tv Key Capitol Hill Hearings CSPAN October 16, 2015 4:00am-6:01am EDT
underscore time porting expectations are in influence the effectiveness of monetary policy. policy makers need to act in a systematic and consistent manner so they are formed accurately and behavior can respond consistent with those expectations bring in my view, it was a total discretionary policy. prescriptive rules, i like to make it clear i stormed the taylor role come the formulation based on john's papers have another a positive attributes for useful reference. first, it has 2 parameters. of a mende.ectly second the role has a desirable feature that when economic shocks push away from the central bank, the teller will prescribes the policy and can push the economy from coming back. a number studies have shown the taylor rule in the sense it's
performs quite well across the range of different assumptions of how the economy is structured and operates. despite these attractive features, i do not believe any prescriptive rule including the taylor rule can take the place of a monetary policy framework that has the collective assessment of a larger number of factors that impact the economic outlook. as i say, the taylor rule has significant shortcomings that could be detrimental to attainment of the mandated objectives. not just theoretical but very relevant to monetary policy in recent years. first, the taylor rule is not forward-looking. it's policy prescriptions based on the current size of the output gap in the deviation from the fed's objective, not how these examples are likely to evolve in the future. in a rapidly changing environmt, the taylor rule and other similar will be behind the
curve. rulee fall of 2008, taylor were above the level of rates at the time. and a sharp, tightening financial conditions that occurred during that period. many economists recognize such prescriptions would've been inappropriate and suggested various ad hoc modifications. said modifications were appropriate. there was no consensus about what of right modification were at the time and because in part the circumstances were so unprecedented and the outlook was so uncertain. had -- i believe that would've slowed down how we would responded to the crisis that would resulted in a policy that was not sufficiently accommodative. the consequence would been a
longer financial crisis and a deeper recession. second, the taylor rule for ally used as 2% neutral monetary policy. large which are says the [indiscernible] the value affected by many oftors including the pace technological change, fiscal policy, and the evolution of conditions. sometimes much higher than 2% and this was the case during the late 1990's as rapid tapping -- rapid technological change is sometimes well below 2%. when credit availability dried up during the financial crisis in late 2008, it was far below 2%. recently the economy and the lower rate is evidence that equilibrium today is well below the 2% rate assumed by the taylor rule. with aere consistent
neutral monetary policy, the very low rates of recent years buttressed by our asset purchases should of been extraordinary accommodative. as a result, we should saying much higher than 2% growth rate than we have seen and should have seen inflation rate much higher than what we actually experienced. this conclusion supported by a number of more formal models. the williams model estimates the equilibrium short-term rate is around 0%, not 2%. and more broadly in a prescriptive rule for the systematic quantitative adjustment for the policy rate to change intermediate variables such as rigidity is incomplete because it does not count for the factors crucial to how monetary policy are transmitted to the real economy. monetary policy affects economic activities through financial conditions included the level of the equity market, bond yields,
for exchange of a dollar, and credit conditions. if the relation between the federal funds rate in other indicators of conditions were stable, one could folks on the level of short-term rates. the financial conditions vary considerably as we saw the financial crisis and its aftermath. one needs to consider development of conditions more broadly. short-termtimes when rates were at a the federal reserve took actions that eased conditions without changing short-term interest rates. such actions have included for regardless that the fmoc was likely to keep rates low for aligning time an asset purchases that resulted in lower bond term premiums. because iat the star do not want to favor a role mechanically does not mean i favor the polar opposite, the discretionary monetary policy in which market participants, households, and businesses
conducted his may how monetary policy is likely to evolve as economic conditions and the economic outlook change. house closing businesses it did not have a good notion of how the federal reserve -- this will loosen the linkage between short-term and financial conditions. uncertainty and make it more difficult for policymakers to attain their objectives. of those factors that influence the economic outlook and how monetary policy is likely to respond to changes in the outlook. this includes fiscal policy, productivity growth, the international outlook, and financial conditions as well was how much inflation and unemployment deviate from the fed's objectives. by conducting in a transparent way and communicating what is important in determining the central bank's reaction
function, i think policymakers construct the best balance between a monetary policy that incorporates the complexity of the world as it is while retaining considerable clarity about how the fmoc is like to respond to changing circumstances. a formal policy role such as the tailorable misses this balance by going too far in one direction. what is important for tanning mandated is not just a formal prescriptive rule but rather the fmoc's intentional strategies are well understood by the public. this argues for clerk medication for the fmoc's meeting stamens and meetings and longer-term goals and monetary policy and the press conferences in testimony before congress and speeches by the chair and other fmoc participants. it is also important that the strategy be the right reaction of function area the policy toroach appropriately
factors beyond the two parameters of the taylor rule -- output gap estimate and rate of inflation. thank you for your time and attention. [applause] john: thank you for coming and thank you for inviting me to be here. last time i was speaking in this room, not of the last time, maybe the first time, first time in 1982. i gave a paper about something called the switch investment fund was like a policy rule. stan fisher and i looked up what he said because stan is not at the fed. he said john reaches a surprising conclusion somewhere, sometime, a government policy worked in a way it was intended. [laughter] john: maybe that same day or
another meeting that same year, paul volker was here and we went over had a few drinks and jim tobin came and i remember-- it was 1982, a difficult period and i remember very well jim asking paul, why don't you over -- lower interest rates? do not setr said i interest rates, i said the money supply and that was the end of the conversation. period, also crossroads a period where the said was -- fed was turning. somewhat related to where we are down. do withwhat was able to his colleagues was turned the fed from a very discretionary stop, go, stop policy which was
distracted in the economy did not do well -- and disruptive and and i do well and it was tall. crossroads are always tough. and i think plus all of the research that people have done have led me to the conclusion that we really need to strive rules-based policy because that is what paul volcker did. he was very ad hoc in the 70's -- 1970's when i started the subject and a change in the economy actually performed remarkably well, the great moderation. i was like the word along b -- long boom. unfortunately, it did not stay that way. , theinterpret the history federal reserve began to get off of that rule like policy and 2003,ally showed up in
2004, 2005 before the crisis. that deviation along with other things and regulatory lapses police mesa great recession worse and -- made the recession worse and lead to a lot of problems. the fed's reaction, to discuss some of bill's points, were admirable. it seems to me it continue to get off track and a coverage of the policies, quantitative easing, the way forward guidance e-likendled was un-rul that one of the problems i've seen. one of the west the thing about the crossroads is where the roads should be and where you should go. it is veryget back, important the way bill has articulated, it is not all or nothing but a matter of
direction, more rule like a more predictable. and i think that's where we need to be focusing. transitione from the , aside from the pros rose is what we're focused on so much and now, good to have a sense of where we are. bill's remarks were very constructive. to me, we should be going in a sense back but not completely because the world is different. you can see how it emerged in markets are integrated with the rest of the world. go back to situation where you could fairly well understand the reasons for the ups and downs in the federal reserve's target. never going to be rocket science, never going to be perfect, but you can understand those pre-in a sense, that is what was going on and that rule like period. caleb was one way to describe that. it was not originally a descriptive device. -- the taylor rule is one way to describe that. it's a described much of the
greenspan's fed. i think of it as more general and not as mechanical. people always quote my original papers and is never meant to be mechanical. as it is crossroads now and actually stated this wonderful dupont plaza, dupont -- circle hotel and looking at another crossroads. it has 10 routes to take. massachusetts avenue, new hampshire avenue, connecticut avenue, peachtree and can go is her way or both ways. 10 options. and the fed has decide which option. it now seems to me it is driving around the circle. driving around that circle. and we want to go somewhere. i do not know -- on a rules-based direction and not going to be easy and never was.
and we learned something from the transition off of qe, former chairman bernanke talked about in a way that was not clear. and then when things got clear, it was white smoke does quite smooth and worked quite -- quite smooth and worked quite well. , would say one of the things normalization, dating back to rules-based policy requires getting the balance sheet back to normal level. a complicated issue under a lot of debate. raise rates, it what to do it by paying interest on reserves or reverse repose. ultimately, like to see the situation where the interest rate, is determined by the supply and demand for reserves. that puts an important sense of and makes ite fed
more difficult to do qe. i do not like qe, qe infinity especially. it seems another part of getting back to a rules-based policy. it?h of those stories is prosperity.ree for maybe wes. i was like the western direction. place you canill go, maybe a little easier, easier trip in that direction. bill, i appreciate the care in which he has addressed these issues. he also gave an important speech in 2012 to the council of foreign relations which talks about his views and a how they relate to policy rules. in a sense, it seems to me that by listening to this and listening and reading these things, it is a way of how is -- past,re was plast
it might be used. an attempt to describe what the fed would be doing is different from a simple rule and nobody was to follow a simple, mechanical rule is useful to compare. that's kind of discussion might very well be how the fed would constructively respond to the requirement that it had reported strategy. how it uses the word strategy. it is not reported mechanical rule. indeed, it may at sometimes require some modifications. the example bill gates of -- bill gave up 2008 was i suggest modifying the rule and that is true. the period where we had this enormous movement between the libor spread. it seemed to be real credit issues in the market. by,mple idea and adjusted
libor is not the best thing to use anymore. very disciplined. it would have made a little bit of a difference. in other words, the modifications were within the context within a rule like, nondiscretionary thing. bill mentioned the taylor rule is not forward-looking. that is because it responsive to the current state of the economy. the best we can measure it. it is hard to measure where you are. i think we are getting better in forecasting. so where we are now is a little easier but i think that, in a sense, is not the way i think about it. if you want to examine whether a policy rule works well, it will always be evaluated in the context of a model of the world or a view of the world which is forward-looking. fed or any of the central banks reacting to today's inflation rate is implicitly
describing how it will react to tomorrow's inflation rate tomorrow. any model or any view of the world which involves expectations will take that into account so even though you cannot really see a forecast for inflation, you see actual inflation rate, it really is forward-looking. attempts to replace the current inflation rate by a forecast of the inflation rate, looking -- making it look forward-looking, they don't work so well. they muck up the works. question of what the equilibrium real interest rate is is very important. originally, the taylor rule had 2% inflation rate, it also had eight 4% equilibrium nominal funds rate. 2% real. a 4% equilibrium
nominal funds rate. thisis the median at point. i do not think that is in any way inconsistent with using a policy rule. that thato describe is the case. it cannot be willy-nilly. youways worried about change your strategy or your ale too often and it becomes discretion in rules clothing. you have to be careful with that. in the last minute, bill recommends a careful list of things you respond to. and how you respond. the taylor rule is too simple. but, is that really so different. isn't that what we are striving for? the reason the taylor rule is simple is because we made it simple. if we did calculations, the
struggle then was to find a rule andthe central banks to use it would inherently be so complicated. everything would matter. could you somehow boil it down to key things? and we could. the idea is that you can boil it down to those couple of things, but it does not mean that your strategy does not sometimes consider other factors. as long as it could be described systematically and predictably as possible. that is what we are striving to do. thank you. [applause] david: thank you very mitch -- very much for your clear and sustained presentations.
this is how i rate people that come to brookings. if they finish on time. the content is secondary. if you're watching online, you and oneit on twitter, of my colleagues will be your agent. you john.start with i think there is a woody allen movie but i cannot remember which when it is where he goes on a first date and he says to the girl -- can we just kiss now and get it over with? before we get into the deeper issues, tell us, are you going to raise rates in september or not? [laughter] mr. hughes: i wish i could -- john: i wish i could answer that. david: if the economy performs as you forecast -- n: it is a forecast, and
not a commitment. people who have been in the orecasting i would look at the data and evaluate how the economy actually unfolds. david: you have said that it was important that the public well understand the attentions -- intentions and strategies of the central bank. how well do you think the fed has been doing it lately? john: in terms of what we are going to do at the next couple of meetings, we have not been doing that well. there are different views on whether the economy has been performing well this year or not. that disagreement about will the giveny be strong enough that the economy is only performing slightly above trend.
the recent economic news's a just the economy is slowing and we have had these developments in china and the emerging market economies that could come back and hurt our economy and hold down inflation. i think where we are very clear in terms of what is driving our decision we having clear in that we want to see further improvements in the labor market so that we can become confident that inflation can return to 2% at the median term. andared to the 1970's 1980's, the federal reserve has much more information now about what we are thinking, what the forecast is, -- years go back even 10
ago, it did not provide an interest rate cap that now you can actually see all of the different fmo see participants, what they think in terms of the liftoff. if you look at the last meeting, you had 70% -- 17 participants. think how well do you they are communicating their intentions? i think it is a little confusing. john: i think half of the people were surprised by the decision and lf thought it was about right. wase would be nice if there a sense of -- 80% got it right. it is difficult now and i think the reaction to that decision was instructive.
one of the concerns, we do not know all of the reasons. reasons -- was concern about turbulence in the market. and the postponement itself seemed to cause more turbulence. it was a learning experience. important because it is hard to change after so many years at zero. it is inherently difficult to do that. i don't think our decision was based on the turbulence in the financial markets. are we makingthat sufficient progress towards our objectives in terms of employment. the uncertainty about the outlook.rowth emerging market economies. that created concern about the impact that could potentially happen to the united states.
me, the issue was not the financial market turbulence but what was happening in the chinese economy and the risk that it could come back to the united states and drag the united states down and make it more difficult for us to achieve our objectives. david: you think the problem is is that policy is too easy or that it is not following your rule? at a lot of look the rules, bill has tried to get some counterexamples but many rules say the fund rate should already be above zero. it would still be lower above -- would still be lower than 3.5%. it would be easy in that sense. , the sense outow cannothat any increase be done as long as inflation is iss than 2% and the economy
not roaring ahead. i think experience shows a rule should have a higher rate at this point given the state of the economy. it will still be quite easy compared to normal. using when we talk about a rule in normal times, when things are stable like they were in the 1990's, and you think that one reason things were so good was because the fed was using the rule. that we had an unusual period in the last 10 years. what with the taylor rule have had the fed do and if the only think you can tell us is -- let us deviate from it, then have you really accomplished your aim of having a systematic rule that people can take comfort in? the rate would not have been so low in 2003, 2004, and 2005. it was written down book --
before the crisis. that is the biggest thing. in rate is what the rule would say. i don't think it would have gotten as high if it had been raised earlier. you had inflation pickup so the fed raised the rate -- i don't think that would've happened. in 2009, the real issue about the zero balance, i had always thought that if that happened you did not do massive qe you look at money growth. then, after 2012, as late as 2010 or 2011, there could have been movement in the funds rate. for the panic and after the panic is when the problems -- before the panic and after the panic is where the problems
were. about -- do you go how do you increase the money flow when you are at zero? it will not increase by it self. you have to have more reserves in the banking system. to do that, you do q e. john: it may have been sufficient to not do any qe. credit demand moved back -- john: i've never heard any discussion about what we do that rates are at zero. how do you prevent money growth from falling? john: would you do with qe but by don -- bonds. youd: you don't like qe or
think they should have done something else? think they should of -- that is what we did. john: we should have purchased massive amounts of mortgage-backed securities. bill: you are not explaining what caused the money supply growth. john: you increase the monetary base by an amount that will increase the money growth. think -- the money growth was doing ok. it was doing ok because we were providing a lot of stimulus to the economy. john: that was not the justification. the justification was to lower long-term bond rates and that was eventually to stimulate the
stock market. i never heard a description -- bill: the reason we did not isus on money supply the -- because we have seen that connection broken down in recent years. systematic ins his pursuit of his goal but he was not a creature of habit in terms of what instruments he used. he used money supply growth for eight period of time. a kerry owed of time. a period of time. using a rule and it is not working, and you have to modify the rule. it happened in 2008 and 2009. -- the economys needs more stimulus because we are far away from our goals. had we provide more stimulus?
>> it was assumed to be 2, maybe -- that rule had a lot of 2's in it. easy to remember the number 2. 2% inflation target. eal equilibrium. so it was based on lots of studies but it was simple. >> i don't think it's changed that much about the uncertainty. what i think has happened is we are in a world which is craving maybe it's going to reverse. more discretion. so that is the best way to put into discretion into a policy rule. you just change the level. you can do whatever you want if you just change that rate. >> you don't think there's more uncertainty today? you don't thie uncertainty today about the equilibrium rate than there was 10 years ago?
>> how that is going to unwind. it has caused more uncertainty the way inflation rates are going to go. in a way, the inflation -- there is more stability about where -- what were you going to assume about the inflation rate in the 1980's? i think there is more certainty about that. about the role as if the rule came first. -- itit more accurate turned out that the taylor rule was a good description of that monetary policy? isn't that the causality? >> i think greenspan describes it as the fed needs and assist. assist. what was going on with paul volker was an attempt to focus
policy on a smaller number of things, maybe inflation. he thought inflation was the best thing to get down. and to be clear about that strategy, he did not have to go it and talk about it very much. i remember the jackson hole meetings. he did not say much. everyone knew about the policy. rules-based.s very if you just did a regression at that point, you would have the 1970's in their and you get much different estimates. , someoneou are saying would have to choose a particular period and use that to drive the coefficient. i can speak for myself, it was not based on a regression. it was not based on looking at what the fed did but what our research told us. >> no one wants to go back to the monetary policy of the 1970's.
we can agree on that. >> when you tell the story about what is happening, i have this character in my mind that the only thing that mattered was stability. early bad times in the 1980's because we had lousy monetary policy. paul volcker brings a miracle. the fed deviates and everything falls apart. aren't there a lot of other things going on at the same time? monetary policy cannot do everything and the fed says that and i agree. but it can cause instability. it can cause stability. if you look at the timings of those movements. if you look at different period's of history, and you look at different countries, monetary policy is very powerful for good and for that. andd: tighter in the 2003 2005. period.
john: by way of comparison, into who thousand three, the file 2%. was in 1997, the inflation rate was inflation, 1.5%, the other .1%. it was a big difference. that was a search for yield. part of the excesses. i always say it was not the only thing. there was some regulatory oversight missing. put those together, and we never know for sure, but it is just the kind of thing that people were talking about. >> do you agree? i think monetary policy is second or third quarter. order.hird i would point to the -- they turned
out to be toxic. i think we would have had a -- if i were to , i would have003 a different critique which is even though the federal reserve rate systematically meeting after meeting, financial conditions never really titans. bond yields came down in the , it cameket went up more and more available. i think it was that monetary policy was not sufficiently tight. failure is biggest more on the regulatory side. has writtenbernanke about this. john: in his new book. david: when you look at what the
fed has done over the last they had these quarterly forecast, they say where they think the rates are going to be in the next couple of years. plot.ave this. they have a press conference. they have written a statement. they have moved to a 2% inflation target. overall, do you think this is all moving in the right direction? have i think you cannot too much information. mucheftly can have too information. you can be confusing things. i agree there are different examples of how to communicate. sometimes, you do not have to communicate when people know what you're doing and that is the ideal. i do think though that the
examples that you are giving are missing an important thing which is what is the strategy? statementn important on goals and strategy that you guys worked out. it is all goal and does reggie. read it. it is a couple of strategies. does not say what you're going to do to the instruments. it does not say how you are going to react if your goal is off track. to me, it is misnamed. it is goals and you need another thing on strategies. bill: i think we have a clearly defined strategy. look at the fmoc statement. it is designed to push the inflation rate up and the unemployment rate down. we havelift off after made further progress in the labor market. that seems to be pretty clear to people. what is not clear is how the economy is going to perform.
and i think the issue is not how the fed is going to react to the of incoming -- incoming information. confident.reasonably to be want us to be able clear about our reaction function and how the economy is going to evolve. thean do the former but not latter. there will always be some residual uncertainty. -- a list oftioned factors and some sense of how you're going to react to them. i heard you say it here. i don't see anything like it in the statement. in the think it is there statement, the press conference, the summary of economic predictions. we have said what is important to us. pressure on the labor market. push unemployment down.
in the sense that this will be sustained. not just about what is happening today but how it affects the economic outlook. if those things happen, we can raise interest rates. i do not understand what is not clear right now. john: no one knows what you're doing. [laughter] say -- i have great respect for people in your position and i respect what you're doing but one of the great things about our country is institutions like brookings. bill: debate is good. david: the question you think the fed has not answered is -- what? what information do you want that you do not have? how will things react? bill: i do think that is a wise
administrations legislation. youhe if it -- if it passed guys, the whole system would have to get together and think about it and articulated. it is like when money growth was put into the act in 1977. the fed christ everybody got together and thought, what is the best way for us to report growth? and it was -- there were different opinions. a lot of people had heard them before. i think they had to come together and that is what would happen. kweisi mentioned the legislation. one fact of life is that almost all the people who liked that legislation and criticize this set are republicans. the democrats have been very defensive. i am curious whether -- why do you think that is? clicks i think it is a problem.
testified, it was just so start. it is an arcane subject. it is somehow, i don't think it just reflects the polarization people refer to all the time. it could be -- there are lots of possibilities. some people say the parties have somewhat different philosophies about government interventions in power so one party -- so generally, less interventionist. another is more interventionist? there are more political reasons. good.t think it is people mean well, trying to be constructive. reason, it has gotten very partisan.
>> why? issues -- we all want to have a stronger economy, a stable economy. there is nothing partisan about it. to theuld go way back jennings bryan type of partisanship. i don't think it is that you are that it isct polarized politically understands why it is a bad idea, in part because -- >> the fed has to carry that out. >> that would ultimately politicize the process, reduce the credibility, and make it harder for the fed to achieve goals.
>> by degree that the original concern about the independence of the central bank was the administration. bill clinton and the young, the administration has been consistent. it seems pretty clear to come from the congress. i am not sure you could get a vote in the majority of congress that things the central bank is a good idea. it is not a very heroic -- >> we are actually talking about particular legislation and there are pieces of legislation which would go in the direction you talk about. >> i think it is constructed to give more independence and more insulation. .here is always resistance congress has a responsibility for oversight. this legislation enables congress to have oversight in a way that the fed does not.
if the fed wast using a ouija board, what can they do about it? if you are support your strategy as you see fit along the lines you --ll was describing, if members of congress, even those in favor of the bill, never asked janet yellen to explain what they would tell you now and now you are deviating from it. it is not clear what their motivation is. you have a semiannual report to congress. why don't you put a chart in and tell congress we did it.
>> whenever you start to focus is thatarticular rule you are creating questions when you deviate. that limits your ability to pursue a different approach. the point that you want to wander all over the place. he wanted to be systematic. changes,rld systematically, you have to change your process. one of the problems with the that it led to a monetary policy that was tighter than the one we pursued which means we wouldn't have made as much progress. think of it this way. more people would be out of work today. that is the real consequence. i don't feel comfortable having more people out of work today on
the basis of the role. >> i disagree. you have no evidence. my evidence looks at historical periods when the economy did well. it is a clear strategy being used and you don't have to look at the united states, you can look at any other countries. it is counter to what you just said. i think we would be better off now in this current situation. there would be less concerned about downturn. what are you going to do during a downturn? the economy is operating pretty well. we got away from that unusual policy. i think the economy is in much better shape. it is not the only issue.
there are lots of policy issues. >> let's compare the u.s. to europe or japan. there are differences between those countries. we were much more aggressive about recaps. as a consequence, even though we haven't performed well, we have performed better than other major countries. >> comparing with europe -- just compare with ourselves. japan followed you. you basically did qe, drove up the yen. the yen is too high. we are going to appoint the governor who dues what the fed days. they drove the yen to 120.
where is that economy? is that humming along? people ever in a lot about currency exchanges. in 2014, the euro was driven down. problema internationally which is not healthy. them?out you impacting >> what is going on in emerging markets is that it is more complex. it has a lot to do with the chinese strong economic growth. booms, i would argue that the fed monetary policy regime has been an important. click see you think that fiscal policy since the crisis has helped the fed achieve goals orbit something that they had to fight against? >> that is a big question. the stimulus packages do not
work out too well. bush and ministration in 2009, with the obama administration. i don't think that is surprising. we learned that temporary stimulus things do not have much effect. about thatt i think fiscal policy. i think that the unraveling of those has required some contraction. inevitabilityf an of these short-term goals. i think the issue about debt is a problem. able --able now and it it will explode. the fed is affecting that to some extent. it seems to me that the fed actions -- sometimes the idea is out there that we are the only game in town. fiscal policy is not working so
we have to do it. bank holds out there advertisement, we can do it. you enter doing too much. central banks have the same problem. i remember visiting the bank of india in 2009 in the governor said, mr. taylor, the government is telling us to do the same thing that the fed is doing, can you give us some ammunition that there was pressure from all over the place to do something and i don't think -- sometimes you just say, no, that is not our job. we are focused institution. the stimulus is contractionary. or fed should offset that say, america, you voted for these clowns? they should look at the overall economy? >> including fiscal policy, yeah. cleargress gives a very
mandate about employment and price stability. that is but we need to pursue. say anything about contractionary fiscal policy. we have to take the world as it is. we need to put all the tools we have available to achieve those objectives. i would like fiscal policy to move it differently. bit lessittle austerity as quickly and as far as it was in 2000 13-2014. we have to take the world as it is. -- the economy itself. the economy now crowing so well. revenues are not so well so state local spending is not preceded very fast. room wheree had a they were clickers and you can like, vote. i did not think that before.
we are going to take questions now. i'm going to ask you to identify yourself and keep your questions short. there is a microphone coming. >> you emphasize a lot of financial conditions and a framework about how thinking policy affects the economy. financialt change in conditions has been the dollar and it is probably the case that you have a lot more time he then perhaps you would normally anticipate based on the rate plans and rate differentials. so when you look forward, how do you think about the dollar in andcontext of your forecast policy strategy? is a reasonable to assume that you will get more drag from the
dollar than you would normally get if you were following array path that is more like the sep than what is currently priced into the market? >> we consider the dollar in terms of how it can affect import prices and how it can affect trade sector performance. the dollar has appreciated by 15% on a basis so that is dampening inflation. it is also restraining growth. we take that into consideration. we are not targeting the dollar. we do not have an objective for the value of a dollar. the dollar is an environmental factor. together -- things describing market conditions. everything is equal and financial conditions are more
accommodative and you can incorporate that into your policy thinking if financial conditions are tighter, you expect the economy to grow more slowly. if you factor that in terms of a -- >> monetary policy and financial conditions are tighter because the anticipate -- the fede extent that follows monetary policy consistent with market expectations and other countries follow policy consistently you would expect the dollar 10 not boo very much. if we were to tighten a lot more than expected in other countries were just following easier policies than expected in apollo -- than the dollar were likely appreciate that, today, the valuation it it is incorporating expectations about how monetary policy will involve. >> i am a micro economist. this. all of i'm thinking, this is just deja
vu. agencies.latory the way i think about this, the 1970's and 1980's, we had regulatory agencies. fcc. they employed forms of taylor rules. prices were regulated. they were bad ones, but they had them. people took your perspective and said, this is too rigid. let's start experimenting and have some flexibility. if these guys can make decisions on their own. this more nuanced approach is desirable. ands go one step further start deregulating all these industries. that is what i am thinking about. good and better than taylor rules really a guiding what the fed ought to be doing?
why don't we go then that one step further and completely isolate the fed from any kind of political influences whatsoever and say look we have these people to look at data, they will be nuanced, and let them make policy. they are not appointed by the government, they don't go before congress. if you find that off the wall i say ok fine per dozen that bring you back to taylor rules and saying well if they are good you are going to let them done a given that they can't we think that the situations will be complete disasters the outcome maybe the rule is not so bad. what you think? >> the reserve has to have legitimacy. a gets legitimacy from the fact that the chair of the fed is named by the president. arethe fact that they chosen by the board of directors and the board of governors.
that is where the legitimacy comes from. what we are doing and why we are doing it -- i think that lets -- i think that is very, very important. i think there problem with having a one off approach is that people would have a andtimate question democratic society, who are whereguys and women and did they get the ability to do this in a democratic regime? what we have now works well. legitimacyr sense of maybe because of the way it works in terms of who gets the position and lots of reports to congress and to the public about what we are doing so it can be evaluated on the basis of our successes and failures. i think that is a good balance. leaving the decision-making about how to do it to us with
the goals are set by congress. i can is a good balance. -- i think that is a good balance. two'm going to try to ask questions. mr. taylor, when you wrote your will, the fed did not have an inflation objective. embeddedhas an inflation goal. it has a 2% goal. why do we need a rule? ask i call my plumber and him to fix a leak, i don't ask him to tell me before he has looked how he is going to fix it, i just want to know he is going to fix it. weekd governors spoke this , and they both expressed skepticism with expectations. it is the foundation of the view
that inflation is going to rise. they also expressed some desire to see actual evidence that inflation is rising before the act on rates. i want to hear what you think of that argument, if you have doubts about the expectations. and if you wanted to see actual evidence in prices and wages before you start moving. thank you. >> john, do you want to start? >> yet. the idea -- the question is the the inflation target enough -- i don't think it is enough. it basically leaves open completely how you get anything is, intervention in this market and that market does not describe the policy at all and i think also the plumber is -- what if there was only one plumber in town? that you had a choice ago to? wouldn't you want some evaluation of their techniques of it and rip the place apart
yet know i think there is a little more than your analogy to think about. there was only one plumber in town and the plumber was incompetent somebody would do something to make sure there is a new plumber in town. [indiscernible] >> i think there is a lot of uncertainty about exactly how inflation works as you drive so-callednt down to full on -- full employment radar so one, so there is a question about how much it is influence inflation much is and -- we don't really know precisely what the shaper that trade-off is in terms of how much inflation we get is a consequence. we don't know how it changes its shape as we drive unemployment down. my personal view is that i
believe that if you push the unemployment rate down far enough, the plumber certainly gets deeper because inflation expectations will probably rise -- what is the federal reserve -- that low? aboutis lots of concern the link between pressure on resources and how that actually feeds through in terms of higher inflation. we --ason for that is inflation equitation's been so well anchored in recent years that it's instantly more powerful determinant of what actual inflation actually is. questionasked the about actual inflation -- i need to be completely confident that inflation is going to be 2% inflation over the term out for some people that -- they -- they might decide that they need to see actual inflation start to head up but i don't feel that that is a necessary condition of inflation getting back -- in the meantime, vice he more pressure on resources and have a belief
that the economy will grow, the rate will continue to decline, i will expect that i will become reasonably more confident about inflation going back over the medium term so i see -- i definitely see a linkage between the pressure on labor market resources and my confidence about inflation. so i actually -- i am not willing to sort of throw that relationship out the window even though there is quite a bit of uncertainty about that link, precisely. >> thank you. question for both of you. can you comment on the usefulness in the united states about targeting a negative interest rate on as an -- as an alternative to q&a. -- as an alternative to qe? >> what? >> i hope the direction opens so many cans of worms and you should probably stay away. i think it is a great thing to do research on how you would actually articulated but i
imagine -- we get developed in new ways to gain the system so the size right now, it doesn't have to be negative in the u.s. we only had this time in 2009 where you could even think about it and since then, it is not it -- issue and it intainly was an issue 2003-2005 which means the biggest mistake is no zero bounce question then, they were way below what i think would be reasonable but way above zero. >> i think it is a question that is on a table right now because the economy is growing above trend [indiscernible] . the one thing that we have seen over the last year or so is other countries have moved to 10 negative interest rates and i would say that the unintended consequence of moving the negative short-term [indiscernible] is less than what people had here. is a totally doing
different institutional set of -- then in the united states and it is not obvious that is because it is working well there that you would necessarily the on to imported here. we have a very different system in terms of how our money markets work. i think you would have to ask yourself the question if it would benefit interest rates and obviously in a very different environment than we are in today. ofential cost in terms unintended consequences -- obviously, as a weather the financial crisis, that was an option. and we decided not to pursue that option because of fears of the benefits not being sufficient to their outweigh the cost -- sufficient enough to outweigh the cost. >> there is a microphone behind you. aren't our interest rates already extremely high? you can see that in world markets, our bonds pay 3%, the ate as spain versus germany
0.5%. our rates are very high and we are seeing the effect in terms terms ofand also, in our monetary policy, we are experiencing the limitation of luckily done from just paper so money ends up in the banks but that doesn't leave the bank in terms of creating money. we are working with fiscal policy that is negative. so isn't there a limitation to saying goodbye -- single by mortgages versus actually buying stuff like water authority bonds, port authority bonds? -- we can buy treasuries, securities, short-term general obligation bonds so we are limited by
sovereign debt. so we -- we are very limited in terms of what we can buy so what bybought was in part defined what the set of things that were -- to buy. long-term rates are higher. they are around 2%. that is actually a very good thing. shows the people actually think that short-term interest rates are going to rise over the next few years that is assigned a sign that we are making some progress in terms of achieving our objectives. the fact that they are so low in germany and japan reflects a greater concern about prospects concernss and greater about how quickly short-term interest rates will be normalized in those countries so i'm very happy that we have higher long-term yields compared to japan. because you think and reflect a stronger economy went quietly reflect a stronger economy and
they reflect the expectation that short-term interest rates will rise in the futures of the future so that we are actually making progress. can i ask you -- that you are seeing a slowdown in the economy. can you give us an idea of what indicators you are looking at when you say that? there is a risk when you are at the zero risk pounds of going to assume, that outweighs the risk of going too late and obviously having to hike more sharply. the onegive us your that? >> i think there is some news that suggests that it is slowing down a little bit. the things that [indiscernible] retail sales which we got earlier this week were on the soft side. i wouldn't one of a too much out of that. there is a lot of information between now and the end of the year and the economy has a lot .f variability in it
in a normal course, the data is not measured very well, very precisely so i wouldn't one me to my town of that. basically when i see is that the domestic economy is actually performing pretty well, consumption is growing at a decent clip, housing is recovering, the business investment is rising, what is holding the economy back as two things right now, inventories, you had a lot of contributions to inventory of growth in the first half of a year we are probably going to get some of that back in the second half of the year on most certainly so quarter for example would probably be somewhat weaker on a tdp perspective not because the economy is weak of because inventories are a drag in the second aspect is the fact that the dollar has it depreciated so much in growth and the rest of the world is quite sluggish and so we are seeing persistent [indiscernible] u.s. trade performance and that is not anything if that is the case should be
able to normalize. as i said, that's a forecast. >> the question also was when you're at zero and don't have her much inflation, you have to adjust to what is the worst outcome? it was more than you would hope for. or is it a worse outcome if you move too when you hear that maybe it was part of the question. that's not what we've learned
you want somewhat higher. it should be higher than zero. it causes some problems. it can't be lowered. -- yourter to have more car needs to have a sense in which it can go faster and but we are in that situation now. >> there are risks on both sides. you risk having to go back down to zero. your riskt too long
of recession. your balancing those two risks. reasonable people can reach different views. >> one comment. i wouldonly one plumber hope you would have as many tools as possible. but as a thought experiment you assumed we were measuring productivity incorrectly and its to questions one is doesn't that mean inflation is lower growth is higher? question number two if you're in a situation where the economy is behaving very differently.
>> those questions are related. i think it's hard to estimate the economy's potential productivity. i think you need to do that. whether concurrent discretionary policy or rule. it's just a fact of life. the world changing the economy changing how could you possibly have one rule? thatnk what we learned is you can have lots of different views of the world and if your it's one reason
not to have a very complicated thing. you're going to start reacting to the problem. you're taking it out one little thing. it's more robust. robust means it works with different views. you don't require expectations. that's what i think we found. that's why they're attractive. they would be a waste. whoe's a guy in frankfurt has a database of 50 different models. meticulously kept. he basically says we have a new rule.
don't just give your view of the world. grexit for understanding productivity and there's a chance it will go higher and the output is eager than we think. in favor or against. so you think we're understating productivity and if we are does that have cornsquenses? >> there's a lot of decombate about it. but the interesting question is if we are understating productivity, are we understating it by more now than a few yeerings ago?
and the other inflation. are we making bigger if we were making bigger errors it would imply inflation was lower. -- if we knew how to mease better we would be giving it. think it's a theological issue. some people are much more optimistic. i potential gdp is a difficult concept. mind don'tin my worry so much about potential gdp.
the rule tells you the identity -- the ideal of district would be below zero what can they do that they didn't do? buying mortgage-backed securities was not justified by that particular situation. if interest rates are at zero and you need to do more to increase the money supply products i think a lot of the reacting tos about particular episodes. that's a well-defined policy.
>> where you sending in september? flex i think the message was consistent. it depends on the data. everything has been set by the chair. and developments. i think if the end of the day were on the same page. >> please join me in thanking these gentlemen. we would appreciate it if you could pick up the papers at your feet. there's recycling outside.
it is exciting for me for many reasons. i am a buckeye, and we have the greatest band in the land at ohio state. this is not a new place for governor kasich. he has been here a number of times, so this is like old home week for us to have the governor back. we are pleased to have him here. i would also like to thank our students, our chancellor who is also a renowned economist nationally, and as well in the audience is our chair, paul holloway. i would like to welcome you all here, and i will turn it over to the governor. mr. kasich: i have decided to run for president because the time to fix america is now. not tomorrow, but right now. the time to make tough decisions and get results even if they are not popular. sometimes you got to make decisions even if people don't like it, because if we continue to hesitate, america will pay a high price. we have seen too much economic stagnation, bickering in washington, paralysis in the white house, as the world becomes more dangerous. and nothing is happening right now to turn things around. and this is about your country, this is about your future. we seem sometimes to be hanging in space. we are not going forward, backward, we are waiting for
the next bad thing to happen. in my lifetime, i cannot remember a time when our nation waits for bad things to happen to us. we need to take control of our future, and we got to do it right now. that is why i am laying out a strategy today that will help us produce the results we need. folks, all the politics, all the focus groups, polls, tv ratings need to go out the window. and we need to come together -- mr. kasich: we need to come together to do what is in the best interest of our country -- lead. sometimes it's lonely. lead. no popularity polls, just get the job done. and it starts with the single most important thing that we
can do, which is to grow american prosperity in the 21st century. creating the climate for job growth is one of our greatest moral purposes. when we have jobs, we can take care of our families. we can participate in the life of our communities. and most important, we can reach our god-given potential to live a life that we were made to live. a strong economy also makes possible the military. that is what keeps us safe and secure. it is the fundamental purpose of the federal government, and it allows us to be able to take care of each other when times are particularly tough. let me be clear, the government does not create jobs. americans do. e do it by our creativity. mr. kasich: by our risk-taking and by our hard work. therefore, the first thing that washington must do is get out of the way, because when
government steps back, we can step forward and after all, isn't this country about all of us? not the big shots in washington, it is about us, in our communities, families. government, i have believed, should be the last resort, never the first. when government is the first resort, it oversteps its bounds. with taxes that are too high, spending we cannot afford, and red tape that kills jobs. we shouldn't let washington do things that we can do better for ourselves right back here at home. those folks way far away cannot run our lives, we have to run our lives. america is a large and dynamic place. getting it growing again is not about checking off a few boxes
with these focus group policy proposals that are disconnected from reality, we have seen them, nor just about being a good administrator. it is about having a vision and an underlying conservative philosophy for getting america to work. then you need to bring people together and then you must have the strength to get results. talk is cheap. standing on a corner and yelling and screaming is like a clanging bell. if you cannot accomplish anything. in my life i have done things throughout my career. i led the effort to balance the federal budget for the first time in a generation. it wasn't easy. you step on a lot of toes when you shake things from top to bottom. many people opposed it, a lot of fighting. but we did it. it produced results. but washington took its eye off
the ball. when i left with my friends, who stood in the breach and balanced the budget, when we left, washington took its eye off the ball, and our country suffered. in ohio, my beloved ohio, we are getting results. with my leadership, we turned and $8 billion budget shortfall into a $2 billion surplus. we cut taxes by $5 billion. the most of any sitting governor in america today. we helped ohioans create more than 300,000 jobs. 00,000 people. mr. kasich: these are not just numbers. they are people's lives and
people's families. strong leaders keep the people they serve at the center of all they do, because leadership is not about self, it is not about me, it is about service. every american, everywhere across our country is in my mind's eye today, especially the people i grew up with in mckees rocks, where if the wind blew the wrong way, they found themselves out of work. they played by the rules, they took care of their families and their communities. they are in my mind's eye. today i lay out my vision for lifting our nation by reclaiming our power, by reclaiming our money, and by reclaiming our influence from washington. the first thing that we must do to get government out of our way is to start with a budget.
as president, i will immediately put us on a path to a balanced budget and i will get it done within eight years. mr. kasich: i went to a meeting the other day where they said we can do it by 2030. too long, too much debt. within the first hundred days we will have that plan to balance the budget in eight years, and to keep it balanced, i will start the process to amend our constitution to require ashington to balance its budget every single year like states and like families in america. we need a constitutional amendment to force them to balance their budget and do its job. and i hope you will support me in that. mr. kasich: a balanced budget
helps create jobs because it makes more room in the economy for businesses to thrive and to create jobs. right over here, you can see the federal debt clock. $18 trillion-plus. it's pretty amazing, isn't t? that is what we have run up, and that is what you have to pay. to the students here today, think about what this means for you. it means $57,000 in debt that each one of you -- $57,000 in debt that each one of you have to carry. and that includes my two 15-year-old twin daughters. putting down their back. we have to stop it. think what you could do with this money to help yourself without having to pay that debt if we could begin to erase it.
i served in congress and led the committee that wrote the government's budget. i was the chief architect of the first balanced budget. when we balanced it, it unleashed job creation and began paying down the debt. in ohio, i have written three balanced budgets and the last one just 3 1/2 months ago. this is something that i know how to do and something that i have done throughout my areer. mr. kasich: how do you do it? it starts by setting your priorities. that's pretty difficult. but then having the courage to make choices that could be unpopular. in our case, we need to reform entitlements to make them provide better services and control their skyrocketing, unsustainable growth rates.
and let me be clear -- you can have no balanced budget without dealing with the problem of entitlements. to change those entitlements in such a way that we can make them sustainable, but yet delivering services are people need. i have done that before. and we will do it again. there is also plenty of waste in washington's day-to-day operations that can be cut. shocking, isn't it? for instance, do we really need two different agencies inspecting catfish? the food and drug administration inspects our seafood so why do we need the department of agriculture to spend $14 million a year inspecting catfish? it sounds like a lot of money here but in washington they leave that on the floor when they turn out the lights. but we will clean it up. the u.s. epa has spent over $15
million on p.r. consultants. they already have a staff telling us how great they are doing. i don't think government should be spending that much of our money trying to convince us to like it. just do your job and cut out the waste. these are two examples of how we can easily save or where we need to spend more money on our military while also streamlining the pentagon bureaucracy so that men and women in harm's way get the maximum benefit from every new defense dollar. i spent 18 years of my career in washington fighting the
bureaucracy and the red tape and duplication and delay in the department of defense. we need to rebuild our defense, but we need to streamline and rebuild the bureaucracy inside that building and as president i will look across that river every single day to make sure that the money that we spend is going to help our men and women in the military and not bureaucracy. mr. kasich: america's taxes are also too high. we will cut them so americans have more money in their pockets and more control over their own lives and better job opportunities. look, you know better how to spend the money you have in your pocket than sending it to somebody in washington so they can figure out what's best for you. in ohio, we cut taxes by $5 billion while turning that $8 billion projected shortfall
into a surplus. as president, i will cut taxes and we will not only cut taxes but we will balance our budget in eight years. both of them, because the balancing of a budget needs economic growth and you manage your spending. both lead us to a balanced budget which ultimately can lead us to a place where we begin to pay down our national debt. president reagan set the top income tax rate at 28%, and it unleashed a decade of growth. we will also kill the death tax because no one should have to visit the undertaker and the tax collector on the same day. small businesses should be able to pass businesses on to their children without having to sell the business to pay the taxes, most of which they have already paid.
mr. kasich: by the way, we killed the death tax in ohio. and small businesses appreciate it. low income americans also need tax cuts just for them. we increased the earned income tax credit by 10%. we eliminate fraud in the system in order to save taxpayers money and reward low income workers at the same time. the philosophy is as we bring down the lower rate to provide incentives for more investment, we are risk-taking and more job growth, we want to provide the ax relief to people at the lower end so they have lower end so they have incentives to work harder and get ahead, not be punished because they put more time in. it is an accordion. help those at the bottom become more successful and bring the top down. for businesses, the top rate will be 25%. this brings us back to a level that is globally competitive.
to help job creators get the machinery and equipment to grow and be more productive, they will be able to conduct a full cost of investments the same year they buy them. folks, when businesses has the incentive to put the equipment in the operations so workers can be more productive, workers will get higher wages. and in our state, wages are growing faster than the national average. it helps these businesses to create more jobs and pay those higher wages. and by cutting tax rates and simplifying the tax code, we will also make it possible for businesses to bring back to the u.s. the money they have been storing overseas. companies are making profits. we believe they have an estimated $2 trillion in profits that are sitting in europe, that
they are beginning to invest in europe instead of the united states of america. wouldn't you like to have that money come back here so they begin to invest in american jobs and american factories and american equipment? that is exactly what we are going to do. we are going to cut those taxes. because they do want to invest here, but we have clobbered them and have made it difficult for them to bring that money home. you talk about a stimulus package? this could be the most successful stimulus package i've ever seen by letting the private sector do the things they want to do to invest here in the u.s. and to spark a wave of research and innovation, we must strengthen the research and development tax credit, especially for small businesses. so when you young people create a small business and invent the new google, we will give you incentives to do it make your
life easier. america needs a fair and honest tax collection system. i have words here on a page. we will change the irs. no more something that we live in fear of, that has bias, that has targeted people. no more. we will clean up the irs and that is one thing everybody in america will agree to. mr. kasich: so there are other parts of our government that are just as inefficient as the irs. the red tape and regulation that steadily flow from overnment agencies are drowning job creators and often don't reflect the will of congress. we can fix this by returning comments sense to agency regulations. we start by giving america a one-year break from all new
major regulations so we can catch our breath. o more rules and regulations from washington for one year so we can begin to get on top of this. we will rebuild our regulatory system and rid it of the abuses and mistakes we have seen in recent years. bad regulations can do more harm than good, so we will require real cost-benefit analysis. the benefit ought to outweigh the cost. we give lip service to it, but we will change it and ask congress to make this mandatory. i will call on congress to do their job and request that any regulation that costs more than $100 million goes back to them for approval. no more regulators passing these laws that they were never elected to do. congress has a responsibility to control it, and we will make sure it happens and that job creators have a fair chance when they object to an agency's decision. we will create a court of common sense. it will be made up of real
americans who i will appoint as the president who will review agency decisions that do not reflect common sense. you will have somewhere to go and someone who will listen to you. and perhaps even someone who will fight for you. it must use the agencies on -own appeals process staffed by its own bureaucrats. we go to the agency and appeal to the people working in the agency tell us if we are right r wrong. that works out great, doesn't it? we need a better way. we need a method that is truly air and independent. speaking of regulation, there has been no single area of america that has been more strangled by regulations than energy.
why has washington worked so hard to keep america from harnessing its energy advantage? we have to set people free to make us energy independent in north america and particularly here in america. mr. kasich: we need an all-of-the-above energy policy. make sure we produce more energy from oil and gas, from nuclear, from cold that we did clean and burn, alternatives and renewables and anything else we can find and we will do it responsibly. we need all and it should come from right here. we cannot continue to rely on energy from overseas. our goal will be to meet the nation's energy needs from north america, and to sustain it, with the right policies in place, we can work with our closest neighbors, canada and mexico to take care of our own needs without having to depend
on four of countries were dangerous parts of the world. that means approving the keystone xl pipeline. enough with the delay. we will approve the pipeline because energy freedom is a matter of national security. we don't want wars. when it is all about energy, when we can do what we need to do in america to be energy independent, and we are on the road to getting it done. and when i am president, we will accomplish it. just as we set ourselves free from energy overseas, we have got to be smarter and stronger about trading with countries overseas. we are inventors. we love to make things in america. we make the best products in the world and open markets can world, and open markets can create new jobs for us here at home. trade can also make the world
more stable and advance our national interest. but i have to tell you, too often washington gives us the false choice between free trade or no trade. we have to reject that and become better negotiators of the trade pacts we want to put in place. and i will tell you, we should only agree to deals that are fair to american workers, and that includes taking a firm stand against countries that cheat, those that manipulate currencies to get an advantage. you understand this in new hampshire. we understand this and ohio. we will call them on it and have an expedited process to stand up for the american worker. and that is critical when we talk about the issue of trade.
mr. kasich: we cannot let these issues delay whenever we see violations of trade agreements because bureaucratic wheels grind so slowly. we will bring them fast and make sure we do a better job of protecting america from getting ripped off. it is essential that we are open to trade for a variety of reasons. but it is also important reinforce those agreements effectively. the jobs we talk about will not be in washington. they will not be created by government. they will be created by americans in towns like nashua and manchester and in my hometown of westerville. that's where we live and where the power of our nation comes from. it's time to make washington respect that, and as president i will work to transfer influence and power out of
washington and back to where we live, where we work, in the states and towns across this country. and it starts with education. washington isn't the nation's school principal, and it sure isn't its teacher. it's time washington stop micromanaging education. education is a local issue to be decided by parents, our communities, and our local educators. yes, we need high standards. but the federal government shouldn't set them or control them. i will reduce the power of the department of education. i will consolidate more than 100 federal programs, 100 programs, red tape bureaucracy, bureaucrats, i will bundle them into four, and i will send the resources back to the states for us to run education ourselves. r. kasich: as president i look
forward to traveling the country to share the best ideas for our states and for local school district that are improving education. improving education. improving education. in the 21 lingts gentry that give our young children the thing that is they need to succeed. we'll take this across the federal government's process center. wherever we can we will take the programs back tolt state so they will have the flexibility to respond. one size fits aul doesn't work. we can do it with infrastructure not just with education but with infrastructure. the super state system is long finished and states already oversee highways design and construction. there is no need for a costly federal government bureaucracy that takes our money and gives it to somebody else. i will return federal gas taxes
to the state leaving a sliver with the federal government for truly national needs and then i will downsize the department of transportation and give it a smaller role for research and safety standards federal spending will go down resource force highways and transit will go up and states will be able to work faster and more efficiently. you keep your money and you fix your roads the way that you wanted to. no more taking our gas tax money shipping it down to washington. they cut them off the top and send you less back. keep it right here in new hampshire for what you need. and if you don't need it you can send it over to ohio. we can figure out how to spend it. it's critical that we give states the freedom to help americans need their job skills heard and stay competitive. that's what this place is all about. training and education is a life-long endeavor. it can't stop after you graduate from high school to
vocational school to community college or the university. it's like long. right now washington doesn't let states pursue their own ideas. the result is that workers usually can't get training help unless they lose their jobs first. so much of the money only gets sent to the states with the requirement that you have to train people once they lose their job rather than training them. so they don't lose their job. that's the washington mentality for you. so we're going to wrap up all those job training programs and send them to each and every date to zeal with their workers and their economic situation and take it out of washington d.c. and out of that dureksy and make sure our people can prosper in the workplace. and i hope you agree. [applause] i'll send medicaid back to the states as well. right now washington makes it so hard to try new ideas that
it seems as though nothing ever gets done. in ohio we are making great progress. better product management. and the practice of paying for value not just volume. these same kind of ideas can also be put to work helping restrain costs in the federal government's health care program for seniors. that program medicare so it is fiscally strong and there to help them. all these ideas together can help us begin improving health outcomes and getting costs under control. we know how to do this and we can do it if washington just was smarter about the need to try a new approach and let people innovate. and let me be clear. we have a program to make sure that medicare is set on a basis and that medicaid can be sent back to the states. something that we have been fighting for since the middle
of the 90s so the governors and legislatures can come up with more innovative and practical ways to treat and also to have a medicare system that will last for these young gov. kasich: the same is also true for welfare. in ohio, we tried to be very innovative, guided by the same idea my mother used to say, it is a sin to not help somebody who needs help, but equally a cent to continue to help someone who needs to learn how to help themselves. very time, we are asking the federal government for permission to allow our people on public assistance to be able to get education so that they can get a job, d