funding the college fund for your kids. he would not say sorry, johnny, things are tight, so we're going to keep on taking our annual vacation and i will buy a new car next year, but you are not
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going to college. that is not how you balance your budget. the american people are expecting that same kind of common sense. -- reflected. if it was there, i guarantee confidence would go up. i speak to ceos of companies all across america. what they tell me is they are willing to do a little bit more when it comes to our personal taxes, because they know they have done very well. they said the single most important thing we want is making sure that middle-class families and small businesses are successful, because if they are successful, we will be successful. that is what we're waiting for. that can be achieved, but it will require all of us working together. it was next? this young lady in the green. then i will call on the sky. >> thank you.
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>> i am from harmony. my husband and son and his wife our dairy farmers. for years we have never had very much money, but we have been creating wealth for this country. i would just like to say that with your rural community, i want you to keep in mind that we always create wealth for this country. thank you. you bet. one thing that i work -- think is worth noting, because i will vilsack, because he has done a great job one of our
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great strength as a country is agriculture. one of the pledges that i made when i came into office was we are going to double our exports. of big component of that is agricultural experts -- exports. so far we have seen them rise to over $100 billion. it creates -- that means over 800,000 jobs all across america. that fact of the matter is that a lot of family farmers are still struggling. one of the things we will be talking about during this tour, and we have a roundtable discussion tomorrow, drawing on the works is how we can make sure we can get more capital to small farmers, how can we help young farmers who want to go
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into farming be able to buy land, because land prices have gone up so high. how can we make sure that they are able to market their products affectively? -- how can they market their products effectively? there are a lot of things we can be doing to help the farm economy. as to help the farm economy in rural communities, you help the entire state. if you help the entire state, that is good for the country uphold. thank you for what you do. young man over here. obama, you, president, obam for coming to the great state of minnesota. my name is will morrison. i live in rochester, minn., home of mail clinic.
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i just want to say i do not think we should solve this debt crisis, and it is a crisis, on the backs of the middle-class and poor. we do not have special interests. they do not have lobbyists. i want to be their lobbyists and special interest. i think if we are serious about this debt, we need to ask the millionaires and billionaires to give up their tax breaks are not all the burden is on us. >> i completely agree with you. >> with that, i want to say thank you for the great job your doing. i support you 100%. you got my vote in 2008. i will vote for you in 2012. good luck. >> thank you. thank you. i want to say one thing about this that. when i came into office, we had one trillion dollars of deficits
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already. the debt is the accumulation of the annual deficits year after year. we had a balanced budget in 2000. we then launched two wars we did not pay for. the first time we ever decided not to pay for wars we were want to fight. we just put it on the credit card. we added a prescription job plan for seniors -- drug plan for seniors, which was important, but we did not pay for it. we had tax cuts that were not paid for. that added a huge amount of debt. with the recession coming in, that added more debt, because what happens is you get less tax revenue, businesses have fewer sales, folks may have been laid off, and you are also sending more money out, because of things like unemployment
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insurance, helping farm stay afloat, making sure we were putting folks to work through things like broadband. the debt problem is real and the deficit problem is real, but it is actually a manageable problem. if you do not believe me, think about it. even after the downgrade, the next day when the stock markets were going haywire and everyone was thinking what is the best for your investment, what did they invest in? they invested in treasurys. the market said america is still one of our best bets. they are betting on us. that is why you have to recognize this is not a financial crisis, although it could turn it into one if we do not do anything about it. this is a political crisis. this is manageable. that does not mean that we
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cannot and do not have to make tough choices, we do. in the debt deal we cut 1 trillion dollars worth of spending over 10 years. we protected programs for students for student loans through the pell grant program. we protected programs for hungry kids. we protected health care for seniors. we protected people who were the most honorable and needed the most help, but we make cuts in areas where we had just got carried away. that was important to do. that solves about one-fourth of the problem. we have more work to do. the key, and i want everyone to pay attention to this as the debate unfolds over the next couple of months, the key is not to cut more out of programs for poor folks and pork -- and
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programs for seniors, the key is to get a long-term plan for fiscal stability. in the short-term we should make more investments that will put people to work and get the economy moving. my grandma, even though she worked hard all her life and had a decent income most of her was usually rely on medicare towards the end of her life, so i know what medicare means to seniors. our health care costs have been skyrocketing, and more seniors are joining up because the
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population is getting older. part of what i recommended when we were in these negotiations, although we did not get a commitment from the other side, is to say can we manage to reduce the overall cost of medicare in a way that preserves still preserves the integrity of the system? what some folks on the other side are proposing is actually to turn medicare into a voucher program. so instead of fixing the system, they would completely overhaul it. what would happen is you would get a voucher that says you are allowed to get a certain amount on health care. if your health care costs keep going above that, you are out of luck. it was estimated under their plan the average senior would pay $6,000 per more per year for their medicare.
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i think that is a bad idea. i think there are better ways for us to manage the medicare problem than to put a burden on seniors. one example is if i were paying my fair share of taxes, then we do not have to put that kind of burden on seniors. i do not want a tax breaks that requires 33 seniors to pay thousands of dollars more on their health care. i do not need it, and it is not the right thing to do. >> welcome to minnesota. mr. president, i have been sleeping in my truck for two days to ask you this collection -- question. i am recovering from lung cancer.
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i tried to get social security /disability and they turn me down. my question to you is we can talk about social security a little bit. >> here is my commitment. i do not know about the other folks, but i will make a commitment, social security will not only be there for you, but it will also be there for the next generation and the generation after that, because it is one of the most important social programs that have. -- that we have. they call it an entitlement, but it is not an entitlement. we pay for it. it is getting taken out of your paycheck. it is true that as the population gets older there will be more and more pressure on the social security system, but the
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social security system is not the cause of the debt and deficit. there are some modest adjustments that can be made that will make a solvent for 75 years. that is about as long as you can think ahead as a country. the way to do it is similar to the way that ronald reagan and tip o'neill fix social security back in 1983. they said we will make some modest adjustments that are phased in over a very long amount of time. most folks do not notice this -- do not notice them. if we do that and all the money goes back into sauces security, then there is no reason why social security will not be there for future generations. again, this is an example of where everyone gets so dug in on their positions. i have to say in fairness,
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because i have commented on the other side and not zero weeks being flexible. there have been times when democrats are not always as flexible as we need to be. sometimes i do get frustrated when i hear folks say you cannot make any changes to any government programs. that cannot be right. most companies every year are thinking what can we do better? are there changes that we could make an order to have the operation goes smoother. government should have to do the same thing. that does not mean we have to make radical changes that dismantle what is the most important social security program that we have. again, the problem is not the program. the program is the policy. you will hear a lot of people saying government is broken. government and politics are two different things.
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government is our troops who are fighting on our behalf in afghanistan and iraq. that is government. governments are all of those fema folks when there is a flood or drought or some emergency who come out and helping people out. that is government. governments are the firefighters and police officers and the folks to keep our water clean and our air clean to breed and our agricultural workers. when you go to a national park, that is government. do not be confused. as repressed -- as frustrated as you are about politics, do not buy into the notion that somehow government is what is holding us back. too much government, it is
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oppressive and bureaucratic and not listening to people not responsive to the needs of people and not customer friendly, that is a problem. if you stand in line that some government office and no one seems to be paying any attention to you, that needs to be fixed. if someone is trying to regulate a small business and not paying attention to the realities of a small business, that is a problem. do not buy into the whole notion that somehow government does not do was any good -- do us any good. government is what sets a man to the moon and invested in research and technology all over the country. i think it is a gentleman stern. right back there. yes, sir. >> our microphone guys are doing
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a great job. thank you. >> welcome. we're really pleased to have you here. you did a little lead into my question a couple of minutes ago when you said government is a lot of things. as we look around us right now and see we are surrounded by school buses, that is where i am headed. it is because we cannot improve the economy unless we improve the foundations, and education is that the foundation of this economy. i would like to know what it is that your administration is planning on doing to bolster education and the face of state cuts, 45 students to classroom, cutting teachers and so forth. >> let me tell you what we did when i came into office.
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the recovery act as about 1/3 to support states and prevent layoffs of teachers and firefighters and police officers. thanks to the work that amy and al and keith and tim and others did, and even after the first round of the recovery act, we then gave states additional assistance to prevent layoffs of teachers. at a certain point, the money ran out. states are still going through a tough time. i personally believe that won them the most effective ways to help the economy is to make sure we're not seeing more teacher layoffs. i will be working with congress and state governments all across the country to prevent that from happening, because you are exactly right. we cannot feed our feed corn. we cannot shortchange
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investments in the future, and no investment is more important than the future. and the challenge we have an education is not just money. we also have to make it work better. that is why what my administration has done is to say we will put more money into education,, but we will also look for high standards and reform at the state level. what we have tried to do is collaborate with governors and say instead of no child left behind, that label schools failures and does not give them help they need, what we think you should do is we will work with you to come up with what are the things that work? how do we help train the young teachers more effectively? how do we make sure there is good data so instead of just teaching the tests, teachers are
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able to get results from a test to use to actually improve teaching in the classroom while it is taking place right then. [applause] the steps we have taken, including something called race to the top that promotes competition does is it you're doing a good job, we will give you extra money to implement the reforms in good ideas. we are actually starting to see improvement across the country. the problem is the improvement is undermined because the teachers are getting laid off and teachers -- kids are going to school four days per week in some states instead of five. suddenly things like music and art and physical education that used to be critical to any school experience, suddenly that step is going away. that is undermining the reforms we are making. my argument to every governor
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and every local school district is, figure out what you can do without, but do not shortchange education. ultimately the most important thing in education are the teachers, and we have to give them support. in fact, we should be paying them more than they are getting paid. if we're doing that, we will be in pretty good shape. [applause] gentleman -- it is a lady stern. right there in the sun glasses. in the blue blouse right there. there we go. >> just want to say i am really excited that you are here. my question is, is there something we can do about the rising cost of prescription drugs? if you cannot legalize marijuana, why can't we just legalize medical marijuana to help the people that need it?
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take a lot of states are making decisions about medical marijuana. -- >> a lot of states are making decisions about medical marijuana. the issue is is it being prescribed by a doctor as opposed to -- well, i will leave it at that. with respect to prescription drugs, the prescription drug program that is now part of medicare obviously has been very helpful, but the costs have been going up and up, so part of the affordable care act, health care reform, also known as obama care -- let me tell you, i have no problem with folks saying obama cares. i do care. [applause] it the other side wants to be the folks who do not care, that
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is fine with me. i do care about families who have been struggling because of crushing health-care costs. i met a young man here who -- right here who as a consequence of health care reform, he has of blood disorder that if it were not for the health care reform act, his family would have been tapped out and he would not have the help he needs. [applause] you can tell he is an outstanding young man and will do great things in his family is not going bankrupt as a consequence of it. the same thing is true on prescription drugs. what we did is we said we will get a $250 rebate to every senior out there who is using the prescription drug plan to help lower their costs a little bit, and what we have done is we're starting to close what is called the doughnut hole.
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for those of you not familiar with the doughnut hole, and the way the original prescription drug plan was structured, you would get coverage up to a certain point, a couple thousand dollars. want to spend a few thousand dollars, suddenly it went away. you were on your own out of pocket until you got on the other side where you spent many more thousands of dollars, and then you would get a prescription drug plan again. we said that does not make any sense. let's close the hole. as part of the affordable care act, we will be closing that. we will also make it cheaper for generics to get on the market, as well as brand name drugs. overall the health care act should be lowering prices for prescription drugs over the next few years. it is getting phased in. it will be phased in over the next couple of years, but you will start seeing relief if your
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family needs prescription drugs. that was part of the affordable care act. gentlemen in the yellow shirt right here. >> hello, mr. president i am from cannon falls township. i want to echo the sentiments of those to of spoken before me in praising you and thinking you for all of your efforts in the things you have tried to do during probably one of the most difficult situation faced by any president in the face of an unreasonable obstruction and opposition. thank you. [applause] i would like to follow up on health-care reform. as of two days ago we now have a split in the 11th circuit court of appeal where we -- were inevitably this is heading for the supreme court. i do not have a lot of confidence in the u.s. supreme
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court with its conservative wing. my concern is they will drive this towards striking down the individual responsibility mandate, which i understand to be so critical to making the system work. my question to you is, what do we do? is this a giant step backward? i am talking about things that have not happened yet, but in terms of contingency planning, you must be thinking about this. >> first of all, it is important for everyone to understand that the affordable care act will not have fully taken effect until 2013. on a big change like this where we are helping a lot of people, you want to face in and do it right. it there are lots of different component parts to it. i just mentioned prescription drugs.
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you have the law that says folks can stay on their parents' health insurance up until 26 years old. a lot of young people, especially if they do not have a job yet, or do not have a job that gives health insurance, they have security as they're getting started off in life. all of the patient rights that were in the bill, all of those things will be there. though lifetime caps, and no fine print that the insurance company get to where you think you are covered, and then when you are sick you try to get insurance and it turns out they're not covering you for that. all of that will be in place. and what we're doing is each state is setting up what is called an exchange where essentially you can cool with your friends and neighbors who do not have health insurance, and now you have a big purchasing unit, it just like the big company does, and that
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means you can negotiate with the insurance company to get a better deal. how many people have tried to buy health insurance on their own without a company? you know what happens. they will charge you an arm and a leg because their attitude is you are not part of the opinion of cool that we can spread the risks of cross. we're setting up these exchanges. where the individual responsibility mandate comes in has to do with the part of the law says an insurance company cannot reject you because you have a pre-existing condition. i think this is the right thing to do. here is the problem. if an insurance company has to take you, pass to ensure you, even if you are sick, but you do not have an individual mandate, then what would everyone do?
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they would wait until they get sick, and then you would buy health insurance. no point in -- it is just think your car insurance. if the car insurance companies had to give you insurance, you would wait until you had an accident, and then you would be on the phone from the rec and say i would like to buy car insurance, please. that is why the individual mandate is important. the basic theory is everyone here at some point or another will need medical care. you cannot be a free rider on everyone else. you cannot not have health insurance and then go to the emergency room and each of us who had done the responsible thing and have health insurance, suddenly we have to pay the premiums for you. that is not fair. if you can afford it, you should get health insurance just like you get car insurance.
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they should not be controversial, but it has become controversial, partly because of people's view that -- let me just say this. you have a governor who is running for president right now who instituted the same thing in massachusetts. this used to be a republican idea, the idea of the individual mandate. suddenly it is like they got in the show. like 0 this is terrible. this will take away freedom for americans all over the world. all over the country. that is a little puzzling. the majority of courts that have looked at that have set individual mandate is fine. there's nothing wrong with say to people who cannot get health insurance, you need to buy health insurance just the car insurance. you cannot wait and go to the
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emergency room. if you are broke, then we will give you some help, but yet if you can afford it, you should buy it. there have been to appeals court so far that have said it is fine, and the other one has taken the conservative line that this restricts freedom and congress does that have the authority to do it. if the supreme court follows law,ident can'tnt of wal then it should be upheld. if they do not, then we will have to manage that when it happens. i just want to make everyone understand that there are a lot of components to the health-care law that are good for you, even if you do not have -- even if you have health insurance. it is true that we hope 30 million people get insurance, but it was also the strongest petionville of rights that was
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ever passed to make sure the insurance companies do not jerk you around and they treat you fairly. that will stay in place. that is the right thing to do. i have time for one more question. i am going to ask this gentle lady right here. i always want to end with the next generation can lead >> i am vaness pier.ea i want to say happy birthday to val. she is 29.s likeshs and why cannon balls? -- cannon falls? [applause] >> i had heard that cannon falls
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has some of the smartest, best- looking kids around. you have confirmed the rumor about the outstanding children. thank you very much, everybody. god bless you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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♪ ♪ >> near this park where the president spoke the associated press reports the chair of the republican national committee
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reince priebus rallied a few dozen tea party members and the college republicans. he also spoke with reporters today on a conference call along with the chair of the iowa rnc. here is that conversation. >> to launch a campaign of our own called obama's dead end to war, to remind the american people of this president that a failure to create jobs, failed policies that have only made things worse. so, what we are doing is we are what -- launching web ads, radio ads, text messaging campaign,
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making calls to independent voters, holding press conferences, ministate where president obama will visit, because we will not stand idly by while this president perpetrates this fraud of a bus tour while using taxpayer dollars to spin his failure to put america back to work. if it was just a few days ago, you might recall, where he said he would renew his focus on creating jobs. of course, he can't help himself because he is the campaigner in chief. so we would rather be out campaigning than in washington leading our country out of the ditch he put us in. he is out here -- today he is in minnesota talking about jobs. but the only jobs he is t about lately is trying to save his own. americans are craving action- oriented leadership but instead what happened this month was a few things.
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we had an embarrassing credit downgrade, we had a roller- coaster stock market, we had stagnating job growth, plummeting consumer confidence and in iowa we had over 21,000 jobs that have been lost since barack obama took office and they have also lost 17,000 jobs since the so-called stimulus panacea was passed, over $850 billion two years ago. nationally we know the numbers are even more horrifying. unemployment, 9.1%. on employment, nearly 16%. 2.4 million jobs lost since obama took office. the national debt, what he was going to get under control, $3.90 trillion added to the national debt. thankfully, iowans in response to obama's policies elected the
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governor and a republican house to counter the leadership on the national level. but job creators need stability and certainty. instead, from obama, what they got was tax cuts, onerous regulations, heavy-handed epa, burdensome and unconstitutional obamacare, then dick did national labor relations board. -- vindictive the national labor relations board. it is not just the economy that is the problem we are talking about, it is the policies of this president, barack obama, put in place, that has made everything worse. now, the president likes to say that the bad economy isn't his problem. ead, he would rather blame everyone but himself. but the -- he likes to say he inherited his problems. but one thing this president did inherit was a aaa credit rating. megna mistake, this is barack
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obama's economy and the only way to turn it around -- around is to make barack obama a one-term president. we will build as a party, build on the 2010 victory in iowa to make sure the state goes red in 2012. that's why i am here today and that is why the republican party will be working hard in the iowa. and because i am because iiowa, i wanted to make sure we open up the call to the chairman of the iowa gop. >> thank you, mr. chairman. a pleasure having you for the debate last week. thank you for all of your hard work on behalf of the cause, and thanks, everyone, for jumping on the call. here in iowa, we know a thing or two about presidential campaign swings and buses. make no mistake, the president's visit to iowa has all the trappings of a campaign tour. the only difference between the gop campaign buses crisscross in our state this summer and the
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president that it was is that the taxpayers are footing the bill for the president that a campaign swing in northeast iowa. at the present's bus rolls in he will realize very quickly it is not the iowa of 2007 or 2008 because ioeans on this -- iowans understand he has failed to lead in certainty for job creators for creating jobs in iowa. 60% of independent voters in this day that were polled disapproved of the job he is doing handling the economy. that is manifesting itself on what we have seen on the ground politically. those of you had a chance to be in ames or watch the straw poll solve the energy, excitement, enthusiasm of republicans in iowa, the second best turnout we have had an straw poll history. 29th straight month iowa republicans out and -- have outpaced democrats and voter registration and he knows this is a state he must carry if he is to win a second term.
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megna mistake, this visit has everything to do with politics and very little to do with policy. that is why he is here. with that, i will just -- time to take questions? >> it sounds good. if you want to 1 ask a question and i believe the operator will allow you on the line. >> if you would like to ask a question, press the start and won, unmute your phone and stay in and clearly and to withdraw, press star and then two. one moment for the first question. our first question comes from arthur delaney. sir, please go ahead. >> thanks for having this call. this question is for both. is it appropriate for iowa to get so much political attention given its economy is really a lot stronger than what is going on in the rest of the country? >> arthur -- if you want to go,
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that is fine and i will go after you. >> there is no question is talking to iowans from the state, there is tremendous exact it say about the economy and it does speak to the president's failed leadership at a time, the prices with corn and soybeans are strong, farmland values are high, the fact that we still have 60% of independent voters in the state disapproving of his handling of the economy shows you iowans care more than just their peripheral interest but what is happening to the country and they see an uncontrollable spending coming out of washington. they see uncertainty with small banks that are uncertain to lend because of lending requirements. business owners who can't tell you how much it will cost to implement obamacare so they are not hiring or expanding. . fears going on across the country and right here and i would. >> what you are seeing across america, in iowa and minnesota and wisconsin is that people in
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this country are hurting everywhere, and as mack said, the problem is national at this point. he deficits -- these are issues of national security at this point and this president is making everything worse. you know, people in the country are really focused in on the problem we are having in this country with spending, debts, jobs. and i got to tell you, i think it is becoming a nationalized issue, the spending issue, in that people are understanding across america that the government is making promises it can't keep and that we have to start making tough decisions and do something about it. but we have a president who would rather be on bus tours campaigning and giving speeches than tackling the issues in washington. so, i think it is important. >> thanks so much. >> you bet. >> you may have watched about 10 minutes ago our coverage of president obama kicking off a three-day white house bus tour
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in minnesota. he is headed south next to iowa where he will hold another town hall later this afternoon in decorah and you can watch it streaming live on c-span.org. tuesday, the president will host what the white house is calling a rural economic forum at near the eleanor border with an agricultural secretary to announce initiatives. and he wraps up things on wednesday in town hall meetings in northwestern illinois and in nearby out of the tour -- before returning to washington and he would take off thursday for a family vacation on martha's vineyard. >> watch more video of the candidates, see what political reporters are saying, and track the latest campaign contributions with c-span's web site for campaign 2012. easy-to-use, it helps to navigate the political landscape with twitter fees and facebook updates from the campaigns. candidate bios and the latest polling data, plus links to c-
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span media partners in the early primary and caucus states. all at c-span.org/campaign2012. >> tonight on "the communicators," and look a capitol hat the efforts to dealh cybersecurity with texas congressman mack phone very on the task force for cybersecurity and with the co- founder of the house cybersecurity caucus -- mac thornberry. next, former treasury secretary henry's talked about the wall street bailouts of 2008. today's current financial climate and the u.s. economic relationship with china. he spoke at his all modern dartmouth college in hanover, new hampshire, begins with a question posed by his classmates labor secretary robert reich. this is money -- moderated by youth of this senator judd gregg.
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clsme robert reich at the following questions. >> there is one last question, the question you get to pose to our next speaker. i looked up to our next speaker would be. maybe this question is a set with your question. but our next beaker is your dartmouth classmate and former treasury secretary hank paulson. [laughter] so, when he is sitting in that chair, what would you like him to have to answer? >> hank, two related questions. number one, why in the wall street bailout did you not condition those funds on wall street doing several things that it needed to do -- particularly with regard to mortgage and mitigation and also making money available to main street through small regional banks, and also, putting some constraints on lobbying by wall
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street for our -- firms, principally during the period of time congress was trying to reform the financial system. [applause] and secondly, hank, after you've explained all of that, i would like you to tell us whether the social benefits of wall street exceed the social costs. thank you, hank. [applause] >> some things in life never change. it sounded like two questions rather than one. i will start with the first one -- on the social benefits versus cost, i have a difference with bob. i am a capitalist -- [laughter] and i believe we have the most
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prosperous country on earth, which has been for a good while, for a lot of reasons, and one of the reasons is we have world- class capital markets and we have had world-class capital markets. and if we want to stay on top and we want to remain competitive, we are going to need a strong capital markets. now, why do we need to strong capital markets? jobs and growth. capital markets funding the companies that will compete in the global marketplace, create jobs, prosperity for americans. why do we need the capital markets? credit for families who need to buy holdings or send their children to school or automobiles or cars or retirement security. i know why bob asked the question, because financial markets and wall street failed us big time in 2007 and in 2008 and there have been a lot of
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focus on that, deservedly so. mistakes, or risk-management, business practices -- flawed business practices, a piece of business practices. but you know, if you just leave it at that and only blame the banks who deserve a lot of blame, we will be right back here again. because there has been much less talk about the flawed government policy that created the problem. we as a country saves too little, borrower to much. as a nation and as a people. of course -- driving from policies that are flawed and uncover just to do that. we stimulated the living daylights out of housing -- tax laws, fannie and freddie, fha, and so on. we need to deal with some of those things. we had a flawed regulatory system. it wasn't a matter of not enough regulation. we needed better regulation, but
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we have a system that was just plain broiled. somebody put it in place just after the great depression so we had an emergency powers to deal with banks but not with non- banks. we need to learn our lesson and a lesson to take away is not that capital markets are not worth while and don't provide social benefit. the lesson we need to take away from all of this is what mistakes were made so we can correct them. it that is one of the things we do in the united states of america. when there is a problem, we shine and light on it and we move quickly to correct it. we need to do that. in terms of his first question on the tarp. this is something i heard a lot. let me be really clear on what we were doing. the purpose of the tarp bank capital program in october when we announced the program, and on a single day we put capital in nine big banks with over 50% of the deposits.
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and in the days and weeks after that, we recapitalize many, many banks. these were non-failing banks. most were healthy. the idea was rather than nationalizing banks as they failed and putting all kinds of restrictions on them, was to get ahead, inject confidence, prevent a collapse, recapitalize the banking system. you can only do that if it was a voluntary program so we needed to design a program that was the lead to protect the government -- that the government would get paid back and the banks would voluntarily accept. let me quickly put that in a context for you. in early september we had been forced to -- and ordered to prevent a real can laminate, forced to come in and essentially nationalized fannie mae and freddie mac. $5.40 trillion in securities outstanding. it would have been an incredible disaster if we had to do that.
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we did that, we fired the ceo's, as we wiped out the equity shareholders. this was a tough action. the following weekend, we at lehman brothers, merrill lynch, an aig going down all at the same time. we tried very hard and we couldn't find a prop -- powers that worked to save lehman brothers. we tried. merrill lynch avoid failure because they were acquired by bank of america, its bank of america acquired lehman brothers it would of been worse because merrill lynch would gone down and would of been worse. aig was taken over under very tough terms, the ceo was replaced and essentially nationalized. we then had to have tried to guarantee three. dollars trillion of money markets to avoid an implosion. when we were working to get tarp -- wamu essentially failed and was acquired by j.p. morgan. what cobia was acquired while it was failing -- wachovia was
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acquired. and six european nations had to nationalize certain banks. so, we made a judgment that we had to do something so dramatic and move quickly. and we were tired with dealing sequentially with one failing this edition after another and dealing with it -- dealing with it at hoc basis. so we said, how do we do something that doesn't look like nationalization, doesn't have government control -- let's design of the security, non-of voting preferred, and i hoped and expected we would get 2000 to 3000 to accept. no sooner than we announced it, critics like people like ask the question and others immediately started pounding, saying -- you know what, you can't let banks get away with this. you got to put restrictions. you got to make them learn more. i said -- more than what? more than it would have lent if they fail?
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how are we supposed to make them land? you got to make them land, put this and that restriction. and as soon as that happens, the banks started to get concerned and congress pass legislation to retroactively changed the rules. so, we had many banks that applied, had been approved and withdrew. many others didn't apply. so rather than having 2000 or 3000 banks taking capital we had a roughly 700. it worked. but they also rushed to pay back the government. now, i look at it and say if 3000 taken capital and kept it for three or five years, it would have been more useful than any stimulus plan. it is interesting to me always that the same people that stigmatize the program and criticized it and said you got to make the banks do this -- or the ones who caused the banks to pull back and regional banks not
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to take money -- they are the ones who say why did you give money to the regional banks? why didn't more banks take it and why didn't they lend more? that is a perspective. you can see i care a lot about it. but the one thing i've got to say -- i was in a class and i tried to explain it and the class didn't really understand. and when i left government, i thought the tarp was one of the most successful government programs of all time. i thought that. but a poll showed 92% of the american people were into the tarp and 60% against torture. so, what do i know? and i think the reason is that we don't like bailouts or rescues -- in our country, the united states of america, we believe that if people take risk, they can make money. but if they take risk and the tax payer has to bail them out
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and then they have to pay bonuses, that is wrong. i think it is wrong get everybody think that's wrong. i did things that were apparent to me but i did it for the american people because, -- abhorrent to me, but i did for the american people because what if we had one of the big institutions go down? but i was not able to make that connection between wall street and main street. even though bob asked two related questions, they are really one in the same. because if you don't understand the role of markets and how important they are two main street, you are never going to understand why we had to do what we did. on that note, you can tell i don't care at all about this. then i am sure you would not have gotten an a in box bicycle as. >> i can tell you -- bubble was a better student then i was.
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he was also a great public speaker, even in college, and a tremendous actor. [laughter] yes, he was -- he was. he was the star in all of the plays. >> first of all, let me thank you for the introduction. i hope it is on. i will shout. it isn't working now? the hand held, either. >> ok, it is up and running. i want to thank the president for putting these programs together. i think they have been great. i especially want to take a moment of personal privilege because it is a great honor for me to have a chance to moderate this program. i played a small part in the
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effort to try to address the financial problems of 2008. and we were on the brink of a disaster of extraordinary proportions as a nation and the world. and really one person stood between this country and its fiscal meltdown of catastrophic proportions which would have impacted main street in a incredibly dramatic way. and that person basically thought outside the box and its -- things that were not typical of governance and got -- got the congress to do things i never thought congress would be willing to do and lead the world and a process of that destabilizing and then trying to correct some fundamental failures of our financial markets and as a result, we avoided a massive disruption that would have affected every american an incredibly difficult way. unemployment clearly would of gone well beyond what it has gone then we would have had probably an event equal to the
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depression in my opinion. and that one person who stood up and basically did what needed to be done was hank paulson. [applause] probably something he learned here at dartmouth that caused him to do it. first off, obviously we appear to be facing another significant financial issue. europe is in a difficult situation. our own country has gone through turmoil over the debt ceiling. i guess i would ask you, did you see similarities with what we are going through now and 2008 and you see greece as a precursor but if -- much as lehman brothers and a devastating event? >> a question of lot of people asking right now. i see them as very, very different situations. let's take united states --
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2008, what is our issue? our issue is growth. we need growth and we need jobs. and this is an issue for the whole economy. in 2008, the housing bubble felt disproportionately on the banking system. and a bubble by definition means that it is unrecognized until it bursts. and there is no doubt bubp will extend -- people saw the bubble, but the full extent of the housing bubble was a surprise to the markets in 2008. it's really was. so today, the risks are, i think, pretty obvious. and i think people largely understand them and are focused on them. and i think the banking system has got more capital, and as a
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regulated and is stronger in this country -- much stronger and a financial markets in this country are much stronger. the challenges growth. let me just tell you why the challenges growth. the consumers had so much debt in 2007, it was 1005150% of disposable income in 2007 -- it was 150% of disposable income. today it is 110%. in terms of wealth, i am sure it has to be off the charts. if you look at that in terms of disposable income it is still way below -- above any historical level. so it is unrealistic to think the growth will be led by consumers anytime soon until it adjusts itself. so, that's the challenge. now, let's look at europe. the effects of the house and bubble and 2008 i taking longer to play out in the capital markets and the banking system
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in europe. and by far, the most pressing problem and the important problem and challenge in the global marketplace today are structural issues in the european union. here i am talking about a large fiscal deficits in a number of nations there, and structural issues of the eu itself. now, the leaders are working on this and it will take some time to resolve these problems. and they made some progress, taken a number of steps. they have not been easy to take given the technical issues and political issues. they've got a lot more to do and it will be messy politically because of they will be tough political issues. one thing we should not underestimate is a vague commitment of european leaders to preserve the european union,
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to hold it together, and to preserve stability. now, in terms of lehman brothers versus greece -- i see that as very different in most respects. lehman brothers was an institution we worked to save, we did not have the authority to save it. we did not have emergency powers for the non-banks. on the other hand, the eu have been working and taking steps to -- and it has got the powers -- for months to deal with sovereigns like greece bang parrot out of a 2008 banking crisis -- greece. out of the 2008 banking crisis leaders everywhere requirements for banks to have more capital. we need that. there will be a spotlight on european banks and that thing one similarity is it will be important for the largest most important european banks that owned the most sovereign debt to be well capitalized. >> thank you. what about this s&p downgrade
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and what do we need to do to get our fiscal house in order in your opinion? >> ok. two questions. the first of all, the s&p downgrade. first of all, our political process, our government has not been working at a aaa level, so there is no doubt about that. but despite that, i would take u.s. treasury of where it -- over other aaa sovereign debt and a day of the wheat -- week. it does not say we do not have important issues we have to deal with. but in my judgment, other major countries all have more significant, more difficult-to- manage economic issues than the united states of america. you are asking me that question -- course, senator gregg, was a
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key member of the bulls a sense and -- bowles-simpson commission, and by far the biggest structural issue in the united states is our fiscal deficit. but coming back to the deficit commission, what they showed, i think to the world -- which i think a lot of the markets already understood -- is we are such a rich country and such a big economy that if we act soon and there is shared sacrifice with and solve this problem by spreading the sacrifice throughout different segments of the country so no group has to sacrifice too much. now, the longer we wait, obviously the more difficult it is going to be. what do we have to do to get our fiscal house in order? i think it comes down to we need growth, and so when we go about
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-- we have to reform entitlements and we have to reform the tax system and we have to reform the tax system so it will give us the revenues we need and give us growth. i start off by saying, despite all of the criticism and how poorly the government performed and all of that -- and i think the criticism is deserved -- let me tell you something, we had, beginning with bowles-simpson and throughout the summer, this is the best public debate i have seen on this in my lifetime. and people understand more about the problem than they ever have before. that is number one. number two, i would say as important as cutting is and cutting expenses, and as an essential, that alone won't get you there. you've got to reform. you have to reform entitlements. and when you talk about entitlements, think of medicare. that is where the huge dollars are.
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and you need to reform the tax system and all the stuff -- i find it very uninteresting and not even terribly relevant about should the tax cuts expire, what should we do with rates. the question should be asked is -- since we need more revenues, how do we get them in a way as we have as little drag on jobs and growth as possible? how do we get them and remain competitive? and no one who is credible that i have heard defends our tax system. i don't think our tax system will get us there. so, we need reform. and we need basic reform. judd gregg, he was the one, the super committee, first person i heard of it was from you. so, i think that idea is judd's -- the way i look at it is this.
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of course, congress took an underwhelming step in terms of the first cut. but it was a step, right? it was a step. now we've got a super committee, and wait and hope they undertake reforms. i, for one -- i, for one, think it is unlikely we will get reform until there is a new election. but i could hold. but even if we don't get reform. if they get their objective, $1.50 trillion, which is an easy lead over a $40 trillion pace over five years -- actually, 10 years. excuse me. i can't make it worse than it really is. thank you for catching me. over 10 years, it isn't easy lift. but let me tell you, you've got to start someplace. unless can't get reform -- that can only be done on a bipartisan basis. that can only be done when both parties want to compromise and
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cooperate and i don't think we can do that with the players we've got in washington and i think we need a new election. i hope i am wrong. but even if i am right i think i -- we are heading in the right direction. >> it leads to another question. we obviously went through this very significant -- albeit an official of the end of this summer. i want to get your thoughts on the tea party and its influence and also the possibility of a threat of default to our debt. >> ok, well, let's start with the tea party. even before that, i wanted to say something about the political process. and it is sort of crazy for me to speak about what senator gregg because he knows more about that than i do -- with senator gregg because he knows more about it. if one of the lessons i learned in washington is it is almost impossible to get something big and difficult and controversial gun without a crisis. twice we got congress to act, and they did it before the
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system collapsed, but it took a crisis. and even if the vast majority of members of congress, in my judgment, understood the deficit and were determined to disarm the about it, it would still be an ugly process to get there. it would take time and be an ugly process. i will get to the tea party. i get all of my republican friends and democrat friends -- mainly democrats -- asking about the tea party and trying to put me on the spot. i start off by saying -- you know what? the tea party did not come on to capitol hill with guns and take over by force. they were elected. elections have consequences and voters from both parties respond to the people who voted for them. and there were a lot of people came in the last election, the voters wanted them to come in and change government. and i am hoping that the next election, the voters will say, you know what, we want you to
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come in and compromise in and solve problems and fix the major problems and fix what's wrong. we want you to do that. maybe i am being naive. but i would like to seeing the fiscal deficit be the centerpiece of the campaign. and then whoever wins, feels motivated to come in and solve these problems. the electorate has got to be educated, because right now -- you know what voters are telling people in washington? we want benefits that we don't want to pay for. we want benefits we don't want to pay for driehaus selfish is that? because, you know, all of you are students here -- your parents want what i want for my kids. i want them to have the same opportunity i have and i made great sacrifices for them to have the opportunity. but in our country, we've got my
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generation being incredibly selfish, not willing to make a sacrifice and the people who pay for it will be the next generation. i think we need a mandate. now, on the debt ceiling, when i is -- what i say to people on that, whenever i am asked, what i said is there is no danger of default. leaders on both sides said it repeatedly that they were going to raise the debt ceiling. so, it was an ugly process to get there. it wasn't pleasant. but again, i come back to what i said earlier. to get major reform, you are going to have to get people who are going to want to cooperate, compromise, and i think we will need another election to get us there. but at least i never thought we were in danger of default and at least the american people now have had a real education. >> i want to change focus and then we will get to questions from the audience. you have been one of the leading
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experts and one of the most knowledgeable on the issue of china. you set up a new institute on china. tell us where you think china is going. is it a threat for us either economically or militarily and what is their future and their problems? and tell us a little bit about this institute. >> ok. i wish it were -- if i lived in new hampshire it would be in darkness but i live in chicago. dartmouth -- my proudest moment is when i gave a commencement address in 2007. i love this school. i did you are getting as good an education as there is. it short improved. i was in a class today and sophomores were asking me all kinds of sophisticated questions. i did not know what an investment banker was when i was here -- i was an english major. did not know the difference between a stock and a bond.
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the institute, what we set up at the university of chicago is an independent institute affiliated with chicago and it is going to be focused on u.s.-china. and the reason it is as i believe when you look at major problems in the world today, i don't care if they are in the economic arena -- i care a lot about environmental issues, or in foreign policy, national security -- you look at these big issues, if the u.s. and china are not cooperating or working together we have almost no chance of solving them. and if we are working with others we got a good chance. i view this relationship as very important this is not going to be like other institutions. it will not be a think tank but tank. we have people who are action- oriented. the first and then we will do is unsustainable organization.
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we will look to negotiate and get important things done. now, china, the first question you asked was isn't china a threat. i get asked that all the time. are they going to knock us off of our perch, are they a threat to our position globally, global leadership -- leadership. let me begin by saying this very, very simply. we are by far the largest economy, the richest economy, in the world. there is not another major economy -- we've got sick of the issues, but all of them, including china, have much more daunting issues than we have. our ability -- our problems are
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of our own making. they are not of china policy making. and our ability to solve them will be more difficult if china has problems. so those people rooting for china are rooting for the wrong thing -- be careful what you wish for -- because if they have problems our problems will be more significant. number one. if you look ahead -- people say where we will be 15, 20, 30, 50 years from now. i would never, ever bet against the united states of america. but, if we are not continuing to be the world leader and the most powerful and important country on earth, it will not be because of china or any other nation but because we did not have the wisdom or foresight or the political leadership to make the policy adjustments we need to make to stay competitive and to stay on top. in terms of strength -- i would
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get to the military in a minute. in terms of strength, our strength, including our military strength, is rooted in our economic strength. china understands that, everyone understands that. so, the most important thing we can do is fix our economy. that is number one. i get asked -- there was a story in "the wall street journal" about a chinese aircraft carrier and i get asked a military question. what i say there -- i can't speak from experience. but what i say, in china and in the u.s., that there are a fair number of people in the u.s. who are concerned about china's military involvement. there are a good number of people in the asian region that are concerned about that. i believe the key thing we need is trust. you only get trust 3
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transparency. so, i am a big believer in military-to-military dialogue, transparency, trust building. when you look at the economic relations between the two countries, we have a lot of economic tension. that is the nature of economic relationships. 30 years ago we didn't have any economic relationship, we did not have tension hybrid of the good news was no tension but the bad news is we did not have a relationship. we had at attention with the japanese or the canadians or the europeans. -- we had tension with the japanese. the military, we did not have the history. the military's don't like or trust each other very much. we really need the trust building there and i think it is really important. then i end with strength. i am all for coming from a position of strength. that means fixing our economic
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problems and being strong economically and asia with trade agreements, being strong -- strong diplomatically and militarily and asia. >> now we are going to take some questions from the audience. who has the first question? there are some questions back there. >> hi. thanks for taking my question. there are several western countries suffering from the same disease -- high debt and very high unemployment. the discussion has been mostly about how we control debt, and unfortunately, according to many it has been to cut spending, which is leading to higher unemployment and lower gdp. i have not heard a single politician or president or prime minister lay out a plan on how to create jobs and boost the gdp which in the and it creates prosperity and peace -- pays
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down the debt. are you aware of any plan anywhere in any country and most importantly what would you do to create jobs, and using job creation and prosperity to pay down the debt. >> i am not going to comment on politicians. i tried to stay out of that. but i would say for myself, because i think this is about job growth, economic growth, job creation. and this is, as you say, it is a problem in many parts of the developed world. it and i think even with the developing world, china has got a really difficult job to keep doing this. because nowhere in the history of the world as any nation transformed itself so dramatically so quickly. and the demand for change is
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unrelenting. and chinese people have high expectations for their leadership. and i think it will be increasingly challenging for them to be as integrated as they are in the global economy if and to continue to do things as well as they have been doing if they don't speed up the pace of reform. so, i think it is a challenge everywhere. but to get to your specific question. i don't think there are -- i don't believe in silver bullets. i think we need fundamental reform. so, the questions really is and our political system adapt. so, the kinds of reforms we need -- i talked about taxes a little bit. so, we clearly need -- if we had a tax system that incentivized savings and capital accumulation and let us raise revenues in a way where we can still be
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competitive and raise revenues that we need, it would make a big difference. there are a couple of ways we could go but it takes tax reform. i think trade is very important. i believe in trade and i think it is disgusting that we haven't had a wto agreement. but we have not even passed the free-trade agreements we had before congress -- with allies like colombia, where everyone knows that would add jobs and growth. colombia, korea, and so on. so, getting trade agreements. immigration. my gosh, immigration. the idea that we've got all of these bright people from all over the world coming into the united states, and rather than adding a visa or a green card to the diploma, we send them back.
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we send a job creators and innovators out of the country. how stupid is that? the energy policy -- we could talk about what we need to do in energy policy. and i think one -- you have to wait awhile to figure out how to fund this. but when you look at unemployment, and you look at unemployment among males 20-50, and you look at the danger of young people being out of work, you can afford anything when you are young other than not to work and not to grow. so, dealing with that -- and i think we just need to think out of the box. this is a great country, maybe there should be universal service for everybody -- not just for military, but peace corps, habitat for humanity, so everybody gets training and maybe an equivalent to a gi bill where you get the skills training or the training you need in this world.
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there are a lot of things that need to be done. but i think the reason it is hard for politicians to talk about them is because they are not that difficult conceptually, but as judd and i were talking, they are not easy it issues in washington did if they are analytically easy like social security, they are politically difficult. there is not low hanging fruit because it is hard for democracies to the fundamental reform that we need. but there are things that can be done that create jobs and growth, but we are going to have to be competitive to do that. >> some students -- a question down here. then we will go back to the audience. >> and i did not get to education, which is huge. >> secretary paulson, in early
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2008 when you were brokering the deal between bear stearns and j.p. morgan, a famously asked j.p. morgan to decrease the price they would pay from $4 down to do doubt -- to $2 a share in the name of moral hazard. why did you think that the shareholders should take responsibilities and take the punishment for moral hazard and not the managers? >> let me say, managers -- let us just talk about moral hazard. i really believe in moral hazard because no matter how good regulation is it is unrealistic to think regulators will uncover the problem is that the banks and didn't uncover and themselves, and which you thought -- unless he thought the banks were intentionally tried to blow themselves up. what you need is every customer, if every lender to the
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banks, every shareholder, every bar were, to be focusing on that bank -- moral hazard. so, i believe in that. we didn't have our emergency authorities to deal with bear stearns. it was either bankruptcy or being taken over. if you don't think management lost their jobs -- let me tell you, they are not running. management was gone, etcetera. there is no one at bear stearns who thought there was a bailout. but when i looked at it, i was conscious of the fact that the fed, the united states of america was assisting that transaction. so, we got a call thursday night that said, you know what, we are going to fail. there will be bankruptcy if the government does not come in. there is something wrong with the picture that says the government is going to come in -- if there was more room, then the government should provide less incentive, ok? why should the government became
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more so the shareholders would get something? so, i felt that. if but later, the deal could not get done. it was not going to get done without raising the price. and number of others said, you are right, let us not get that in the way. it is not that i was mean- spirited or i wanted people to have the equity wiped out. it was the same thing -- aig was structuring -- look at fannie and freddie. the bill was criticism we wiped out the equity shareholders of fannie and freddie and the preferreds we structured the deal. the government was taking big losses and big risks. and you imagine if -- and people called it a bailout. could you imagine what would have been done if we had taxpayers, and to pay for the shareholders. in those companies, management
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went at bear stearns as part of the takeover. top ceo's at aig and at fannie and freddie. we did not have all the tools we need it. >> a question over here. >> thank you very much. i have a follow up on moral hazard within the firms. you talked a lot about regulations of firms themselves, but as someone who ran goldman, it seems henceforth we will always have a situation where traders and managers and the firm are doing extremely convoluted and, but things and nobody at the top can fully understand what they're doing with the firm's money, and since those people are paid on commission, heads i win and tails, the farmer loses. within the firm how the man is the risk? >> that is a huge issue. people focused on the compensation and the amount because of some of the amounts
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are obscene. but more important is the system. this is something we focused on and i focused on very hard at goldman sachs. first of all, people paid traders formulaic compensation and give them a percentage of the trade and profits -- i would say get what they deserve, but they did not deserve it. the taxpayers got it, too. what happens is if traders get a percentage of the gain on the upside and did not pay for the losses, it should not work. should not have formulaic compensation. the form in which you get compensation. and we were very careful of that. we gave a big part of the compensation in equity that had to be held. and the other big protection you have in these firms is having experienced people on the trading desk who were
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shareholders and really had every incentive to look out for the firm overall. and the last thing, which i think many firms ignored, is it they would think as the control side and operations and look at cutting costs. what you need to do is put really experience, capable people -- former traders, former bankers -- in the control side. you've got to pay them the same way. you've got to have great people. and if there is an argument between them and the traders or the front office, they've got to win. these institutions are not easy to run. it and disk management is very important -- and this management is very important. >> sir, i think we started essential in with a fairly balanced balance sheet for this
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country. i did not go to dartmouth, so i am a little slow. but i don't understand why we did not have a war tax -- why aren't we asked to pay for the two wars rather than out of our debt on an ongoing basis? >> a lot of people ask that question. what i come back with is, is the answer i gave before. we clearly, in my judgment, need more revenues. if you look at revenues, over a 40-year period, they have been roughly -- i don't know, 18.2 of gdp or something like that. and expenditures are 21% or 22 percent -- ok. now revenues are about 15, right? an expenditure is give >> 22.5 deede
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>> -- >> 22.5. >> ok. we need more revenues, but we have a tax system that is really broken. it is filled with loopholes, which is just one form of social spending or another. looking at something as sacrosanct as the mortgage deduction. i don't happen to have a big mortgage but if i had a million dollar mortgage, why should i be able to deduct that? there are huge loopholes. on the corporate side, we have a system that really doesn't let us, in my judgment, be competitive, in terms of the way we tax corporations. we are out of step with the rest of the world. but again, it is filled with loopholes. a different industries pay
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different amounts. all kinds of crazy incentives. we have a situation where almost half the people in this country don't pay federal income taxes. they pay other income taxes. it is a system where we need a fix -- yes, taxes are very, very important. i tend to not focus on should there be a war tax, because i look -- this is a bad analogy but -- because we are not the titanic -- but it is like moving the deck chairs around. but what we need is fundamental reform. we need a tax system that lets us get the revenues in an equitable way so that we can be competitive. if i am repeating myself, sorry. >> down here with the students. if we can take a question here. do you have to sit in the front row as a student to get a question? >> secretary, i have a question
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about another one of your passions, the environment. given what seems to be it -- divided very much in a partisan basis, what can we do to raise awareness about environmental issues and what role can the federal government play in trying to create awareness and resolve the issue? >> to me, this is hugely important. let me just tell you what i am doing. my interests personally have always been and wild and beautiful places -- biodiversity, working to help create diverse national parks in a province in china or in chile, or things in the u.s., or the rain forest. that is fun for me because when i was here i would like to go to
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places like that. but i am very concerned, very, very concerned about global warming. i am very concerned about all of the issues with energy efficiency, alternative sources of energy. so, the paulson institute at the university of shocked -- chicago, when wade engage with china one of the major issues will be environmental because we are the two biggest economies, the two biggest emitter of carbon, the biggest importers of oil. we've got common interests. my view is the only way we solve this problem is developing new alternative sources of energy that are cost effective on this scale. and government are not going to do it. there are a lot of things that need to be done there.
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china is well ahead of us in terms of what they are doing. but they need to be. they have all large issue. they have 1.2 billion chinese, and we have given them are really bad model here. 1.2 billion chinese cannot live the way we do in the u.s. there is not enough resources in the world. they realize we need new models of growth, energy efficiency. so, one of the first things i will do is on sustainable urbanization. is not because i love cities. trust me, i would rather be anywhere besides new york. but look at where the problem is. look at the issues are around water, which are just huge,
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huge issues. look at energy is -- energies, and if we want to get things done, we need major breakthroughs. if it does not get done in countries like china, it will not get done. the kinds of things i am being pushed on are these. i often talk with people in india, china, other developing nations, and they say, when you guys went through your development phase -- i said, we sure did. two things are different. now we have the a science to know how bad it is and we have the technology. it is wrong not to be using the cleanest, commercially-available technologies. it is important to have clean
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technologies. there are a whole series that i push on. i think these are very important issues. i.t. -- i want to be an optimist because i believe experts are often wrong in technology and development. i love to tell the story that years ago i was working with motorola, and they had a consultant to a study as to how big the market was for mobile telephones. they came back and said 900,000. because t-mobile cell phone are about this big, the battery last this long, and they did not see the huge upside for technology. sir, you got me going on something. >> actually, we are out of time,
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but you will take a couple more questions, right? let's go up here. then we will come back to the students on the left. >> first of all, thank you for sharing with us this afternoon. my question, secretary paulsen, you say the united states must be stronger economically than china. can you expand on how we get stronger? >> how do we get stronger? i think a little bit almost the way i answered the last question. it certainly is not spending more money on military. ok? we spend multiples of what other countries spend on the military, and even their there is room to cut and still be strong. it is very hard to cut military spending, because part of this is jobs in politics and everything else.
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what i think we need to do, we need fundamental reform, because i do believe the chinese and everyone understand economic strife. bob reich's question about wall street was a good one. at a time when people looked at us, and looked at us as having been pixie dust. in our capital markets were the world. they wanted to work like us. when i talk to the chinese about opening their capital markets, because i believe they needed to open the markets for their growth, and they were not able to make the kinds of changes they needed in china unless they performed and allocated capitol and had investment products for their consumers so
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they were not ripped off, putting deposits in banks, inflation, and so on. when i was making that case to him, he said, listen. you used to be my teacher. my teacher does not look so smart anymore. look what happened at your capital markets. hours drink has got to be, i do believe, -- our strength has got to be, i do believe, in our economic power and all the things america represents. all that is still here. we just need policies. the chinese are no different than anyone else. they understand strength. ok? and right now come up we looked stronger than they are. -- and right now, we look stronger than they are. we have great underlying
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strength. we just need some strong leadership and some policy reforms that are going to put our economy back on the right footing. it is going to take a while. >> last question? we are a little bit over time. >> sari. thank you for coming and talking on the china issue. i think i recall mobil, it may be another american company predicting it china's economy would overtake the united states by 2012 or something. how do you think we can compete, not just at the base -- at the basic level? >> let me come back to so-called experts. when people just draw lines and
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assume this kind of thing can continue, there is a lot. first of all, china has significant challenges. significant challenges. not the least of which is continuing to manage an economy with a pace of change that is so relentless, and using this mixture of administrative measures. no economy just goes like this and defies gravity forever. ok? there will be issues with their economy. i hope they continue to grow, because that is a big benefit to us. let's talk about their workers. enormous challenges. the idea that there are huge issues in terms of big
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inequities, and they are working hard to deal with the. they are dramatically increasing wages. wages are going up very quickly. they realized they are too big for exports. wages would of 20% last year. they cannot continue to grow unless they develop new energy models, new models for growth. so, they have got -- one of the other issues they have got is here in the middle is the political. to understand china, recognize the last leadership change, almost 10 years ago, when they went to hu was the first time
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that a sitting chinese premier did not pick his successor. this is the second time. there is all kinds of tooling and throwing -- toing and froing. every decision they make in china, whether it is economic, personal liberties, all these things is going to be what gives us the most domestic stability. i happen to believe what will give them the most domestic stability is pacing -- is speeding up the pace of reform and he's personal freedoms and liberties. that is the case need to make. they have challenges. do not bet against the united states of america. for that to happen, you can " that china -- quote that china
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line forever. they cannot keep growing like that forever. they need to change the growth curve, and we need to get our job done. china is an interesting foil, because there's a question about china. it is not going to be determined by china, trust me. is not going to be determined by any other country. it is going to be determined by us. the decisions we make, the policies we put in place, that is going to be done by america. if china has problems -- and i hope they do not -- our challenge is greater, because we are integrated into a global economy. >> thank you, thank you very much, mr. secretary.
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[unintelligible] [applause] that is a pretty good place to stop. do not that against america. >> to begin with, i will say jeff is the answer to the question, not bob reich. [laughter] i can only imagine what he would ask. our big need in this country is economic growth and jobs. jeff, you are serving as chairman of barack obama's jobs council. my question to you is what can be done in the short term to create jobs in this country, and more importantly, what can we do to regain our competitiveness
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and create jobs in the united states of america. >> we all would like to hear the answer to that. [applause] >> president obama is on a three-day bus tour through iowa and illinois. he began in minnesota, about 40 miles south of minneapolis. he is now travelling into iowa where he will hold another town called -- town hall meeting. on tuesday, the president's will hold what be white house is willing our rural economic forum where he will be joined by the agriculture secretary tom vilsack, and he will wrap up on
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wednesday with town hall meetings in northwestern illinois before returning to washington. the white house says this is an official presidential to work, not a campaign tour. you can watch live coverage of his stop in decorah, and we will have that streaming live on c- span.org. you can also see president obama online in the video library. tonight on "the communicators," cyber security with rep mac thornberry and jim langevin. we take you to london now, where last week the british chancellor
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of the exchequer, george osborne, updated parliament on the stated the economy. his position is similar to the treasury secretary. this is about an hour and 20 minutes. >> we come now for a statement by the chancellor of the exchequer, mr. george osborn. >> here, here. >> mr. speaker, people will be concerned about the turmoil in the world financial markets. i want to update the house on what we're doing to protect britain from the storm. cause r causes of this instability. as of this morns, markets in asia and europe are a little calmer although some are still currently down. over the last month the dow jones index has fall p by over 14%, the french market is down 23 %, and it's striking that the
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german market is down 24% and even chinese equities are down 20% since november. bank shares in the all countries have been hit particularly hard, many sovereign bond markets, too, have been exceptionally volatile with market rates for italian and spanish debt soaring before falling back in the last three days. sadly, britain is not immune to these market movements. in the last month, the if ftse 0 is down by 15% and british bank shares have also been hit hard. however, while our stock market has fallen like others, there has been one striking difference, the market for our government bonds have benefited from the global -- here here! >> u.k. guilt yields have come to around 2.5%, the lowest interest rates in over 100 years, and earlier this week the u.k.'s credit default spread or the price of insuring against
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sovereign default was lower than germany's. this is a huge vote of confidence in the credibility of british government debt and a major source of stability for the british economy at a time of exceptional instability. and it is a reminder of the reckless folly of those who said we were going too far too fast. >> here, here! >> we can all now see that that approach would have been too little, too late with disastrous consequences for britain. mr. speaker, it is not hard to identify the recent events that have triggered the latest market falls. there has been weak economic data from the u.s. including revisions to previous gdp, and the historic downgrade of that country's credit rating. and the crisis of confidence in the ability of euro zone countries to pay their debt has spread from the friday friday to major economies like italy and spain. but these events did not come out of the blue, they all had the same root cause: debt.
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and in particular a massive overhang of debt from a decadelong boom when economic growth was based on unsustainable household borrowing, unrealistic house prices, dangerously high banking leverage and a fail were -- failure of governments to put their public finances in order. unfortunately, the u.k. was perhaps the most eager participate in this -- participant in this boom with the biggest housing bubble, the most overleveraged banks and the largest budget testify sit of them all. now, history, mr. speaker, teaches us the recoveries from this sort of debt-driven balance sheet recession was always going to be choppy and difficult, and we warned that that would be the case. but the whole world now realizes that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped. markets are waking up to this fact, and that is what makes this most dangerous time for the global economy since 2008.
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i think we should be realistic about that, i think we should set our expectations accordingly. as the governor of the bank of england said yesterday and the head of the office for budget responsibility has also noted, the british economy is expected to continue to grow this year some 500,000 new private sector jobs have been created in the last 12 months. that is the second highest rate of net job creation in the g7. but instability across the world and in our main export markets mean that in common with many other countries, expectations for this year's growth have fallen. and that is what our response must be. first, we must continue to put our own house in order. i spoke again yesterday to mervyn king, and i can confirm the assessment of the bank and the treasury, the british banks are sufficiently well capitalized ask holding enough liquidity to be able to cope with the current market turbulence. we have in place well-developed and well-rehearsed contingency
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plans. we must also continue to implement the fiscal consolidation plans that have brought stability to our bond markets. i believe the events around the world completely vindicate the decision of this coalition government from the day it took office to get ahead of the curve and deal with this country's record deficit. while other countries wrestled with paralyzed political systems, our coalition government has united behind the swift and decisive action of cuts and the emergency budget. while other countries struggled to command confidence in their fiscal forecasts, we have created an internationally-admired and respected and independent office for budget responsibility. these bold steps have made britain that safe haven in this sovereign debt storm. >> here, here! >> our market interest rates have fallen while other countries have soared, and the very same rating agency that downgraded the united states has taken britain off the negative watch that we inherited and reaffirmed our aaa status.
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this market credibility is not some abstract concept, it save jobs and keeps families in this their homes. families are benefiting from the lowest-ever mortgage rates, and companies are able to borrow and refinance at historically low rates thanks to the decision we have taken. let me make it clear not only to the house of commons, but to the whole world: ours is an absolutely unwavering commitment to fiscal responsibility and deficit reduction. abandoning that commitment would plunge britain into the financial whirlpool of a southern debt crisis and cost many thousands of jobs, and we will not make that mistake. >> here, here! >> the second thing we need to do is continue to lead the international response in europe and beyond. in the g7 statement greed to between finance ministers and central bank governors this week, we said we would take all necessary measures to support financial stability and growth. in the euro zone, there is now a
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growing acceptance of what the u.k. government has been saying first in private and now in public for the last year, that they too need to get ahead of the curve. individual countries must deal with their deficits, make their economies more competitive and strengthen their banking systems. existing euro zone institutions need to do whatever necessary to maintain stability, and we welcome the ecb's interventions through securities markets program this week to do just that. but this can only ever be a bridge to a permanent solution, and i've said many times before that the euro zone countries need to accept the remorseless logic of monetary union that leads from a single currency to greater fiscal integration. many people make exactly this argument more than a decade ago as a reason for britain staying out of the single currency, and thank god we did. >> here, here! >> solutions such as euro bonds, mr. speaker, solutions such as euro bonds or other forms of
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guarantees now require serious consideration, and they must be matched by much more effective economic governance in the euro zone to insure fiscal responsibility is hard-wired into the system. the breakup of the euro would be economically disastrous including for britain, and so we should accept the need for greater fiscal integration in the euro zone while insuring that we are not part of it and be our own national interests are protected. that is the message the prime minister has clearly communicated in his calls with chancellor merkle, president car soaz si and other -- sarkozy and others this week, and i've done likewise in the g7 call of the weekend and will do so again at the september g7 meeting. but this is a global as well as a european crisis and a -- at this august meeting we need an international framework that allows credit to countries like
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china to increase demand in debtor countries to make the difficult adjustments necessary to repay them. everyone knows what needs to be done, but progress so far has been us frustratingly so with lengthy disagreements on technical definitions, let alone any concrete actions. the barriers are political, not economic, so it is up to the world's politicians to overcome them, and there are no excuses left. finally, mr. speaker, the u.k. like the rest of the developed world needs a new model of growth. surely, we have learned now the growth -- surely, we have learned now the growth cannot come from yet more debt and more government spending. >> here, here! >> and, mr. speaker, those who spent the whole of the last year telling us to follow the american example with yet more fiscal stimulus need to answer this simple question: why has the u.s. economy grown more slowly that be the u.k. economy so far this year?
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more spending now paid for by more be government borrowing and higher debt would lead directly to rising interest rates and falling international confidence that would kill off the recovery and not support it. instead, we've got to work hard to have a private sector that competes, that invest t, that exports in today's world. that is the only route to high quality jobs and lasting prosperity. in the developed countries and especially in europe, that means making the difficult structural reforms needed to restore competitiveness and improving the underlying performance of our economies. the e.u. should be cutting red tape, not adding to it. and internationally we have the greatest stimulus of all sitting on the table in the form of the doha round, a renewed commitment to free trade across the world that should be taken up now. ..
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in welfare and education reform, we will continue to pursue a radical agenda. but there is much more that we can do to create a new model of sustainable growth. we must rise to that challenge and confront our vested interests. stagnation as it stood in the way of growth. mr. speaker, in these turbulent times for world markets, we will redouble our efforts to remove obstacles to growth and we will stick to our plans that have made britain a safe haven in the global debt storm. [jeering] >> mr. speaker, the shocking and
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inexcusable events of recent days in our city, of today the government says are rightly there is a need for large. but looking at the economic events of recent events, and equal and perhaps even greater threat to our country. putting jobs, small businesses at risk all across our country. it is right that the chancellor is updating us and the country, and i am afraid to say the state of the british economy to. in the same spirit, in the same spirit of bipartisan cooperation between the prime minister and labour opposition, let me say where we agree with the chancellor of the exchequer. first of all, we made the right
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decision not to join the single currency, and we agree with the chancellor that the current situation requires more decisive and radical action and we have seen so far. large involving himself in these discussions, and is also preparing contingency plan if british banks come under threat. tough decisions in europe, but is it not clear that if european leaders so far demanding austerity from smaller countries is not working because it is nothing to do those economies growing? and without that, countries find it harder and harder to convince the markets they can repay their debts. should the chancellor not finally take the lead in brokering the plan for growth, alongside european wide guarantees, your wide guarantees, to reduce debt service costs and stop
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spreading? mr. speaker, i also agree with the chancellor that months of political wrestling and inserting in the u.s. over the pace of deficit reduction have depressed confidence in u.s. growth. but does the chancellor agreed with both who favor a balanced and sensible approach to deficit reduction? and fairly rapid u.s. interest that could drive the world bank into recession? or does he agree with his friends, and we know he has many in the republican party, and in the tea party movement who have urged deeper and faster cuts and hailed the recent budget deal as to 90% of their demand? is the chancellor on the side of u.s. federal reserve, from a treasury secretary a nobel prize winner, mr. speaker, or in the words of the business secretary, is the chancellor on the side of the right wing nuts?
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mr. speaker, it's also right that g7 finance ministers are now find discussing a coordinated response to what is a global crisis. but listening to the chancellor analysis you would think that britain is a bystander, watching public debt crisis unfold in the u.s., best told by individual countries taking their own actions against debts on his analysis the faster the better. so mr. speaker, this is now a global crisis, a global growth crisis on a global scale. does the chancellor agreed with me, it is the coming together of powerful negative forces in every continent, including here in britain, continue to be leveraging by banks and the private sector, addressing tightening of consumer spending, and fiscal retrenchment from government, it is those forces together which now, a warning,
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this crisis could become as great as the crisis of the early 1930s. the 1930s, mr. speaker, when governments around the world ignored their collective responsibility to promote growth, plowed on with austerity of entrenchment and ushered in a decade of depression, unemployment protectionism and fiscal interest -- instability. families and businesses deeply worried about their jobs and mortgages will hear the chancellor's talk of safe havens that concludes he is either deeply complacent, or is in complete denial about what is going on in our country. these policy started kicking in well, well before this latest financial market instability, confidence has collapsed. our economy has flatlined the nine months. and nine months growing slower than both the united states and the eurozone, and on the latest figures, the forecasts confirm to be downgraded yet again even
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before that downgrade, falling 46 billion pounds higher in the chancellor plan. mr. speaker, we do need a tough medium-term plan to get our deficit down. but it is -- the chancellor -- [shouting] the chancellor's reckless speeding the house will come to order and i will repeat what i've said before. if dems are shouting their heads off, and then expecting to be called, they are suffering from an element of self-delusion. mr. ed balls. >> mr. speaker, is the chancellor's reckless policy too far, to those that have ripped out the foundation of the house and left our economy deeply exposed to this global hurricane. and yet in the statement, despite all the evidence, and with our stock market falling 10% more this week, does the chancellor still cling his policies are working. and we are a safe haven. despite evidence of the last two years, credit default swaps,
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despite the fact in the last week long-term interest rates have fallen in britain and in the united states over the last week, despite that he still claims that falling u.k. bond yields are not actually a sign of stagnant growth in our economy. does he not remember the japanese ministry of finance briefly took some confidence as low as 41 years in the early 1990s and at the beginning of what turned out to be a decade of no growth and stagnation? i have to say to the chancellor, however many times he says his plan is working, that doesn't make it true. however many times he claims he is restored confidence or delivered on deficit reduction, that doesn't make it true either. we know he has spent the last four nights in hollywood but he just cannot write the scripts and watch it come to light. that is not how things work in the real world, mr. speaker, and if he won't take it from me,
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it's interesting, if he won't take it from me he should hear the words of paul krugman, the nobel prize winner who said britain's experiment in austerity is going really, really badly. fighting in fantasy. the wolf is at the door and osborne think it is the confidence very. mr. speaker, the chancellor finds the state of the british economy reissuing. we find it deeply worried. he rejects our call for action now, including a cat and mouse to plow in the gardens. we say this approach is deeply reckless. the eurozone is in crisis. america, the british economy is flat like a global markets is in turmoil. the world desperately needs strong and united leadership. and here in britain we need our chancellor to get out of his complacent denial and get back to reality before it is too la late.
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>> chancellor of the exchequer. >> thank you, mr. speaker. i did see mickey mouse in california. he seems be riding the labor party's economic policy. let me start with the areas where we agree. we agreed that it is right for britain not to join the euro, and maybe the shadow chancellor change the official party of the labor party to that respect. on the contingency plan of the financial system, i'm very happy to offer the shadow chancellor a briefing from the tripartite authorities of what those contingency plans. obviously as he will understand, they have to remain confidential but as a say i'm very happy to give him that briefing. on what he says about european countries have introduced their deficits, being forced to do so, i would ask him, who is supposed to be lending his european countries this money that he talks about in this imaginary
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world where they're not taking action to reduce their deficits? he voted against the decisions we have taken to increase the resources of the imf, no children and thinks there is some magical body out there, some investors who will lend money to these european countries that don't have credible deficit plans. it is completely nefarious as he put it. now let me talk about the u.s. he mentions the u.s.a. he called for a stand on this measure? arguing. i agree with the plan president obama's set out, george washington university. may be the leaders of the opposition doesn't know what's going on in america at the moment. [laughter] actually, actually the president of the united states, the president of the united states have set out a deficit reduction plan that is at the same pace and of the same scale as the one that we are pursuing in britain.
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that is what the president has said as his offer, and the the opposition he has set forward of tax increases and spending reductions are the same as the spinning consolidation that we announced last year. they are based on some of the ideas put forward by the commission to go to the u.k. for inspiration for some of their ideas. now, he says there is a global economic crisis. he is right about that. we agree about that. but it is caused by an enormous debt overhang. that is what all fears, economist are saying at the moment. it's also right when he says the labor party need a tough deficit reduction plan. i agree with him about that. where is this tough deficit reduction plan? we have just spent the last two and a half hours listening to labor mp get up and complain about spending cuts, complained
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about the deficit reduction plan, yes, they are all nodding their heads. where is the top deficit reduction plan that he promised? [shouting] mr. speaker, the shadow chancellor is now almost alone in the world in making the argument that he makes. he talks the international leadership. if you turn up at the g7, the imf, the g20, with his plan to borrow more, to increase our deficit, he would be laughed out of that meeting. he is completely irrelevant to any international debate. and i'm afraid he is living proof of why the public will never again trust the labor party with their money. [shouting] >> sir andrew tyrie. >> does the chancellor agree the collapse of the eurozone is a warning to any government which flinches on dealing with a deficit? is why the chancellor isn't quite right to stick to the
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commitments that he made a year a go to put the country on course of greater stability? does he not also agree credibility is a long run economic policy but also depend on a fully developed strategy for improving the supply side of the economy? he talked a bit about that at the end of his statement. when he is intending to publish, to fully work of improvements. >> first of all, i completely agree with the treasury select committee says about the credibility of the deficit reduction plan, now disaster it would be in the current environment to weaken that plan. we would within hours i think find themselves sucked into the global debt whirlpool that other countries are struggling to get out of at the moment. so i agree with him about that. i've also agree we need to do more to bring the supply side of our economy. this is hard work. it means taking on difficult tested interest. we've seen the argument in the
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last few days about planning controls where we're trying to make it easier to have economic development. there are plenty of groups who pop up and up those that. it is an example of some of the battles we have to have and to win. i confirm we will be producing the second phase of our plan for growth. is also at a time of the autumn forecast. >> mr. david miliband. >> mr. speaker, a be very grateful to mr. chancellor confirm private sector estimate privacy, which are 4.% downgrade over the next four years means it will be impossible to hit his fiscal target of turning the debt-to-gdp ratio down by the end of the parliament. >> the independent estimate most recent made, was done by the imf this month. they made an assessment using lower great forecast, and they came to the conclusion that we would have both a fiscal mandates and our target for
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reducing debt. and they have made that clear and they're asking for reassessment. i can't help but note that if you given the leaders speech he had written, then the labor party in a much more credible place than it is today. >> malcolm bruce. >> as the world circles country after country, is it not an indication discovered it was right to come together with a robust strategy to bring our policy into balance? the labor party lacks credibility. if there's one area we can be sure this is done in a fair and equal way which puts the lower and middle income groups in the driving seat of recovery. they accelerate process of reducing, increasing the tax ratio and reducing taxes on those people is the best way to do it. >> well, the honorable member is absolutely right. we are taking many, over a million low-paid people out of tax altogether come and that is implementing the policy of the
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liberal democrats put forward at the general election. i also agree with him, it's a vindication, not just of the economic decision but also the political decisions we took. i think you're reflective artifact we had a hung parliament, the first time since the 1970s. we formed a coalition government. i was a difficult decision for both parties involved. when you look at the political weakness in other countries, which is driving a lot of the market concerned about this countries, look at the political strength of the government in britain, i think that is attributed both political parties. you set aside their clinical differences and came together in a national interest. >> jeffrey robinson. >> thank you, mr. speaker. with the chancellor assist in the bewildering, that his plan is working. please tell the house by how much this year, this financial year he will fall short of his financial tide of the apposite reduction speak with the important difference between a
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time when he was in a treasure and i'm in a treasure is we have an independent office for budget responsibility that makes those announcements. and it is not the chancellor that makes those announcements for the very simple reason, that by the end of the last government those treasury announcement were sewed discredited they were believed by absolutely no one. and one of the important decisions, early decisions we took to restore credibility and british public finances was the creation of an independent agency to make those announcements. [inaudible] if so, why? >> it is the case that in the first two quarters of this year the u.k. has grown more strongly than a tiny bit however that is not a source of comfort for the world because we need a strong u.s. economy as well. and we want to help bring about
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the international framework which will enable that to happen. >> mr. speaker, isn't everything it took until the end of page five of his speech with chants of to even sadly mentioned the word growth? when i reflect upon the fact his own -- the region to the pages is a very important very important money into the low plan that was supposed to solve this but has actually left the english region stagnant lake growth over the last nine months? >> both he and i represent constituents in the northwest of england, the striking facts about the regional settlement agencies is that during that period regional disparities in our country grew. it didn't work in the way they were supposed to work, and i think local enterprise partnerships, pinball businesses and a much more practical boundaries, will help deliver that local growth. but i have to say, if he thinks all the worlds problems at the moat are caused by the fabric
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here, i think he's exaggerating his case. >> mr. william cash. >> the chancellor will know that our trade balance is between 2002-2009, 2010 with the other 26 number states has gone up from minus 40 billion minus 53 billion in one year. does he not agree that even he would repudiate the idea of veto a fiscal unit with a hard-core euro with such and crippled trade deficit against? the coalition agreement according to the latest answer i got from the prime minister determines our relationship with the european union. desdoes he not agree, disagree h the deputy prime minister we must every negotiation, radical renegotiation, and the repatriation of powers so we can achieve growth for all our -- shop-vacs but i think is in parliament and is, the national interest they should be suitably
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rationed at the chancellor of the exchequer. >> what i would say to my honorable friend is i'm afraid we'll have to agree to disagree on this. i think there monetary union leads you to more. it was one the reasons i was against joined the single currency. however, i think it is not in our interest allow that to happen more in the eurozone. because it is in our absolute national economic interests the eurozone is more stable, and it's clear to me that means they need a more fiscal powers to reduce their instability and that currency zone. that means of course that britain's fight hard to make sure its interests are represented, that we are not part of this fiscal integration, and important decisions, for example, a financial services continue to be taken at the level of 27 but i have to say he talks about treaty changes and so on. i think the prospect of a major treaty changes to bring about this eurozone fiscal, is not
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imminent but i imagine there'll be a lively debate if and when it comes about. >> the number of people who claim jobseeker's allowance in my constituents have gone up massively, hard-working people with good work records unable to find jobs. why will the chancellor not look seriously at areas like mine, do more, take measure to money in the hands of ordinary people such as reducing the vat? >> we have announced an enterprise for sheffield, and we'll have further announcements to make in the coming weeks. what i would say, evidence of the last 10 years is that actually in important regions of our country, and i have in my mind the statistics of the west midlands from her constituency, private sector employment actually fell over the decade before the financial crash. i mean, that to me shows the
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model of growth based on the biggest housing of any country with the possible exception of our them with the most overleveraged things, the highest budget deficit ultimately lead to ruin. and we need a different model of growth where we go the private sector in areas like sheffield, and get real lasting jobs rather than assuming we can just use government spending. >> mr. john redwood. >> someone who believes we do need to get deficit down and do more to assist growth, to help them. will the chancellor look at the dreadful losses of rbs and they get on capital that is on their share? and see what more can be done to manage that colossal axis in the interest of economic growth and attacks from? >> well of course we continue to monitor the situation rbs and, indeed, all the british banks very closely. there is of course a concern in the financial markets about the capless vision and liquidity provisions of banks in many countries. i have to say this has not been
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expressed at the moment about the u.k. we passed a stress test will. we have a strong liquidity provision in place for the banks, including rbs. and i think there for the markets can have confidence in british banks. >> but isn't it clear that the right honorable gentleman whole strategy is failing? since it is now almost entirely dependent on achieving growth? and since the economy has been flat nine for nine months, export markets are stymied. could easily have are been tried with little or no effect. interest rates already flat on the ground. what exactly does he expect the growth to come from to get out of the long stagnation? >> as i said the british economy is turning. the assessment of the bank of england and the office of budget responsibility that it will continue to grow. the growth in the last six months has been stronger than the united states of america.
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as i pointed out. and half a million jobs have been created in the private sector in the last year. last 12 months. so that is all good news. and i have to -- the question, where does he expect the money to come from for additional government borrowing? who in the world which into a country that abandoned its deficit reduction plan at a time like this? particularly a country like britain which and fortune has the highest budget deficit and the g20? >> we are all still hearing that banks are not meeting sufficient funds available to small and medium-sized private enterprises to their constituency. upon which the guns strategy has been based to make up the deficit of the loss of jobs in the public sectors as result of the strategy being pursued.
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a downward estimate in growth. what we do business secretary mean when he said we would have to find more imaginative ways of getting the money through? can take find what he meant by that? does he agree with it? >> the challenge that we face in many developed countries face is this, banks are shrinking their balance sheets. they got too big. they let too much money. they are also courting capital because of the current market. what we're trying to do is ensure that in the process, bending small and medium-size businesses is protected and, indeed, increase. we signed an agreement with the banks the beginning of the year, and emergency agreement to see an increase of 15% and small business lending. we will publish the figures tomorrow, so i can't get them today. but the banks themselves have already indicated that they are on track to meet a 15% increase in small business lending over this year, and i'm confident the figures tomorrow will show that that is the case.
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>> in june 2010, the deficit reduction plan as adding 8 billion tax rises the year, and 52 billion of cuts from 1415 every year on top of the 73 billion or so fiscal consolidation that labor had. it also forecast growth this year on 2.3, 2.8, 2.9, and two by 7%. those figures -- what with the chancellor do? we increase taxes? quickly cut public spending from then? or did he mean by adjusting our expectations accordingly that he would change his deficit reduction targets? >> we are not proposing for a second to change our deficit reduction target. and, of course, the deficit reduction targets is a structural budget deficit target. and was deliberately set as such. i have to say, the reason we set
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out those plans in the emergency budget, the reason we went on beyond the mantra provided by the last government, not that they're written in the proposals to do that, but the reason we went beyond that was because on the day we came into office our country's credit rating, know what those plans were, was on a negative outlook or downgrade. our market interest rates would track income and would the governor, the bank again, the imf, the cbi think the government's budget, the previous budget deficit plan was not credible. if we stuck with that plan, even if we filled in the blank space, i believe we would now be part of the whirlwind of suffering debt crisis, the sovereign debt crisis which is engulfing other countries. >> before there's any attempt to rewrite history, the chancellor just confirm again that until last year's emergency budgets and spending plans, this country's aaa rating was on
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negative outlook and was only restored to stable through them measures he took last year? the real lesson of the united states, of any country that goes off its fiscal deficit reduction plan can suffer a downgrade with all the damage to jobs and prosperity. >> well, my honorable friend is absolutely right. last year in january last year, the largest bond investor in the world was sent this. they said that u.k. is resting on a bed of nitroglycerin. and today i could read out a whole string of comments from market participants in the u.k. has been a safe haven in the sovereign debt crisis because of the disease we took. and, of course, can't impose, the rating agency which is just downgraded the u.s., to the u.k. off negative outlook, reaffirmed our aaa credit rating. and the practical consequences of this is much lower interest rates. if we pursue the policy proposed a more spending, more debt, immediate response will be higher interest rates which
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would kill off any recovery. and that is what it is really economic madness. >> thank you, mr. speaker. given worsening u.k. growth, with a chance of advocate further easing? if he won't say on that, does he believe that there's no chance of rapidly rising hurting our export? >> well, these are both matters property for the bank of england. and for government to comment if he chooses to comment on the value, and in terms of positive easing, the arrangements which were as agreed by the previous government, which i continued, remain in place. if the budgetary policy committee makes a search request, then, of course, we'll seriously consider it but we've had no such request. >> sarah newton. >> yesterday in my facts reported the low-cost the barn in the u.k. on average for five years to fix of mortgages. and a 1400 pounds cheaper than two years ago.
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this is very welcome news for hard-working but squeezing constituents in my constituency. i can the chancellor confirmed that he will continue his policies that will have a low interest rate so important for families and businesses across the country? >> i absolutely i will. and i think interest rates are often the missing parts of the debate in this chamber. and it is economically impossible for the opposition have more spending, more debt, and low interest rates. those things don't square in the current global economic environment. so the automatic response, the immediate response to the market and quite possibly for the monetary policy committee would be an increase in interest rates if the party opposite were to abandon the fiscal plans that we have put forward. we would have interest rates that would kill off in recover
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recovered. >> without preamble so we can maximize the number of contributors. >> mr. speaker, the frightening ability of the world economy has arisen since and as a result of the abandonment of postwar arrangements designed in bretton woods and a localization and globalization of finance capital. half of that original was each of its country had its own currency. isn't that sensible to move back in that direction by establishing national currencies within the eurozone? >> well, we did abandoned the bretton woods arrangement the early 1970s. it's been a while since we've been operating under the international arrangements. i would make two observations. he makes a serious point about the eurozone. i think it would be disastrous for britain's economy if the eurozone was to break a. i think would also be disaster for the economy of the eurozone, it would leap immediately to a
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crisis in many european countries. and that's why in our interest, in the eurozone works. some of us question what it was right thing to go ahead with 15 years ago. we said we didn't want britain to be a part of the. as i've said before i told you so is not an economic policy for today. but when i think he is right is that we do need better international arrangements for monitoring and dealing with the global rebalances but the fact that huge credits in countries like china and big data countries like the u.k. and united states. i'm afraid the progress of the g20 and imf on this is painstakingly slow. some of the meetings are not even able to agree on definitions. i hope if there is a silver lining to the black clouds of the moment, the financial market crisis, we will see in the autumn meetings much greater progress that i think if one accepts needs to happen. >> thank you, mr. speaker. i congratulate the chancellor with the death of reduction
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program. but can he tell us, what has he made about the rising price in gold? how much better off the u.k. economy would be if the last comment had sold off gold? >> well, in anticipation that the question might come up, as it often does, treasury event, the price of gold has hit a record high as people would've seen of $1800 year it was $300 when the shadow chancellor sold our gold stock. and as result of this country has lost 12 billion pounds. >> thank you, mr. speaker. the chancellor, the house will know the chancellor does not mention the fact that we are approaching 5% inflation. he did not mention the fact that we're 46 billion over his borrowing. he did not mention the fact that consumer confidence is falling, or that the business confidence is falling. he did mention his growth plan
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but there is no growth. when we accept the parallel that the sharper the cuts, the deeper the cuts, the less growth there will be? >> well, the question i would ask him is who does he expect in the world to be lending money to countries with very high budget deficits that don't have credible deficit reduction plans? what group of people would put the money on the line? that's precisely the problem we've got at the moment in the global financial markets. he asked about inflation. the governor of the bank of finland said yesterday in his press conference expected inflation to hit 5% this year. but i would say another silver lining to the dark cloud, the commodity prices have fallen in the last few weeks. the oil price has fallen somewhat off its high. one of the biggest challenges i think all developed countries, and, indeed, developing countries have faced in the last year or so has been a very big increase in the oil prices. >> mr. speaker, can i welcome the chancellor's comments about the need to cut deficits? can i also remind him that
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however the market is important for exports? and the growth required and sellers to the conference to transact. will he therefore while -- remember the need for demand and still demand british economy for households and businesses is very important? and will he not lose sight? >> well, of course i agree we need to make it i think you meant partly comes from confidence. and confidence comes from economic stability. and if we think of the difference between a statement that i've been able to make debate in the house of commons and the kind of emergency statements that emergency budget cuts, that many finance ministers have had to announce the last two weeks, then i think you have in a nutshell the reason why we did the right decisions last year to get ahead of the curve and why so many other countries are now trying to catch up. >> does the chancellor say how
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exactly plan to control his team at when they're already offices, houses and shops which are standing empty in my constituency? >> of course we need to fill vacant properties but we also need to about new development. and i think all of us want to protect areas of outstanding natural beauty in our country. i had against interested in the greenbelt. but, frankly, the planning decisions are so lengthy in this country and so bureaucratic and so complex that almost every commission in the last decade to look at the british economy has identified plan as an obstacle to further economic development. and i think we need to get, simple by those plans and control. so yes, we protect the countryside but we also get decisions in reasonable time that allow development to take place. so that's what we've introduce the presumption of sustainable development into the planning system. >> jeffrey brown. >> how can the chancellor -- given there are four and half
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million employed to justify people to each of them, or a court of them took an extra person, don't have a huge dent on the unemployment rate. >> of course small businesses are the engine of job creation in our country. and as i say, 500,000 new jobs have been created in the private sector over the last year. that is the second highest rate of job creation in the g7. in terms of specifically helping small businesses, we avoid the increase of small business taxation which labor party put in last budget, he shakes his head. he did know but that was an increase come in small business taxation. we cut it. and it also introduced support for the exports come exports a small businesses, a central part of the strategies developed by stephen green, to help small businesses export. and, of course, i prefer to the agreements with banks which are now starting to see an increase in lending to businesses that
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sent it wasn't happening last year. >> chris williams and. >> the frontline economy and inflation set at 5%. the stagflation looms large. so can the chancellor to help the house why he is so wedded to crack tea party economics when he is plenty failing the country? >> sounds like the shadow chancellor wrote that question. [laughter] let me, let me repeat what i have said early. actually, the proposal put forth in the speech of george washington is for deficit reduction in the united states of the same pace and at the same scale as the one we are pursuing and britain. and that is because in america, they have to do with the budget deficit. >> thank you, mr. speaker. europe is making increasing demands on a pension parks, and
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iverson made demands on our vat but is it not time had a debate on how much? he said economic would be disastrous if it broke up. but surely they should be a debate. 75,000 have signed a petition but surely this ought to be a debate. >> we do debate the european budget in this parliament, and quite lively debate. we are fighting hard to freeze in real terms, freeze the european budget. not just for next year but for the coming new financial perspective from 2014. and we have enlisted a number of allies i think across europe now. there is an understanding with very tough decisions at home of public expenditure at almost every european, in every european member state. we need to give a control on the european budget. >> the momentum for growth in u.k. economy has clearly not run. i'm glad he's going to make announcement about growth in the
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autumn. as the plans for those we take the imf you that if there is a prospect of a lengthy period of weak growth ahead, should doing to consider temporary tax cuts? >> well, of course we bear in mind advice from the i f. and others. but they make it clear that that is not their scent of you at the moment. they were very -- they asked themselves, the very specific questions. and they say this but the weakness in growth and rising inflation raises the question whether it is time to adjust macroeconomic policies. the answer is no. strong fiscal consolidation is underway and remains a central. imf article for report published on the first of august. >> recently the u.k. has been highest per capital exporter in the world. vital to future growth. what action is a government taking to ensure we can continue to compete locally for services on a level playing field,
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particularly in the european union? >> the first thing i would say is wow it's not all the economic data has been encouraging recently, actually the services index for the united kingdom and in the last couple of weeks was actually one of the, i think the strongest in europe. and gives us some cause for optimism in that sector. i agree with him that we want to maintain our competitiveness. and we want to export more to you, i think the agenda should be much more but complete a single market, implementing things like the services which just sat on the too difficult to handle shelf for far too long. this is the agenda we need to get the european union focused on. [inaudible] factory of divided in my constituency. they like many of the construction projects companies up and down the country are very, very worried about the prospects for immediate economic growth. particularly in the light of public procurement cuts.
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what i would like to ask the chancellor is, what is he going to do to stimulate demand and growth? what personas are you going to do in the very near future? so that we can create and safeguard jobs in the private sector. [inaudible] >> the first thing i would say is, in the spending review we actually sat capital budgets which were higher than the ones set out by my predecessor, the chancellor of the exchequer of the last labour government. government. cicely capital spending budgets are higher than they would've been under the plan that she stood in the last election. when it comes to getting the construction section moving, and that is precisely what we are attacking issues like the planning delays that have been difficult it is why we made a number of tax changes in the budget to help the construction sector. the construction index was also
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positive in the last couple of weeks. and i would just say to her, it is not possible when you're running behind such a definite energy 20 to the banning of fiscal consolidation plans, to seek out there in the work from money to borrow. that would lead higher interest rates, markedly higher interest rates but look at interest rates in spain and italy at the moment. we know the higher interest rates to particular damage to the construction sector. >> tobias ellwood. >> allowed us to keep our aaa rating, unlike some other countries like the united states. and possibly now france. of the chancellor say what would happen if france did lose its aaa rating in regards to e.u. stability funds? and the ability for eurozone bail outs to continue in the future? >> my honorable friends asked a good question, which has been asked in the markets at the
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moment i have to say one of the causes of instability in the last couple of weeks has been loose comments from finance ministers on issues such as debt. so i will take the fifth and not comment. >> jeremy corbin. >> does the united states have any concerns about the power of the credit rating agency that is him and at a whim can cause disasters on smaller a comments to increase interest rates, lead to public spending cuts and lead to devastation for many poor people's lives? does not think it is time to report under some kind of accountable control? >> well, it might surprise the honorable gentleman to say, ashley i agree with at least part of what you say. we have concerns about the way the credit rating agencies have operated, and that's why we've been heart of european discussions against european rules on credit rating agencies in place. and i think they are
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appropriate. where i disagree with him is to blame all of what's happening on credit rating agencies the credit rating agencies, however imperfect are trying to give market investors some idea of the credit worthiness of countries and india companies. and the truth is this. did not lead to spending cuts. the reason we have had to take spending cuts is this country is currently spending close to 50% of gdp on public expenditure. that is far higher than the historic average under conservative and labour governments, and that is why we are having to act. we are doing it because with a record budget deficit, the highest in our peacetime history. and highest energy 20. >> mark spencer. >> thank you, mr. speaker. the chancellor made reference to murder and and an agreement with the banks. but is he aware that these banks are double counting their lending by forcing businesses to convert overdraft into long-term growth?
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i have a business in macon stages want to expand, who want to take a more staff, and they cannot do this because not only for banks nothing helpful, they are being obstructive. >> i'm very happy to look at the specific constituency case that he mentions, 11 look into the details of that. and get back to them with an answer. [inaudible] forecasting even higher unemployment and more jobs will be lost. the government wants policies. they are putting new work obligations. [inaudible] not all of them will. and, therefore, really wrong that the people who have been doing all they can to find work,
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and so helpless, the loss of their benefits. can the chancellor speak to the effect of this? these obligations should be lifted? >> first of all, if i might correct the honorable lady. the obr are not forecasting rising unemployment. they aren't forecasting falling. i reminder have the money private sector jobs have been great over the last year. but let me give directly with your point about social security. the welfare system is a policy trap that is discouraging people from working. and people on benefits face incredibly high marginal tax rates, if they seek work. that is why my secretary, my right honorable friend in work and pension has my full support seeking major reform of the
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welfare system so that we incentivize people into work. and i think it's one of the most important reforms this country is undertaking. >> given our country's debt, it's reassuring the price of the government borrowing has fallen to the lowest level since the last liberal government. how much more expensive, how much more expensive would government borrowing mean if our interest rates have gone the same way as those in other parts of your? >> it would have been of course ruinous. not just ruin is for individuals but also ruined his for the government. one of the largest governments things i've inherited unfortunately is debt interest. we are raising taxes in order to pay our international credit. it is now in the forecast to rise sadly over the parliament because as we reduce the deficit and that's what it so important to try to get debt falling by the end of the parliament. so it would, of course any
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reduction in our guild is good for the government. and it saves us money as well. >> can the chancellor explain why he -- [inaudible] >> the office of the budget responsibly makes its independent fiscal forecasts, which is one of the great, i think one of the great policy developments of this government that's been created by an independent body. they would be making its autumn forecast in the usual way. >> the chancellor rightly mentions the issue about the doha round and about trade. trade is something that permeates every single aspect of governments growth agenda. i just wonder whether the chance would like to comment on whether he believes that the g20 really appreciates how crucially important releasing trade and ensuring greater free trade at
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this particular moment in the global economic crisis? >> well, i think the honorable friend is right. i think the significance of this is it is therefore the countries of the world to seize today this month, next month, if you're looking around the world for something, in very short order, increased global demand, it is sitting there in the doha round i hope to make progress in the g20. it will be the leading aspect of making progress in the g20. we have some good i -- good allies. there are both obstacles. >> mr. speaker, is it to we have been used, why are we seeing significant growth in the value of families? >> as i say, make it a very simple policy not to comment as previous chances have decided
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also to do on the value of sterling. i don't propose to break that commitment today. >> in terms of the steamers to the british economy, what effect does a -- will be the effect increase borrowing which we didn't have an impact on increase mortgage rates, demented people up and down the country? what would be the aggregate impact, say, over vat? >> of course my honorable friend is right that there's a very significant monetary stimulus in place with these very low market interest rates. and, of course, the official rate. and both of those would go up, almost certainly in the case of the market come and probably indicates of the monetary policy. and that is why this talk of more fiscal standards, alone in the world. this debate is really happening almost alone in the labour party
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of the united kingdom. it's very difficult to find an opposition in where in europe that is arguing for less than reduction, coming off the published plans of government. and as i say, the shadow chancellor ashley turned out that one of these meetings and put forward his proposal i think you'd be laughed out of the meeting. [inaudible] join me in saying our best wishes to the officers injured last evening. of his statement come and ask him, with 11% coming off the stock market, the british values, this is not an impact in many, many pensioners. what's he going to do about it? >> well of course the stock market falls to affect pension investments, and, indeed, other equity investments that people have. our stock market has fallen, not as much of some, but nevertheless it has fallen.
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he says why is that. it's because of the global lack of confidence in governments abilities to deal with their deficits. and the reason i shall we've not seen the turbulence in our bond market is precisely because we have got at least a credible deficit reduction plan. and i might know, mr. speaker, it's been over an hour since i've been answering questions. and our almost since the shadow chancellor said we needed and that labour party a plan. has one single labour mp got up and proposed one single component of deficit reduction plan. know, they have not. >> the fact that over the last year we have seen the private sector create four times more jobs than has been lost in the public sector does my right of what the friend agree with me, is it a better approach to job creation and the overreliance on the public sector?
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>> my on the front is absolutely. first of all i should take the opportunity which i didn't take on responses last question. to praise the work of the police who have shown outstanding bravery in the last few days. and my thoughts go out to the member to the injured officers. he's right, that surely we have learned something from the last decade, which is relying on and sustainable housing great, unsustainable government spending, unsustainable bank lending is not a model of growth that this country can pursue. again we got to get office countries addiction to debt. and an addiction to debt not just in government but in banks and in household. that is what we're doing. it is a difficult adjustment that many western economies are having to go through. unfortunate for us, we were the most enthusiastic participants.
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it is a typical adjustment here in the u.k. >> does he agree with recommendations that he said -- [inaudible] >> we are in active discussions as he well knows with all the parties in wales, and with the welsh government. discussing what further powers might be default to the welsh assembly, including fiscal powers which might have a role in economic development. i don't want to preempt that debate, but the fact that we are compared to engage in shows we're doing this this in good faith. >> mr. neal carmichael. >> given the credibility the coalition government has worked with deficit reduction program,
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and also low interest rates, does he think that kind of message would be appropriate to encourage the same competition making swift and strong across the european eurozone? >> i think we have got ahead of the curve. and as a say i'm not going to -- the limit having to come to the apartment and announce emergency budget cuts because they didn't get ahead of the curve. i think it is important for the euro zone countries and, indeed, all country to fiscal credibility. there are many good examples in the eurozone of countries that have done that, and we are part of that act. [inaudible] >> can i say to the chance of people to my constituency, mass unemployment -- can ask the chance to win since to do to in my constituency?
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>> i would make this observati observation, that its own every labour government in history that has -- [shouting] >> isn't it the case the better way to the hard-pressed families, job seekers, and pensioners mentioned by all members of the house that are getting on with the business of trying to make savings their own budget, their families income, that they need to see a stable economy in order to make sure that they are eventually maintain? >> well, my honorable friend is right. what we are able to provide is that stability in the government debt market which is lacking sadly as other government debt markets. but i think all of us now need to rise to the challenge of removing the obstacles to growth. elamin confronting some vested interest, even potentially some
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trade unions. but is actually essential that this country wakes up to the competitive pressures of the modern will, to competitive pressures to countries like china, brazil and others present to us. and get that private sector growing in a way that will create sustainable jobs that were so lacking in the last 10 years. >> lester government borrowing pay 25 pounds than lower anticipated. can you give us an explanation, chancellor? >> as i already explained, we have an independent office -- i was pretty tempted to say that the and was the previous chancellor knew that he didn't want to have to downgrade his foreign forecast before the general election so recorded kitchen sink the borrowing of the forecast a year before to make sure he was able to show a reduction just before the general election. ..
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rather than being seduced by the voodoo economics of giving tax cuts to the rich. >> there are plenty of american references at the moment in this debate. the point i would say to my hon. friend is that actually some of the asset sales we have proposed and indeed undertaken, we have used the receipts of those to invest in new infrastructure or any particular industry. we have to deal with this on a case by case basis, but the spending review did set out however going to use some of the asset sales for future
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investment. investments. >> pamela nash? >> mentioned in a statement earlier the gross forecast for this country five times since he took office. how does the chancellor say that and that is an economic haven? >> bye quoting the the governor of england, and she said that -- they appointed this, governor of the bank of england. what the governor of the bank of england said is the u.k. has done what it can in terms of putting major conditions in place to assure the rebalancing and recovery. we have incredible fiscal plan which many countries do not come in and we do. that's what he said yesterday. >> james? >> thank you mr. speaker. he adopted to the debt funded
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cut that would have an impact upon the u.k. aaa credit rating. >> i think a multi-billion dollar increase in our deficit would undermine market confidence in the u.k., would lead to an immediate, probably within minutes, and interest rates the what mean higher effective mortgage rates for businesses and for families picks, and it would be one of the things that would take off the recovery. >> i was pleased to visit the energy services in my constituency tuesday. a company that invested 20 billion pounds to meet transition pieces for the offshore when the industry. they are frustrated and the disadvantage they have that germany and other european countries have by its own. with the chancellor do something to help the british industry in sure the wind farm by british help hundreds of jobs and get
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the economy moving again? >> we are seeking to develop a domestic green energy business of which it sounds as if the company that he speaks to is a good example. i hope they by british products like wind turbines because they are the best in the world come and to help that company make the best products in the world we have to trade competitive business components because the competition from the likes of germany is so strong. and i would also say that some of the decisions that have been taken on our energy policy has provided some stability that allows investment in that renewable energy technology. >> and drew curious mix before mr. speaker. that's one of the regions the last ten years lost private sector jobs on the public sector. our way back to the manufacturing -- can i ask the chancellor to look very closely at things like the carbon for
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pricing and putting the wings and perhaps more could he look very seriously at [inaudible] by next year? demint first of all i completely agree with him about the need to make progress on the planning reforms for the reasons that he said. that does mean in difficult positions and taking on pressure groups but i think that is absolutely right and the planning of reforms we make deutsch into account the need to preserve our natural environment the bridge toll is something i'm very familiar with because of the member who is a tireless campaign on this and the treasury is conducting an economic study to the effects of the bridge tolls, and there will be reporting at some point in this parliament.
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>> dr. blackmon? >> i congratulate the chancellor for recognizing there's a link between what happened in the global economy and the u.k. economy. in the light of this can he say what it's going to take to ensure the problems that the u.s. economy and the eurozone do not need to further downward pressure on u.k. economic growth? >> chancellor? >> unfortunately i can't, to the to make the u.k. not affordable to those events elsewhere in the world but of course there's a global connection to it i would draw this distinction between what i am saying and what my predecessor, the previous prime minister says. i'm not saying britain has been blameless in the way it's handled its economy in the last decade or so. [laughter] we were the most enthusiastic participant of a global debt and as a result of the more difficult adjustments.
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>> roger williams. >> recent reports have shown that the economy has the capacity to grow and grow quickly if it has the right conditions. will the chancellor confirmed that in the state on the growth -- plan for growth those conditions will be met and the economy can play its part in approaching the national finances? >> well, the first, but i would say to my friend, is we recognize the specific need for the economy. it's one of the specific strands in the second phase of the growth review, and i think one of the key -- i know something of the constituencies -- one of the absolute keys to the rural economic development is the infrastructure world and which i think opens up all sorts of business opportunities in what has previously been regarded as a remote places, and i think that is why we are right to be investing in a rural broadband
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across the u.k.. >> dr. alan white head. >> but we took the opportunity first to repudiate the office of budget responsibility so growth with 46 billion additional borrowing requirements, and what additional cuts is he planning in order to avoid that outcome? >> i think the honorable gentleman says two things, one is the office of budget responsibility is independent. i have to say if it's going to work as a permanent institution, it is going to need the support of the offical opposition, and i hope that's forthcoming not just in the latter support but also in the spirit, which is there is not a constant demand for the chancellor today to provide their own fiscal forecast. so there will be the first point i would make. the second point i would make to the honorable gentleman is as i
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say, we have put in place this credible deficit-reduction plan. we have heard from the chancellor of the beginning of the session that labor needed an incredible deficit reduction plan as well. not a single member including him has proposed a single pound of spending cuts in this session. and i think until labor party gets that credible plan that will not really be able to pass a sensible debate. >> george freeman. >> as my honorable friend seen the data that none of the showings of the private sector four times more than the sector has lost but also britain is now second in the g20 league of net job creation; doesn't that show that the strategy is working and that the shadow job growth is out of touch and hasn't learned the government role you can't borrow your way out of a debt crisis? >> will, he has a history and the golden rules and they don't
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usually turn out to work. but my honorable friend is right. my honorable friend is right that we are seeing job creation. we are not removed the complacent by that. we are working extremely hard seeking to improve the competitiveness and making sure it's able to export and invest. that is the model of growth this country has to pursue. >> thank you mr. speaker. the last nine months have been planned to present in the proceedings in the nine months it was 2.1%. many have been about the growth and economic and regeneration. if we continue to see growth to this nature either flat line will the chancellor look again and will he be looking at policy that stimulates growth? >> wealthy only thing i've heard from the party opposite which by the we presided over the deepest
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recession since the 1930's -- the only thing knife heard is a complaint every time any proposal was put forward to cut the public expenditure. we just heard that earlier today. i have not heard any growth policy as she puts it from the labor party. i just heard opportunistic opposition to everything this government is doing that a credible deficit-reduction plan. the chancellor then is going to >> for politics, public affairs, books and history, is the c-span networks, available on television, radio and online. search, watch and share with c- span possible video library. we are on the road with our c- span digital boss and local content vehicles bringing resources to local communities and showing events from the country. the c-span network -- created by
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cable and provided as a public service. >> president obama is on a three-day trip across the u.s. he started in minta and is traveling to iowa for a stop there today. you can see live coverage of the advent in iowa at c-span .org and the earlier stop in the c-span's video library. tamara, the president is holding a rural economic forum near the illinois border. he will be joined by the agricultural secretary to announce. a look now at the present cost job proposals from this morning 's "washington post all." host: andrew fieldhouse joins us from the economic policy institute to talk about the president's proposals for job
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creation. welcome to "washington journal." guest: thanks for having me. host: does the president have a firm plan for creating jobs, and if so, lay it out. guest: i think the president has articulated several things clearly. he pushed for a jobs agenda. the most visible near term items of the extension of the payroll tax cut an emergency unemployment benefits as part of the tax compromise. withdrawing the measures would create a real drag -- that is the first do no harm principle. it does not actually add to the growth on the margin. beyond that, he pushed for an infrastructure bank, he pushed for increasing infrastructure investment. $213 billion additional infrastructure investment over the next decade. but congress has not been able to meet him on increased surface transportation spending. part would include a $40 billion infrastructure bank, which i think it is a great idea.
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but then, a lot of his policies are focused on long-term growth than near-term. and i don't think it has been made clear. patten's reform is probably a real sensible thing to do but you will not see jobs in the next two or three years -- patent reform is probably ever sensible thing to do. but the voters have in mind -- near term job creation and a much lower unemployment. host: we've got a chart from "the wall street journal" which has four measures you touched on briefly. i want to go through all for more detailed explanation, andrew fieldhouse. first, extending a payroll tax cut for another year. how in the president's mind and in the mind of the administration, how will it create jobs? guest: right now easy the consumer in no position to lead the recovery. personal consumption expenditure
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unexpectedly fell in june. we saw 0.1% added to -- growth gdp growth from personal consumption -- remember, consumption accounts for 70% of the economic activity for this country. between stagnant wages, high unemployment, and sweeping foreclosure crisis that has gone unaddressed, the consumer is not in the position to spend a lot of money. saving rates are up a little bit. but you will not see a pickup in consumption until wages and salaries pickup. by increasing disposable income, the payroll tax cut would help that. you are essentially transferring debt from the private sector to the public sector. the payroll tax cut reduces employees' social security contributions by 2%, the maximum cut is about $2,100 for the top earners. another -- host: another item mentioned by
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the president and getting a lot of write ups and various newspapers is the creation of an infrastructure bank. what is an infrastructure bank and how will that put more people to work? guest: the idea is you would partner with the private sector, there would be cost sharing and the federal government would pick up some of the risk but you could somehow leverage public dollars. i think this would help. i think there are a lot of infrastructure projects that have not been taken on. i certainly think state and local governments are not in a position to pick up a lot of infrastructure investment right now. the budget crisis will be as bad if not worse and and the 2010 fiscal crisis because money from the recovery act is pretty much gone. it really comes down to the federal government. my only concern with an infrastructure bank at the present time is that the private
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sector has not been willing to invest in anything. they did not say a higher rate of return because there is not consumer demand. there's a reason treasury rates are at historically low levels. i think there is a case to be made that only the federal government is in a position to push the economy forward. i think establishing an infrastructure bank is a great project. i think it will be more effective when growth has picked up. but for near-term job creation i think direct spending in infrastructure makes more sense, hire bang for the buck. host: talking about president obama's proposals for job creation with andrew fieldhouse, federal budget policy analyst with the economic policy institute. if you want to get involved, give us a call --
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and we've got a special line for business owners -- 202-737- 2579 is our line for business owners. what you think about the president's proposals for job creation. before we get to the phones, tell us the difference between the infrastructure bank and the stimulus program that the president got a lot of criticism for when it was instituted? guest: the stimulus program was much larger. it cost about $821 billion, and about one-third was tax cuts and tax rebates. a lot was the aid to states. we increased the federal matching rate for medicaid, which plug a lot of state budget shortfalls. and unemployment insurance, a huge expansion of food stamps. it infrastructure component was only about $46 billion.
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not nearly as large as it should have been. thinking about deficit finance the most -- you are borrowing at an interest rate. federal government, 2.2% over 10 years. if you have a rate of return that exceeds that you have no problem financing. the case that and the structure has rate of return above 2%, pretty clear cut. you saw the bill watered-down to include more tax relief and less of infrastructure spending. of the econometrics suggest taxes have much lower impact per dollar. in fact, the alternative minimum tax, which is not been lifted and anyway, was included in that stimulus package. there were a lot of things in the stimulus package. the american society of civil engineers estimates we have a $2 trillion deficit and infrastructure and the next 12
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years. host: our discussions of the president's proposals for job creation with andrew fieldhouse of the economic policy institute. our first caller is from sarasota, florida. peter on our line for business owners. tell us about your business and then give us your question. caller: i am a graduate of fordham university in new york -- the two businesses i own, one was international business publication, and that was in texas, in houston. the other business that i had was a university consulting business that was out of pr where i dealt with 12 universities down there -- out of puerto rico where i dealt with 12 university down there and placed international students from germany and europe as well -- i am fluent in six languages and a dual citizen in hungary. i was up in washington, d.c., talking to the hungarian embassy about dual citizenship. i will hang up after this --
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what is your opinion in terms of what the fed reserve and the federal reserve bank governors will be doing in terms of credit policy and monetary policy relative to small business owners. i am retired now down in sarasota and we own property down here. of a foreclosure market is miserable down here. florida, as you know statistically, is no. 1 nationally and residential foreclosures. i would like you to address the issue of what bernanke and the federal reserve bank governors are going to be doing about the credit market policy and loaning money to small business owners. i will hang up and listen to your comments. host: andrew fieldhouse, the wellhead. guest: the federal reserve has to do more to help. it should be made clear that a lot of what they did in 2008 has already been done. they cannot lower short-term interest rates.
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and federal fiscal policy is in a much better position to address the jobs crisis. that being said, i do believe the fed will reserve will embark in a third round of quantitative easing, the purchase of long- term bonds. they had recently purchased $600 billion in long-term treasury debt. i suspect that you may see the fed resume purchases of asset backed securities, particularly mortgage-backed securities. when standard and poor's downgraded the u.s. credit rating, the also downgraded ratings on fannie mae and freddie mac, which collectively own or in short half of the residential mortgage market. while we have seen interest rates for the treasury fall, you will see an increase in the cost of borrowing for fannie and freddie, and as a result, mortgage rates will go up. i think the fed buying more mortgage-backed securities will help lower interest rates but there is a limit how much lower interest rates can do to resuscitate the market.
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we still have close to one-third of homeowners under water, 1 million homes have been foreclosed in the last few years and without targeting -- right to rent or bankruptcy reform or forcing banks to write down printable, i did not think you will see a real correction in the housing market. beyond that, i think the federal reserve should eliminate its rate of return on reserves. right now it is paying banks a quarter of a percentage point in interest on reserves held by the fed. that is lower than their short- term interest and actually above what investors are willing to lend to the treasury for two years. i think you would see an increase in consumer lending of the fed no longer paid banks. and then there is the option of a higher inflation target which would help reduce the net present value of homeowner debt. the targeting 3% inflation instead of two, would have a big compound affect the next five
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years. host: scranton, pennsylvania. a pall on the line for democrats. you are on "washington journal" with andrew fieldhouse. caller: in scranton, when i was in school -- i am 60 years old now. there were so many factories. had all their factories and pennsylvania, making clothes. rca had a huge facility. you name it, we made it in pennsylvania, and now we don't make anything. there are enough factories. the job creators that the republicans talk about, obviously they are not creating any jobs. they are destroying jobs. they are moving everything overseas. i saw on "60 minutes" last night, all the corporations, they just a post office box in switzerland and they don't pay any u.s. taxes because sorts of
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an's tax rate is 15% -- switzerland's tax rate is 15%, half of ours. host: we will leave it there. you gave us some information to work with. tack on to that, andrew fieldhouse, one of the president's proposals for job creation deals with passage of free trade deals. give us a little more details about that in terms of some of what the last caller had to say. guest: sure, what paul is saying -- he is right, our tax code does have an insidious designed that encourages firms to move production overseas. we allow firms to voluntary -- voluntarily repatriate money, they do not have to bring it back and pay tax on that unless they want to. it means they never have to. part of the gop jobs plan is allow corporations to move upwards of $2 trillion and
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foreign profits back to the united states at an absurdly low tax rate, 5.25%. we tried this in 2004. almost all went to stock repurchases and dividend payments even though it was not supposed to, money is fungible. this is a windfall, andending te would be a good way to stop -- with regards to the free-trade agreement, if you believe the free trade agreement creates job, it is like tax reform. you will not see jobs created immediately. i think what the president is missing in his immediate approach to foreign trade is the currency manipulation in china.
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my colleague has estimated that 2.4 million manufactured jobs were displaced due to china between 2001 and 2008. i think that we can solve the global and balanced trade and make manufacturing more competitive. within 18 to 24 months, we would see a change as a result of a weaker dollar. would passage of these free trade deals bring more u.s. companies back doing business? guest: the tax code is more important in terms of bringing manufacturing back to the united states. host: san antonio, texas, on our
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line for business owners. what is your business and what is your question? caller: what is going to happen in the transportation industry? it seems like every day there is a new tax that the government is pretty much of forcing corporations to have. people are talking about having to reform the tax code. when it comes to transportation or trucking companies, we have to do something. we do not get any tax breaks. if anything, we see tax hikes or fees. i'd like to get an explanation on that. guest: are refocusing -- the tax
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rates at the federal level are incredibly low. part of it is a consequence of a deep recession. in large part of it is due to tax hikes. president obama had a new tax cuts in the recovery act. we have not seen large tax increases at the federal level. i cannot speak to what has been passed in texas. i do not think tax rates are really the problem. the lack of aggregate demand, the lack of conception -- if people sought a wage increase, their disposable income would rise. we have a really weak economy. it is running almost at $1 trillion below potential -- the
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economy is still very much the press. that is a much bigger concern. if you do not have an opportunity to expand your business with new customers, that is going to hurt your bottom line. was: andrew field houshouse working as an assistant budget analyst with the house budget committee. how long ago was that? guest: most of a1 day11tthe 111h congress. host: ok. let's go back to the phones. caller: i do not note economics
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very well. but i want to talk about the core gdp. ours is starting to fail. why haven't the congressman issued junk bonds said that we can invest in our own tax i should be able to invest in greensboro and get to the return -- we can rebuild the transportation sector if we have cash for the regular people. guest: i think you see a very weak economy out there. consumer credit has retracted enormously. some are afraid to take on risk at the banks. we see that with a revolving
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into non revolving credit. there is a limit to how much the federal government can do for individuals. most revolve lowering in -- most involve lowering interest rates. i do not think you will see a direct lending program. it is more efficient on creating jobs, increase aggregate demand, with the exception of doing something to address the foreclosure crisis. host: steve is a business owner from livingston, new jersey. talkr: i want tolk about the garment industry. is no manufacturing inrin
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manhattan. -- how are those jobs ever going to come back to america? host: what business do you have? caller: we live on the domestic side of the garment, which used to be a huge business in new york. today it is down to a minuscule business. there is absolutely very little manufacturing in garments. you can bring in a suit from china for $60. there is no possible way these jobs are ever coming back to america. it used to be a tremendous industry in america. host: is the garment industry ever coming back to the united states? guest: it is very hard to bring
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industries back at a certain point if it has been gone for a long time. that may be the case for the garment industry. simply by having the dollar and a juan aligned instead of the depreciation, you would see a different balance with china. more construction of our exports. consumer fewer of the chinese exports. china's export-led growth model -- they face the question of rebalancing their economy. they can consume more and they are saving. the united states is barring a huge amount of money. a more balanced global economy
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for the sake of decreasing inflation in china, appreciating their currency would be a good way of stabilizing the global economy. i am not sure which industries are likely to bounce back. i think you would see a rise in u.s. manufacturing. manufacturing capacity is at 75% right now. it would not be hard to set it back up towards historical levels. host: washington post, a charge on democratic and job creation. a tax credit for hiring new workers. ellen fannie mae and freddie mac to read foreclosed properties. and school construction and renovation. among these four, which has the most combined support between
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house and senate democrats and the president? guest: today become a little tricky these days. two of the bills that i like in the e
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