Transcripts For CSPAN Washington This Week 20140216

War on the poor. My district is also very low income. Manufactured housing is a big deal. 50 of the homes in my district are manufactured housing. And yet, the policies really made it very difficult for banks to lend on that. I suspect that your staff has made known to you that these pressures exist. Have you all discussed that in any greater detail that wed need to look out for the people on the low end of the income spectrum . Well, qm was a policy adopted by the Consumer Financial protection bureau. I think they are trying to address a set of practices that resulted in unsafe and unsound okay. Well, thank you. Lending. But it is very important to monitor their impact on credit availability. One of the reasons that weve been able to get by with a qe is that were the worlds reserve currency. Has the fed thought at all about whats going to happen when more nations are expressing discontent that were printing money and were devaluing what theyre holding . So weve seen countries trade with other currencies past year . Any thoughts about what happens if the world says youre not the worlds reserve currency anymore . The dollar plays a Critical Role in the Global Economy and its the Federal Reserves job to make sure that inflation remains under control so that the dollar remains a safe and sound currency and can continue to play that role. Thank you. I have nothing further the other countries. Im going to yield back, mr. Chair. The chair now recognizes the gentleman from missouri, mr. Cleaver, for five minutes. Madam chair, thank you for being here. I want to talk Consumer Spending and jobs. 5 of our population is doing about 35 of the Consumer Spend i ing, and if you exclude food and energy, Consumer Spending would rise 1, 2, 3 , something in that area . With the distribution of spending, its very unequal. Yes. So im my concern is how do we increase Consumer Spending, raise gdp unless we are able to get a larger share of the population spending . And for them to spend they need to have some form of income. So what is the impact or what would be predictable impact if we if we had an Employment Benefits and a number of other programs that we are weve backed away from in congress . Well, with respect to unEmployment Benefits, they certainly were serving to support the spend iing of individuals who had long unemployment spells, and, you know, ending those well have some negative effect on spending and in the economy on growth. Because theyll spend everything they receive . More or less yes. Thats true. Thats right. Yes. So several people have talked about the structural unemployment here in the country. What do you think 6. 6, i guess, is unemployment, and thats not necessarily good but its better than what its been, but im interested in real unemployment. The u6 rate. What do you think it is . Do you have a good estimate . Well, the u6 rate includes discouraged workers. Yes. And those on part time, its substantially its substantially higher. More than double the dosh. Its close to 13 , and that is a much broader measure of shortfall in our economy from what we would like to see. So, you know, certainly there is discouraged workers, those who are marginally attached. We have 5 of the work force thats part time. For economic reasons theyre not able to find fulltime work and so thats a measure that is disproportionately elevated in comparison with the 6. 6 or u3 Unemployment Rate. So are there Jobs Available and people just wont take the jobs . Well, i think there is a short fall of jobs and the hiring remains well below normal levels and theres a shortage of demand in the economy that propels businesses to see that their sales are rising sufficiently that theyre wanting to take on enough additional workers in order to lower unemployment back to a normal level. Thats what were trying to address. I drove down to the boot hills in missouri, im from missouri, to speak at an event. On the way back i stopped at a chilis restaurant and there were no waiters or waitresses coming over to the table. They had a little box on the table and you speak in the box and to order your food and then somebody will bring it out. And they give you a certain number of minutes before its brought out. The point im making is, were taking jobs away and then were criticizing people for not taking the jobs that dont exist. Thank you. The chair wishes to alert all members, i intend to recognize two more members at which time the chair intends to call a 30minute recess. The chair now recognizes the gentleman from florida. Mr. Posy for 5 minutes. Thank you, mr. Chairman. I originally and i do want to ask about the volatile three pigs, but the questions by ms. Bachman i think deserve a little bit more response. As you well know, dr. Pauls legislation to audit the fed was the most cosponsored bill in the 112th congress. Very bipartisan. Passed by an overwhelmingly bipartisan vote, and it did not talk about interfering with the daytoday management and Decision Making of the fed, it was postDecision Making audits. And seeing were all government and official agencies under our dominion are subject to audit, it just seems very strange that the audit would object to having the logic behind their decisions and the many other of the litany of items youre exempted from being audited for deemed to be reasonable. So i think if members of congress can ask the gao to come into the Federal Reserve shortly after a meeting where weve made a difficult decision and to perhaps review transcripts and look at the debate that took place around a particular decisi decision, we release transcripts. We release minutes of our meetings, but to come in, review materials and say, no, we dont agree with a decision that was made at the last meeting will stifle debate in meetings and bring to bear shortterm political pressures in the Decision Making in the federal open Market Committee, and i do believe that independence of the Federal Reserve in making Monetary Policy means that we need some scope for deliberation and exercising our best judgment and then explaining to congress and the public what the logic of that was. And the purpose, as ive understood it as mia peering at a hearing like this, is to give members of congress exactly that opportunity. I understand that. Some of us believe in the old adage, trust but verify, and thats what an audit would do. And so would it be reasonable to assume you would not object to an audit if it was post 30 days or 60 days . Is there a time limit when you would be totally unafraid to be audited in retrospect . Well, an audit is different than secondguessing policy judgments than made. Im not guessing we do that as it is now. I mean, we dont agree with all decisions you make now. I think thats clear from at least one side of this aisle, but i would like to think that at some point the fed could be audited like all official federal agencies, much less one that is not a Government Agency but has the run of our entire economy. Well, this is an exemption that has been granted the Federal Reserve thats central to our independence for decades by congress and weve changed a lot of policies trying to make it more transparent and accountable. Id like to think that government gets less corrupt every day, not more corrupt. Well, i dont believe that the Federal Reserve is in any way corrupt, and i believe that the confidence of markets in the Federal Reserve and in our Monetary Policy making would not be enhanced by that type of audit. By knowing by historically being able to audit things that every other agency is subject to review for but you should not be let me get over to baso 3. Starting in 2003 the recovery ratio will require enough banks to have net cash outflows for 30 days. The problem is that baso 3s definition includes the solve voern debt of countries like portugal, ireland, italy and spain. Dont you think that thats like leading sheep to slaughter . Well, we have designed a rule in the United States that would have stricter definitions to minimum. So you think that thats not the same as rating agencies with high risk mortgages as aaas which triggers a 2008 crisis . One is for our banking organizations and weve proposed this in our rules to hold assets that can be quickly converted into cash. Time of the gentleman has expired. The chair now recognizes the gentleman from colorado, wears his broncos cap. Thank you, mr. Chair, and ill wear my broncos cap next week. Madam chair, thank you for your testimony today and i had the pleasure to hear mr. Bernanke for a number of times come testify at these very same hearings and, you know, i really appreciated three things about him. One, hes very smart, very steady, and not very exciting. And i want to say youre following in his footsteps. Thank you. Appreciate that. So what i would like to talk to you about a little bit is the epsock and what is happening just in terms of numbers of meetings, what generally are you concerned about bubbles . Have you seen anything that, you know, would cause you some conce concern . We hear that Student Loans are awfully high and that might be a difficult issue coming up so can you tell us a little bit about what you see the role of the epsoc and how often you meet . I have to say im new to epsock. Ive only been in office 11 days and ive not attended epsock meetings previously, but there will be one this week. Epsock does meet regularly. There are deputies and staff who meet very frequently. Clearly a major focus is to address potential threats to financial stability, to identify those threats, and to assess them. This is something the Federal Reserve is very focused on. We have built very substantially our capacity to assess risk to the system. We bring that to epsock. We also use it in thinking about Monetary Policy and in supervising the largest institutions. We recognize that in an environment of low Interest Rates like weve had in the United States now for quite some time there may be an incentive to reach for yield and that we do have the potential to develop asset bubbles or a buildup in leverage or rapid credit growth or other threats to financial stability, so especially given that our Monetary Policy is so accommodative, were highly focused on trying to identify those threats. We could potentially take them into account in Monetary Policy, but certainly in our supervision and regulation we would try to address those threats. Broadly speaking, we havent seen leverage credit growth, asset prices build to the point where generally i would state that they were at worrisome levels. The stock market broadly has increased in value very substantially over the last year and, you know, our ability to detect bubbles is not perfect, but looking at a range of traditional valuation measures doesnt suggest that asset prices broadly speaking are in bubble territory or outside of normal historical ranges. There are a few areas where we do have concerns but nothing pr broadly speaking. So Student Loans, you mentioned again that the growth there has been very, very large, that mainly governmentbacked Student Loans rather than private, and i would say the concern there is this is debt that will be with students for a very long time if they get into financial difficulties, that debt stays with them. Its important that they be getting a good return for the borrowing that theyre doing, and its important that they understand what the burdens will be on them when they take out those loans. Of course, its very important, education is critically important, we want to see that, but the burdens are very high and its important that the education that students are getting pay a return and that they understand what it is theyre getting for the debt that theyre taking on. Thank you. And then ill finish where i started. Mr. Bernanke, very smart, very steady, not very exciting. The markets must agree because the markets are up today so we appreciate your testimony. Thank you for taking on this job. Its still a difficult economy out there even though its getting better, and we thank you for, you know, being at the looking ahead to this you miss, if newsmakers this morning, another chance to watch it today. It talks about the boards role when it comes to the nsa and other privacy issues. Here they are, coming in, closing in on me. Im still thinking, even eight. When i went through survival school, they taught us the people who capture you are probably the least trained to capture p. O. W. s, maintain them. The best time to escape his right then. These are rookies and i pulled out my combat masterpiece. I had two rounds. Get away, get back. Then i fired a round right over there head. They did not flinch. And onesed their rifles of them reached in his pocket a little comic book that some of them carry in their pocket. It had drawings on one side and vietnamese fanatics on the other. The drawings showed them capturing an american pilot. In his uniform with his helmet on come a parachute, and his hands up. Surrender. Y said, hands up, hands up. So here i am facing about nine long guns, staring at me, and i decided that was the best advice i would get that day and i said, hands up. Lee ellis pow tonight at 8 00 on cspans q a. Back to the common the back to the House Financial Services committee. Offering their own insights about the economy and Monetary Policy. To begin with live coverage on cspan3. We will now come to order with our second panel. Professor of commissions at stanford university. It is commonly referred to as the taylor rule. Dr. Taylor holds a phd from stanford in economics. Dr. Mark clayber has spent six years on the Senate Banking committee. Regrettably again, not as prestigious as the House Financial Services committee. He holds a phd from george mason. Before joining aei she was the director of research for the Financial Services round table and did a tour of duty on the hill on the other side of the capitol. Last but not least, dr. Codonal kohn has previously served as the vice chair as the feds board of governors from 2006 to 2010. We are beginning to wonder if all former chairman and vicechairman of the fed end up at brookings. Without objection each of your written state manies will be made part of the record after your oral remarks. Each of you have testified before us and are familiar with the process. You know about the green and yellow lighting system. Dr. Taylor you are now recognized. Thank you mr. Chairman, thank you for inviting me to this hearing. I would like to use my opening remarks to refer back to my set of questions that have to do with the policy rules and formulating of Monetary Policy. It seems to me that the case could be made that Monetary Policy could be far better had its been made on a set of policy rules. If policy moved in that direction we more quickly move to a more sustainable higher growth rate. There continues to be interested in what you refer to as the taylor rule. Based on the research of many people over many years not just me. When the fed has followed youlls close youll s rules close to that performance has been very good. One where the performance of the u. S. Economy was extraordinarily good and that was a period when the fed pretty closely to these rules. I think performance could have been much better. If during 2003, 2004, and 2005 the fed had followed a rule like this, we would not have had the excess risk taking and not have had as much of a housing boom as we had. And the Great Recession would have been much less of a year. If during the period of a financial crisis, we would not have had to had a kwquantitativ situation. Therefore Economic Growth would have been better in those circumstances. I want to emphasize such a rule would not preclude the actions during the panic of 2008. Its classic last resort role which helps stable ice the markets. I recommend that legislation be put in place to require the fed to report on its policy rule. It would be a rule of its own choosing. That is the responsibility of the fed. If it deviate d, the fed or the chair would be required to report to this committee about the reasons why. We are not close to that right now. Some could argue that could be done in a procedural way. Number one, the fed recently adopted a 2 inflation target. That is exactly what the taylor rule recommended 20 years ago. More over, the bank of england and japan have adopted that target. Number two, the forecast of the current fomc for the Interest Rate is 4 . Combine that with the 2 independent rate target, that is what that rule recommended 20 years ago. There is a consensus now that the fed in particular should be greater than one when inflation picks up. There is debate about what the reaction should be. Some argue it should be larger and some smaller. But the 4th reason why i think we are in a position to move in this direction more so in the past is statements of ms. Yellin herself. She has indicated that statements like this are sensible and good herself. She would argue that these are not yet formal times. There is debate about when we would get back to normal. It seems to me that debate should be whether it is normal and it is about when. Chairman, distinguished members of the committee, i want to thank you for the attention to the meeting. Certainly the opinion that every Government Program should be reviewed regularly, the American People deserve nothing less. I can think of no part of the federal government more deserving of oversight right now than the Federal Reserve. I will not repeat chairman yellins assessment of the economy as i agree with much of it. But will highlight a few issues. The release last week of januarys Establishment Survey will review continued weakness. It is below expectations. The concenus was 189 and below the Monthly Average for 2003 of 149,000. Despite these trends will are bright spots in the labor market. The rate rose to 63 and the unemployment ratio increased to 58. 8. The margin allally attached lab force remained flat. I would assess that the numbers was monday dedest but quite rea. We did not see the numbers driven by people leaving the labor market. However, i will depart with the remarks of chairman yell lyin a others in fact i would say that policies have retarded job creation and what employment growth we have seen has been in spite of policies coming out of washington not because of them. Policies have driven up asset prices and have trance for the from savers to borrowers. It may have in cruised the ib sensitives with capitol. It reduced the velocity of money and weakened the impact of the fed sewn. I think the fed zone have delivered little in terms of delivering our labor market. This would be bad enough had it not placed them in a curious position. Once we start to see increase Interest Rates, i think we will see a reversal in asset rates and there are a number of markets that we have yet to see that will only become clear once we remove these policies. If you have long periods of time where you pay people to take money, they are going to do some dumb things with it. Turning to regulatory policy. I believe there was probably no bigger force pushing the act of the financial bail outs. I believe the federal distrust is driven by the public surprise that the fed can rescue anyone it seems. Title xi refers to arbitrary ba bailouts. Dodd franks title xi limits federal bail outs. As the chairman is aware, notice of proposed rule making was released days before christmas last year. Let me mention issues i have with the rule. One is the determination of insolvincy. It does not to limit the notion that a firm is only insolvent once it is bankruptcy contradicts historical practice. It passes the assistant via solvent firms. The final issue i have with the rule, top level issue i have with the rule, is also the definition of broad based. While i am against any bail outs, i believe the intent of dodd frank is that you are only assist classes of firms not individual firms. I believe the language proposal falls short of that. I will say it is a notice of proposeal making. I will be optimistic that hopefully these issues will be addressed in the rule making process. Thank you. You are now recognized for five minutes. Thank you for the opportunity to testify today. Ill lead with my conclusion. It has never been more important for the fed to be transparent and accountable in its rule writing. It is involved in over 50 rule making. The Federal Reserve houses and funds the Consumer Protection bureau and has taken place in the stability council. It is charged with super vision of banks and non banks in the country. Yet the fed has no requirement to disclose cost benefit analysis on its rules nor are the feds rules subject to challenge on the basis of their economic impact. Former fed bernanke and yellin have found otherwise. In 2011 they found that Economic Analysis is not standard or routine at the Federal Reserve. It is important when looking at the impact obrules on low impact americans. I detailed the efforts for this in my testimony but ill go over for this now. The cost of a basic bank account. The proportion of the Bank Accounts qualifying for free checking declined for 76 in 2009 to 2012. Credit cards have become more difficult to access. And hundreds of Community Banks which are of ten the most Community Banking option have closed their doors to costs. Many families have been shut out to conventional banking and have turned to payday loans which can be more expensive. The dodd frank act has set out to help consumers. Some have proposed setting fees. Others may want to subsidize credit. History shows us these options may end up doing more harm than good. I propose considering the impact on consumers during the rule writing process and adjusting the rule writing process. This can be accomplished by establishing a he cost benefit analysis. I propose a retrospective evaluation for major rules. People say it is rarely done well and may slow down the regulatory process. It is routine in most other parts of the federal government. Federal agencies have been expected to disclose benefit analysis. Cost benefit analysis is in effect of check in regulatory overreach. The dc court struck down because the sec failed eto consider the consequences. The new rules on the economy and consumer consumers is difficult on households that have bore the brought brunt of this. The Federal Reserve grew under the dodd frank act and this is increase in need in cost benefit analysis. Thank you for your time. You are now recognized for five minutes. Dr. Kohn could you pull your microphone closer to you please . Although Economic Growth has picked up. Federal fiscal policy will be much less of a drag next year. The policy is very far from where it can and should be. Utilization and industry is below average. Slack and labor and capitol use has resulted in competitive conditions for workers and this has been reflected in rates set by the Federal Reserve. We are in a risky zone for inflation. It could push us into a destructide destructive zone of deflation. Federal reserves decided it can dial back security purchases but it has chosen to keep shortterm rates close to zero until inflation seems about the best policy right to me. The most important challenge will be deciding when the begin raising Interest Rates and at what pace they should rise. There are no reliable form lula for making this decision. We are in unchartered waters. Policy must respond in unprecedented ways. Slow recovery were unprecedented in post war u. S. Economic hi i history. There is no judgement in the conduct of policy and the most important way the Federal Reserve can reduce uncertainty is by reducing mandates. Planning for the future care far more about the rate of inflation than they do with the size of the portfolio of level of rates. That brings me to future economic activity. It is one of the few ways to talk about communication. It must realize that policy making and it didnt do this last summer. It tried to do too much uncertainty. Our economy is a complex mechanism and state is not summarized and policy needs to react to regulators and prices. This complexity presents challenges but it is a reality. The third challenge is associated in part with Monetary Policy maintaining financial stability. It does encourage people to take more risks than they might otherwise have done. The issue is what problems might en sue and Interest Rates are raised. Close contmonitoring and using regulations of discovering and dealing with this source of instab billity. I agree with this and i think it is superior to one in which ipt ra interest rating are raised. The final challenge and it is for this committee as well as the Federal Reserve is reserving the independence from Monetary Policy. Congress should hold the fed accountable for achieving these goals and if they dont, why they havent. This committees intension to revisit whether the congress has set the appropriate goals for the Federal Reserve and whether the fed is suited for the goals is welcome. We need to be careful to safeguard the Federal Reserve for the political process. Much evidence over time and across country strongly. Thank you. Mr. Chairman. The chair recognizes himself for five minutes for question. Her concern over the unsustainable level of entitlement spending. I have heard the president say he was concerned. Most economists are concerned. I cant find anybody to say we should fwin begin to reform it. I hear her also say in some respects she supports the taylor rule these are extraordinary times. Im reminded, everybody wants to go to heaven, because nobody wants to go today. What is the day that we take up the taylor rule. Would it have been appropriate then or now . Please elaborate. I think that if we had stuck to a rule like that. As it was following pretty closely for a long period, that we would have had a better performance. We should have stuck with this long ago. I indicated that in my remarks and testimony. With respect to going negative. That refers to a situation that a policy rule like that. And it certainly doesnt suggest that now. Would it have ever gone negative . Not by enough to justify this action it went beyond 2009, 2011, 2012, 2013, 2014. It is unprecedented than we have ever seen before. I know you listen to chair yellins testimony perhaps the first few hours of it. I asked her to comment in my own question to her concerning the current state of guidance and the piece of the wall street journal and i would like to quote it to you again. Perhaps the open Market Committee should have called it the evans suggestion. Now that you have heard the respon response, what is taylor rule like . The current Forward Guidance that has been used so far is it keeps changing. It began really 2003, 2004, 2005 they talked about measurable pace and a long period. And in more recent periods it was a fixed tatstate. And then there was an Unemployment Rate. Well have to wait a little longer. The problem has been the changing back and forth. It is hard to do Forward Guidance. Even the people who support it recognize that. It is not a rule in a sense that you stick to it. It is always a rule. This one seems to be erratic. You have advocate d feds 133 powers. So how would you define or if you had our jobs and could write the law, how should the lender of last resort define the law . How would you see the purpose . If you are going to have one, i would limit it to discount window lending based on good collateral penalty rate. And the deefiations from that have been the problem. Yes. When people thought about it as far back as the 19th century, lending should be to this man and that man. Not just to commercial banks but to all the key elements in the money market. There werent just banks, there were other brokers and things like that. As the u. S. Financial market has developed, and these other it simimportant that they be able to support liquidity to it. I would be opposed to spending 13. 3. I think the fed needs to think about how it is going to implement it. Maybe the rules arent suv. I think they have to be part of preventing a run, a panic in the markets from bringing down the system. I have exhausting their only time. Mr. Chairman i will point out. It is good to have the gavel and give yourself as much time as you like. I appreciate your patience today. I know it has been a long day for everybody. We talked about the taylor rule. Im curious about the 10 billion sorry, i forgot i was in washington, not back in lancing when i was in the state ledge sla to slate tour. It appears that the fomc is going to be continuing that. It appears i will be reading the tea leaves with the chair woman today. It is tied up with a bow today. The next powerball winner will be one, two, three, four, five, six. As we are moving forward. I wonder if anyone is going to comment on that. I want to get something on the impact of low and moderate income. So that is their strategy and it is good to have a strategy. You saw what happened on may and june. You could quarrel whether that is too specific. I congratulate them with moving ahead with some kind of strategy. But you would rather have a strategy laid out like that . Yes, much better. You have seen the markets better reaction than last june. Let me also echo that. I would prefer to see tapering at a faster rate. I think it is an appropriate direction. With extra caps that portfolio very slowly gives the market things to tolerate. The market seems surprised. And then in january. When the next crunch came not that surprised. Certainly people have been trying to tie it to that when weve seen dips in the market. Our friends in new york pay attention. I think those emerging market economies have seen lots of challenges and the taper is a small part of the problem. Lets talk about low and middle income households. I wish there was a Single Person on the other side of the aisle was here. Representing one of the poorest counties in the nation. Im very concerned about what is happening to those hard working, working class families that feel like they are getting the short end of the stick. And here they go, the Community Banks are getting harder and harder to work with. And now they are turning to their Credit Unions and now their alternatives. Talk about that. Sure, there has been a lot of discussion in washington about economic mobility and we know that access and credit sand Savings Opportunities are important for families. What concerns me is that an unintended consequence as the rules that we have put into place. With good intensions is that those opportunities are becoming more expensive or rare and those are becoming more lack of mobility for them. What would you identify as the most agreethious . The university of chicago has suggested the durban amendment alone has resulted in 25 billion in higher fees for consumers but i think the danger with pulling out one or two rules is that we miss the broader impact on consumers and we cant over look the impact that is going to have in decreasing credit and Savings Opportunities. Two wrongs dont make a right or in this case 400 wrongs dont make a right. I see my time has expired. At the moment we have a little bit of a supply of time. At this time the chair now recognizes the chairman from indiana mr. Stuttsman. Thank you mr. Chairman and to the panel for being here. You mentioned the comment that caught my ear today from chair yellin and that was what we are pha facing today is very unusual. The economy goes through changes and we could say they are unusual. I guess what is normal times. Looking at what we have today. Im not sure that the economy is abnormal as much as washington is abnormal. You look at obama care, dodd frank, the durban amendment, qe regulations, what would you like to comment on . Are we over reacting and causing more problems or fixing more problems . I agree that a major problem in the u. S. Economy is major policy. They have indicated that. The fiscal policy. Getting entitlements under control. A great deal of uncertainty, a great deal of intervention. If i look at all of those things, it is quite remarkable at how much they are. I think that is why we have had this weak recovery. If the policy is the problem we can change it. The idea that the policy itself is not normal, doesnt add up to me. It was a problem. Serious problem. But we are going away from that. We cant argue forever that the economy is not ready for a good kind of normal policy. I think we are ready to go with improved policy. With almost 2 trillion on Balance Sheets in the private sector. People are waiting. I have talked to Small Businesses and they are waiting to know what the rules are and letting the dust settle before they can move forward. I would like to talk about the mandate. How does the fed respond to the Current Conditions that we are facing. We are seeing unemployment numbers dropping i tell you, you get outside of the belt way, we are hurting. We are seeing more peemt oople f the workforce. What should the fed do . Any three of you if you would like to respond to that. I do think that policy has been a tremendous drag. The chair mentioned earlier the tax increases. Whether we have seen that in the fiscal cliff. It is important to talk about os tert. All of it has come from revenue racers and not spending cuts. I think we need to fix policy that is outside of the realm of the fed and that you can only do so much. There is a great amount of cash on the corporate Balance Sheets. Almost two trillion on bank Balance Sheets. But it is cost facing the labor markets cost. So i will repeat something that chair yellin said which is Monetary Policy is not a pant pantacia. To go back to your question of what would i have the fed do . Follow a taylor rule. Was nothing like 1. 25 point Something Like that. No one is sougti insougt sugges another rate. And to begin to taper into a quicker way. 30 seconds would you like to comment . Sure i think there is a burden on congress to address the 11 Million People who are unemploy unemployed. Aside from providing some level of stability we have seen that the fed hass encouraged businesses to hire. I am in favor of congress to hire bonuses from those to get a job. I think the best hope is moving the longterm unemployed back to work. This current policy is appropriate and will be at least for a little while longer. Among the issues has been the increase in taxes but the key li the decline in federal spending. I asked myself what would the markets look like if the fed funds rate was 1. 25 instead of 0 right now and i have to think that the stock market would be lower and Housing Starts would be slower because Interest Rates would be higher. We saw that it would be 1. 7 to 2. 7 this summer and it slowed the recovery in the Housing Market. Automobile sales would be less because the ability to borrow to buy a car must be encouraging sales. So i think higher Interest Rates would have produced slower in even slower economic recovery. This is this very difficult discussion about the counter factual. The Federal Reserve is saying we arent satisfied. We think it would have been worse without it. Others say no. Im just myself convinced that by and large higher ipt rantere rates are association raiassocer demand. I want to agree i think there are a lot of points here that we dont know. I would say take the Housing Market for instance. Starts are about a third of what they were at the peak. It seems to me that the data suggests that most of the boom for the buck has been refinancing and it has been higher prices. But me refinancing which i have, but it doesnt put into construction workers back to work. So it is yet in my opinion to see the actual Construction Market turn around in a very big way from that. So i think that is important to keep in mind that lending doesnt seem to be getting out there. Having that move is more important than pushing housing priced up. As we see families across the country with dollars being taken away from to put towards Health Insurance and cost of banking they have less money to be spent to buy new cars and homes. The chair would like to alert those in the hearing rooms and those listening in their offices votes are expected on the floor within the next 15 minutes. It would be the chairs intent to keep this questioning going until that time. At that time we would excuse the panel and ajourn the hearing. Now to the gentlemen from South Carolina. Lets stay right there on a couple of different topics. Dr. Kohn i hear what you are saying if interest rating were higher. That we would be selling fewer cars and fewer houses. But doesnt that imply sair tha the recovery iselucery anyway . It is certainly keeping it lower than any one thinks it would be over the long run. The rate is higher than what the market is charging . If the rate you mean what might prevail over 15 or 20 years . Well, with the Federal Reserve has to set the shortterm rate and establish in this. It set it at 0 and didnt have the deservsired impact so went to printing money. So it is not there isnt a mechanism here given the central bank and the kind of money facility we have. We are not on a gold standard. There isnt a natural way to establish a natural rate. If tomorrow, janet yellin says that quant taytive easing is going to zero, what would the interest be on the ten year treasury . It would go up i dont know 50 or 150 basis points. I think it is subject to different interpretations. That is my point. I dont care what you call it. If the fed was not actively intervening in the markets the rate would be higher. That means to be me that the rate of car sales would be lower than it is today. Im worried sir, that we are creating asset bubbles in assets, stocks, would you agree with that . I think it is something to be watchful and careful of it. But i dont see evidence of it. We are leaning against forces that are holding back the economy. Last year it is increases in taxes and spending. Some of it we dont understand. Mark was correct. We are understanding of the economy is rudimentary. People like dr. Taylor keep pushing back the frontier. Lets me go to another question. I apologize for cutting you off. About the mandate. One of the things that i heard was her support for the dual mandate. I think that was different than what we heard out of her predecessor. I had a chance to hear from him and while he played lip service to it. He also said but i acknowledge in the long run Monetary Policy cannot influence the rate. My question is if that is economic orthodoxy right now. Why are you and mrs. Yellin putting such a dramatic faith in the dual mandate . If we cannot influence the labor market in the long lun. In the short to intermediate run Monetary Policy can influence the labor market. Has it . And the statement they put out in january of every year recognizes that they dont have control over the longer run but they do have influence over the shorter run. We have been doing this for five years. Has the kwan taytiquantitativeid jobs . Yes. You wouldnt agree with me i think we have had some of both. On the survey of businesses they have added many jobs 200,000 a month. No no no 200,000 a month i think we have done maybe five of six times over the last year. It was 130 last month and 75 on an adjusted basis the month before that. No, i think we have added to employment so as she noted 7. 5 or 8 million jobs in the recession and unemployment is still very high i agree and the Federal Reserve wouldnt have n engaged in several rounded if it hadnt been okay with the outcome. If you take the same policies towards fighting deflation. Im waiting for my chirm to the gentleman from South Carolina asked for it, the gentleman got it. The chair now recognizes the gentleman from pennsylvania. Appeared comfortable with the fed staff company. I will em what will you look for in a stress test . What kind of variables . One of the things that im most concerned about. Were all in agreement that rates are going to go up so i do worry that as a yield curve steepens that youre we do need to keep an eye on that when rates go up. I also think we need to be a bit more stressful about sovereign risk. I think we need to look at the treatment of municipal debt. Across the board that we really need to take seriously. What would your consideration be, for example, if Interest Rates did go up 150 basis points . And what that would do with the value of the securities that the fed is holding right now . We certainly know that increases in Interest Rates will lower the value of long dated assets ong bank Balance Sheets and Federal Reserve. I think thats a very real concern for me. The entire exit strategy says that you will not have to conduct open markets. The factor of the desire to raise interest on reserves. This is where im more skeptical. My back of the envelope is on the reserves probably paying somewhere around 6 billion a year. In an inflationary environment, i can see that approach 30, 40 billion and it strikes me as politically unsustainable for the Federal Reserve to cut a check to the banking industry. I do worry that open Market Operations may be off the table. Would you consider broader impacts . We have that experiment about a month ago. Whether it was related at all to pull back on qe. Any thoughts there . I certainly think were going to start to see rates go up. Earlier numbers were 100, 150 basis points. So of course we do hope that you start to have economy recovery so that the fundamentals start to drive it. I dont want to push the comparison too much. I do think were in the 2003 to four situation. We saw a tremendous amount of situations in 2003. That went away when Interest Rates started to go up. You started to see a reduction in credit quality. I worry that we will start to see that cycle play out again. We had a booming bust at the beginning and end of the 80s. I think thats something that needs to be taken quite seriously. We have heard the suggestion that there has been a cost benefit analysis. Do you have an opinion that the fed may have done with respect to the rule . There is no Economic Analysis disclosed by the fed on the rule, which is gree vous. I think that is a great example of why having a requirement would be an important step forward for the fed. Thank you. Thank you, chairman. The chair recognizes the gentleman from north carolina. Thank you. And thank you all for being here today. How do you believe this will affect mainstream america and is there anything that the five regulators can do to calm the fears that were hearing in the financial industry . We can start with you, if you like. Sure. I am one of the issues that i dont think is discussed enough in the focal rule, i do worry that you combine that with a liquidity coverage requirements, i worry that were putting our thumb highly on the scale towards Government Debt versus the private sector. I think one of the things we need to do, its quite interesting they have almost got to mirror each other. Banks have not stopped lending they just changed who they are lending to. So, i do think that we need to keep that in mind in terms of long term growth that we dont want to push the system away from lending to the private sector. We have not had financial crisises caused by lending, but we have by lending to governments. Anybody else want to comment on that . I havent seen any studies that specifically look at the Consumer Impact but theory would suggest that banks could seek higher yields elsewhere and make the system more unstable or off set reduced revenue. So while there was no Economic Analysis before, this also raises a need for retro speculative analysis to consider how its really impacting the economy. The Unemployment Rate is trending downward. Would you believe this is an indication of a Strong Economy or indicative of people leaving the labor force . The january number has been driven by people leaving the labor force. I think its modest improvement, you have seen in previous month s. Yes. I think a significant part of the unemployment reduction led towards declining, look at projections on Labor Force Participation the demographics cant explain a lot of the decline. The actual Unemployment Rate will be higher than whats recordedk i the Unemployment Rate significantly increased africanamerican teenagers, which to me is quite shocking. I think one of the only real bad policy mistakes was going into this session, we put in place a series of minimum wage increases that i think have hurt the teen aged labor market. You are trying to do that today . I didnt hear your question. I just made the comment that continuing in the venture today to make it more difficult for teenagers to get jobs. I just like to get your opinion on how this has affected the current fiscal issues facing our country. The country still faces some very, very serious long term fiscal issues in terms of the demographics interacting with the promises that pass congresses and president s have made and enacted into law. Do you think this has been a help or a hindrance . They have made it easier for the government to borrow money at a cheaper rate. But politicians have. Thank you very much. I yield back the balance of my time. Thank you and thanks to the panel. Appreciate my testimony. This was a subject that i was exploring with the chair a little bit but i would like your thoughts on this. Obviously, as the fed continues to taper the Asset Purchase Program and as Interest Rates begin to normalize and elevate, the cost of borrowing to the government is going to rise. What council do you have to congress in terms of the urgency and the time sensitivity of getting our fiscal house in horder and the impact it will have on cost of borrowing . I think this is more of a medium to longer term problem. Its important to act soon. Its not fair to do it to people who are going to retire in five years. I would add i think theres a tendcy to kick the can down the road on the debt. Dont come for 25 years based on current projections by the cbo. But there is substantial economic literature that says countries with the levels of debt to gdp that the u. S. Currently has right now experience Slower Growth and less job creation. So when you look at it through that lens, i think its an urgent requirement for congress to fix the debt. You know, i would emphasize as well, i agree basically with what was said and i will emphasize as well, we can address long term fiscal issues now without having any negative impact on any short term stablization goals. While im skeptical, dealing with long term entitlement problem will be a positive not a negative. Thats still lingering around. Projections of long term debtors are as pessimistic as they were four or five years ago. The sooner it can be addressed, the economy will respond positively. I was reading with interest your written testimony about the impact that Financial Regulation has on low income americans, some voices have been pretty vociferous and aggressive advocated an increase in the minimum wage. I like to hear how consolidation in banking is forcing many to be unbanked or underbanked and moving into alternative outlets. You are being forced into alternative Services Like a payday lenders. At the same time were anticipating the Consumer Protection bureau clamping down on that industry as well, leaving a lot of these low income folks with no other alternatives with access to credit. I will take your questions one at a time. There is is a lot of debate about the disemployment effects from minimum wage but what we do know is that even if it worked perfectly, its a really perfect way to lift the poor out of poverty because most people who are poor do not have a job at all and people who are low income, very few of them is actually in minimum wage. Most of the minimum wages are given to younger workers, part time workers and those three or four times above the poverty level. I yield back. Doctor taylor im under the impression you have travelled the greatest distance. At least there is consensus so we know that banks are sitting on a trillion six, a trillion seven of excess reserve. Im trying to figure out what further rounds of quantitative easing achieve for us today what there hasnt been is a discussion today about what is it going to take to unwind this balance sheet. Maybe there will be further taberring. Even if there still is, we are adding to the balance sheet. Under you and my mentor, senator phil graham have written about this subject in the past, but what are the risks socialed if she and the other members choose not to taper what are the risks associated . The only thing i can say. I dont think it should be postpo postponed. I dont think the purchases are doing much good. I say look at qe 3 as a program. How can you say that program worked . You can say it was the problem of unwinding. I think it would be a mistake never to unwind because ultimately thats going to be inflationary. Its the one we are always rewarded about. We have experienced that downside already. Mark is quite right. Thats going to be hard for the fed itself. Theres the question of capital losses, how thats going to be treated. Ultimately as i understanded, you have to get on with it. And at least theyre getting on with it. Want to thank each of our witnesses coming to testify today. I would ask each of you to please respond as promptly to these questions as you are able. All members will have five legislative days within which to [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2014] to a lookup, we will at some of the conservative policy summit held recently in washington, d. C. With tom donohue. He testified recently on capitol hill. The newsmakers and National Security and freedom of the press with thomas friedman. Night we continue this with a live twohour program. The managerial skills. It makes mount vernon a successful operation. A mix of possible for washington to be away for eight years. Aboutres something Abraham Lincoln that she saw the potential and helped develop it. Its help polish them up for washington society, the Political Parties they had where they invited a lots of very important will. She will did a lot of power. The involvements in the political career is right from the beginning. She becomes much more active in 1921 when they contracted polio. Monday night at 9 00 eastern by von cspan. Conversation about the first ladys and their contribution to the nation, live at 8 00. The Washington Examiner had an article today about comments made by former senator jim demint on cbsface the nation. He was quoted as saying conservatives do not feel like they are represented in washington. He is not the president s of the Heritage Foundation to several republican lawmakers. You some of the summit beginning with jim demint. Over the last 15 years or so we have seen every combination of power in washington, d. C. We have seen a republican president with republican majorities in the house and senate. We have seen a republican resident with a democrat majority in the house and senate. From 20082010 we solve the democrat president capable of getting through an aggressive agenda would democrat control in both the house and the senate. We looked about this. We said if we are serious about building america for freedom and civil society, we need to do something more to make sure that our policy gives across the finish line. That is why we started Heritage Action. Have learned there are three things that are necessary for conservatives to do to ultimately get our america built. Do Something Different than what youre supposed to do. We have to win elections. It is undoubtedly true that conservatives that we will never do this unless we have elections where majorities are open to our ideas. This is not a sufficient condition. Is very popular in washington say washington is broken. It is not broken. Washington, d. C. Is a finely is aimed ate that expanding government power, picking winners and losers in the economy and making sure those who have access to the corridors of power have access to the lobby is to run this town. It allows them to have a competitive advantage for people who want to break in and disrupt the businesses. Washington, d. C. Is a good i is a place where good ideas go to die. Until we break the status quo, conservatives will never have interest. That is the second condition. The third is that we need to have bold ideas. Are interested in making my better for all. That is what were here to talk about today. We have a fantastic roster of people talking about issues from show from School Choice to access to energy, what we can do about cronyism and all the way through the agenda. Fighting the status quo is likely to headlines. I cannot think of a better person to lead out the discussion today in our first speaker. He needs no introduction. As i went around the country with him, i introduced him simply as the real mr. Smith comes to washington. I am pleased to introduce the president of the Heritage Foundation, senator jim demint. [applause] good morning. Thank you so much for being here to join us today. Im pleased to welcome all of you to this very important policy summit. I think Heritage Action for hosting this today. I am also very grateful to the many members of congress who will soon be speaking. I appreciate them taking time out of their busy schedule to join us and share their ideas. Toaddition, a big thank you all the policy specialist from lentand elsewhere who have their expertise to shaping these ideas and will be a part of presenting them here today. Toetimes it is too easy caricature conservatives as people who are more interested in stopping bad policies than promoting good ones. I know thats not true. But i suppose at times it is tempting to just sit back and be snide about the many failures of modern liberalism and big government. With examples like detroit and obamacare, they make it too easy. But even with such easy fodder, we cant give in to this temptation. We are conservatives first and foremost because we know that conservative ideals brought to action will help people the most. We have the concrete solutions to build upon the successes of the past and realize the potential of the future. Crucially, much of this requires cleaning out the cobwebs and rust, which have gathered in too many federal laws, an antiquated federal tax code and a Regulatory Regime that cannot address americas current challenges. In short its time for real progress. As the great c. S. Lewis said, we all want progress. But progress means getting nearer to the place where you want to be. And if you have taken a wrong turn, then to go forward does not get you any nearer. If you are on the wrong road, progress means doing an aboutturn and walking back to the right road; and in that case the man who turns back soonest is the most progressive man. Unfortunately, there is nothing progressive about the progressive establishment. It cannot turn around it is blocked by a berlin wall of the mind, trapped behind policies that promote subsistence, not independence; control, not freedom, and the endless gray concrete of centralized power. The men and women who will shortly take this stage have looked over that mental barrier and seen a new landscape, one where problems are solved, not subsidized; one where citizens are entrusted with the care of their own families and communities; one colored by opportunities as diverse as the millions of lives in this great nation. Today, well be looking at the path act, which representative Jeb Hensarling has introduced to dissolve the bumbling fannie mae and freddie mac and encourage private investment and innovation. Well see the transportation empowerment act, introduced by representative tom graves and senator mike lee, which lowers the gas tax, cuts red tape, and returns funds and Decision Making back to the same localities that know best how to handle them. Senator lee is also going to reintroduce the welfare reform act along with representative jim jordan, which not only saves taxpayers hundreds of billions of dollars, but puts social assistance back on track getting people into jobs and out of poverty. Well be hearing about the hero act, which takes School Accreditation out of the hands of federal bureaucrats and puts it at the state level, while lowering the cost of Higher Education for students across the nation. Representative Raul Labrador will walk us through the marriage and religious freedom act, which enjoys broad bipartisan support, and prevents government discrimination of any person, church, business, or other institution based on their traditional view of marriage. These policies do not arise from the lobbying of special interests; they are for the benefit of all americans. They were not designed to serve those who walk the halls of power, but those who sweep them late at night. If conservatives in congress wish to return to their seats this november with a mandate from the people, the ideas presented today will help secure that mandate. Its not sufficient for conservatives to run against agendas; they must advance ideas and legislation that will build a stronger america. A mandate to lead without a plan, without a proposal, without original legislation, is no mandate at all; it is simply a continuation of a broken, deadlocked status quo. Already, there are rumblings of huge, contentious pieces of legislation we might see in the coming year. These bills, as ever, treat the law like a club, with which 50some percent of the country uses the law to bludgeon the other 40some percent. Like the disastrous obamacare initiative, they attempt to address an issue altogether in one grandiose action, legislation stretching into thousands of pages, unread by the very people voting on them. They invariably increase spending and our National Debt and create more problems than they solve. They are divisive to legislators themselves. When enormous bills are rammed through congress, it destroys any hope, any reason to reach across the aisle and cooperate on improving our system of government in ways that are agreeable to everyone. Perhaps worst of all, they divide our fellow citizens. Its not just a matter of political disagreementwell always have that, and i think we can always find a way to benefit from it. The unity americans have with each other does not arise from quashing those communities with different beliefs or opinions, but allowing them to govern themselves according to those beliefs. And when so many different viewpoints and lifestyles and cultures are forced into one mold, resentment replaces love for ones neighbor. Public affection turns into public enmity, patriotism into ambivalence. I ask the leadership of the house and senate, regardless of party, to leave this hamfisted approach behind. Instead of wasting time forcing the country into onesizefitsall policies, take the opportunity to genuinely consider the ideas we discuss here today, and allow for open debate on these and other proposals which could improve lives of Many Americans so easily and so quickly. I am confident that these ideas, if allowed to inform our laws and our way of governing, will make that first great stride toward the three things we all wish to achieve a Strong Economy, a strong society, and a strong america. Let this be both our goal and our starting point no matter our parties or philosophies, we can unite if we recognize were running in the same direction. This agenda to unite america has the promise to give aid to those disadvantaged by circumstance, opportunity to those trapped by bureaucracy, and protection to local values endangered by national meddling; these ideas can bring people together once more in appreciation for each other, their country, and, dare i say it, even their government. Appreciation for each other, their country, and i dare say it, even our government. Thank you and i look forward to being with you here today. \[applause] jim has some time to take questions if we have them from the audience. Anybody want to jump on first . Jim, zsh jim can you start off and talk about your experience in the house and senate in terms of bold ideas when you were capable of moving them forward, what some of the hurdles were to getting those going . I better stand over here where theres a microphone. Its never easy to move things through the house and senate but i will say when i first came to the house, mike i was elected in 1998, there was certainly much more bipartisan working together. All the bills that i introduced, we had a bipartisan or democratic cosponsor, and but what i have found, not so much in washington, that america is hungry for bold ideas and clear leadership. Certainly the polls are clear that theyre pretty disgusted with congress in both parties. But what we found in the last year, we talked to people all over the country, students, minorities, people from all walks of life, is there is broad agreement on the things that were talking about today. Even, i think folks who have who have had a liberal mindset for a long time are starting to see that the federal government, despite good intentions, cannot do the things theyre promising to do. They have not been successful running our schools. Health care appears to be a disaster. But we see states opening up so many new opportunities. It wasnt too long ago when the president said we were out of energy as a nation. But now that states have moved around all federal lands around federal regulations with new technology, we found we have enough gas, natural gas, oil to last 100 years. Lowering the cost of energy and creating vibrant economy. So the bold ideas, mike, we see moving at the state level more than the national level. We can see choice in School Creating opportunities for atrisk and poorer children who had no opportunities before. We see families with jobs because states are developing energy. We see a lot of states solving the Health Care Issue in different ways. So these are not just pie in the sky ideas were talking about. A lot of what you hear today is just taking the a need a legislative idea, and moving the power and money back to the states and doing the things in washington that we need to do, doing them better and more effectively and more efficiently and hopefully at a her lower cost. So im confident that these ideas, these are not huge things like tax reform or entitlement reform that we know we cant get done this year. But the things in education were talking about, the things in transportation, i know that theres a number of democrats who support them because some of the ideas have been introduced before. So im optimistic that if we take these ideas to the American People, thats the whole idea of Heritage Action is not just to take them to the hill but take them to the American People, inspire the American People with these ideas and then in that, hopefully well create a consensus with their legislators to get something done. \[inaudible] the discussion of amnesty and immigration, id like you to talk about the politics of that issue. Well, i think the broader issue just these comprehensive thousandpage bills, we see the damage that they can do. And the pattern in washington now is to introduce them and pass them within two days before america has a chance to find out whats in it. Thats what happened with obamacare, doddfrank, and they would love to do the same thing with the huge immigration bill. That type of bill, it will divide our country right now. And we need Immigration Reform. But as weve talked about at heritage, we dont need this big conglomeration of comprehensive bills, especially at a time when americans have lost the trust in this president to faithfully carry out the laws. There are immigration laws on the books that the president is ignoring. So how can we in good faith say, yes, well give an amnesty now and then the president is going to fix our borders and handle workplace enforcement and do the guest worker visas that we need. Frankly, this is not a good time to do it. I believe that we need Immigration Reform, heritage has a step by step proposal that i think will earn the trust of the American People, unite the country around an idea and i think restore the this whole idea of our heritage of immigration which we certainly support here. But with this president , what hes done with obama kaye and arbitraryly enforcing our laws, how hes misused the i. R. S. Against his political enemies to give the president the authority that would come with this giant amnesty bill does not make sense. Daniel Patrick Moynihan said you have the right to your own opinion, you dont have the right to your own facts. I had the opportunity to have a Lovely Exchange with david brooks on meet the press about the immigration bill and theres a misperception that theres an immigration bill in washington, d. C. That would give america the modern immigration system that it the serves. Theres not. Theres a corporate cronyism bill in the senate thats masquerading as an immigration bill that was written behind closed doors by this aflcio and chamber of commerce and it would do a disservice to this to allow a corporate cronyism bill to pass, to make us all feel better about doing Immigration Reform and miss a chance to modernize the system. We are eager to work on a stepbystep possess to work on Immigration Reform. Unfortunately theres nothing to work with here in washington right now. Today were going to hear, im certain, a number of conservative ideas, Heritage Foundation, Heritage Action has done a great job in advancing them but to get them to become law, what plan do you have to get the Senate Democrats even to consider them and get them passed get them past harry reid or do you plan to take the ideas to the states where there are republican governors and republican legislatures that would have a propensity to be more support snive the American People have the right to be presented with a choice. I think that one of the things that we regret about the last three or four years is that they have not been able to have that level of choice because House Republicans frankly havent pursued a bold agenda. Think back to the fiscal cliff debate of a year and a half ago. If youd gone into a debate and said to the president of the United States, we just passed a tax reform bill that would have been pro growth, wouldnt have been worried about picking winners and losers but instead making life better for all americans, thats what we want, to use this opportunity, to use the unfortunate opportunity of the fiscal cliff to do that. If youre not willing to do that, well maintain the status quo of keeping the bush tax cuts because now is not the right time to raise taxes. That allows the americans to see that theres a conservative agenda, that works for all americans, not americans who have access to lobbyists who can get a 0 Corporate Tax rate. Were here today to talk about those bold ideas. We hope that the people in the senate, the president , anybody in washington will look at those bold ideas and say, this is what whats right for america. Frankly, were skeptical. Theres a status quo bias in this town that needs to be broke. Were committed to break it. Bold ideas, we think, will work at the ballot box and we think anybody that works on bold ideas will result in electoral success. But right now theres theres not a conducive environment in washington, d. C. To advance a gold agenda thats good for all americans because this town is where bold ideas go to die. So its not to be done in the next six month bus the process of starting that process is what were here too do right now. Are you advancing some of these ideas let me jump in here. Thats a big part of what we do. Our folks at heritage are traveling all over the country, working with states, particularly in the area of School Choice, right to work concepts, so we can stand here in washington and point to states that are working and working with these ideas and by promoting them i think were encouraging other states to do them but as mike said, showing the world that conservatives have an alternative to whats going on here in washington today. Thats been the real weakness, i think, in the last few elections is the idea that the economy is so bad, gas prices so high, it was going to take the democrats and obama down. That doesnt work that way. Americans need to know what we stand for. Youll hear part of that today. Certainly this is not our whole solution for 2014, but you should take a look at that if youre interested and ideas that can build a better america. What we want the country to know is that the ideas that were talking about really unite people. We have seen that all over the country. They agree with our ideas. Sometimes they dont like the packaging of republican or democrat but the country is not nearly as quided divided as washington makes it out to be. If we can present ideas and weve seen it with School Choice, for instance, Juan Williams helps us with School Choice. Minorities all over america are seeing that this is a way to get kids out of failing schools and into schools that are working and safer and get more opportunity. By doing this, i think well help pull the country together and hopefully show both parties that the right ideas are also good politics. I thought maybe youd make some progress there since its been going on for 75 years. Ill let mike comment on that but we did make progress in the sense that we helped americans see. I think for the first time the farm bill wasnt a farm bill. 0 food stamps and the spending 80 food stamps and the spending on food stamps increased dramatically. They cut it back a little bit. If we hadnt forced a debate on it, there wouldnt have been any debate on food stamps or farming. I think we made it harder for them to drive through a farm bill without real reforms. Well be working on that every day between now and then. Mike, you were on the front lines of all of that. Thats a great question, it el straits the problems in washington were here to address today. You cant find a single policy expert from right to left who thinks america has Agriculture Policy that makes sense. The peterson policy did something a few years ago, coming up with plans Going Forward and all of them said there needs to be changes to the Agriculture Policy. Yet when the deal is struck three weeks ago, the media and nerve washington, d. C. Said, bipartisanship has broken out in washington, d. C. , washington is working, something got done. Well, something got done in the sense that it passed but america did nothing to move our Agriculture Policy forward toward a modern, 21st century Agriculture Policy would look leek. Instead we kept the same sovietstyle ag policy this country has had for decades. Im hospitalistic, we have gone through two years of frankly unpleasantness that none of us want to be caught up in over a farm bill. Im optimistic that the house agriculture committee, the Senate Agriculture committee, committees in the past that have had very little interest in meeting with policy experts to talk about what a 1st century 21st semplingry pardon me bill, will use the next few years before we have to go through one of these again to think outside the box. Weve had members of Congress Express interest in sitting down with us and figuring out, when we have to do this again in five years, whats good policy, not just whats the status quo pushing forward but thats whats happening in washington. The farm bill is a perfect example but you see it in every other bill that goes forward and i think today is the start of turning that around. More now from the national Heritage Foundation. Lets rejoin the conversation here. I am excited to introduce jim jordan. Great leader on almost every conservative issue that, you know, a lot of you know him. He is absolutely a great leader on every conservative issue that we work on. Whether it is federal spending, tax reform, entitlements, pushing back against cronyism, jim is on the friend life. En he chaired the republican study committee. As he chaired the republican study committee, his leadership there was extraordinary and that Committee Really flourished under his leadership. It became clear under his chairmanship that this was a guy to keep an eye on. Since leaving the rfc chairmanship, jim has not slowed down at all. Hes become in many ways the voice of the conservative conscious in the house of representatives. Now on top of Everything Else that hes working on, hes taken on the very important work of transforming the welfare state. We slang around here. We call it welfare reform 2. 0. As you know, this has been a very important issue to the Heritage Foundation. Its been at the core of what weve been working on for decades. Heritage was instrumental in the 1994 success, and we are determined the to keep those victories and to keep transforming the welfare state. So, hes been working hand in glove with robert and jen here to translate those ideas for how to keep going into legislative form. So his bill has been dropped, i think this week. Its ready to go. We are going to make a massive push after this for cosponsors. We want the Leadership Team to bring this to the floor. This is a very important piece of legislation. So hes been working with our people here. Hes also joined one of our panelists, bob woodson, who im excited for you all to be able to meet up during the panel. And hes gone out into the field to see firsthand what the kind of challenges that we face are. As you know, this is going to be an important one for us. So i want us to be able to find pa way to push this out there. Were excited to help jim on this bill. Were excited to advance it. Please welcome jim to the stage. Dont clap. You havent heard me talk yet. Thank you, jim. Thanks to heritage. Let the greatest policy think tank in the whole darn world. Any time you can team up with heritage well said theyre doing all the work. I just that to get the privilege introducing the bill in the house side. Senator liesman introduced it on the senate side. And we so appreciate heritages work. Not only on this legislation, but of course on all kinds of conservative issues. These two people over here are going to join the panel are the specific ones. Bob woodson. Weve been down and saw firsthand what people getting in the trenches and going out and helping people. Not just talking policy. Not just saying big things and nice things, but going out and ministering to people and helping them to improve their lives. And jennifer marshall, of course, has been tremendous. She organized the whole trip and has done so Much Research in this area. Let me say it this way. If youre going to stop poverty in the broad sense, and im going to talk briefly and well get to the panelists. If youre going to prevent poverty, three things you need. Work, Strong Families and free markets. I mean, its really that simple. Focus on work. Focus on marriage and family. Focus on free markets and lets be honest, this administration is not doing good in any of those three areas. And thats why we need to change and thats why we need to highlight this, and thats really what our bill is all about. And i want to spend my few minutes talking mostly about the first thing, and thats work. We crossed the the line last week. You probably all saw the cbo report. We now have one of two major parties in the country embracing this concept that less work and more help from government is now part of the democrat platform. And i would argue we crossed that last week. Did you hear the comments that Keith Ellison made . And i like keith. Hes a nice guy. Did you hear his comments on the tennessee sunday shows . Did you hear what nancy pelosi and harry reid said about job loss . Its sad to see one of the two major parties what i would argue now step over the line and embrace the idea that its somehow good when people work less. We come from entirely different focus. This bill we have is an entirely opposite direction. We think work is a good thing. I would ask you all to lets just do a short exercise. Think about the first job you had. Very first job you had. Maybe it was a paper route. Maybe it was babysitting the neighbors kids. Maybe it was working at mcdonalds or burger king or some other fast food restaurant. For me it was bailing hay. I grew up out in the middle of nowhere in ohio. It was bailing hay and mowing lawns. The first real business i had was mowing lawns. The things, the lessons i learned, my brother had a lawn mowing business. And the you think about the things you learned from that first business. How to manage money and manage resource. We had kind of an interesting operation. My dad said my dad was old school and he said, okay, ill provide the truck. A beater of that truck. Give you the two riding lawnmowers. We had one push mower and gas cans and that kind of thing. He said, ill provide those. You guys got to pay for the gas. You guys have to you hang out with your buddies. You have a date on the weekend. That will come out of your money. You learn to sort of manage the resource. He was old school, too. If you were screwing around and broke something on the mower, you had to break for that. If it was normal wear and tear, he would cover that. You learned about work and the satisfaction you get from doing a job well. You get done. You see the nice lawn you mowed. You met the customers need. You learn the basic values. And when we dont let people experience that or we have policies that discourage that or disincentivize that, we rob them of the abilities the to learn the skills that we all got from our very first job. We took those skills and lessons and principles onto a better obviously im not still mowing lawns. I would like to mow my own. I do. But thats what were missing. This focus on work. I was thinking the skills you learn you learn to deal with people. Whenever someone would call our house and find out we were in the mowing business, someone would call. We would see them and answer the phone. And we knew someone was asking for us to mow their lawn as well. We had 20 at the time. We didnt need more. We would be in the background like we dont want more. My dad never turned one down. Anyone called, we always took that additional lawn. But you learn to deal with people. I remember the steinberger ladies, too. Two older ladies who were never married, lived together, two sisters. They had a big lawn. We quickly learned a lot of times you pull into someones house and grab the mowers and get to work because you that had to get to the next one. With that house we always went and took a few minutes before we started to talk to them. We knew if we talked to them a little bit and visited with them a little bit, they were more likely to bake the chocolate chip cookies and have them waiting for us. They did it so many times. You just learn thoese skills tht are important in the business im in now. Right . We had to keep track. You had to write down that sho so many people wanted it on thursday and friday before the weekend. So many Different Things you had to do. My point is this. Were robbing people of the opportunity to get those same skills. And we have a bill that focuses on that. It focuses on how important work is. That central element. Our bill is real simple. Real simple. It says lets do two things. Lets figure out what were spending the money on right now. 77 means tested social welfare programs. Your federal tax dollars are used to fund the various social welfare spending we do. Lets aggregate that. Lets figure that out and lets require states, lets incentivize states to have Work Programs that make a difference in peoples lives and teach them loez lessons that we all learned. Whether it was mowing lawns, flipping burgers, running a paper route, whatever it may be, lets teach them the basic skills to move onto better employment and Something Better in life. If you had a chance and if you see the story the story in here, i got it. Wall street journal over the weekend, i thought it was interesting. Economist Casey Mulligan talking about this issue. We had mr. Professor mulligan speak at a Sub Committee hearing about year ago on the unemployment concerns and started talking about these issues. Of course cbo understood this guy had it right. It was largely his analysis put into our anal sit. I would argue on the the broader policies from this administration, but its worth your worth reading that if you get a chance. Ill finish here and well get to our panel. President johnson said this. He wants to strike at the causes of poverty, not just the consequences. And nast whthats what our bill to do as well. You want to get at what causes poverty, its not focusing on marriage and family. And you want to get at what causes poverty, its not adhering to free markets. So when we focus on those things, good things can happen, and we can move in the right direction. Last thing ill say is i used to say this to all the the student athletes we got a chance to some of you know my background before i got crazy and got in the business of politics and public life i was assistant wrestling coach at ohio state university. I used to tell our student athletes all the time, hard work doesnt guarantee success, but it sure improves your chances. You want to achieve things in life that have meaning and significance, hard work is the best ticket. When we have a culture and when we have Government Policies that go in the opposite direction, thats a mistake. Thats something we should all look to correct. And when owe focus on that work opponent and work ethic, you build a quality that is the most important character quality necessary for anyone to achieve anything of meaning, anything of significance. And thats self discipline. Its so important. I think ive shared this story with tim before. It stuck with me. At our High School Wrestling coach at our high school. Wrestling is big at our school. My brother is the coach at our high school. We won the state championship the last 14 years in a row. Its a big deal. But the coach that got it all started was our coach back in the day. The wrestling room is named after him. He got cancer a few years ago and passed away. Had an amazing Memorial Service for this guy because he had a huge impact on students and student athletes in our school. He would talk about discipline every day. He was the toughest teacher in our school. He was taught chemistry and physics. I still remember. Jordan, this is chemistry class. This is not just any old class. You want to do well in my class, you better read the material the night before. You better come to class prepared. You better answer questions and participate in class. Its going to take discipline to do well in this class. This is chemistry. And then the wrestling room. He would drive me nus. Self discipline is the most important quality. I was like, would that guy shut up . Hes driving me crazy. Sounds just like my dad. Now i got to get it from coach at class and in the wrestling room. It hangs in the wrestling room today. Discipline is doing what you dont want to do when you dont want to do it. And doing things coachs way rather than your own way. And thats doing things the right way when you would rather do them the easy and convenient way. The biggest problem in this town is we always do things the convenient way, instead of the right way. This is about teaching them the qualities to help them do things the right way. So they can better their families lives and their lives. Its focusing on hard work and self discipline. Thats why im so excited about it. Well get there. It wont beeasy. Tell me anything in life thats worth doing that is easy. Thank you all very much. And time for questions. [ applause ] were going the panel. Thats right. If i could invite our panel up now and ill introduce them as they come up. If you havent had a chance to hear from bob woodson before youre in for a real treat. Hes working with a lot of folks in in congress, like jim said, getting them on the ground. Getting them to talk to people. Really to understand. To rub shoulders with folks and see whats its about. Bobs work has been really important to this effort. Jen marshall here at the Heritage Foundation have been working with bob and robert on this. Jen is the director of our policy study here at heritage. And we are really privileged to have her, too. I will open it up with a couple of questions here. Then we can go do the audience. I would like to start with bob. Bob, your testimony at the Senate Budget committee about hurt with the helping hand. We saw that very powerful. You shared a story about your niece in that testimony. Thats what really connected with a lot of people. Would you mind sharing that with the group today and talking about the implications of it . Yes, when the chairman first of all started off by talking about when her father died, left behind six children, impoveri impoverishimpoveris impoverished Rural Community and welfare was important for the family to become restored and they all went to politics on government scholarships and therefore that was her defense. And my response was that we generalize about poor people. We disaggregate them. You have people who use welfare whose character is intact like she did. It was used as an ambulance service, not a whole transportation system. Then you have category two, like the woman, young mom in wisconsin, who saved 5,000 of her welfare checks to send her daughter to college and she was charged with a felon. And she reasoned, well, i made a decision, and therefore ill stay dependent. Not because she had bad character. She made a conscious decision. Thats a second category. The third category, those who are poor because of the chances that they take and the choices that they make. There are character deficits