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tv   C-SPAN Weekend  CSPAN  April 17, 2011 1:00pm-6:00pm EDT

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you have rapid sustained private investment growth. that is good. it is three or four times the growth of the economy as a whole. you can see strength across the american economy. commodity prices are high. if you look at high-tech and manufacturing, it is very encouraging. we are uniquely positioned to benefit from the fact that you have the rapidly growing parts of the world are in the early stage of a long expansion. we are like germany and uniquely good at producing the things they need. they will consume with greater intensity. that is anchoring a substantial
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rise in exports. that is good and encouraging. i would expect that to continue. the fundamental challenges are trying to make sure the quality of education improves. the incentives we create need to be strengthened. we are about to broad -- launched a broad tax overhaul with that objective. private firms will under invest in basic science and things like that. it is important for the government to do that. the debate about the government is so important because the challenge is not to figure out how to restore gravity on the fiscal position. the issue is to do it in a way that allows you to invest in the things that economies required to grow over the long term. we can absolutely afford to make the basic investments. it is not only about money.
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it is about reforms with incentives that can create a stronger infrastructure for economies to do well. the signs of recovery are encouraging. unemployment is still high and the housing market is still in the state of some trauma that will take years to heal. the other parts of the u.s. economy looked very resilience and phonemic. if we can get the fiscal reforms in place, we will come out of this in a much stronger position than we were in coming in to the crisis.
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>> why is it so difficult to attack the issue of tax increases? it has gone down to a rate that no other western democracy has for the top rank. that is not to speak of the 15% that some groups that are even wealthier pay. my question is why? >> i am not an anthropologist, sociologists, or politician. you are asking the right question. let me explain why you should still be optimistic about the united states. unique among the major economies are the revenue to gdp ratio being very low. we have the capacity, with modest changes in tax reform, to
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get us in a position to restore sustainability without the risk that we are going to hurt future growth or damage incentives for investment. we are in a stronger position. we have to solve the political problem. the average effective tax rate in the united states is very low. it is unsustainably low. for the united states to keep rates where they are, we either have to cut deeply in already thin programs or you have to ask me to borrow trillions of dollars from china and our children to finance them. that is not an acceptable option for the united states. we are going to have to confront that. i take the more optimistic side.
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with relatively modest changes in our basic tax system that have no plausible risk to how well the economy functions and how we grow incentives for capital formation, we can get ourselves back in fiscal position. we have to solve the politics around it, that is manageable. >> the budget discussions are going to dominate washington for months. if it is that straightforward, why is it going to take so long to come to a minimum resolution? >> if you look at how americans see themselves, they see themselves as very strong and independent and tough but still
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fundamentally generous. our political leadership seems less willing to treat them as relatively strong and generous and able to make the basic dresses. you need a system to embrace that fundamental strength of americans. americans are ahead of the politicians in understanding what is necessary. it requires the balanced approach with a shared burden across the political spectrum. the economic and political imperative for us is to find a way to block the leadership of both houses and the executive into a constraint that will force them to where they can agree on how to do that.
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they are going to need to spend more time to resolve the debates about tax reform and entitlements. that will take time to resolve. the beginning of this is to lock people into the same objective and make them understand that for the sake of the economy and individuals, if you need to lay out this the fifth -- basic path. it can take some time to resolve as long as you lock people into the constraint. >> in 2008, you were in the middle of this debate when the financial system almost melted down after lehman brothers. there was a critical vote in the house of representatives on the tarp. it went down. i would be fascinated to hear
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whether you think that was a sobering lesson for the representatives in washington that they will do the right thing on critical votes on whether you think the same thing might happen because people want to push it right to the eds -- edge. that tarp vote was a moment when it showed american democracy worked. even though they did the wrong thing, they came back into the right thing. >> there is no responsible case for taking that risk again. i am confident the people responsible understand they cannot take the risk. this is the united states of america. only 10 years away from cataclysmic crisis -- only two
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years away from cataclysmic crisis with huge damage to our credibility and loss of confidence in the basic capacity to manage affairs prudently, we're just starting to repair that. we have moved aggressively to fix the mess. we have gotten that most of the investments we've made in the financial system. we will achieve the financial rescue in what will be judged as the least cost, most effective financial intervention in modern history. we've put in place reforms to lay out a framework for better restraints and risk-taking. the idea that having come out of that with unemployment still at 9%, a huge amount of trauma still left, the idea that washington would take that kind of risk now would be inconceivable. it would be irresponsible. people will say there is
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leveraged but that would be deeply irresponsible. it will not happen in the end. if they take too close to the edge, they will own responsibility for the miscalculation. >> i am president of the american chamber of commerce in germany. i live in frankfurt with my wife. i read an article in the german newspaper and it said something like the u.s. federal taxes only support through programs -- medicare, medicaid, and social services. everything else is done on borrowing. is that true? >> in a broad sense, yes. >> is there any consensus or fought about the federal vat? >> no, no enthusiasm anywhere for that. let me take the positive side about that.
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you can close the gap and start to reduce the overall debt burden on the economy without a revolution in tax policy or what we do for insurance and pension benefits for the elderly. it does not require radical restructuring of basic things. it is difficult to do. it is tougher than in other countries because the challenge is so great. with consequential changes, you can get yourself to sustainability. >> we're running close on time. we're going to take heed of questions at once. jim? >> jim hope from the council on
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foreign relations. councilman ryan finally broke through the avoidance of talking about entitlement programs with a proposal that we shift the cost to the individual. the president reacted strongly to that. what is the alternative? this is the number one problem in terms of getting the fiscal house in order. >> you wanted to take another question? perhaps the gentleman who has been waiting in the second row. >> i am with german television. in light of the front-page article in "the new york times" today, were you too soft when it came to holding responsible some of the senior bank executives for their role in creating this
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financial crisis? >> i will take them in order. the fundamental long-term problem is produced by the basic reality that although we are a number country and the public share of health care costs is much smaller as a share of the economy, we are living longer. the cost of living longer is rising dramatically because of the quality of technology and health care and how extensive is. that drives our long term challenges. the only way to deal with that in the economy is to try to slow the growth in health care cost. that requires fundamental reforms like the affordable care act. you have to build from that to change of americans use medical care. you have to change the incentives for that. if you do not do that, you still need the economy -- still leave
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the economy with unsustainable costs. the strategy the president adopted and will be the dominant strategy for the country does not just shift them. to ask the relatively poor, unfortunate, or disabled, or seniors in nursing homes to soar -- absorb a dramatic cost in the increase of things is necessary for us to do is a country. it is not something we would embrace. you have to focus on reforms to lower the rate of growth in health care costs. if you think about the strategy adopted to fix the financial crisis, were we tough enough?
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that was a question for the people responsible for enforcing the laws of land. we have a very good, strong set of legal protections. it is their job to enforce those. on the basic question of if we got the basic balance right and whether it was tough enough, i offer the following things in contrast to what happened around the world. we forced a dramatic restructuring in the basic finances in in the united states. before the crisis, banks and financial institutions -- we took the weakest ones out of the system with brutal force. in no longer exist today. much more dramatic restructuring than what happened in any other major economy that were caught with larger issues relative to their economy.
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in switzerland, the u.k., and france, things are about five times gdp. it is 1 times gdp in the united states. the restructuring was necessary. we were more aggressive in forcing recapitalization of the financial system. we have had more capital come in because we were tougher in forcing people to disclose the scale of losses. that have dramatic consequences for the equity holders and financial institutions. we left them with a market test of viability by forcing them to disclose and recapitalize. the financial reforms we're starting to implement will give us authority we did not have before the crisis to make sure you can maintain the growth,
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leverage, and risk-taking that can cause systemic crisis. the great strength of our financial system before the crisis was always that we had a level of disclosure, innovation, and efficiency so that it was the best place in the world to take the savings of the world and guide them to the companies that come to dominate the world. they dominate in innovation. for that to happen, you need to do things. you have to have more confidence in the basic integrity of the system than before. you need to have a more stable and resilience system so we do not leave the business community and business customers of banks and individuals vulnerable to catastrophic
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consequences that come when people are allowed to take on too much risk. we got something terribly wrong. we are in a very good position now to get them not better. i am very confident this american financial system will reemerge of the basic standard. it was for many decades the basic standard for how to run a more efficient system, better allocating capital to ideas, with more integrity, better disclosure, a better enforcement, better constraints on risk-taking, more resilience. we're only still at the beginning of the process. >> we almost set the gold standard. >> i did not say that. [laughter] we are out of time. please join me in thanking secretary geithner for a very stimulating conversation the
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pressures on his time are so great. i have been told to please stay in your seats so that the secretary can get on to his next appointment. >> thank you very much for sharing your insights with us. we wish you all of the best. we hope that we can welcome you next year for an update. thank you so much. [applause] from thenging executive branch to the legislative branch. we have the honor and pleasure to welcome one of the most experienced congressman, congressman waxman. he is also operating on a tight schedule. he has to be back on the hill for a hearing. he needs no introduction. congressman, we are delighted to have you here this morning. he will be challenged as well by gillian tett, the u.s. managing editor of the "financial times."
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you are the best u.k. expert to the u.s. since cadbury. welcome. [applause] >> time is pressing for congressman waxman and secretary geithner. i will jump in without introduction and ask you this. we just heard secretary geithner paid for reassuring picture of what is going on in the fiscal front. he was arguing that the bond markets understand and will not panic. a political solution will be found. he was also arguing that
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republicans are responsible and intelligent enough to come to the table until everyone agrees. that was the subtext. do you believe it? >> when all is said and done, people cannot let the debt ceiling go on raised -- unraised. the consequences could be catastrophic. this is more serious than one week talked-about shutting down parts of the government without appropriations to keep it moving. i do not think either party would want to be held responsible for the consequences. the brinksmanship will go on to the very point where both will have to agree. it will not be easy. this conference is excellent
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timing. this is the week when many of the issues are coming to a head. we're going to vote today to fund the government for this fiscal year even though we are already six months into it. we immediately go to the vote tomorrow in the house for the rise in budget. we expect it will pass. republicans have the majority. the rise in budget -- the ryan budget is now countered by president obama's speech where he positioned himself on what he thinks we need to do. that is going to start the debate. the next key moment will be when we confront raising the debt ceiling and have to get the parties to agree to do that. >> i would like to know what you think about the content of the president's speech. what about the timing?
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there was some bafflement in the market about why the president did not weigh in earlier. the bipartisan fiscal commission reported late last year. would it have been better for him to jump aboard late last year instead of now? >> and did not know if you wanted to embrace every detail of those recommendations. i do not think he wanted to pick and choose and present something as a target than -- then for the republicans to attack. i think he wanted to stand back. in the senate, there is a group of six members trying to put together a proposal that would be balanced with an increase in revenues as well as spending cuts. that would affect the entitlement increases. in the house, we have the republican budget proposal. if only cuts -- it only cuts and
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dramatically eliminates the guarantees of entitlement programs. it is interesting they backed away from social security. i thought that was a bridge too far. now they are on the defensive as a result of the president's speech. >> they are called the gang of six. they think they're in the process of forcing bipartisan consensus around a table. the president's intervention yesterday has been an attack on the rise in -- ryan plan. the republicans have reacted angrily. it will be harder to get around it down. >> that has been underlined
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problem for some time. when the erskin-boles commission was meeting, they voted together for the balanced approach. in the house, no republican would vote for it because we did not want revenues on the table. the question they have to deal with is whether they stay with that position of no revenues that makes it impossible to get agreement. we are very polite here. [laughter] i am trying to be more british than you. i was trying to be very appropriate. >> republicans do not want to jack up taxes under any circumstances. >> they want to extend the tax cuts from the bush years. with the deficit, we're paying for the tax cuts for the top
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incomes. we're paying for it of the cost of the people of the lowest income levels -- at the cost of the people at the lowest income levels. >> if you were a financial trader, a betting man, given where we are at the moment with the split, what kind of odds or probability would you attach to the likelihood of some grand deal being done before may or june. that really is the deadline now. 10%? do you agree with secretary geithner is probably 100%?
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>> i think it is highly unlikely we're going to have a global agreement on a deficit reduction bill that will be bipartisan. i think it is highly unlikely. i was in a side room where we have secretary geithner on television. i could not hear him. my guess is he was talking about reaching an agreement to raise the debt ceiling. the republican position is they are not going to agree to raise it until they have assurances that this will never happen again. we're raising the debt ceiling to pay for the debts we have incurred. most of that was in the bush years when we borrowed money to fight two wars, give tax breaks, and pay for expensive expansion of the medicare entitlements for prescription drugs. they did not do in the most
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efficient way. we have this deficit we inherited. they handed over an economy that was widening the deficit because of the recession. that is where we find ourselves at the moment. there is not going to be a bipartisan compromise agreement because the differences are so great. i think we will take those differences to the campaign in 2012. in the meantime, we have to do two things this year. we have to increase the debt ceiling. i feel we will accomplish that because it would be irresponsible not to. by the end of this fiscal year, we have to adopt the spending levels for the next fiscal year. we have those two must pass bills. otherwise, we're going to spend time in the house with the
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republican majority pushing through the funding --defunding of planned parenthood and their political agenda. >> in terms of your ideal ratio of tax increases or revenue measures to spending cuts, the u.k. is roughly in the ballpark of what the erskin-boles proposed. where would you be on the spectrum of spending cuts to tax increases? >> i think 50/50 is a good balance. the center for budget priorities has recommended 50/50. we have to look both sides of the equation.
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too heavily weight it on the cut side will do a great deal of damage to the entitlement programs. i support the programs. we need to reform them. the biggest cost increases are in the health care area. the legislation the president successfully sought passed and signed attempts to deal with health care costs in a rational way. the ryan budget shifts the costs on to the very poor and elderly to come up with additional resources. >> you are rushing off now to take part in an energy committee. you are prominent in the energy debate. one thing that has been cut its spending on trying to find clean energy and renewable resources. in the focus on the fiscal
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issues, will some of the energy issues get sidelined? >> i am concerned about it. a lot of our energy advances came through the stimulus bill when president obama first came into office. every republican in the house voted against it. a big part of it was to stimulate investment in renewables and alternative energy sources and new technology. i sponsored and passed through the house a comprehensive energy bill in 2009. it would have put a cap-and- trade system in place on carbon emissions. that would have three results. we could not get it through the senate. we still have to get the results. we need to lower our dependence on oil. it is a national security matter. we're so dependent on foreign
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oil. we're helping to finance terrorism as a result. secondly, to give the market signal for investment and set the rules clearly in place. that is what much of the business community wanted, to know what will pay off in the future. i think it would create millions of new jobs in the new economy. third, we need to deal with carbon emissions that cause global warming and climate change. republicans in the house denied there is such a thing as climate change. they are science deniers. on energy, they believe we want more supply. that cannot be the solution when we consume 25% and only have to% of the world supplies. we need to develop resources. we will still be using coal and oil for the foreseeable future,
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but we have to move towards greater efficiency in the use of those and moving towards other alternatives. if we do not, investments are going elsewhere. china is moving forward. the united states will be left behind. that would be a very sad result. >> you have to rush off now to committee hearings. thank you for joining us. the best of luck in negotiating what will be a challenging cocktail of policy issues on the energy and fiscal side. [applause] >> at the same event, white house national director gene sperling talked about the deficit reduction plan. he is interviewed by gillian tett and introduced by frederick kemp, president of the atlantic
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council. this is 25 minutes. >> it is wonderful that along with the new board member, you get wonderful introductions. it is being published in the united states and germany. i am very happy about that. i want to give my greetings to those who so ably lead this organization. it is my great pleasure today to introduce the closing speaker, the cleanup hitter. i remember once hearing in the tradition -- introduction that the head of ibm gave to it henry kissinger. he said. kissinger was a man that needs no introduction. he said thank you but the introduction was far too modest.
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i will give a short introduction to gene sperling who does not needed introduction either. he cut his political teeth in the 1988 dukakis campaign and on the staff of mario cuomo before joining the 1992 clinton campaign as a policy adviser. during clinton's first term as president, he served as deputy director of the new the created national economic council. he was director of the national economic council from 1996 to 2000. he played significant roles in the 1993 deficit reduction act and the 1997 balanced budget agreement. i guess we have deja vu with the difference. those who remember his service in the clinton administration recall his effective and
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efficient workaholic ways. the nickname "gene the machine" comes from that time. his office was known as the bureau of gene. now he has to pull the genie out of the bottle. he was known to manage policy and press in a way that you can. it has been said that his highest talent is an extraordinary ability to make policy arguments in a way that makes them convincing to the message people and legislative people. he certainly needs that talent now. he was recalled into government service president obama. he became director again of the national economic council in january and assistant to the
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president for economic policy. he is in the midst of this budget battle. today he comes directly to us from a meeting with the president of the white house. i am sure you have interesting insights to share. i hope you are willing to make some news. as a final point of introduction, i will read you a quote from gene sperling from two years ago when he noted that the president has to find the right balance between fiscal discipline in dealing with real problems. "it is the ultimate walk and chew gum at the same time. you have to show you can restore fiscal responsibility and be making gains on the greatest challenges like health care and education." two years later, we look forward to an update on the challenge.
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thank you very much. [applause] i do pass to the in the minister will -- pass on to gillian tett as moderator. >> thank you. there are many things i could ask you. i will start with an issue we were talking about -- you were talking about the president. that is the speech you gave yesterday and the attempt to forge a new fiscal direction and some sort of agreement going forward. given your experiences and have cut your teeth twice on this, how do you read the current move? will it be possible to work with the republicans to avert a showdown on the debt ceiling and
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get an agreement in a reasonable time frame? >> that is a big question. in the meeting yesterday, there was a broad understanding that not extending the debt limit is not an option. you cannot play chicken with the united states fiscal credibility. this has been established since the time of alexander hamilton. it is one of the hallmarks of the u.s. financial regime. you cannot want to have a debt clock. it was one thing to have a countdown to the government shut down.
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you do not want to have a countdown clock on whether america will default on its obligations. nobody wants that. it is not responsible. no one should use the full faith and credit of the united states as a bargaining chip for any policy goal no matter how sincerely the support that. we should assume that people will act responsibly and move forward in extending the debt limit. the second question is what we can do to create greater confidence that the united states is going to live within its means and put ourselves on a path where we stabilize our debt as a percentage of income and have confidence that the ratio will start coming down.
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the president has felt strongly that he had to put forward a plan and there had to be a serious effort to move quickly to consider what could be done. it does create big issues. is there a chance we can come together on the broad of five in terms of the policy vision? -- on the broad divided in terms of the policy vision? are we capable of making progress on what we do agree on? that will be part of the cool -- the goal of the vice president as we try to bring together a process going
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forward. it will be a great challenge. in 1993, we had a successful debt reduction. in 1997, there was a bipartisan balanced budget agreement. in between was a 1995 and we did have a government shutdown. 1997 was really the same actors. in 1995, i used to do "crossfire" every month. we sat across from each other in 1997 to forge a balanced budget agreement. although i do not agree with everything he is doing as the governor of ohio, we are friends. there is an element of trust there. you have to have hope.
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things can work out. in december after the election in november, we were working hard to prepare for what could come out of the tax agreement. one thing we worked on was what we could do beyond just the issue of extending the tax cuts. we worked on what could be helpful for the economy. we came to the conclusion for that a payroll tax would be good for the economy. there was a good chance the republicans could agree. when we were working on this, people would come to meetings and say that they would check their male and go home. there will not be serious discussion during a lame duck. you ended up having a tax agreement that was successful.
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you got these two other elements. you can see even in the fed minutes and in most reports that the payroll tax reduction that has been very important to the economy has been successful. that was a bipartisan agreement when the odds were discounted. you have to be prepared for success and bipartisan compromise even when the prospects are uncertain. we're governing. we have that obligation. >> it came up about the anthropology and sociology of what is going on. when you look at the tribal behavior around here, --
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>> those are her words and not mine. >> compared to 1993 or 1997, the climate is more poisonous and polarized. there is less trust then there was 20 years ago or even 15 years ago. that is one of the big obstacles to getting an agreement in place. do you think the climate is worse? will it be harder to get the deal then in 1993 or 1997? >> 1993, 1995, and 1997. in 1990 by, you did have deep divisions. -- in 1995, you did have the decisions -- divisions.
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some of the same people did find common ground. there is no question some of this is exercises in building trust. i talked about the tax agreement. we often have fierce political bottles with the senate minority leader mitch mcconnell. but when a decision was made that we would have an agreement, there was an element of trust. i recall after he and the vice president spoke that we were told to go talk to some of his books to put things together. that would have been a time when people might have tried to gain ground on his said what.
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instead, we had been instructed that there was good will and to get the agreement. the behavior on our side and their side was honorable. we were able to work things out. we're back to having a lot of battles. it does show you can create some trust that can help us govern. there were a lot of phone calls between the president and speaker gainer -- boehner. the disagreements are strong. yesterday, you did see a lot of response will talk about the need of everyone to find a way to not allow the debt limit to become a game of chicken or do things that would be risky to our economy. you have to hope that ultimately the people and leadership remember that they are responsible for governing.
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that may sound naive. i have given a couple of examples where people did work together against all odds. i will give you another example from october of 2008. the democratic candidate for president, barack obama, and the democrats in the house and senate health got a republican ialsident in the financ crisis. they realized that you have to put politics to the side when you are at the edge of an economic crisis. it is worth maintaining optimism released blending optimism with a healthy dose of skepticism. >> what does this mean for the real economy? there has been consumer concern
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about the outlook for debt. there is business concern about the outline -- outlook for debt. that can undermine confidence in spending. is the budget debate having an impact on the real economy? >> i would not say this is the main drivers of the economy at the moment. i do not know how much concern about the future on fiscal issues is affecting individual consumer family behavior at this point. i do think confidence is special thing. it is something those governing have to take seriously and not
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take for granted. i think you are trying to preserve the confidence that still exists in the united states. we have seen that when times have been difficult, the united states is still a safe haven. even in an ugly economy, it is often the prettiest one in the room. that is not something you ever want to take for granted. when you look at what needs to be done, you need a comprehensive deficit reduction plan that will significantly move us in the direction of the debt declining as a percentage of gdp. because you are dealing with confidence, things like the president being willing to go out and propose a $4 trillion
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deficit reduction plan, being willing to work across the aisle, the president putting that front and center in the fiscal and national debate even when gas prices are on the minds of most american families. that shows a concerned and focus that is important for economic confidence. we should be aiming for deficit reduction plans. in this divided government on the economy, we need to look for every opportunity to do something this confidence- inducing and shows we are able the political will to start moving the deficit lower. >> what are the chances of
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getting a comprehensive package this year? >> i think it is pretty tough. that is all larry does. he talks about the chances this will happen in meetings. i used to tease him that he 0%.ays picked 35% to 4 it is the scam of picking those odds on something that is extremely unlikely. if you say it has a 40% chance of happening and it is unlikely and it happens, you claim huge credit. if it does not happen, if you say that you said it was unlikely it would happen. [laughter] i think it is very important that we be at the table having the discussion.
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that should be our ultimate goal. we should maintain some optimism. we should also be looking to see if there -- to not let what we disagree on keep us from searching for common ground on what we could agree on. deficit reduction, debt reduction, restoring or protecting economic confidence is not an all or nothing in denver. -- is not an all or nothing in denver -- endeavor. for us, we were not apologetic about the fact that while we were seeking $4 trillion in debt reduction that we were aiming
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for 12 years over 10 years. you do need to do it carefully. you need to do it in a way that does not inhibit an emerging recovery or inhibit investment. we do not want to have harsh reforms on things we should be strengthening like medicare or medicaid. the real issue is insuring that we're doing something to control long-term cost growth. -- thisng we're doing is important. during budget fights, people can start cleaning -- claiming a specific target is the end in itself. the end in itself is a growing economy that supports the fundamental values of the american economy.
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it is a place where everyone can move up and there is a broad middle class. that is the fundamental goal. insuring fiscal discipline and confidence that we will live within our means and control our debt as a percentage of income is a critical component. it is a component of the strategy. you have to have the balance. in terms of unemployment, i do not think there is a lot of upside for people in my position to make objections to the projections. it is cooler thing to do when you are on the outside. the important thing is that we are seeing a resilience in private sector job creation. last month was very important.
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there were the issues of the supply disruption from japan. you have oil prices. we've seen it go from $3.11 pre- egypt to $3.79. yet with all of that, we saw 230,000 in job growth. the fact that the unemployment rate dropped because of gains in employment instead of decreases in labor force participation was encouraging. you wrote about where we work on manufacturing compared to china. we are almost 200,000
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manufacturing jobs of the last 12 months. that has been a relatively unnoticed successful part of the recovery. the last time the united states gained over -- close to 200,000 jobs in 12 months was 1997. i think there is a lot of resilience in the labor market that we have seen so far. when you have had the kind of great recession we have had, even 200,000 private sector jobs a month is not as much as you would prefer to move the unemployment rate as fast as you would like. a drop from 9.8% to 8.8%, one full percentage point was the largest drop we have seen since 1984. some people have lowered the
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growth estimate little because of issues with energy prices in the last few weeks. from theross the board private sector forecasters coming in december very few were projecting we would be in the 8's by december. i would say the average forecast is looking at 8.5% of the end of the year. i will just quote them instead of making my own projection. it is one place we have seen things being better than they were supposed to be. to go back to the december plan , it is important to take out insurance when you have a recovery. we don't know in december there would be historic change in the middle east that might affect
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oil prices so much. having the extra $1,000 per family has proven to be an important insurance policy. even with higher gas prices, the typical family still has more dollars for spending than they would have had as projected in 2010. >> that seems like a pertinent point on which to end. you need to get back to saving the world and the economy. thank you for your time. best of luck. [applause] >> this week, donald trump is in boca raton, florida. he speaks at the tea party rally. that is tonight on c-span.
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>> to be a parent means you are training the people you cannot live without to live without you. >> the college admissions process, financial aid forms. andrew ferguson was not prepared for "crazy u." >> it was starting to dawn on me >> find out detaches up tonight on c-span's." it is what our signature programs available online. on wednesday, michigan democrat carl levin and oklahoma republican tom per one -- tom coburn released a report on the ause of the financial crisis.
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of theort is the work on subcommittee investigation. this is one hour, 15 minutes.
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>> this report uses internal documents from the people involved in the institutions and businesses involved. the report tells the inside story of an economic assault that cost millions of americans their jobs and homes while wiping out investors, good businesses and markets. high risk lending, regulatory failures, inflated credit ratings and wall street firms engaging in massive conflict of interest contaminated the u.s. financial system with toxic mortgages and undermined public trust in u.s. markets. the report we are releasing today -- are we able to remove that?
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>> the report we are releasing today is a company by 700 new documents that were obtained since our hearings. those documents are over 5800 pages long. 2800 but notes. it is the longest report our subcommittee has never released and comes at the end of the longest investigation we have ever done. it is a bipartisan product of a bipartisan investigation that was bipartisan every step of the way. the threads that run through all of the chapters in this sordid story are conflicts of interest and extreme greed. the story starts with washington mutual selling tens of billions
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of dollars in dubious and often thought to let mortgages either directly or through mortgage- backed securities, created a veritable conveyor belt of shoddy loans and mortgages and polluting the u.s. financial system with junk assets. the next chapter is about a federal regulator, the office of thrift supervision, seeing the danger and sitting on its hands instead of acting to oversee a bank on which it depended for 15% of its budget. the page then turns to credit rating agencies, moody's and standard and poor's, were giving triple a rating is too high risk securities, securities that were issued by firms that they were
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dependent upon for their own business, which also was a clear conflict of interest. when the securities collapsed in value, when the municipalities -- the municipalities were left high and dry. the final chapter looks at investment banks, mainly goldman sachs, that created a huge market for shoddy mortgage related securities, then packaged and sold them using deceptive practices, placing bets ets and secret against the securities they were selling to their clients and making big money when the house burned down.
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senator coburn and his staff, working with me, have produced and in depth anatomy of the financial collapse that has affected every american. i want to thank senator coburn and his staff and my staff for their extraordinary commitment, participation, and contribution to this report. it makes all of the difference in the world. action like this is a bipartisan action. it deserves bipartisan support. it has received it from senator anf -- myself and my staff. i will turn this over to senator
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coburn and i will return with a longer statement and then he has to leave. >> senator levin, thank you. i would make four point. the first is, we do not need commissions to do our jobs. we spent $8 million in 15 months on a financial condition that did not report anything of significance. this staff did it in a period of months. we have outlined a serious report that culminates in additional recommendations for our financial regulation. as you see in the report, most of those we concur with. there are some differences on policy. what this tells you is that if congress would have done oversight on the appropriate committees prior to this, we would not have had the problems we had in 2007 and 2008.
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i agree with senator levin. there was significant conflict of interest that led to this precipitous change in our country and our economy. they could have been identified in advance. overhead speaker] >> we can hear you. [inaudible] >> i thought i had heard and seen all things appear. i am not sure i have. conflict of interest led to a lot of poor decision making. lack of transmission -- lack of
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transparency also led to poor decision making. a lot of what we see in this report, had there been transparency, would have never happened. finally, what i would comment on is that congress had not done its job in other areas. we have done a great job on this committee of ferreting through this. it is a long report. i have read it in detail. it is factually accurate and backed up by that. it shows the lack of ethics in some of our financial institutions -. they embraced no conflicts of interest not caring about the outcome of their customers. when that happens, no country can survive and need it and its
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financial institutions. i am glad to have senator levin working on this report. it is a model. there is waste, fraud, and abuse in the federal government. we can prevent the next one of these things to happen if congress does its job on a routine basis instead of actively problems have occurred. senator levin. >> thank you very much.
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we tried to assist the readers in a number of ways. there are hard copies and cd's, which we are handing out. this is on our website. each chapter begins with specific findings of fact with the evidence. there are recommendations laid out. the recommendations are in one place.
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the first chapter is about washington mutual, the largest thrift institution in the country. it is about the loans that they made and the mortgages that resulted from those loans, which defaulted leaving hundreds of billions of dollars in losses and triggered the economic disaster that followed. there is a warning from the chief risk officer months before the high-risk lending strategy was presented to the washington mutual board. that is presented on page 66. he said they should be much more conservative. despite that, the board was presented with a high risk strategy rely on subprime loans where the ball or worse --
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borrowers who were high risk were provided with loans. there were low initial teaser rates and negative amateur as asian -- negative amortization. that is laid out in page 19 of the report. the reason this course of action was taken is because of profit. on page 64 of the report, you will see the presentation from the wamu board showing the margin on the gain on the sale of these products in the basis points.
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the government guaranteed mortgage had a margin of 14 basis points compared to a fixed mortgages having 19. you go all the way down to the home equity loans. the relative gain on sale, depending on the type of mortgages, is a huge difference. the subprime mortgages average 150 basis points compared to 19. you have seven times as much profit going to wamu from the use of this strategy. there was a huge gain in terms of profit. that is the reason they went in this direction. the chart on page 64 was the
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--esentation to the wamu b board. what happened is because of shoddy lending practices. the toleration of fraudulent loans, extensive fraud. this is laid out on page 49. the knowing sale of delinquent loans to investors. one of the key point we are making in the wamu presentation is on page 126. the representation to the buyers of the wamu mortgages near the end just before the collapse when they sell their mortgages were in trouble, that
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representation to buy years was that there was no adverse selection procedure in the selection of mortgages. on page 127-134, you can see that that was a false representation. on page 126, excuse me. e- the bottom, it says woamu mails indicate that prior to assembling the loan pool, wamu identified the link was the prone option are mortgages 0--
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identified the link went -- delinquency-prone loans. they selected them for sale to move rest from the's books to the investors in -- move risk from the bank's books to the investors. they had a written commitment that they would not select in a way that would be unfair. in other words, they would not have an adverse selection procedure. in fact, they did have an adverse selection procedure. some of the restrictions on teaser loans and negative
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amortization is in the dodd- frank legislation. in the office of thrift supervision, they identify, during 2004 and 2008, 500 efficiencies as wamu. you will see on page 164 of the report that we find that the ots allowed washington mutual to engage in shoddy and fraudulent loan. we find it abdicated its responsibility. ots impede it oversight of washington mutual. on page 177 and 195, the bank examiners were well aware of and had documented the banque's high
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risk and poor quality loans and -- bank's high risk and poor quality loans. ots sat on its hands and failed to do what it was supposed to do. take a look at an interesting e- mail. it is from the ots director from the washington mutual ceo. this is the head of ots e-mail in the head of wamu. we apologize. i am sorry to communicate by e- mail. i have left a couple of messages
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on your office on, but i am guessing you may be off for a long weekend. he says he is wrestling with a memorandum reverses a board resolution. i have decided an mou is the best approach for ots. we always do a memorandum of understanding. if someone were looking over our shoulders, they would be surprised that we do not have one in place. as much as i would like to be able to say a board resolution is the appropriate regulatory response, i do not believe it is. he would like to say a weaker action on his part is appropriate. he does not believe it. he says, i do believe we need to do an mou. he goes on to say, we do not think the investment community
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would not be surprised, but would be surprised to learn that one does not already exist. it is on page 211, the top of page 211. to continue this e-mail from the director of ots, this apologetic e-mail from the -- to the head of ots after 500 identified problems with no action having been taken. he is apologizing for communicating this way. instead of lowering the boom, he sends this kind of message. he says he is sorry to communicate this decision by mail. what this does is convey a sense of familiarity and disclosed that the head of ots knew his
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agency had been given preferential treatment to the bank after his down -- after its downgrading in february of 2008. headots -- the head of ots says, others looking over our shoulders would be surprised was not already an mou in place. the ots was abolished by dodd- frank, and for good reasons. chapter 3. these are the credit ratings. i will answer some questions and turn this over to staff. chapter 4 is mainly goldman sachs. chapter 3 is the inflated credit ratings. in the words of our report, on page 5 of the report, inflated
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credit ratings contributed to the financial crisis by masking the true risk of many mortgage related securities. on page 6, will report at triple a has less than 1% of default. 90% of the aaa ratings given to subprime residential mortgage- backed securities that were rated in 2006 and 2007 were later downgraded to junk. we also say in our report back at the triple a credit ratings were a key cause of the financial crisis. there is an inherent conflict of interest when the issuer pays, when the money coming into the credit rating agency comes from the person who is security is being raided.
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we point out that the credit rating agencies weakened their standards to keep wall street business. on page 7, they were aware of the problem. they were aware of the high risk loans. on page 256, we talk about the revenues that were received by moody's and standard and poor growing from $61 million to $261 million. in the case of standard and poor's, they went up 400% from $64 million to 21 $65 million. on page 273 up our report, we say the drive for market share and increasing revenues, ratings
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shopping, and investment bank pressures, have undermined the ratings process and the quality of the ratings management at moody's and standard and poor's. they used standard pressure to contain market share. that is laid out on page 275 and 276. we talk about the ongoing threat of losing deals and being one of the drivers of providing these ratings that were so exaggerated and the recommendation is that the fcc should use its regulatory authority to rank the ratings organizations in terms of their accuracy. it is a new approach to get objectivity into the ratings business. the fourth part has to do with
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financial activities. there is a section 01 deutsche bank -- on which a bank because we discovered some disturbing activities there as well. from 2004-2008, the united states issued $2.50 trillion in residential mortgage-backed securities and $1.40 trillion in collateralized debt obligations that were backed by mortgage related products. there was a huge outflow of these structured transactions. these products were developed by investment banks. they allowed wagers to rise and fall on the value of a specific security or collections of securities, which are referenced in these cdo's.
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the indexes allow people and financial institutions and their clients to bet on the rise and fall on a basket of securities. on page 319, which is the next page i would like to refer you to, in the metal, you find the following -- in the case of goldman sachs, their practices included exploiting conflicts of interest with the firm's clients. goldman sachs used contracts to place billions of dollars of debts that specific rmbs would fall and cdo's in value while convincing customers to invest in newrmbs'
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new securities.d in one instance, goldman sachs took the entire short side of 82 cd billiono -- of a dollars ac billion -- $2 billion. when it lost about it, they made a $1.70 billion gain at the expense of the client to whom they sold the security. the deutsche bank material comes next on page 330 and on.
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i will leave that up to staff to get into. it is running kind of late in terms of what my plans were. page 376, we are back to goldman sachs. i will refer you to that page. the hudson-anderson cdo shows how goldman sachs used this to transfer assets, as is a favored client, and make a $1 billion gain and profit at the direct expense of the clients who invested in the goldman cdo's.
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the case study shows how conflicts of interest related to proprietary investments led goldman sachs to conceal its adverse financial interests to potential -- from potential investors and place it and it took interests above those of its clients. that is a pretty damaging kind of a finding. there are pages of evidence that is between these findings to support it. something that is totally new in here is that goldman sachs attempted what is called a short squeeze. that information will also be discussed by staff. that is laid out in this report between pages 386-430.
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i will just give you a couple of quotes from some of the e-mails or flavor. -- for flavor. page 46. excuse me, the bottom of page 425. this is a self evaluation of one of the traders on the desk that ran this operation. here is what he wrote.
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in may, while we were remaining as negative as ever on the fundamental of subprime, the market was trading short and susceptible to a squeeze. we begin to encourage this squeeze, put plans in of getting short again after the short squeeze caused capitulation. this strategy seemed doable and brilliant. once the negative fundamental news kept coming, we stopped waiting for the shorts to capitulate and initiated shorts ourselves immediately. this was an attempt. these are some of the e-mails that were written. near the top, we should be offering protection down on the offer side of the streeton tier one -- on the street to cause
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maximum pain. we should start killing. let's start picking up some high-quality stuff. this will have people totally demoralized. further down, goldman documents show that there was a plant and an attempt to conduct a short squeeze despite the harm that could be caused to goldman's client. that is our report on the short squeeze. i want to go back to the big short. page 446 describes the large net short positions that goldman had through most of 2007. in february of 2007, $10 billion in net short positions. on page 451, goldman sachs
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claims be claims are too specific and do not account for the weight or value of short positions. that is goldman sachs' claim. their own charts and documents use the term net short. 4400 times. they never used the weighted method or their assets. -- for their assets. 3400 hundred times, net short, not once. the term they think it's more poor. -- more appropriate is net
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short. when you look at their documents, pages 466-469, we lay out their own documents talking about the big shorts. 466, the risk bias is to be short6. . that is what they represented on their own -- represented to their own board. we put on a big short position. enormous direction and short. we chose to take a directional view of the market during most of 2007. we maintain a net short subprime
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position and withstood the benefit from declining prices in the mortgage market. lloyd glenn wein said -- blankfein said the firm is still betting that collateralized debt obligations will drop. we continue to be net short in these markets. their cfo, we made money on that short positions. the greatest trade ever made. i have a huge short. later on, goldman sachs denied there was a directional bets against housing. they denied they were consistently in net short.
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page 474, i want to go back and read from the reports. near the bottom of page 474, goldman sachs' denials of its net short positions and the large profits produced by those net short positions are directly contradicted by its own financial records and internal communications as well as its own public statements in 2007 and are not credible. that is our binding. their denials are not credible. later on, we get the answer as to why they were denying what they were doing. that is that the evidence
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discloses that they had a bit short and that they engage in troubling and sometimes abusive practices. 8476. -- page 476, the evidence uncovers troubling and abusive practices. goldman sachs sold poor quality products to clients around the world and saturated the market with engine instead magnified the risk to markets. it shows multiple conflicts of interest surrounding goldman securitization activity, including its use ofcdo's -- of cdo's. they produced their own proprietary gains at the expense of the clients to whom goldman sachs sold the cdo securities.
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why would they deny that they were engaged in a huge short in 2007? because they gained at the expense of their clients. they used abusive practices to do it. pages 480-485 showed what happened at the end of 2006 and the beginning of 2007 when the mortgage market began to fall. they tried to return some of the securities back to the people they obtain them from. they said they tried to put back these loans, get them back to the people who had sold them to them.
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it said it would be a battle. the analysts analyze they would have to put back 28% of the new century loans. new century stopped paying back the money goldman sachs was claiming they owed them because the loans were so deficient. all of this evidence of goldman sachs' awareness of bad mortgages -- they continue to securitized those same mortgages. that is indicated on page 488. this is after their own assessments were that the market had gone under. they were trying desperately to return those securities to be people who had issued them and get reimbursed for them. they were continuing to
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securitized and sell. they did sell large numbers of these mortgages, these securities in the early months of 2007. the huge sales effort they made, making this a top priority, page 5 and 03, tucson -- 8503, pagee -- page 503. they were giving out ginormous sales credit to their sales people if they could sell them. page 513. in 2006 and 2007, the goldman securitization business was marked by multiple conflicts of interest in which goldman sach''
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financial interests were opposed to those of their clients. back to hudson. it is a hudson security called 2006-1. it was synthetic, $2 billion cdo that referenced a certain assets. the key feature was the number of conflicts of interest that were about just in the hudson. i call it the hudson scam. page seven -- page 517.
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one key feature of the hudson cdo's is that goldman sachs selected the assets which were supposed to remain with been ceo -- c till theydo -- cdo until they reached maturity. in each of these hudson cdo's, goldman played multiple roles in its administration including senior swap counterparty and credit protection provider. goldman took 100% of the short
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side cdo. when it declined in value, goldman sachs made a $1.35 billion profit at the expense of the client to whom they had sold the security. on page 518, the reason they created hudson was to create an exit for what they called the ir long abx risk. they were long on the securities in the abx's. they tried to sell them. it said goldman sachs had accumulated billions of dollars in abx assets referencing prime securities. in august, they decided that the abx trade had run its course. they directed the mortgage department to sell off its holdings. after several weeks of holdings
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-- weeks of trying, they were unable to sell. what did they do? page 519. they decided to crack to this cdo to try to see if they could 'sduce the armed's -- the firm risk. the cdo would function as an xit for the firm's long abx position. now i want to jump ahead to -- the marketing booklet. page 524.
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this is the marketing booklet for hudson. do we have that up your? -- up here? this is what they represented to people they were trying to sell the security to. goldman sachs has aligned incentives which the hudson program by investing in a portion of equity and play in the ongoing role of liquidation agent. we are going to focus on their first representation to buyers. they had aligned incentives which the cuts and program because they claim in the
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booklet they sent out that they had invested in a portion of equity. this was not true. there incentives were not a line. their incentive the -- their incentives were not a line. their investments were what they called the portion of the equity. it amounted to $6 million. they were short, hidden, secret in hudson.billion dollar in other words, there opposite position was 300 times the size of their aligned position. that is the representation.
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incentives are online. they had invested in a portion of the equity. they represent further down on page 524 that the cdo was a reference from the street. they laid out the criteria of what would be incorporated from this security. it was not a balance sheet cdo. if you look down at page 524, it was a balance sheet cdo. it came from their balance sheet and their criteria. they took the risk away from their balance sheet and transferred the risk to their clients. work incentives online? no, they were not.
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a balanceuh she-- not cdo. yes, it was. i will get to the liquidation aging in a minute. i want to talk about the word, "may invest." in the area of possible conflicts, they said the following -- this is in the middle of page 527. this is in their offering circular describing certain
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conflicts of interest. here is how they describe it. gsi may invest and/or deal for their own respective accounts. they list the things they might invest in. or in credit default swaps whether as protection buyer or seller. this was a fundamental representation -- fundamental misrepresentation. they had already purchased 100% of the short side of this deal. this was not that they might do something. that tells people who read this
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that they may or may not do something contrary to the long position. they already had. obtained and committed to keep -- because they were trying to go short. on page 527 at the top, goldman sachs was making a proprietary investment of the cdo that placed it in a direct adverse position. relative to the words "may invest," this disclosure indicates that goldman sachs may invest. the offering circular misrepresented goldman sachs' investment plan. at the time it was created, goldman sachs had already determined to keep 100% of the short side and acted as the sole
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counterparty of the investors buying hudson securities, acquiring $2 billion in financial interests that was directly adverse to theirs. there is a section here about goldman sachs acting as the hudson liquidation agent when
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the security fell through. on page 575, we find that goldman sachs created a direct conflict of interest between goldman sachs and the client to whom it sold cuts in securities, which goldman sachs exploited by placing its own financial interests ahead of those of its client. when the liquidation process took place, there was a compensation we uncovered -- a
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conversation we on covered. this is close to the end. it is between goldman sachs and the national australia bank. this is on page 580. this comes at a later time in the proceedings. this comes after the austrian bank has already purchased the security. now it is being liquidated by goldman sachs. there are a lot of issues between goldman sachs and others about their delay and the conflict of interest involved in the delay of liquidation. i would not go into that again. you can go into that with staff.
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here is the part of this that shows how secretive this process was. the short position in the hudson. how goldman was receiving -- goldman sachs was the seating clients by not saying they had the short side right at the beginning as a proprietary matter, but also that they were going to keep that interest hidden right through the liquidation. here is the conversation. these are notes from someone who works for goldman sachs. pacge 588. a goldman employee. here are his nose. this is page 580 near the top.
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he was sent an e-mail asking if goldman sachs told any of the huts and investors if goldman sachs held any of this -- told any of the clients and investors in goldman sachs held in the of this. he responded, according to his own notes, that it owns equity in the different pieces in tifferent charges = --differen tranches. he did not disclose that they held 100% of the short position in that $2 billion cdo and it would increase in value as the hudson assets lost value. the australian bank replied by asking goldman sachs to provide
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more specific information about goldman sachs' holdings in the transaction. "could you please follow up with what goldman sachs holds?" a direct question from a client. he asks the australian bank why the bank wants that information. want tok responsds, " make sure you are making restructuring decisions for the right reasons. -- make sure serving be right s."trinterest he responded that the intended goal of a liquidation agent is
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to serve the best interests of the cdo. the deception can not get much clearer than that. direct question. nonresponse. page 602 is the analysis of goldman sachs' 12 conflicts of interest. we were able to include them in the dodd-frank bill to try to get at the kinds of conflicts of interest that were so rife throughout this story right from the bidding -- the beginning with washington mutual right to the end. even with the security that they gained $2 billion from on the
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short side by misleading and misstating their interest. goldman sachs is still hiding the fact that they were the beneficiary of the failure of the hudson cdo. i have gone over. my staff is still with me. i will turn it over to them. that we first see if you have questions. >> are you making any criminal referrals? is there any comment on the fact that no figure on wall street has been indicted or gone to jail? >> criminal decisions are not made by us. they are made by the department of justice. enforcement decisions are made
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by the sec, not by us. we will be referring this matter to the justice department and the as you see. the-and the sec. in my judgment, goldman clearly misled their clients and mid less congress. >> [unintelligible] can it be described as a giant ponzi scheme? >> my hope is that there is still time. hope springs eternal. yes. [inaudible]o
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>> but for the greed and deception of the huge bank and the other banks besides washington mutual that engaged in extreme greed and deceptions, the failure -- the pollution of this system upstream would not have occurred. so they are a major fact. >> upstream where mortgages were signed? >> were they were granted. were they were collateralized in the beginning, such as washington mutual. that is where the pollution began in this system. but for the failure of the regulatory agencies, in this case the office of thrift
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supervision, because of the failure to supervise the bank after 500 notices of problems, doing nothing until we have the largest bank failure in history by far, but for that failure, this problem would have been avoided. it is a contributing factor. there's not one factor. there are a number of factor. but for the conflicts of interest, which caused our standard and poor's and moody's, which people relied on when they see aaa ratings, but for their failures and conflicts of interest and caving in to the pressures from wall street banks to give aaa ratings to securities that did not deserve them and they knew it, but for that, we would not have had the collapse of those securities. but for greed and misrepresentation, the deception of banks such as goldman sacks, you would not had securities which not only failed, but which
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shafted their own clients. but for the failure of those securities at the hands of pension funds, municipalities, when they all failed, the housing market, which collapsed was -- i will not say total, but huge -- in just this report, you have four major causes of the economic collapse. and there are others. there are four "but for's." >> [inaudible] >> it is not mind standing that that is the problem at all. that is just one plaintiff, one
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complaint, one problem. there are a lot of other possibilities with people who have been harmed by the deceptions and by the misrepresentations to seek action. i think the sec has been slow to act. hopefully, there will continue their troops. -- their tropes. >> [inaudible] -- would have prevented this meltdown. do you think you can prevent another one? >> that surely would have helped avoid it. i cannot say with certainty that it would have avoided it. it would have been a heck of a lot less severe.
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in each chapter, with the legislation to address the problems that we have identified, we do go into that in each chapter. i make some reference to it. i think it would have been avoided if we had this in place. >> [inaudible] and the volcker rule [inaudible] >> there are two parts. one is the proprietary trading which we tried to end in many cases. they are fully disclosed in other cases. we will reduce it, make it more safe, and not allowed at all in other cases. there has not been enough attention paid to the fact that we prohibit conflicts of interest in these kinds of
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transactions. we leave it to the regulators to specify which conflicts of interest will be prohibited. for the first time, we have a generic prohibition on conflicts of interest in these kinds of transactions. it is a generic prohibition of conflicts of interest. that is the thread that runs through all of this material. of all of the misrepresentations, all the failures, the thread is conflict of interest. in every case, there is a conflict of interest. you have extreme greed of the company. >> a couple of things that you mention in your report, one was on a classified [inaudible] do you think that 20% down payment is too severe? [inaudible]
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and they need credit ratings for capital standards. >> i think we have to be much more cautious in terms of down payment. i tend to lean on the side of having a significant requirement -- down payment requirement. i have not taken a final position on that, but i lean toward going the direction from what we saw in these mortgages. we have a new alternative. with the new regulatory authority that they have at the sec, we believe that the authority for rating agencies -- just the way you have with automobiles, you have entities out there that rate automobiles in terms of the number of repairs required.
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we think the the 30 that we have given the sec is sufficient -- we think that the authority that we have given the sec is sufficient. measure the accuracy and keep track of these ratings. they have in their power to rate -- to have about ratings, not of the securities, not of the mortgage-backed securities. >> we litany the legislative fix in order to [inaudible] >> it says we should rely less and i think that is true. to the extent that there will be reliance on the rating agencies, if those agencies were rated by an outside, independent, objective source, that could be
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someone who keeps track of the accuracy of their ratings. we believe the authority exists in dodd-frank to do that. >> i am interested to note know if any of your folks can across e-mails are memos by general counsel from deutsche? >> we will get into deutsche bank next. my staff will cover deutsche bank and and that. they have the answer. i do not have the answer. >> what do you think the impact is on the perception of u.s. and the u.s. financial system abroad? negative and is
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understandably so. there are a number e-mails in the report that talk about the reaction of clients in other countries, of how upset they are about how -- or by how quickly the securities went under. and the target other countries. they knew that the market here had gone sour so they had a very aggressive campaign with a number of the securities, including hudson, a timber wolf, and the other two. they traded with vulnerable client potential -- potential fines because they were vulnerable, because i had less knowledge. theyyou're overseas,
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targeted clients in other countries. i think that is very, very sad that they would do that. i think it is bad for our country. and i think it will be a negative impact. >> you could argue that the risk kept going in the circle of wall street. >> $1.5 billion went to morgan stanley, a major piece of it. they sold the morgan stanley piece earlier. then they had a lot of trouble selling the rest. that is when they're very aggressive sales campaign kicked in. that is when they turned to "hey, let's go after potential buyers in other countries." >> [inaudible]
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>> goldman was, i think, the only major bank that did well during the recession. we tried to find out how is it that they did well, the tactics that they used. i believe there were disgraceful and sticking it to their own clients violates their own claims that the clients come first. they have a website which says the climate comes first -- the client comes first.
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"our clients' interests always come first." that is simply not true. that was goldman. there are hundreds of pages, thousands of documents that show -- probably dozens of pages and hundreds of documents that show that the clients interested not come first. in terms of misleading the congress, i believe they misled the congress. there's no doubt in their testimony. they claimed they did not have a big short in 2007. in so many of their ways, their testimony was misleading, i believe, inaccurate. what we will do with all the testimony is refer them to the department of justice.
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>> [inaudible] >> it is just a deferral to the department of justice for production. whether that constitutes perjury, it needs to be decided by inappropriate authority. we are not the appropriate authority. >> [inaudible] is that just for goldman or for all of them? >> ok, i will leave you this. i appreciate your staying power. this was a superhuman effort, over three years. i have never seen anything quite like it. we're talking millions of documents. we just hope that something really good comes out of this and that this is a deterrent to new -- the turned to this kind
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of conduct. >> california congressman doug mckeon, chairman of the house arms committee -- the house armed services committee will talk about impending changes in department leadership and the national security team. today at 6:00 p.m. eastern on c- span. >> two state governors from different parties offer different to purchase thursday for solving their respective budget problems. testifying for the house oversight committee, wisconsin gov. scott walker defended his efforts to strip public until unions of most collective bargaining rights while democrat peter from vermont said he was able to win concessions from state unions without any collective bargaining. we begin with the introduction
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of the governors. >> we would now like to recognize their first panel of witnesses. no one on this side of the day can introduce him as well as their own members. with that, i will call on the gym to introduce as gov.. >> it is my pleasure and honor to introduce my friend and constituent yougov. scott walke. i was acquitted with spot 20s ago when he became active in republican -- 20 years ago when he became active in republican politics. in 2002, he was very collection for chief executive or county executive of milwaukee county. utives or county executive milwaukee county. he he was reelected to two terms. his political success has been based on the fact that he tells
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people where he stands. he tells people where he stands and when selected implements them. he faced him in milwaukee county as a result of outrageous pension scandal that his predecessor was at the heart of. he was able to pass nine county budgets or propose nine county budgets without a tax increase in the background allowed him to be elected as the 45th governor of wisconsin last fall. very few people here know who scott walker was until the last two months or so. however, those of us who have known scott walker and his commitment to principle we're really not surprised at the proposals that he made two not $137 million budget deficit, but a $3.6 billion budget deficit through the end of the next budget period. so again, i am sure that you
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will find governor walker is interesting as we in wisconsin have. he is a very polarizing figure for those of us who love them in wisconsin really thinking for the job he's done. >> i thank the gentleman and with all the people that governor shumlin could've had introduce an eco-those >> thank you, mr. chairman. on mr. ranking member, members of the committee that i serve on a couple of things as he is a private-sector person. he and his brother established an expanded a very successful private business in southern vermont. he has been on the frontline of creating jobs and having to pay good wages and good benefits and
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do with the practical realities of keeping the business going day in and day out, expanding and growing and being an employer. he also served in our citizen legislature first in the house of representatives and then for several terms in the state senate and peter, as the president pro tem of the state senate, the desert senate leaders served more years as senate president than any other moderate in history. so he comes to his job with legislative experience with private turks parents, with the obligation to pay bills in the trains run on time. he is now serving as governor of vermont after being a lack did in this past election. just to give you a sense of how vermont operates, he won a primary with four other democrats because his original market history was 200 votes.
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with four under he went on a unity to her. talking together rather than finding we trust our town clerk and let them do that can't and do the result. he also comes to the job with the benefit of the tremendous history we in vermont are proud of, a bipartisan tradition. it embraces two things. number one, we fight hard in vermont, republicans and democrats capriciously quick to hear. but in vermont, democrats think that republicans usually house to merit to their and republicans think democrats have something to say. and we actually do our best to listen to each other because both sides have enough humility to appreciate that in fact there
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is truth on both sides of me got to come together for the good of the states. a little bit of background, we had governor richard snelling, very respected and revered with the downturn in the 80s. he did something with the democratic speaker of the house to try to adjust the fiscal situation because we pay our bills. vermont has a balanced budget amendment, but were cheap and we pay our bills. we are frugal. the democrats agreed to cut programs that were really important to them. the governor agreed to a temporary surtax because we needed some revenues. it worked out. we came in the balance. taxes went down. we were able to support programs. we then had governor dean in good times cut taxes. he is a democrat. and when he did that, he implemented some tough budget reforms to make sure we didn't spend because we had a surplus. we sent me back to the taxpayer can put into place budget
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controls. peter shumlin is carrying on the tradition when we got into a fiscal situation because they work with the unions and say we have to share the sacrifice. they sat down at the table and went out and there was a sense of common purpose it's been embodied in vermont that has to be sustained just to give. you get mentally tested around your feet get it. they listen to each other. it is my pleasure to introduce
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governor peter shumlin of vermont. >> i thank the gentleman. pursuant to committee rules, i will be sworn in. but you please rise to take the oath and raise your right hand? do you solemnly swear or affirm that the testimony you will give will be the truth, the whole truth and nothing but the truth? let the record reflect that all witnesses answered in the affirmative. please be seated. gentlemen, we have congressmen who come before us, senators who come before us and governors who come before us. governors are always the best witnesses. they understand the five minutes left for the q&a that in fact your entire testimony will be placed in the record. to help you with this, you will see the typical green, yellow and red lights as my predecessor
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on the committee said in all 50 states we know what red means. so with that, i recognize we didn't to a coin flip. he wants to go first? governor walker. >> thank you, mr. chairman. distinguished members of the committee, visiting members as well, we got to know each other a little bit after the election with the new training for new governors. it's an honor to be here today. as was mentioned by several in testimony, we are not above the wisconsin. there's 44 different states and the district of colombia facing deficits. in total, over $111 billion in total deficits ranging from 2% to 45% of budgets. in our case in which content starch july 1, we face a $3.6 billion budget deficit. governors across the country, democrat, republican alike face a challenge in many cases proposals received from one into
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the other governors cutting. in many cases they cut billions of dollars to a local governments, school districts and others and in turn many of the states is one of two things. massive layoffs or a massive property tax increase it in many cases, sadly some of both good and wisconsin with a different option. progressives and the docents are progressive options. for his forgiving data and local the tools they need not just to balance the budget this year, but for the next two years and for generations to come. that's important. some here in other places around the world may say that it's a bold political movement, but i would argue it's a very modest request. what we're asking for governor employees like myself is a 5.8% contribution for attention in a 12.6% contribution for health care. thus protecting the middle class. that protects middle-class jobs and taxpayers and if you ask middle-class workers in my
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state, both say they think were offering pretty reasonable. i don't have to go too far for now. my brother, david, works at the banquet manager part-time as a bartender. his wife works for a department store. the two beautiful kids. when his turn the other day. your typical middle-class family. when the debate for starter tommy said i pay $7000 a month for health insurance premiums and the little bit i can set aside for my 401(k). at the two have a deal at which are offering. bigger than all across my state when i go to plants and factories and small business finds the activity like that because on average middle-class taxpayers pay about 20% of the health insurance premiums. federal employees be on average 28% of their health-insurance premiums. as the chairman alluded to, federal employees for the most part do not have collective bargaining rights for benefits and ultimately for salary. makes me wonder why protesters in madison in columbus and not here in washington v.
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you've got to look at the facts. it's very clear out there. we are offering more generous than what you offer federal government employees and if the average average is not here it's in our state capital. more important now than just the fiscal way back because what we're talking about here ultimately save $1.7 billion to state and local government spending over the next two years. it's not the only lose balance the budget, but it's a piece of that. the other important elements remembers this makes government for battery. i can think of no better example than a young woman by the name of hampson who a year ago was named to any teacher of the year, teacher of the public school system at a time a week later she got a pink slip. she was one of the teachers it off. why? are collective-bargaining agreement required a contract that protected a system that pays more than $100,000 in total compensation for teachers, with no contribution for health care and ultimately a case of seniority. our reforms allow schools and other local governments to hire
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and fire based on performance and americana pain performance with the best teachers and workers are from. but ultimately is going to make things were better. it worked in indiana when mitch daniels said the six years ago. was mcgovern more efficient, effective and accountable to the public and most likely workers in the state continue to be rewarded today. the last thing i tell you is this ultimately is good for the economy and our state as well because in the end, investors want to look at a state with the state and local government is stable. we are showing wisconsin is open for business. the thing that's most important is when you think about overdoing, we really make a commitment to the future. at the two high school. in fact, some classmates are here today from east high school. our proposals are about making a commitment to the future so our children don't face even more dire consequences than what we face today. for more than a 200 years, this country has been based on
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leadership relators care more about children and grandchildren than they did about themselves. it is time you're in then across this country. we have leaders began to worry more about the next generation than the next election and that's exactly what we're doing. thank you, mr. chairman. >> thank you, governor. governor sheldon. >> thank you so much, chairman issa, ranking member for this invitation today in on members of the oversight and reform committee in particular thanks to my friend and congressmen, peter welch who does an extraordinary job for a start in washington. thank you for the warm welcome. it's great to be here also with governor walker. as governor walker mentioned, we met at governor's school out in colorado and i don't want to give you any ideas of congress people running for governor, but if you do get to the school made a wonderful dinner together and governor walker and myself and his wonderful wife share common challenges we are among the biggest cause of governors in
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america and we share a very challenging job. in fact, i say to governor walker earlier if they told us to be governor's school, the message we were taking over, we might have rethought it, but it was too late. but we are dealing with some extremely tough economic times as you know. i hope to make governors walker trip to washington. i want to make clear that with the number one maple producer in the country. governor walker's number four and it is the company better. >> as one of the advantages of being governor. there's no more tsa's. but thank you. we are both safe in the first 100 days, creating jobs and raising incomes of those that are earning less money and vermont are on average the same money as earning 10 years ago.
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as both of our challenges and respective states and the other governor cherie. mr. chair, i want to directly address the question of not -- what is causing the fiscal crisis that those governor and i find ourselves in. we know it's a result of the greatest recession in america and his dream. the result for us is declining revenues and expanding expenses as we face higher unemployment rates, higher service calls and arrests. that's the challenge. without getting into how we got here because i know that's been debated and we'll save that for another day, i simply want to talk a little bit about what our challenges as governor to reach economic opportunities and balanced-budget. when i look at it, i don't start with collective-bargaining. i don't start with my public tensions. i start with the true cost. and vermont and this is true of most states of the country, hope here is my biggest rising cost.
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i've watched health care costs and vermont double over the last decade from 2.5 billion to $5 billion a year. in 2015, my bank and insurance commissioner tells me vermonters and an additional $1.6 billion on health care and that's the biggest cost in the state budget. what does that mean in real dollars? in the $2500 by 2015, 1.6 billion, $2500 out of every vermonters pocket from those born yesterday to those at the other end of life in a state where on average people and making the same wages they were making 10 years ago. so i'm going with the money is for both the statement people of my state to grow jobs and economic opportunities. we're trying to get health care costs under control. the second driver to leave it or corrections. our direction specialist doubled in the last decade. other governors face similar challenges.
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so we're trying to go with the governor is. i want to talk a little about our experience with state pension and retiree health publications for state employees because i think it really matters in this debate. what we learned in this area is that there are steps you can take to significantly reduce the cost of tax tears without undermining traditional defined benefit plans, which most objective parties agree to provide your retirement security, served to retain quality employees and are more efficient than a defined contribution plan. that's what we've learned. how did we get there and how do we work together to get the job done? what we did and i was then president of the senate with republican governor and republican speaker is we brought the union together and we understood that it was going to be an example of shared sacrifice and so did our state employees is congressman welch suggested. what did we get?
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in this discussion, the lesson we learned was we get more with maple syrup do we do with vinegar. we brought it to the table, talk.and here's here's the result. shared sacrifice. 3% to 5% cuts over a two-year period with no increases. to come with a higher retirement contributions from our state employees. three, we raise retirement ages for state employees to help us with the problem. for, we reduce health care benefits to her state employees and some of her teachers and five, we required what this resulted in was a 25% reduction in our annual payment to pension funds and still have them fully funded. so the point i'm simply trying
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to make as you can get this job done. you can balance the budget. you can create jobs in your state without taking on the basic right of collective bargaining. the reason i feel so strongly about that if i asked the question, who got us into this mess and under riccio at that? i can tell you from my perspective the governor we just came through the toughest winner in about 20 years. lots of snow, lots of ice. plow trucks were out almost every day. i've got to tell you if a network poltrack as i'm sure governor walker is done. and when i got behind the windshield of the plow truck in a driving snowstorm this type of chart driver working seven or eight different mothers come to 14 for plow in front of and a tractor-trailer truck passing on the right compass and yahoo! on the left, i've got to tell you
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working a 12 or 14 hour day for 14 bucks an hour from the plow truck driver to get us into this mess. when i go and visit schools and they see the children -- the the challenges their kids are dealing with. they didn't get us in this mess. my public employees didn't get us here. we has to share the sacrifice in getting this out, but it doesn't mean we take away collective bargaining, which is what made the middle-class in america strong and folks under assault in this recession. so in closing, mr. chair, i will simply say this. we have found, as i mentioned, that you can bring folks around the table to compromise, get the job done, balance your budget, create jobs, be fiscally responsible come but you don't have to take on the basic principle of collective bargaining. you don't take an firefighters, police officers, teachers and he don't take on your hard-working employees. he work together with them with maple syrup, not vinegar.
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it works. thank you. >> thank you, governor. >> i will not recognize myself for the first round of questions. governor, the sign behind me we don't normally point to the science. this is the title here today, but the last part where it says, choice or necessity, the cuts he made in cooperation with your various union groups of public workers is probably close to an 80% of you spend time you spend directly or indirectly in people who were for the government. was it a choice? was a necessity to in fact find a way to provide essential services for less money and not go into deficit and name? >> u.s.a. and assess me. well, we don't have a balanced budget amendment is congressman welch suggested.
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we have to balance their budgets to get the job done. so he made choices we do and vermont because we really like her triple-a bond rating. and the business person. we understand we can't take care of the most vulnerable among us to balance the budget. the >> i like to ask governor walker same thing. we are rather in love with the title today so we thought we'd get the title entrance answer out. >> we've seen in the past for her to us making critical decisions right now for many it was a choice and the reason they failed to make the right choices wayward here today and that includes democrats and republicans before. for many, many years, lawmakers and governors in our state failed to make the right choice, pushed the decisions to the future. they raided segregated funds, delayed payments coming as one-time federal stimulus a two years to balance the budget and that's along with the meltdown of the economy largely why we another state are facing major budget crisis.
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>> one of the reasons retitle today's hearing that we know you'd be here if i happen to be from california and we too in our state under republicans and democratic governors have an increasing debt claiming to balance the budget. in business and light governor shumlin, if your assets are per se going up in your liabilities are going up to me don't claim you are in balance and that's a problem i've seen in many states and particularly my own. government shumlin come you mention one thing that's interesting to me. he said a defined benefit plan is more efficient. i'd be interested to see what efficiency do you get by having a plan which promises something in the future that no one can be sure of actuarial strike, but obvious if they failed because you see this large adjustments. what is efficient about that versus knowing an amount of money is going into a fund in
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that amount of money will be invested fairly and in fact be available at the yield. which one is more efficient from a standpoint of predictability? i'm not talking about 401(k)s or individual. i'm saying for example union -- trade unions in my state if you're an electrical contractor, you can't control a contractor that hires you today versus tomorrow, so even though you try to define benefits come you are defined contribution plan because you only get the year in which your employee is an electrical contractor to come the employing you'll get that much money and the next or you can't control -- can't crawl back the way your employees can call that tiered so why did you think of the sufficient? the efficiency question kind of lost me. the mac is efficient for two reasons. the first is against the employee guaranteed retirement plan. i think there's been tremendous misunderstanding around the country, which is vermont as an
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example, our average pension -- the >> i understand what is more desirable for the recipient. you're in the federal government, we have a defined benefits plan. >> the efficiency from my perspective as governor is simply the returns for an investment, not taking a picture for the first recession, but over time in unlike general motors hidalgo bankrupt. they never have and i believe in crips he is exaggerated. it's not within the constitution. >> therefore relatively fairly different standard. the point being the average return for us has been around 8.5% indica says the ability to deliver your project the ability to deliver your project foreign employee who is often working for less foreign employee who is often working for less than you'd get paid. >> i've got your answer. i like to governor walker appeared along that line, why is that more efficient than knowing the amount you give any given year into the budget is the
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amount. even if you've invested and try to make the same returns that they make sure they're going to give a similar percentage. why is that more efficient versus perhaps making sure that you budget without ups and downs, neil doesn't occur? >> when you look at benefit the public or private sector is ultimately more efficient, it's not what i'm advocating. and our case, like what the federal government and vermont, we have defined benefit as well although i think it's important for asking for is changing the benefit of. we're asking for people, get myself included to pay more as a contribution for the cost of that. mr. quickly -- representative quickly tucked in his opening statements about the state of illinois. that's an important distinction. in illinois earlier this year governor quinn the legislature raise taxes on individuals and
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businesses in an attempt to balance their budget. yet today they have a pension system that has funding. we went the opposite way. we made it easier to do business in the state. we show wisconsin open for business and we have a pension system that essentially fully funded. that is important because you get to the heart of the spirit that is why illinois is in the category because they feel to make tough decisions to get finances under control. >> thank you, governor. i just want to make one thing clear for the record. the federal government currently for regular federal workers, 20% of what goes into our health care benefits are paid for by the federal worker. in the case of the post office, it is historically 20%, the one of the major unions has renegotiated it to 25%. that is what's happening here since lynn washington. they recognize the ranking
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member. the >> thank you very much, mr. chairman. you know, the thing i think stands out here is the fact that they say this to both governors or we may lose sight of the night is like the postal workers we have a few days ago they were able to shed 100,000 employees out of 700,000 in three years. one of the things they said is they are americans, too and they don't find sacrifice in. and speaking of sacrificing, governor walker, when i listen to your testimony, you made it sound as if you had a very reasonable offers to the union, but that they have been unreasonable by rejecting their offers. for example, you ask employees to contribute by 20% for pension and 12.6% for health insurance premiums and knew not to say
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most workers outside of government would love our proposal. we talked about your brother and like many other workers in our states without a deal like the one i offered to government workers. the thing i did not hear the was the unions agreed to double the care of the health insurance premiums and increase contributions. that's not true? what did they do? yeah, i went to hear what you say. read an article from the local paper. >> i'll answer the question, representatives. two of the statewide union leaders made a statement a week into the debate about suggesting that they thought they could suggest that. in the mix of thought into the bill was signed into law, nearly every local union that settled the contract, settled that without a pension or health care contribution. to me, actions speak louder than words.
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the two stayaway leaders could not speak for unions have nearly 1000 municipalities, 424 school districts and 72 counties. they're the ones who decide the local level and up until the bill assigned amount they were not followed actions of their leaders. to me, actions spoke letter than words. the other key difference is begun in the struggle to make knowledge both turkeys. the public is democrats driven by philly to make tough decisions. if we were short-term fix, we push the problem to the future. will we give our permanent long-term solutions, the tool state and local government need can only get if you make those changes are in terms of workplace protections, wisconsin is the strongest double service protections in the country. that was more than a century ago. that was what the new law in place and that protects grievances in both hiring and firing protections remain after exchanges. the >> looking at an article from
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the wisconsin journals, i guess that the local and this article a democrat states senator john work and back local employees have agreed to financial aspects of your proposal. and all they're asking for is to strip them -- that she not strip them of their collective bargaining rights. that is not accurate? >> again, does the statement made by stayaway leaders. the actions they took contradict the statement, that they did not -- the agree to the five and 12. you would've seen a james film across cross and all of their communities they would've put money with the mouth is into that. so i think you're right about the story accurately explains what was proposed at the time, but in terms of what they actually did, their actions did not represent what directions do
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not coincide with the statement said the state regulators. >> did you ever consider dropping their collective bargaining demands? did you ever consider that quiet >> as a county elected official for eight years. we talk about shared sacrifice because my county faced a crisis. i gave river 275,000 by personal salary back. and maybe personal sacrifice again going to pay more for pension and more for health care as governor in the state of wisconsin. during the time i repeatedly met with unions and ask them to make modest changes, modest changes in pension and health care contributions. one year i asked them to consider a couple 35 hour work weeks in order to avoid massive layoffs every time the response i got with go ahead come away for 500 people. i don't care. as i when i talk about no class and not segment taxpayers outside government. the middle-class workers that
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would've been enough for people i represent us well, just like in the state of wisconsin. if i have to choose between massive layoffs are making these sorts of reforms, i'd much rather stay in the side of middle-class child because remember the vast majority of people in the middle class in my state and across the country have been paying the bill for the expansive government year after year after year and to meet those are the people in standing up to protect. you never hear me speak throughout this entire debate the matter what others may fan of her son until word of any decent public servants who work the 300,000 decent people in my state for the local government. i have great respect for them. i just know in this together we've got to make changes to make sure their jobs are protected into the future. >> thank you. >> chair now recognizes chairman of the subcommittee, mr. mchenry for its unquestioning. >> thank you, mr. chairman. governor walker can't push your testimony.
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governor shumlin, thank you as well. there is this discussion a tough choice. now, when we look at what the government does, and there are services that polities and state rendered today people of the matter is collection of tax release whether it's local governments providing police and protection through the police are making sure that if somebody's house is on fire you the fireman show up. so there are tough choices between the services that the government provides and the obligations it has. so governor walker, can you discuss this challenge for a governor who walks into a very tight budget situation? the challenge between do you continue to provide services taxpayers expect or do you continue providing a benefit for a select few, meaning you have a
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pension obligations health care benefits in these types of things that the people getting the benefit are largely not paying to receive? in the near taxpayers footing the bills. can you discuss the challenge? >> sure. again, i'll tell you not only as governor for the last couple months, but a county official for eight years prior to that, first we saw the distinction. we saw the challenge under the environment before we pass this bill into law or local governments, in particular, would force of to sacrifice the guy faced with the problem we face, where when we attempt reggie time, one before to fascinate because of the pension scandal i inherited in 2002. we were stealing this ahead of the curve before the economic meltdown. we try to make some very reasonable changes when it came to us as government employees paid for things that pension and
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health care and even other adjustments temporarily as part of the work week. we did that for two reasons. one, try protect as many jobs as possible. to enter in because jobs provide services to try and protect core services for the people we serve. that is essentially the impetus for me when i looked at the budget crisis we are facing in the next to your site 2.6 billion. i knew we had to make a fundamental change we were going on the path many other governors across the country, democrat and republican alike to cut billions of dollars for schools from university systems, local governments in other eras affect other things imagine. and instead they are saying there's the cuts will either make it up to massive layoffs or make it up through massive property tax increases. in my state i can afford to have anybody, public or private sector anymore massive layoffs. for a change in the business climate, republicans and democrats alike to pass
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legislation that it is one of the most proactive approach of agenda for the country. we had to do all that. we want to protect jobs. by the same token we know one of the other things that would cut down recovery would be a massive tax increase. he saw two years ago my predecessor raise taxes on individuals. we saw the jobs leave. we want those people to come back. >> i understand competitiveness in the midwest in terms of job creation, so there's competition on tax rates. >> ups early. we love the 7.9% effect is now 9.5%. we love that distinction because we want more people to come to wisconsin. >> well, thank you. the other question i have is as opposed to a private-sector pension, where those receiving the pension benefit are the ones affected by the changes. they are the only ones really affect the. the difference with that public sector pension is that we as taxpayers have to foot the bill. so it is not simply a life
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perpetrated to the beneficiary or recipient of the pension, saying perhaps to receive scenario on return on investment are underfunded pensions and so on and so forth. it is also aligned to those taxpayers have to foot the bill for those underfunded pensions or less underfunded pensions. so my question to you, governor walker, a steeply the sufficient transparency and disclosure with public sector pensions today? >> i think about the state and local level as well there needs to be more transparent the. one of the things we're most proud about that we balance the $3.6 billion budget for two years ago with the largest deficit in state history. in my budget, i presented the beginning of state legislature to reduce the structural deficit by more than 2000000000.90% reduction pointed out to call the present positive.
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but the last thing you heard anything related to a budget because we took control of what we should have been doing for years and work from both political parties. that's incredibly positive. others because that differs in many cases to the next generation. we can't do that anymore. >> i know my time is expired, but certainly those arguing about public sector pensions. you have those same pensions are underfunded and it bad. those are the optimists. does the look of the pension system the optimists. does the look of the pension system the optimists. does the look of the pension system the optimists. does the look of the pension system are two well-funded. >> i mentioned the illinois wisconsin distinction. you have the speaker of the general assembly, a longtime union alleys took a month ago
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about the possibility of producing the benefit itself. that's what i meant to me to take you seriously. someone who's been a stalwart union of reducing the benefit. that's me would be unacceptable. we made a promise to public service about retirement benefits would be. we should protect the matter what party were in. >> thank you, governor. we now recognize former chairman of the post-committee, mr. towns for five minutes. >> thank you very much, mr. chairman. governor walker, why do people in general talk to people from your state around the nation feel that your focus is on helping the corporations and basically the wealthy at the end of the middle class and the poor about when they have that
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perception of you. .. the middle class people you >> when you see me dtc wendi amine event? giving tax breaks to big business? >> we don't give tax breaks to business. what we do is targeted for small and big alike. we have a tax credit as you create a job there is a tax incentive but it's tied
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specifically to job creation so the person who benefits the most is the recipient of the job. if there's not a job they don't tax break. >> what's began planning rate of wisconsin? >> 7.4% unemployment rate pistol too high, obviously less than the average. we had about 13,000 jobs in the private sector, about a.d. 200 new jobs in manufacturing next week we put all the new job numbers and i think we are going to be on the right path. >> did you have to lay off workers and municipal workers and government employees in order to put your budget in place and get the 13,000 that was increased? i'm trying to get the balance. >> you're right. in our case putting this budget together we have to be avoided for the remainder of the fiscal year 11 the deficits of the fiscal budget put together my predecessor jim doyle we have to make up $137 million we had set the stage for the $3.6 billion deficit and balance the next
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two-year budget we have to be series of things and other changes, other reforms and we are talking about one part, about $1.7 billion the next two years for state and local government on state government for the final couple of months which is the end of our fiscal year would have 40 million-dollar savings. bye getting the savings we avoid laying off approximately 600 state workers we avoided that way. >> have you thought about using maple syrup? >> i've got some now. it's pretty good. it's not as good as the cranberry juice we make in wisconsin but it's good. >> rhetoric in using benner utter? >> i tried as a county again if eight years and they basically told me lee of people and to me that isn't acceptable. if you are for the workers in this economy the last thing i want to do is see people laid off and this was a much, much better approach. >> how did you get people to have a different attitude i don't understand why people in wisconsin would think that way.
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wisconsin is just like a lot of other states in this nation any way, governor schumer? >> thank you, congressman towns. i'm listening to governor walker and sitting here realizing we all have similar challenges as governors on like the congress we've all got to balance our budgets. so, they're real question is what are we arguing about? and my plate is if you want to go after collective bargaining which i believe it helped build this country and build the middle class that's been under assault in this recession, just come out and see if i'm going to go after collective bargaining but if you want to balance your budget you bring people in. you talk to them, you have a dialogue. i can guarantee this. what vermonters are looking for is the same thing they expect in wisconsin and expect in america, they want reasonableness,
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compromise, they want bright people working together to solve problems. and when you use vinegar and refuse to meet with units and don't sit down and talk with them, when you take on an outright assault on a basic principle and a space society which is collective bargaining, the thing my grandfather when he got off the boat and others rely on and rely on to make a decent living, to come from the beet farmer to success in america that in the build our country that is a different debate so what we are talking about as i sit here and listen to governor walker talk about he's opposed to these challenges all the governors for doing the same things here folks. the question is are you going to bring people together to solve problems or go after assault on the basic principal in america of collective bargaining. >> i think we are trying to do two different things if we want to go after collective bargaining just say we are taking you on. but don't try to blame the worst recession in american history on the need to go after public
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pensions. the question over here let's be honest about this. tax payers have almost paid for a public pension retirement plan. this isn't something new, folks. this started with pensions, with asking public employees to give up economic opportunities they might have if they did what i did and build a business and made a lot of money. in exchange for getting the lower wage and the less economic opportunity, the targeting guaranteed 25, 22,000 on average retirement once they are all gone. it isn't new news the taxpayers pay a portion of that and employees pay the other portion. what is new is ice-t and governor walker's state are asking the employees to pay more than the did before. >> the gentleman's time is expired. >> governor, keep using maple syrup. >> we are going to try.
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>> mr. chaffetz for five minutes. >> thank you. governor, i'd like to talk to you if i could about the pension plan in your state and coming from utah i think we have two things that have served us well. one is in the state constitution we have a balanced budget amendment that forced the issue to actually balance budgets. number two, a defined contribution plan as opposed to the defined benefit plan and consequently the state has one of the lowest tax rates as business is thriving and we have hundreds of millions of dollars in the rainy day fund. now i went back and looked at the pew study on vermont and you're doing better than most states that funded about 92%. but you make a comment about the chairman of the predictability of the pension program and about talked about the health of the program because it can't imagine a defined contribution plan is not superior to the defined benefit plan because how do you
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account for that? >> all i can tell you is that is served my and other states well that used defined benefit plans and that we have had over time -- >> somebody told me they thought they were going to get an eight to 8.5% return i would say they are smoking those maple leafs. and 8% return on investment nobody's getting that kind of return. >> if you look at the average for the state pension across the history of the defined benefit plans you'll find we get about an 8% return on average and obviously there are good years and bad years but unlike general motors since we aren't going bankrupt we have to look at the averages and that's what we've got that's why wall street -- >> you think you're going to get that -- >> going forward to you think we are going to get that? >> we do, that's why moody's and the other bonding agencies allow us to assume that way of return on investments. we aren't making this up as
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governors that's what they require us to do based on history. if you're a governor you have to deal with the real world and the real world receive were to move from the defined benefit to the defined contribution plan hypothetically it would cost a ton of money in the first ten to 15 years for the reason that the current employees help to support the pension obligations of the states in defined benefit plan. if you pull the new ones out, you immediately have a high your up-front cost than he would otherwise if you've got to support your existing defined benefit as he moved to the defined contribution so there's a lot of reasons why the governors are not thrilled at the idea and you're hearing this from republicans and democrats, this notion that if you just move to the defined contribution of our problems are going to be solved isn't in the real world. >> with the gentleman yield very quickly? governor, if you are fully funded that isn't true. if you are fully funded be able to stop putting money in the
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moment you make the switch because if you are fully funded you are 8.5% would pay all your benefits so you can't have it both ways. >> we are adequately funded. >> as long as we understand adequately is kicking the can down the road so this davies share with you like the right of return of the treasury would run out in 20, -- 2023. you would depend on the high return you cannot bank on in your own statement. >> if i can answer that, mr. chair --. >> both governor walker and botcharov on wall street to try to convince them we are running sound economic states that the bond rating depends on our economic future. we managed retirement funds based upon the expectations of wall street. vermont is doing that right since the aaa bond rating. one reason is we use the actuarial projections that wall
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street gives us which are hybrid and the treasury return and i tell you if you study this issue you find vermont isn't giving anything radical here, we are doing but wall street expect us to do and it is a higher return than you'd get on the treasury. >> i don't want to go over my time. ausley really do think a flashing red light for investors for this country for the congress because we anticipate the states try to be running back to the congress we can't even find ourselves, we can't to manager. i don't want the states to think they're coming to the federal government to get a bailout. i think states that haven't made that difficult choice and made it difficult transitions to the defined contribution plans are putting themselves in peril and great risk. that's the experience in utah. we made that choice. it's on a more sound trajectory and i think you will find the states who did make that effort
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and make that transition will be much more sound financially. that's my perspective but i think it's going to be on one of the biggest issues moving forward mr. chairman on your back. >> we now recognize the former mayor of cleveland ohio, dennis kucinich for five minutes. >> thank you mr. chairman. governor walker, you said union leaders agree to the financial kutz but then you blame the the local unions for not following through on these pledges. that's because you refuse to drop the demand of the workers and collective bargaining rights that have nothing to do with the budget, and refuse to negotiate and reject the offer. governor walker, if the unions and wisconsin agree to the financial cuts that you saw it, i don't understand how this can continue to be characterized as to the debate of the state budget deficits supposed to be a hearing of state and municipal debt. i don't understand how revealing collective bargaining rights for public workers shows us anything about state debt. let me ask you about some of the specific provisions in your
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proposal to strip collective bargaining rights, first, your proposal would preclude the need to require unions to hold annual votes to continue representing their members can you please explain to me and members of this committee how much money this provision saves for your state budget? >> that and a number of other provisions because if you're going to ask and you are going to put in place a change like that we want to make sure we protect the workers of the states so they have a right to know what kind of value they get and the same reason we give workers the right to choose which is a fundamental american right, the right to choose whether or not they want to be part of the union and whether or not they want a thousand dollars bid -- >> how much money does it say, governor? >> it doesn't save any. >> [inaudible] >> it has no effect whatsoever. reclaiming my time, it had no effect whatsoever on the state budget. i want to ask about another of your proposals. under your plan, you would prohibit employees from paying
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union member dues from their paychecks. how much money but this provision save your state budget? >> it would save employees of to of thousand dollars per year the could pay for the pension and health care contributions. >> governor, it wouldn't save anything. the cost if anything it's obvious the real intention here -- >> it's to give the workers the right to choose. >> i will back it up mr. chairman, right here from the state of wisconsin legislative fiscal bureau a nonpartisan state budget agency much like the congressional budget office the bureau was asked to identify provisions in the governor's bill that are non-fiscal policy items that have no state fiscal fact. this letter confirms the obvious that governor walker's effort to repeal the rights of the state workers is in on fiscal policy item. no effect on the state budget shortfall. i ask unanimous consent this letter be included in the
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record. >> reserving the right will inspected and plan to include it in the record. >> that's unusual you would reserve the right to object. >> the gentleman will suspend -- >> we fully expect to include in the record because it's not a publication that is widely distributed we simply would like to receive it and as soon as it has been quickly vetted during this hearing it will be accepted that is a consistent policy from both sides -- >> i would like to respond in the 14 years i've been on the committee have never had a chairman and reserve the right to object for putting an official document in the record that would central to the purpose of this hearing determining whether or not you stripping collective bargaining rights, governor, is a financial issue or not. it's not. it's a political issue. >> the gentleman is incorrect. chairman waxman they repeatedly. in most cases just as here by the end of the hearing items
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which were not part of the widely distributed documents were accepted. i expect to do this and i would work with the gentleman to get it done before the end of the hearing and the gentleman may continue. >> just a matter of public record anyway. the title of this hearing is a choice or necessity. i think what we've been able to demonstrate here is that the attack on collective bargaining rights is a choice, not a budget issue. there are budget issues as well that need to be addressed in wisconsin for example according to the national nurses united and u.s. states facing budget shortfall revenue from corporate taxes have declined to .5 billion in the last year. in wisconsin two-thirds of corporations pay no taxes and the share of state revenue from the corporate taxes has fallen by half since 1981 savitt published in the nation by john nichols and i want to ask to submit by unanimous consent and also in the real news network
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the have a report that points out the short budget, the budget shortfall of 137 million wisconsin could have been covered if the state had just kept going its state legislated taxes would say let expire after 2008 also points out if they had gone on to collect the estate taxes from the wealthiest citizens they could have paid down the debt. i just want to say in conclusion mr. chairman, that we really are here at the center of a great debate over the purpose of the government whether there is such a thing as the public's fear with public servants who perform duties on behalf of the public using resources that belong to the public or is the government going to be auctioned off it the highest bid to the corporations who privatized and inevitably drive up the cost of the government control of the cost of services, taxes that is where this debate is headed nationally.
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i think that the benner walker is inadvertently done a public service by exposing the extent to which this mind set of privatizing what is the public's fear bringing this issue to the forefront, 72 for being here, both governors. >> thank you. >> the chair now recognizes the gentleman from oklahoma. >> thank you governors for taking your time to be here with us. five of a point of clarification you begin your oral statement talking about how you didn't want to balance the budget based on the facts of and i do country of federal employees as well. the employees might do with benefits and the after the real crucial issue that the new vintage or statement by saying in the previous given this time they did deal with payment pensions, retirement words, so what will your not starting your time, you did say that we have just dealt with a few months ago, is that correct?
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>> it's been an ongoing effort both the previous governor the middle forget i was the president of the senate and helped negotiate with the speaker of the agreement with the teachers' union. sinecure talking about you didn't want to do that on the backs of workers at this point you didn't see the corrections and saw health care as a major issue but dealt with the retirement issues and such. >> i don't mean to suggest we didn't ask for more state employees to make sacrifice. we did and they did. all i'm suggesting is we did it by bringing up to the table. >> sure, is just a method on that side and the cooperation that the others had with all of the leadership as well it takes two to tango on that one as well as people come together. let me ask a question to you think the federal government should be involved in dealing out states when they have that issue is there a point in time would say it's so far in debt and out of bounds the federal government should step in and bail them out? >> that is a question i'm going to leave to do and i never want to run for congress. >> that is a question i'm going to ask because you represent the
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intent of the state. >> i don't think you're going to have to and the case for the bankruptcy states is greatly exaggerated for political reasons. when i go to wall street and i say as i did a few weeks ago we are in pretty good shape in vermont, wisconsin is in pretty good shape. tell us about some of the states we are worried of, california, new york, illinois and others and they say this is wall street speaking, we think that the case is being exploited for political reasons that there are not states that need to go bankrupt. we need to see your way through this and that the case for the pension crisis is being overstated by washington. >> do think the government should be allowed individual states? >> no. >> let me ask if all but to both of you as we have time and that is our their things we are doing is a federal government the right of your cost as a state, but i'm looking for an am i committee has been dealing with are unfunded mandates, things that say i like the amount of
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budget and control, these i can manage and these i cannot because the federal government has the requirements, are there things we are doing to cause you more debt and problems in spending. >> we have two minutes i'm not going to able to answer that question. >> you have to submit all you can for that. >> number one thing you can give us? block grant medicaid to be to get a block grant for medicaid i had to put $1.2 billion more in the general purpose revenue, the state funding into the next budget also to cut everywhere else, it's the biggest challenge out there and we have efforts the required to maintain things by the federal government and to manage the cost me to get the point we did places like gunderson luther had been ahead of the curve when it comes to the idea and concept of local homes pay for performance and don't come at of procedure and we have that option -- secular aware when on the budget
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committee we brought that lady we've been told the governors will certainly keep people out of nursing homes and be reflected the populations and you can't be trusted with these funds. >> your dad was made in the 90's when the different connie thompson was governor and push reform that bill clinton ultimately increase the welfare reform and in the end for giving block grants and the charges made back then we had the most successful welfare reform during the generation >> there are areas we are doing that is causing pain as far as the financial side. >> we're concerned about the cost of medicaid and medicare. the only thing i caveat is just a block grant makes me nervous is the populations grow older which is happening in all their estates as the cost and the utilization goes up. i don't want it to be an excuse for the federal government to get out of its obligation on the sharing of the cost of the same. we are giving a block grant, you're on your own of the utilization was that it's your
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problem. so how that flexibility gets translated is important, the details matter. second, the biggest -- of the driver is the education costs and no child left behind and there is no question those mandates are driving education expenses in the public schools requiring us to teach protest and require an extraordinary people work of teachers when they could be teaching. >> thank you very much and with that i yield back. >> i thank the gentleman. we recognize the gentleman from iowa. >> thank you. my name is bruce braley and i'm proud to be a public employee. in fact, governor walker, when you were a 6-year-old growing up in my field believe the planned field on the y got my first job with the county conservation board and i learned how to clean toilets and how to mop floors and scrape to come off the bottom of school desks and i also worked out in the blazing sun building bridges on the farm
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to market rhodes driving an act and the spikes and the lumber and when they on the job my left hand caught on fire so i know a little bit about what public employees to and the groups from washington ran against you and yet you yourself have a large amount of support from secret to donor groups like the ones that attack me and my campaign are you willing to go on the record today to announce the influence of the outside secret money and political campaign ads? >> human campaign ads on the principal of good government, and i think that's what we are here to talk about today. in fact, you ran a campaign ad called real leadership and when the campaign ad ran it says your focus was bringing people together to solve problems you remember that? >> you ask the question and that's what i did -- the first
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month and a half when democrats and republicans can together to push economic -- >> this is my time, governor pete you answer the question. >> if you to do a political stunt go ahead. >> i'm not to been a stunt if dr. phill were here he would say how is that working for you? you also man and have called yes we can and said working together we can put government back on the side of the people again. you also ran an ad called me get right talking about government scandal benefitting politicians and he ran all those ads. this is your chance to make it right. are you ready to apologize to the people of wisconsin for hiring the 27-year-old son of one of your major campaign donors was a lobbyist and that individual had no college education, every little managerial experience and had to try to conditions to the convictions hired for and 81,000-dollar your job and you obviously had better qualified applicants? are you ready to make an apology to the people of the county? that doesn't sound like good government to me.
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>> please turn off the clock. the chair would remind all participants although members here have a right to speak for five minutes and say anything they want and they will consider it germane. our witnesses are only asked to respond to items which they came here prepared to respond to and consistent with the subject of the hearing so it's for the witnesses to decide whether a question is germane and in fact members here have an almost unlimited right to say what they want to say during the five minutes. the gentleman may continue. >> when i grew of a man plainfield chuck grassley what is the state assembly back then there were good decent people many of whom are farmers who recognized many of whom were deacons of my father's church who recognized when the time for talks you have to make tough decisions particularly when the times were tough and the finances of the church and that is exactly what we are doing. we are talking about -- you may
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not want to talk about that and i will answer your question -- >> i'd be interested in your answer because people of wisconsin want to hear today. >> i'm glad you're interested in the people of wisconsin because that person was five levels before me and when that position was brought to my attention i had my staff go back and have that person taken out of that position and i acknowledge the fact there were more qualified people and i asked what else would be put into that so that is the answer to the question. >> i reclaiming my time. >> we've written an article about this and noted that to of the highly qualified candidates for that administrative or oscar, former state cabinet secretary under the republican governor, scott mccollum who had a doctoral degree and eight years of experience overseeing the cleanup of the petroleum contaminated sites, the second bernice madison was a professional engineer who served since 2003 and the post to which mr. vv to he was appointed and
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had 25 years of experience in the state government and since the focus of this hearing is on good government practices and how that affects the that the states have a think it's time we got some straight answers from the people who were radically reforming state government and that's why this is still important, and i would ask the chairman to hold a hearing and i have a letter for the chairman since we have rolled jurisdiction according to the committee website to look into the other factors that are impacting the state budgets including cronyism in state government and i have a letter to the chairman to that effect i ask unanimous consent for the article from the telegraph herald in title walker insults young worker with cronyism published on april 11th of 2011 to be made part of a record and i yield back. >> the gentleman from florida for five minute. >> thank you mr. chairman and thank you both for being here this is insightful for me especially my home state of
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florida but we are also going through some of the similar exercises you all have gone through. it's interesting because we look back at the history of collective bargaining and public-sector unions franklin delano roosevelt and with president john f. kennedy who didn't feel there should be collective bargaining or there should be public sector unions so on this issue if it shows the evolution of this and why it is a crucial issue especially in light of the debt and deficits each state in the country are facing. the federal government in the office of personnel management have published consecutively for years up until 2008 a study of the amount of time that was spent by union employees on officials time. last time this was published was 2008 and showed the federal government union employees spent 3 million hours of officials time to engage in union activity. this is a cost the federal taxpayers about $120 million of 2008. unfortunately upon the repeated request by several congressmen
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and enterprise institutes under this president wouldn't seem to respond from that. in your perspective states and i will start with you, governor walker, do you keep track of any official business or a union business done on officials time? >> i wouldn't have the numbers of the top of my head but state level we see this image the local level and we saw that when i was the county executive and it's an interesting cycle because in many cases they are paying money that normally goes to brokers but also goes to the employees' unions who then use it for political purposes and collect candidates who can advocate for more government and taxes under the middle class. it's a vicious circle. >> so wisconsin does keep track of official times and union activities? >> this time, for example, the state and local level that the employee -- people employees of the government designated as union officials have to account for time this taken as a part of the contract. in many cases we saw the local county the number of individuals
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who were on the payroll working for the unions. >> governor from this in such a region in vermont? >> it's not an issue in vermont, the unionized work hard and work long days and long nights and we are certain that that is what they are doing and that is what they do with their time. we are a small state where everybody knows what everyone's digging, and in vermont, we work hard and public employees work just as hard as our private sector employees. in florida we are deliberating on the legislature something delivery did when i was in the legislature what was known as the paycheck retention act and would require the employees make an affirmative acknowledgment and confirmation that they will sign over a certain part of their pay check to the union dues and did it just having taken out regularly. it is something entertained in either of your states, governor walter? >> that's in the legislation i signed to the law approximately a month ago and the concept of that is in the interests of the
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workers they should have the right to choose if they want to have that money taken out and to be part of the choice is whether or not they give that money that chooses them. >> it hasn't been a significant part of the debate. we are the governor facing a tough economy and budget challenge trying to balance it and thanks to the congress the deficit for all the governors haven't really had to be dealt with because they got so much money from washington and that's over and we have to balance the budget the old fashioned way so we are making tough cuts and tough choices and i'm doing it by focusing on what matters which is health care cost corrections and those are areas with explosive growth and i'm not worrying too much about the union dues. in accomplishing these objectives, whether they be pro union or anti-union, whatever they may be requires people to come to the bargaining table and people to come to consensus a compromise and one of the issues we saw in wisconsin is the were
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senators on the democratic side who left the state to fail to come to the table to address and as a public official to take personal offense to somebody that aggregate's the responsibility by not owning up to their obligations to make these decisions as difficult as they may be. so, governor shumlin, i would ask do you condone such activities where elected officials who leave the state or aggregate their responsibilities to enforce their obligations as an elected official? >> well i've got to tell you i've got my hands full dealing with the challenges and facing in vermont and i don't comment much on what's happening on the other 49 states and is focusing on what is happening in vermont. in vermont everyone is working together with lots of maple syrup to get things done. >> thank you. governor walker? >> i have great concern and i talked factory workers the last month or two to point out the job for three weeks you wouldn't be working there anymore. i think it's pretty clear. so i think there is a real
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challenge and obviously the individuals in those working to decide whether or not it makes a difference long-term but you said something else about working together and i believe that but i also believe more important than working together is people want results. and so in the beginning of this year we work together but devotee republicans and one independent in the legislature. we passed some of the most aggressive job-creating legislation in the country and show wisconsin was open for business. sometimes working together is a problem in the past democrats and republicans worked together and push the problem off to the future and in some point leaders matter what part the have to stand up and so we have to do something about it. >> thank you. i yield back. >> the chair now recognizes the gentleman from vermont for his statements. >> governor shumlin, i see behind you is a leader of the employ union firefighters sitting next to his brother from
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wisconsin. you're the governor, public employee union, did one of to not get the memo you're not supposed to get along. >> i don't know if i can get it but we get along great as you know and there's nothing better than the fire fighters working hard for us risking their lives every single day. >> as i listened to governor walker described his problems, it sounds to me very similar to what you described to me this morning when we had breakfast the problems you face in vermont. governors cannot the escape the consequences of the greatest precision that we had since the depression and that recession is brittle and shows no mercy whether it's a republican governor state where democratic devin real-estate. you've described your approach, but clearly there are points of contention that you have to deal with as governor. a legislature that is pushing
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you and you're resisting to raise revenues and public employees who did cooperate but on the other hand they have a represented their members and up for the wages and benefits. maybe give a brief summary how you manage to get from here to there. then a lot of people to talk to your governor walker i don't have that much time. >> i will try to be brief. as you know my guess is my approach is much different than other governors from the country, trying to create jobs and economic opportunity. i mentioned the middle class has been kicked in the teeth over the recession harder than in years and we are trying to raise their income and we do that by going after raising health care and the recidivism in the directors budget and what we have a high recidivism rate so by going where the money is while we've resist raising the taxes so that we can actually grow jobs and economic opportunities peaden heard governor walker talk about
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wishing to import jobs, illinois and we are all doing that. i'm hoping in new hampshire and massachusetts as we manage the budget and we are a great place to do business. we raised a family the best place in my judgment. >> but we do it by getting along in using common sense. >> governor walker to make an observation we have a problem here in congress and this is my own personal observation but certain. there's a winner-take-all attitude i hear my republican colleagues say we have to deal with spending and i happen to think they are right. italy also think we have to look at other things, to back the tax code and in revenues i would say that quite candidly from some of my colleagues that one of the problems in congress is a winner-take-all approach where even if you see this in the health care debate, the democrats won on health care last year and now a repeal it.
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if you win in a way where the other side feels they didn't have a seat of the table or things were crammed down both sides can be doing this there's a price because you end of winning the vote but you don't make progress on policy and obviously your state was the center of the storm with a very hard confrontation between the two sides, asking if you would just observe for comment on your thoughts about whether there is a price that may be paid in your state as a result of the fact that the approach that was taken did result in this enormous confrontation in a lot of controversy and a lot of pain that continues even after your policy i think was prevailed. >> a think the results obviously are frustrating. one of the things that frustrated the the most is it you're going to practice it a democracy you have to be in the arena and when 14 of my
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colleagues in the capitol decided to leave for three weeks they made it difficult to do that. in particular one of them worked with before on the jobs initiative to work with the sand as he revealed in wisconsin state journal week ago sunday he was closer to less than his other colleagues. my hope is people like him and others will continue to come to the table and work on the jobs agenda and the things we need to continue i think we will be on the right track but again i go back to what i said before. people want us to work together but because they want results. when i look what mitch daniels did in indiana essentially for the state, he did what we are proposing in this legislation to do. his numbers were far beyond mine and that first six months he was an office dealing with the same passion just not as big because he did it through executive order not three piece of legislation but four years later he was active with 58% of the vote because people saw the results. the fear didn't materialize and the results proved in that state the government got better, more
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efficient, more effective and good public employees in indiana. >> i yield back. >> the chair now recognizes the gentleman mr. kelly for five minutes. >> thank you mr. chair. both governors, thank you for being here. i come from the private sector so i will understand inlet having your own skin in the game and being able to sign the check. sometimes down here we lose perspective whose money it is your spending and when somebody else is picking up the tab it's easier to say go ahead and keep on partying. i want to ask specifically because the chair start with a discussion and also mr. chaffetz about the defined benefits and pensions and i know in pennsylvania that while all of us took a hit when the stock market went down and we lost quite a bit of it that the end of the day that was a loss. if you can in both of your states tell me who makes up the loss for the benefit that is -- i think the defined benefit is a complete illusion that gives the
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believe somehow the future is with predictable and reliable and we all know it isn't so please tell me the deficiency, the difference between what defined benefit is based on the actuaries are saying and the equity who makes up the difference for that? >> i think it's really important to stick with the facts and the fact the matter is if you get vermont this is what happens. in the worst stock-market crash in the long time to go from roughly 12,000 to 6,000 the average person in a defined contribution plan sold the stocks when they got discouraged between eight to 6,000 those in the defined benefit plans of public vermont and raising them to hold on and hold out and that's what we did. so now retirement plans are higher than they were in the depths of the loss.
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the large investor now has lost what they saved for retirement. saddam, the great example where a defined benefit plan protects workers more ably in a defined contribution plan in vermont example is exactly is a proof of that theory. >> who makes up the difference in the loss? >> my plan is there were no losses without the gains back. >> anderson there is somebody that does provide a safety net and we both know that. governor walker? >> it's the taxpayers, and in our case before this reform, we talked about for example my proposal for the five to 8% contribution it's clear in vermont and other states before this reform other than half literally a handful of state and please the taxpayers are picking up with the employee contribution and the employee. so i'm not a thing the impleader
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contribution to be financially having the employees of the state including me pay for the employee contribution. the employer pays part and the other part. wires traveling in the midst of the debate particularly when i got an infection in plant 25 to 50% of the health insurance premiums most of them have retirement plan it wasn't a pension of the 401k and many of them to keep people working for suspending the match to be able to keep people from being laid off and when i'd walk them through what i was asking is with a minute you're taking all this money away. as an example in the basic family plan that my family has, we will go up to pay about $200 a month in premiums versus about $90 a month. again most people on the private sector wonder that's unbelievable. >> that's the most important thing to understand. if i have a defined benefit i
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can go ahead and stick with that plan because come hell or high water i'm going to get my defined benefit but when you are the person that is in real money in the program and you have a chance to opt out now and keep what you have or lose it and you're putting it in the lockbox and my daughter and my wife is a teacher i've got a lot of friends whose benefits are guaranteed and they are guaranteed by people in the private sector who will see a reason the tax is to recover the loss on the pensions and i think that's where the deride comes. this isn't the union workers versus non-unions and versus democrats. it's about americans. and if we're going to share the games we are going to also participate in the payment but understand when you have your own money in the game it's just a difference between somebody who is guaranteed a benefit regardless of what they put in and that's the important thing. taxpayers make the difference in all these losses. that's the model and that's what's wrong with it. we don't have a safety net in the private plan but the public sector does but that is a vast
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difference and makes it easier to stick with the plan that is upside down. one way or another i am still may hold. thank you for being here. i yield back mr. chairman. >> the gentleman from virginia, mr. connolly for five minutes. >> thank you mr. chairman and welcome, governors. >> governor shumlin, did understand your testimony that he said the pension fund in vermont has an eight come 8.5% annual return? >> that's correct and it's important to address the question of who pays and the taxpayers do at least in vermont maybe we are unique i don't think so, 80% of the benefits we pay out are paid for by the return on investment, 80%. >> that's correct. >> you're a member of the national governors' association. estimate is it your understanding from your fellow
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governors that vermont is unique and that most pension funds are in fact under water or are about to go so? >> it is not my and standing most were under water, no. >> mr. chairman i would ask unanimous consent to enter into the record correspondence provided by the national league of the city's, naco nsa and other organizations pointing out as a matter of fact most state pension systems are very solvent that have been quite stable the last half century. >> have they been received by the parliamentarians it? >> received by the parliamentarians? >> we have copies here. >> we will bring them up and reserve and make a final decision by the end of the hearing. >> thank you very much. >> governor walker, when you
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campaign for governor, did you can pan on the issue of collective bargaining being a problem with respect to the budget? >> i took that wages and benefits overall and ran campaigns but i didn't specify what for my talked about in the broad spectrum and in fact aft wisconsin, one of the unions, treen campaign for lawyers pointing out some of my statements about collective bargaining and other issues. so that was an issue that was part of the campaign. >> i didn't ran an ad i'm going to talk with this attack in a couple of debates about the fact the full spectrum of issues. >> that's a lot of debate. >> we didn't have that many. >> most members of this body. >> in your dates with your
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opponent you actually brought collective bargaining and said that's something i'm going to address as the elected a are. >> i talked specifically about the five to 12% and they said how far are you willing to go? >> i'm willing to change the law from one and whether it is a outright change. i talked about it there and it ought to begin in the transition >> i'm asking a very specific question. due to explicitly -- >> nope. >> savitt might be -- you might see that some might be surprised that you made collective bargaining such a centerpiece of your so-called reform effort after you were sworn in. >> i would say no because 38 years as the county executive finally talked about it, broad and it was called the reali tour when i talked about the challenges we were unsustainable and the collective bargaining. >> from your point of view nobody should have been surprised when you were elected and sworn in.
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>> 100% correct. >> were you surprised of the reaction in generated? >> for eight years it took on the status quo in the county that every elected. i was elected 54 to 57 and 59% because i think in a time of crisis people are not so much concern about republican or democrat, they want leadership. that is what we are trying to the state level. what did surprise me candidly is the level of the national attention the folks that came from washington and others to be part of that debate. >> thank you. let me ask a quick question. you got a famous phone call from somebody pretended to be david coucht. he said once you cross these bastards will fly you out and really show you a good time. youth responded by that same oil right, that would be an outstanding. what do you mean by that and what did you think he meant? >> at that point i was done on the call and i was trying to get
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off of call and get to the next issue. islamic it wasn't that you were mr. coke and he was promising to reward you for what you were doing. >> did not on that regard, no. >> the foley out didn't strike you? >> no i didn't even know what cali is. >> have you ever had a conversation with respect to your actions and wisconsin? and using them to punish the members of the opposition party on this? >> nope. >> you've never had such a conversation? >> thank you. >> i've spent eight years talking about the challenges of the county officials and the fact i had a union or series of unions in the county that constantly told me to play people laugh as opposed to making modest changes. -- before. my time is up. >> thank you, mr. sherman and governors for being here today. governor walker, i believe your statement in my home state of
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tennessee has constitutional requirements to balance the budget. obviously the constitutional requirement doesn't exist in washington, d.c.. do you believe that these constitutional requirements give additional support and leverage and to make the difficult decisions that need to be made to get your fiscal spending under control? >> yes, and i think both of us as governor talked about the fact that as governors regardless of the party, for us to succeed and have the states grow the economy we have to have a balanced budget within it is a constitutional requirement or otherwise i think the states are going to succeed regardless the governors or the states that take the fiscal challenges head-on. >> thank you. the last election is clear to me coming from the private sector that the american people have signed the referendum that they feel the government over always too large and intrusive and it's in the way of creating jobs, and so i would take heed to that as we sit in these hearings and
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justify the programs within the federal government and whether they are good or not and have discussions of whether or not private sector versus public sector pay its fair. governor walter how would you gauge the workers in wisconsin? critics have said your reforms are hurting a group of workers already worse off in the private sector counterparts. or the wrong? >> let me point out too quick things in that. the debate is never about the level of pay for the compensation because i think they are a great people who work of the cities and county or school district state government. i said that repeatedly. with this is about is balancing the budget making sure we can do it long term getting the state governments the tools. there's plenty of studies over that show whether you have a higher education or not. when i toured the state and talked to the constituents and
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talk to people in the middle class looking at the factory from locations they realize they are the ones that fit the bill for the more government and they think it's realistic they're paying an average 20% for health care for the pension or the 401k they think it's realistic for the rest of us who work in the government and something similar to that. >> governor shumlin, you mentioned in your testimony earlier that you went where the money was to help get your fiscal house in order and you mentioned health care. i was wondering if you had in sight you could share with us as to how you went about that and if you have a solution to the health care crisis and the cost. >> how long do we have? the answer is yes, we are working very hard to pass a health care bill will be the first in the country where health care is the amount of privilege for the individuals and isn't required by the employer which we think will be the job creator but most importantly as governor walker was talking about health care will be reimbursed providers
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based upon keeping people healthy, health care outcomes instead of the fee-for-service model. and we've put together an ambitious plan passing the senate almost as we speak it's all because the house and i going to sign it into law and come to congress and maybe for a few waivers so i'm so glad we had this the opportunity to start baking now. >> we will be interested to see how that turns out as we have our challenges here. do you believe that collective bargaining is a basic human right? >> i believe it's a basic right in the space society, and i say that as a guy that was born and raised in vermont. my ancestors like so many of us in this room came to the country with nothing and ended up picking beets in my great grandfather in the west somewhere and frankly were it not for the right to collective believe bargained i don't believe my relatives were most
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middle class americans would have the opportunities for economic progress the enjoy today. it's a basic human right and democracy this is direct contradiction with franklin roosevelt who was a pro union percent and said the ticket was attention should be paid to the special relations and obligations to public service but public itself and to the government process of collective bargaining is understood cannot be transplanted into public service and he goes on to say a strike of public employees manifest nothing less than the intent to obstruct the operation of the government and until the demand is satisfied. can you comment on that? >> someone as great as roosevelt could be wrong more than once. >> i would disagree that my time is up and thank you for your comment. i yield back. >> i thank the gentleman and want to acknowledge mr. merkley from connecticut.
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>> thank you very much, mr. chairman, and both governors, thank you for your attendance today and for sticking with us throughout this process. i guess i just had a simple statement in question for you, governor walker. i guess for those of us watching this debate played out and i think this has been covered by several of my colleagues it's hard to square the concession have been made by the unions and their willingness to come to the table and the continued drive to strip them of collective bargaining rights and there's been a lot of conversations among the country have to leave to how this plays into the much broader debate that's happening around the nation. when we looked at the amount of outside money that's been spent in wisconsin with respect to doherty election, to the site over the legislation and then
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most recently in fell last few weeks with respect to this election for the court. it's hard to make the argument that this debate only plays out in the context of wisconsin's budget, and in fact some of the key players in this drama seem to be pretty open about how this is ultimately about trying to kill a pretty important constituency for working families and i think we have this quote on the board earlier when mr. connally was asking his questions, but let me read it aloud. the state senate leader scott fitzgerald said recently during an interview on fox news, quote, if we win this battle and the money isn't under the auspices of the unions, certainly when you are going to find is president obama is great to have a much more difficult time getting elected and winning the state of wisconsin. and in an e-mail solicitation on a fund-raising letter, excuse me, that he sent out, he was
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making the pitch that republicans should be supported because they faced on the big labor's bully tactics and democratic walked out on the senate to break the power of the unions in wisconsin once and for all. this sounds a lot like a broad political fight to try to defeat your opponent to try to defeat the advocates for the working families, and i guess i'm sure you have a good answer to this question, but i'd like to know if you agree with the statements of your state senate leader scott fitzgerald and how you would address the concern of many of us that the reason that you have $2.1 million being spent on behalf of your candidate for the court, the reason that you have groups like the coke brothers pouring in thousands and thousands of dollars because this is about a much broader effort, and it seems some of the key players in the fight, certainly the state
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legislative level lower open about how this is a much broader assault on unions and the allies of the unions. .. there's money coming off a rebound from sources and i think a lot of that in the multiple reasons. i shan't answer for scott strode for scott walker. i can tell you for me it's about
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the budget, but it's also ultimately about making government work better and i think it's a change in middle-class matches the middle class. it's even middle-class individuals who work for state and local government because for as we ultimately believe in wasting the alternative that would protect the middle class jobs by avoiding what other states are doing with massive layoffs at both the state and local level and ultimately put in place a system that the government will work better. i've got two kids in a public school. i'd like to have a system like we do elsewhere in society who would pay for performance, i'd like to have people based on merit and performance. these reforms and powerless to keep our best teachers in schools and that's part of the package as well. >> my time is almost up. you can certainly a time as to whether you agree with your state senate leader when he said
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this is ultimately about trying to defeat president obama in wisconsin. >> i can say what it is for me. it's ultimately about balancing the budget now in the future, not just temporary because it had too many people temporarily pushing problems in the future. it's the long-term answer about long-term reform in our government. our schools and local governments and states operate better. like millions of dollars being pumped into the state who disagree with that vision, but i appreciate your answer. >> i want to acknowledge my colleague from south carolina. >> thank you, mr. chairman. i noted the conciliatory tone and book your inch reduction in the statement. i've made a couple of notes. you mentioned the unity tour, which i found spidering. he said come to the table. you mention the word gracefulness in the knesset on four different occasions he said
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come together. my question is how do you do that when a site with whom you disagree has absconded from the state and is essentially a fugitive from responsibilities? with table to you set and you're not in the same state? >> e-mail, you don't try the reasonableness please the heat of the crisis. to avert the crisis. i'll tell you by way of our experience under the republican governor, jim douglas, we need to get roughly $25 million out of our pensions for teachers to balance their budget. and things were going so well in those negotiations with the governor. so the democratic senate president, myself and the democratic speaker sat down and said listen, we're going to have to get the savings that we can do it with you or we can do it without you and really would like to do it with you. and they turn to us and said we want to do it with you. so my point is when you're going
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to work together, when you do at the american people want most desperately from politicians in washington right now it's a delight. reasonableness, compromise, you have to start with that foot. you can't ask for it once you've created crisis. >> there's a concept of mutuality that is inherent or required for that to happen. i know you would agree with me. i also want to say inherent in your comments to me and in your testimony, frankly, instability. in the last two weeks alone, members of this body up and told by a colleague to go to, not purgatory, not tedious, not the river styx, but hell. my colleague from virginia made reference to a phone call placed to an elected official. will you help and join me in decrying the rhetoric and tax kicks in i just laid out? >> you know, i think that
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stability has to be applied to all public officials and i think we need to raise the bar collectively peered across this country -- >> to think making surreptitious phone calls from pretending to be someone you are not enhances stability and discourse in this country? all i can say is i have no disagreeing with you that this ability tunnel runs both ways and we all have the responsibility of public statements and the american people expect for us to be so will all the time. >> you in response to doc your date charlie somebody may have misquoted collective bargain -- the ability to collective bargaining for basic human rights and democracy. what is your authority for that statement? what is your constitutional authority for same?
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>> well, free speech. >> and your abilities stack, where would you point me in the constitution for support for the underlying notion >> you know, it is my belief as a governor of a state that collective bargaining is the right and something that insert disk country with extraordinary progress in distinction and it's allowed, as i mentioned, families like mine who came from nothing to succeed economically in the best democracy, the best economy in the best business climate that anyone could never design. so all i can say is i see it as a basic rate. >> are there exceptions? >> not they can think of. >> law enforcement? >> law enforcement should collective bargain like anyone else. they have in our state has had great results.
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>> in my state of south carolina, we laid all prosecutors and furloughed them for five days last year because we have a fiscal crisis to come most every other state. if that's something you had entertained in your state? can you oversee furling the core functions of government, which all three of those categories are, could you ever see that happening? >> we actually did move arcades to a four-day week. >> federal courts are saying the judges have always been -- >> we noticed our state judges. >> basing my time is up. >> i acknowledge my colleague, mr. tierney for mr. chester cheeses. >> thank you, mr. chairman. let me just ask you, when you're trying to resolve your problems in a state, and you start off with unions by saying you are going to require them to hold annual votes and continue representing government
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employees they would no longer detect dues from the paycheck and expect them to come to the table and start a conversation with you? is that the way you begin? not know, that's not what is up with. >> i just think that's a point worth making. >> what percentage of your annual state government spending is the contribution to your pension accounts? >> it's about 4%. i think it's important we remember that. when i talked about the real challenges governor having to balance the budget, my health care costs go in double digits. my corrections budget has doubled. my challenge is not pensions. of course it is a consideration, but are pension funds are not performing well and were doing okay. >> what percentage of viewers they spending is related to the pensions account? >> if you look over all and i don't know the exact vintage,
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but i can give you the numbers. >> if you don't know that, as it significantly more or less than 4%? >> total budget is about $600 billion -- excuse me, $60 billion. the total amount of savings we have is 1.4. >> national association of state retirement administrators is less than 3% of all state and local government is used to fund public pension funds. do you think this is generally rough? governor walker, and you want to make >> i will follow up and give you the percentage. the >> we talk just a second about the defined-benefit. from the early conversation, my understand is you recognized when you switch the defined-benefit at the defined contribution, there's a tremendous shift in the risk to the beneficiary. is that right? >> risk and cost.
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>> rebook colonna shoulders -- >> basically generally inures it and others that when the original station was set up, that was part of the progress of the employee may have taken some other area they were negotiating on and returned for having a little more security and retirement. my right? so it was the employer making the deal as well as the employee. seems like a fair deal to you? on the aspect both of you if i could not not come into either review as for the authority for the americas active state? >> no. >> to interview believe the bankruptcy court is better able to overcome differences in the political process in your state governors and legislature? >> no. what do they begin think of the court can restore fiscal
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stability in your states? the mac no. >> no. >> to give you think you'd be better better manage your state finances? >> no. >> no. >> so you both agree with the letter that governors require a democrat from washington and governor heinemann from nebraska sunset congressional leaders that essentially made up point. allowing states to clear bankruptcy is not an authority in the state theatre. states are separate entities in which the public trust is granted to electric leaders and the bankruptcy proposal suggests the bankruptcy court is better able to overcome political differences can restore fiscal stability and manage finances of the state. the assertions are false and serve only threaten the fabric of local finance. each of you gentlemen be in agreement with that? >> that the ng's position and i support it. i agree. >> i yield back.
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thank you, mr. chairman. >> would the gentleman yield? >> the gentleman yields. >> let's go back to you, governor shumlin. as i listen to you talk about the maple syrup in your methodology, there was one word that she left out. and the reason why i think you got the cooperation that you've got is because the restart. the workers felt that he respected them. i heard your story and i wouldn't be here either it's the were not for unions. no doubt about it. my parents were former sharecroppers come in many south carolina came to baltimore, got a union job and that's why it here today. i just wanted you to know they felt respected. >> i appreciate your comments and obviously we write for firefighters, four police officers, folks that are plowing the roads and all of our public
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employees is incredibly important to any chief executive. >> the gentleman from arizona, mr. gowdy -- i'm sorry, dr. kosar. >> i want to get back to original topic of state and municipal debt. we are not talking apples to apples in your state. when we get this right. you actually are a tax giver to the federal government in your attacks taker from the federal government i'm not mistaken, right? for every dollar of tax to generate 82 cents back in vermont get $1.12 back, right? >> you know, i'm an expert on the cheese in our state, not the apples. >> but there's a difference. to my link here as back to the basic core problem with all
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states and the federal mandate that some of the state should be doing, right? particularly governor shumlin come you talk about health care and collections. isn't that an amendment right? does she like the ability to have flexibility in regards to those oversight of those funds? >> well, yes, frankly, but you need to define what we mean by flexibility because my fear is that we have this -- >> if i can just finish what i was saying as we get a little bit towards the next budget discussion is that flexibility means were going to leave the requirements and take the money on behalf of the federal government and states of being tougher shape than we are already was under reimbursements with medicaid and medicare. >> and i understand because with the unfunded mandate, the same cost no one wants to talk about and that is for the federal law to be enacted in the state, we
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hire more workers that are not in the area. turn the public sector. therefore these rules continually go up. part of this is based upon the maturity -- if i look across the board coming from arizona and holy cow, look at those numbers here in the second, but the problem is that the budget problem in each of the states are derived by the unfunded mandate by the federal government. >> i think that's an oversimplification. the veggie challenge and states are derived from the worst recession in american history run on by creed on wall street in housing bubble got transferred to main street. i was the culprit. >> i've got to stop either because did we also have a problem with the federal government and not? didn't the government establishes up in the risk pool and all the aspects of risk kind of regulators and telling banks and the financiers will do this. so this equal blame to go around
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and that's how we want to go about. >> i would argue if you want to get into that, there's no lack of regulation of wall street to let us to the crisis. >> once again, government problems. coming from the federal government. what i'm trying to get back to us it's not an oversimplification because when were telling you a rule, if it is intrinsic to the federal government's mission, do you think they ought to pass the buck to you or they should fully fund it? >> i think the federal government should keep its promises to the states. >> are you prepared to honor those promises to communities? >> absolutely. >> okay, so when were talking about health care and corrections, i'm having a problem here on what this unfunded mandate is coming from because we constantly are kicking the can down the road and these are the core principle problems that you brought up his health care and corrections.
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>> it isn't the mandate -- we don't have federal mandates and corrections that are really budget challenge. >> wait a minute. you know, i've got a few new sheriff in my neck of the woods in the federal government breathing down his neck saying yes you can do that, no you can't. there is some oversight in regards to the federal government that dictates exactly how you can incarcerate a prisoner. >> i not see a car striver in the state budget. >> how do you feel, governor walker? not only the federal government to state government, but many times the mandate for the local government and the extent to get more flexibility i want to make sure that doesn't cut it in half
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either. if you put the power in the hands of the people at the state level, states are better equipped to tackle the challenges and in turn can once tapirs another staple at different needs and outcomes in the more we can adjust to not have the better will all be. the gentleman from new york -- the gentlelady from california california -- >> thank you, mr. maloney and thank you, mr. chaiman for your participation here today. i don't know if i would've done a severity two of you, but i'm glad that you have. let me start off with governor walker. i have here a website, debbie debbie w..stand with that is supported by the americans for prosperity and it
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is of course funded by the co-brothers. and then it went public site for workers to sweetheart contracts filled unheard-of for taxpayer loses every time. she agreed that statement quite >> pirates in a statement before, who pays for the pensions and things of the taxpayers? i do know about that statement, but conceptually who pays for the pension health care benefits? at taxpayers including public sector employers are taxpayers as well. >> is a quick facts about repair legislation. the second point is respecting the public trust. the teachers choose not to cheese country in teach, do you believe this statement to lavish contracts? >> lavish contracts? no. you earned her the earlier, but
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i pointed out to me this is not about which one of the doctors asked whether that public employees are paid too little or too much and i said that's not what this is about. this is about trying to balance the budget and provide long-term to make government work better. >> let me ask you this, excuse me for reclaiming my time. do you think teachers in wisconsin are paid adequately? >> if we could set up a system where we report based on performance and merit, i'd be willing to pay more. we don't have the system right now. >> to know what the starting teacher salaries in wisconsin? >> depends on the district. the lucky public school system total compensation package for an average employs about 101,000. >> is starting teacher salary in wisconsin is $25,222 inn
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>> thymus spoke, to be careful. when they said was, and in reading the rating agencies,, we go sure and make our bond ratings are strong and they know how we are managing our but idg. they feel like the "doom and gloom" about pensions is greatly exaggerated for political reasons. they do not believe states are going bankrupt. they do not believe it is the state's biggest challenge and they are puzzled by the current perceived crisis.
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cracks in much of our discussion about a defined contribution, what is missing is the fact that taxpayers have to pay 50% of that pension benefit every single month regardless. in the defined benefit plan, as you pointed out, 80% of the cost is borne by the growth that the investments receive. the taxpayers, then come and a pain 20%. is that not correct? -- than and up paying 20%. >> in this financial crisis, we have asked for public employees, the unions to pay more. they have agreed to pay more and increase the share than they are paying. somehow that is getting lost between the trees here. the fact of the matter is, yes you are correct. 80% of payments come from investments in the fund. we have mastered the employees and they have agreed to pay more than they were paying apre-
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crises. i am up next. we are not closing. we are allowing the chairman of the judiciary committee and i was a voting and leading a subcommittee. we were talking about davis- bacon so i had to be there. i did read your testimony and appreciate you being here. i did want to ask some questions. gov. walker, i appreciate what you have built in milwaukee.
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i have enjoyed riding in both wisconsin and vermont. i wish i was there right now. as a former state official in the state legislature, i am familiar with your situation, governor walker. we had a 1 $20 billion budget. we enacted 26 tax cuts, regulatory reform, and a number of things that ultimately went to, when a death in 1999, a budget surplus and a rainy day fund of over $1 billion.
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>> we saw higher unemployment and job loss and after that. clearly raising taxes is not the right answer. the more you put money in the hands of job creators, the better off you will be. >> mich. the come as you know, we are at a $5.70 billion shortfall. the governor is taking aggressive steps and is being pushed back as well as when you have experienced. as well as dealing with the emergency manager authority over municipalities, that leaves my question. what do you think of that type of authority and what are some other forms that may need to be pursued in order to strengthen the fiscal standing of states like your own? >> i would have to look specifically at what rate is
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proposing there. and this goes to the heart of the corner -- former county official and why we've pushed towards these. sometimes people confuse us into thinking this has an impact on private-sector union and it does not. this legislation does not have an impact on that but for the public sector to be able to make changes to ensure financial stability at the state and local level. we had to make the changes. many to make sure government can continue to be reformed to improve the system which was a part of this package as well. in totality, i believe we give local governments the kind of long-term tools they need not only to balance the budget but to make prudent decisions so that they can protect.
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>> i appreciate that. what steps can -- or should inot congress do to help you in york budget situation? >> as a federal taxpayer, which i am reminded of this week, asking me to bailout and other state is something i am not interested in as a taxpayer. each of us in each 50 states have to make tough decisions to ensure that we not only balance our current budget but make long-term decisions. it will look to people that the federal level and other entities to do that, it puts us in a very precarious position.
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the gentleman from massachusetts, and i apologize for this, ask me a question about process. one thing that is important to put in the record is we did not start the debate the way it has been characterized. in december after the elections but before i was born in the office, they rushed to the lame duck session to the governor and tried to pass through contracts that would have locked us in a more dire and financial situation with costs that i believe we could not account for with the $3.60 billion deficit on the horizon. we were successful in appealing to some of the democrats in the legislature to stop that from happening. when people ask why we did not begin by negotiating, it was because the tone was set early on by the process taken after the election before we were sworn in which is why it became clear to us that we needed to
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empower both our state and local governments make the long- term changes. >> thank you, governor. thank you for putting up with the confusion along there. >> thank you for your very thoughtful questions. welcome, governor. they keep for your testimony and for being with us here today. gov. walker, many unions and some elected officials including some republican governors have criticized your actions as "extreme." referring to them as a french effort -- fringe effort to dismantle unions. how do you respond? do you feel your actions were extreme or out of the mainstream in any way? >> no. i believe fundamentally that what we have heard said over and
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over again was a fundamental right that you all in the congress would be acting on it. you do not have collective bargaining except for the postal service workers. if it is a fundamental right, why are you not debating it? it does not. it is a government entitlement. the examples we have heard about the impact it has had on families and legacies, i work with private-sector unions and i hope to work with the public employees. but collective bargaining is that a fundamental right. rights come from the constitutions. nowhere in the constitution is that clearly defined. >> many of the criticism is coming from the unions, but i have a stack of editorials here from major papers across the country and i would like to go through some of the headlines. "the chicago sun-times" says, "cut pensions but do not bust unions."
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"the philadelphia inquirer" says, "a bridge too far." "the los angeles times" says , "wrong in wisconsin." "by overreaching, wisconsin gov. hinders reform in all states." i even have some editorials from your own state papers, the centennial, "the green bay press gazette." i'd like to read from a few of these and get your responses. "the philadelphia inquirer" calls your actions and, "a partisan plot masquerading as fiscal prudence." "the new york times" says, "even when unions have made
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concessions, republican officials have kept up the attacks. the republicans claim to be acting on behalf of taxpayers and this is not believable." "the l.a. times" says, "that public employee unions must be crushed in order to balance the state's budget is deeply disingenuous." "the milwaukee, wisconsin, journey sentinel" says, "parts of walker's budget repair bill unfairly targets public bargaining for public employees." even "the green bay press gazette" which endorsed you when you ran for governor says, "
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casts the debate as an anti- union campaign and not a tough but fair shared sacrifice." what is your reaction to these statements by respected papers across our country? >> thank you for your question. i point that two things. the factual error that a few of those papers alluded to and i mentioned before. the unions did not reach settlements. two public employee union statements weighted neither codify your agreement but -- >> this is not referring to the specifics. may i finish? my time is expiring. the point that they made in these editorials is the same point that many of us on this panel have been trying to make today. we are trying to make the point
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that is one thing to ask for shared sacrifice for financial reasons. it is unfair and appeared to try to be stripping american workers of their rights and there does not seem to be any financial rationale at all. that is what these editorials are saying. instead, it appears very much, to me and to others commit to be ideologically and politically motivated. >> per your original questions, i would say many of those same voices said the same things about mitch daniels in 2005. after his time in office and people saw the benefits of the collective bargaining reforms to put in place where the government got more efficient, more accountable and altman the public employees the reworded, the people in his state reelected him with 50% of the vote. they recognize results.
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>> we now recognize the former chairman of the full committee, the gentleman from indiana for five minutes. >> may i add to these editorials in? >> without objection, so ordered. the earlier unanimous consent is also extended so his will also be placed in the record. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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>> governor weicker has returned. i really appreciate your mentioning mitch daniels. he is my governor and we think he has done one hell of a job. we are proud that you think so as well. he did a lot of the things that you have tried to do in wisconsin by executive order. as you said very clearly, the state is in good physical condition and he has done an outstanding job. we are very proud of him. that is why he got reelected by such a large majority. from -- he won the election for the first time since 1964 that we lost a state to the democratic candidate, mr. obama, for president. against the tide, he did very well. governor, you do not have a balanced budget requirements in your state. >> know, we do not. >> you are going to adopt the
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single payer system for health care? >> we are trying. >> how will you pay for that? what the challenge in health care reform across the country come in both federal and state, is that no one has gotten cost- containment right. our first challenge is to design a system where we use our dollars more efficiently insuring that we are spending less on health care. we will pay for this once we figure out how to get cost containment right, which is the real challenge. then we will figure out the best publicly financed method to pay for it which will be made in 2013. >> are you familiar with the situation in tennessee with their plan or the situation in massachusetts? >> i am not clear what you are alluding to. >> you may want to program and not exactly like yours, but similar. the government was going to
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control the expenditures and that sort of thing. >> i have not studied massachusetts or other states as much as i study vermont. frankly, we have already done that. the republican governor, jim douglas, covers and we have onehealth access. no one does a better than may been massachusetts. we now have a cost problem. it is doubling every 10 years and driving businesses. we think we can get it right in vermont. >> without raising taxes? >> we are raising taxes right now because health care premiums are going up so quickly. money coming out of the people of vermont's pockets faster.
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i pay when i give my employees' health insurance. it is a rising tax on businesses. it is a huge risk to job creation. >> are you probably will have a tax increase? >> no. we will design a system where we spend less on health care than we are spending now and finding a way to pay for it where the individual is now required by the employer. the tax increase now is coming from the rate at which health care costs are raising adjacent to our income. >> how do you make the offset? you have to have the money to offset the rising cost of health care. how will you get it? >> we are going to reduce the rising cost of health care. >> i understand that. if you cannot reduce the rising costs. >> but can reduce the costs, we will not pass the bill. >> so you will not have a tax
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increase? >> our goal is to pay less for health care. we want to ensure that we are delivering quality health care to everyone in the vermont without the raise. >> you are a very good politician and you are stating the issue. you are not saying that you will not raise taxes, but if necessary you probably will have to. >> what i am saying is we are paying the tax right now on every business in vermont. >> i and the stand, governor. i can see how you got elected. you are sharp. -- i understand, governor. >> i have the municipalities survive without huge tax increases unless you did what you did. i was very happy and that you had the first capacity to stand
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in their when you had those problems. i know this is before the supreme court, but did you have any idea when they will make a ruling under case? >> the appeal was being made to the supreme court right now. in very well may be likely today. the circuit court mentioned it may be by today and tomorrow to put forth a ruling on the individual -- the original issue on the open meetings law. one way or another it could end up in the supreme court. >> and that would probably be a close vote on the supreme court. >> it is hard to tell. i am not a lawyer. i had the audacity to actually read the legislation i voted on sometimes i was accused of being a lawyer. i read the statutes. in this case, the law is pretty clear. and led the and whether it is the circuit court, court of appeals, or the supreme court will rule in favor of the legislature. it is not if this will be the law but when.
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>> they are providing a speed rating course for the members of congress of they can read 2500 pages in 124-hour period. i am happy you read wisconsin's bills. as i understand it, you ask the employees to contribute 5.8% of their pension and 12.6% to their health care premium. the current private sector employees pay about 20%, so what you were talking about was substantially less even though it was an increase. >> that is correct. they are paying more and also paying the government. >> do you have a merit pay and system in wisconsin? >> we have a civil service
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system but we do not have the same things for those individuals who are represented employees. it is important in schools, counties, to pay for performance. >> i see the boss's back so i will turn back to him. i yield. >> the chair now recognizes the gentle lady from the district of columbia. the ranking member is recognized for unanimous consent that they will be given seven minutes. i did wanted to make sure we got equal time. >> absolutely. we have run over on almost every person, but i expect that the next speaker may run over a similar period of time. the gentle lady from the district of columbia. >> thank you both.
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i am very grateful for you to come this morning. at the present us with a contrast in the approaches to running a state government in hard times. i want to know that i recognize that there is a great differences between your two states. both of you come from states with a history of strong unions and collective bargaining. in important ways, you are compatible. you're facing something of a backlash, governor walker. i do want you to know that i believe you were facing a terribly serious situation when the new governors come in and are faced with what you are faced with.
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there are warnings that we could face a double dip. that is what happened in 1937. the history books tell us that president roosevelt experienced something of a backlash to his spending to get that of the great recession. then in 1937 they called the results of the roosevelt depression. i would like to ask you, governor walker, had you yet met with the union leaders' backs >> the head of the office of state employee relation rights have talked about how we move forward
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from this point. >> now that you have come out of the worst of the fight, to seek a meeting with them as to avoid and meant as much as the breach that you could. >> on this issue and where employee contracts go forward, that is why that meeting was set up. on other issues beyond just the public employe contracts but with the afl-cio, for example, on issues of unemployment compensation and changes that may need to be made. we have a council. >> eu are the head of the government. you have the press conferences. you call the shots ring grew these people are not going away. you would not have to be engaged in the details, but a simple
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meeting, would that not send a signal the you have at least reach down in the hope of better relations in the future? >> mar relations want to be with the workers of the state. >> they are in fact represented and unless they get that, of they would figure that you could jump over them and have a better relationship given what has already happened to them. >> who want to move through the position. >> it is what happened in the past that led to the most serious breach with the workers in memory. .et me ask governor
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and see if these figures are correct. the teachers are agreeing to three additional years of work before retiring and contributing a greater percentage of pay for pensions and the pension is at the root of much of the trouble in the state and your state employee association voted to increase the pension contribution by 1.3% over the next five years? how have you been able to give the union to give up so much and apparently maintain some kind of relationship with collective bargaining? the heart of it in the beginning of your comments. the first thing i did as governor after being sworn in that very day was called the
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vermont state employees union into the office and tell them that i needed to make $12 million worth of additional cuts and wanted their cooperation for hiring freezes and other methods which are not part. i did not threaten them. i said we needed to work together to solve the problem and guess what? they stood with us and we made the cuts and exceeded the $12 million we needed to get for this fiscal year. i have seen both examples. kellie the last eight years, we had a republican governor who never invited the teachers' union to his office and therefore turned to the speaker and myself to get concessions on the $25 million on that. being raised about, compromise, common sense is what the american paper are looking for. they want us to sit around a table together to solve these problems. we have done so in vermont and nine other governors are doing
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it. we would all be well served by that approach. >> i would never make an assumption to give you any advice. you know your situation better than any of us. if i may, mr. chairman, use an analogy that you are aware of the congress is very polarized. the chairman and i are on very different sides when it comes to matters affecting national policy in an even the district of columbia. when i have had a disagreement with them, while i have not recruited him to my position, i have always felt that this is someone we could talk with. i represent people who do not
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have a vote on the house floor with second per-capita income tax. i will not tell you what to do, but i am in the minority here. whether i am in the minority or the majority and we vote different party lines, we maintain good relations. after you have had a tough fight, i would want to take the high road and say i am calling in and this is why i did it. i hope things go better in the future and be done with it. thank you, mr. chairman. >> we have a vote. i do not want to hold the governors over. we have two people left to have
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not spoken and i will ask you to be at or below five minutes so that you both can get in and we will recess this panel and think the governors. mr. davis. >> thank you very much, mr. chairman. i want to thank both of you gentlemen for your patience but your thoughtful responses. i am concerned that there appears to be a systematic attack american workers and part of that attack seems to be designed to blame them for our fiscal challenges in this state. governor, in your testimony, you attribute state budget shortfalls not to american workers but to, and i quote, " the greatest recession since the great depression." revenues are down in the need for government services is up. is that accurate depiction?
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>> absolutely. >> "the washington post" columnist has the same coin and indicated that would ever fiscal problems wisconsin is or is not facing that they are not caused by labor unions. that is also true for new jersey, ohio, and other states. there was no sharp rise in collective bargaining in 2006 and seven -- 2006 and 2007. there was no dramatic change in our unions organized, yet the state budget collapse, revenues plummet, taxes have to go up, and spending had to go down all across the country. blame the banks, blame capital flow, and blamed the lax regulation of wall street, and
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blame homebuyers, home sellers, but do not blame the unions. not for this recession. gov. walker, how do you respond to that view? >> as i mentioned, there are a number of reasons that brought wisconsin to a $3.60 billion deficit. you mentioned a bunch of different reasons for the recession. without a doubt, it is the economy. we want to show that wisconsin is indeed open for business. beyond that, and something i have a knowledge, it has been deferring tough decisions. for 16 years, -- 60 years since
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the state started to measure the structural deficit, state lawmakers and past governors have rated things like the transportation fund in the state by pushing off state payments to the next by lanham. -- biannum. all of those things, which are believe my colleague mentioned as well, all of them collectively our problems. we are trying to identify possible solutions and the reforms that i am talking about today represent a portion, about $1.70 billion in savings, and i have a $3.60 billion deficit. >> there are those who suggest that you have balance your budget on the backs of middle- class working families and have cut funding for public education, low-cost prescription
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drugs, and in home health care. while at the same time you give tax breaks to wealthy corporations. how do you justify that position? >> i say that is not true. if you look down the line at the budget that we proposed, the biggest beneficiary is the middle class taxpayers in state of wisconsin. the biggest tax relief we provide is a freeze on the property tax in the state of wisconsin in our budget. that affect the middle class taxpayers as much as everyone else. i would say but the middle-class are those who have been paying the largest share of taxes to pay for this expansive government in the past. reports $6 billion and reforms save $1.70 billion. the rest of the nearly $2 billion needs to come from a variety of other areas and some of it will come from other agencies.
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we are actually giving them the tools to balance the budget without massive cuts in service or layoffs. >> thank you, mr. chairman. >> the gentle lady from wisconsin. >> thank you so much, mr. chairman. the governor and i have really long history. we are friends. i am crazy about his kids and wife, but i will not spend my time threatening we agree on anything. -- pretending we agree on anything. i will suggest to you, governor, that i do not believe you have a $3.60 billion a structural deficit. i was on the finance committee for many years. the chairman has asked the right question. state and local government spending cuts -- choice or necessity? the $3.60 billion structural deficit is simply the difference between the agency
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requests and your "austere budget." there's a lot of debate about whether or not there really is a $3.6 billion budget deficit. the medicare payment, one-time- only. $200 million in the the patient compensation fund. the courts say you have to pay that back. of course, that was not even in your budget repair bill with a $58 million for the minnesota reciprocity fund which was also not in your budget reconciliation bill. the fiscal bureau for current fiscal year 2011, you have a $121 million in cash, which is not a lot of money. you started out by giving $117 million in tax breaks which
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reduces revenue for the next fiscal year. in contrast to giving these wealthy people a tax break, you cut the earned income-tax credit doubling the tax on the poorest parents. with respect to collective bargaining, he said in your testimony that people were running and having fits trying to get the federal contract said that they were working on. all 11 examples given, members were making concessions around health care -- every single one of the 11 people. you said yourself that the pension fund is 99.67% funded. the question is choice or necessity. in terms of public workers making more money than the private sector, that is not true.
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they make a point to% less considering their education and training -- they make 8.2% less. pension is deferred compensation. they have bargained for years for less money in order to have a pension which is the deferred compensation. now, let me ask you. choice or necessity? the the really have to and the medicaid benefits for dialysis patients or waiting lists for disabled people who need home health care? what in the world as balancing a budget have to do with a program in milwaukee to expand education vouchers so that the richest person in milwaukee county can take six to $500 away from the poorest kids in the state for education. what does that have to do with balancing the budget? you reinstate the 30 hour work week on welfare recipients and you tax welfare recipients $20 on month to balance the budget.
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transportation. i am using the five minutes to make my statement. you will say you get $410 million to your favorite fund, the people you love coming to the highway people. $410 million that governors in the past have raided four education. you took $1 billion that of education, but you did not do it for transit. there are 12 communities in wisconsin that give 24 million rides per year that are going to suffer because of what you have done. you will lose $46 million in federal funding because you have taken away collective bargaining. that is against federal law. governor, i ask the question, if you have time to answer, the state and local government spending cuts -- choice or necessity? i yield back the balance of my
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time. >> with the gentle lady yield for a question? >> 10 seconds. >> what federal law requires collective bargaining? >> there is a transportation prohibition. we have communities in wisconsin that provide public transportation and you have to have public workers' collective bargaining agreements in place in order to get trains a reimbursement. >> with the gentle lady be willing to put that in the record, the data supporting that? >> csi. >> thank you. i think the two governors. members left and right have a lot of unanswered questions but only because many of us spend too much time not asking the questions. in some cases, we simply run out of time. i would ask both of the governor's if you lift the aid of your staff would not mind answering a supplement to questions from the committee. let the record sure you have
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answered in the affirmative, which i appreciate. with the beginning, we received a general need for you to add additional information to expand on any answers you gave or provide supplemental information. i thank you again. that has been great for the committee. and for those who took the time to watch and 10, with that we stand recessed until 10 minutes after the last vote. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> to be a parent means you are turning the people you cannot live without to live without you. >> his son's college admission process, guidebooks, the s.a.t.'s, the weekly standard senior editor andrew ferguson was not prepared for "crazy u." >> nothing like that happened to me when i was thinking


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