October the congressman needed to extend the debt limit. We kept him closely informed literally every week. And there was not a negotiation over the debt limit. It was a question of congress figuring out how it was going to deal with the thing they had to deal with. That is protecting the full faith and credit of the United States. An budget conference is intrinsically congressional process. One of the few things that does not come to the president to be signed. The house and the senate agree on a resolution and it sets their government on how they will handle operations in budgetary matters. Budget Experts Consult with people on the hill and answer questions. It is intrinsically a congressional process. Clear. W is quite the president has budget is something he sticks by. It represents what he offered to the speaker at the end of last year. It is i think the right solution. We have to see where this conference goes. Lex let me ask you one specific issue on appropriations. Max baucus, the chairman of the Senate Finance committee will which he has on for corporaten tax reform. In particular the issue of taxation of overseas earnings. There is a lot of as you know, you hear a lot of concern about this issue. I do not know if you had a chance to see this latest proposal. Of this budget, this may be an opportunity to do with this issue which does worry business people. I talked to senator baucus yesterday. I think it is a very constructive step that he is putting forward a draft. I look forward to studying the details. From what i understand it shares some significant characteristics with the president s framework which i think has a certain amount of convergence between democrats and republicans. I hope the democrat engage with him on it. When you let the majority work of actually do the right thing. If you let the majority work on tax reform, the president outlined in july every possible path. If you cannot do everything, have our statutory rate not be something that drives business out but attract business. Taxinate some of the provisions that skew decisions and there is the benefit in business tax reform, in tax reform in general. There is some onetime revenue that comes in. The president said in july we ought to use that to jumpstart our investment in infrastructure. You cannot use it to lower tax rates forever because it would not pay forever. It is onetime savings that we inc. Would be an anonymous shot in the arm to the economy. It would build the foundation for strong growth and job creation economy Going Forward if we put it into infrastructure. I am hoping this conversation can move forward. Theres an awful lot of issues moving through congress where i do think there is the potential of consensus. Reform and tax Immigration Reform and the farmville. That october represented something of a threshold that we crossed over. If we can see processes where ideas are put forward, where it is about trying to see if there is common ground. Be a good thing for the country for its would you see the u. S. Economy . We have had a couple of months of better employment growth Area Unemployment is still high. Youreal Unemployment Rate, account for those people who dropped out of the workforce. Growth has been pretty soft. What is your expectation now Going Forward over the next year or so, are we going to be stuck in this rut of over two percent growth and still high unemployment . If you look at the Economic Data from the last few months there are a lot of encouraging signs. We are seeing the housing sector doing much better. We are seeing manufacturing doing better. Private sector, jobs. The jobs numbers that came out a week ago went back and corrected numbers for the previous couple of months showing that we have had 200,000 jobs which is higher what the original numbers were. Significantg a trend in the right direction. If you look at what has been going on the last year we have had an anonymous amount of fiscal drag. Some of it was intentional, the phasing out of payroll tax holiday. The imposition of lower spending levels. Some of it was unintentional. Sequestration kicking and because congress was unable to ande on a set of medium longterm alternatives. That fiscal drag runs its course. There are various estimates but of fiscal 1. 5 of gdp drag. Andy the year with just over two percent gdp, it gives me reasonable optimism that going into next year it will be better than that. You look at the jobs numbers from last month, we have seen state and local employment declines inr federal employment. During the depth of the recession it was the other way around. State and local government was shrinking. If the headwinds abate which they will and the rest of the economy from housing to manufacturing to state and local government are doing better, those are all indications that we ought to go into next year stronger. We had the strongest employment growth in october for quite a while despite the Government Shutdown. Some people suggested we might shut down the government more often. Jobight get private sector growth. The economy would have done better if we had not had that debate here in washington. And 2013 we in 2011 debate seen government policy uncertainty, putting a kind of call on investment activity, we might be seeing the kind of recovery we all want. I am curious what the views in terms of are in marginal Investment Decisions and how the debate in washington effects the decisions that people in real businesses are making. From the conversations i have had with ceos it is substantial. And want to come to questions from the audience. Let me turn to financial reform. We have had dodd frank, we have this issue and a number of issues related to that. One particular thing i want to ask you about is the volcker rule. Using their own money for proprietary trading. You have said that you want atlines from the regulators the end of the year. I do not want outlines, i want to rule. What are we going to get, is a clarity . Im optimistic we will see a role by the end of the year. I have met under pretty regular basis with the regulators. Five different agencies have to come to the same place. It is a consultative process. It has to come to closure. It was an important part of dodd frank. It is important in terms of financial regulatory policy. It is important in terms of confidence in government. I think that if you look at the time from dodd frank being enacted to now there were a every of years when effort to delay the implementation of dodd frank was used from slowing down funding agencies urging congress to repeal dodd frank. For the last year we have seen a different and vernon. We have seen an environment that need for certainty and acceptance, that dodd frank is the law of the land has replaced the effort to delay and perhaps repeal it. But i became secretary i moved in on that opportunity and pulled the regulators together and said you need to figure out what it is that are the differences between agencies and we have to come together every few weeks to talk through the issues. You need to make decisions. The major issues are resolved. Is aare figuring out it complicated piece of business. On the one hand they have to preserve the ability of firms to make markets and on the other ofd because of the policy stopping proprietary trading, needing to shut down the kind of risky positions that firms were holding on their own account. I am optimistic that they are getting there. You expect there to be the role will be agreed and published by the end of the year. That is what i have urged them to do and just last week the president reiterated it. It does look like a pretty hostile environment for Financial Institutions right now. You look at what is going on at jpmorgan, the way the dealing withn is financial issues. There is concern on wall street as you know. Maybe this is going too far, and the environment you are creating opportunity, the incentive for companies to take risks and that will jeopardize the economy. Are you concerned you have the balance wrong . We have the deepest, most liquid Financial Markets in the world. It is part of the vitality of the economy. We have come out of the worst economic crisis since the Great Depression and it was an economic crisis that was brought on by practice this is should have been better regulated. In my view going into this has been consistent. We have to try to figure out the right thing. A question of do everything you can or do as well as you can. It is a question of trying to get that balance and do it right. I have said that on that line when youre not sure given the crisis of 2008 and 2009, you can err and corrected if youre doing too far. Others say you less and come back and toughen it up. The American People are still recovering from the economic crisis. We have to be able to assure them that will not be another financial crisis anytime soon. We have a few minutes for questions. Lets get a microphone. Yourself,ld identify take your name, rank, and serial number. Early in the conversation he made a couple of almonds about the debt ceiling. Comments about the debt ceiling. [no audio] [inaudible] what would be the scenario [inaudible] the important thing to remember about the debt ceiling is that it has been at the end of decisions that have been made. Money,s has appropriated revenue rules have been set. In the end, the debt limit comes after all the policy has been made. So there really is no raise thee but to debt limit when you need to borrow in order to pay the bills. You can be a full throated debate about what our policy should be on any of those other areas but there cannot be a question once we have made commitments as a government that we keep our commitments. It cannot be that we have contractors who have done the work and we say we will not pay them. It cannot the that people have entitlement benefits but they do not get paid. The full faith and credit of the United States whether it is bonds or contractor benefits have to be honored. I think that the whole idea of debt limit reform is something we should think about because the kind of brinkmanship that we saw in 2011 and 2013 i think did harm the economy. It did hurt confidence. It did reduce investment act committee. And hiring activity. It does not serve a useful purpose because it does not really affect the policy. About what a debate we should do in tax reform in terms of how much revenue and how much entitlement reform to do, that is a different matter. On president has put a plan the table and we have been ready on multiple occasions to reach an agreement on a bipartisan basis. It cannot be that you get to the end of all of the taxing and spending decisions and say the government cannot pay its bills. I do believe congress has to do it. I think if you look at the comments that have been made by congressional leaders, republicans and democrats, i do not think october was something they want to repeat. I am quite hopeful they will do it in a businesslike way ahead of the scheduled expiration of the debt limit and certainly without the brinksmanship we saw a few weeks ago. We have come through a difficult time in terms of the economy. You mentioned about the marginal decisions on investment. Polled the if you businessmen they would say they had a particular lack of influence on policy today. Ofother words, the view industry and commerce are not really reflected in policies coming out of washington and so on. Any viewif you have about why that is. Im not sure i agree with the premise. I know i speak with ceos on a regular basis. The policies we designed, we designed them with the real intention of trying to meet the needs of businesses that want to expand and grow the economy. Our tax reform principles reflect much discussion with the private sector. I think that there has been a bit of an evolution of the parties in this country. I think that some of the traditional support in the for largerparty businesses and Financial Enterprises has changed a little bit. That may be what you are referring to. Businesses thought we were listening to them in september and october. What i heard them say is we go to the hill and we do not think people are listening to us there. I think a lot of people on the hill were listening. Peoplee are 50 or 100 who do not have a traditional view it does not mean no one else is listening. I urge people not to focus on 50 more radicalhave a idea of what to do but focus on the core of members when it came to a vote on october 16, the overwhelming majority did what business made sense thought made sense. I think you could find a bipartisan majority that would do the right thing. A hard break at 930 and the stock market is about to open. You have got to get to your day job. Hank you for joining us. On the deficits and Economic Growth. This is 35 minutes. It is my great honor and privilege to be here with larry summers. When he was two years old his parents took him to his pediatrician who happened to be my father. Father, ato larrys story he told, his parents expressed concern that larry was not talking much at two years old. Supposedly my fathers response was i would not worry about it once he starts. He will never stop. So with that. Moving right along. Had been able to post questions i would have asked you but i will ask for a show of hands. To pick the top priority, the single top economic rarity for the u. S. Government right now and they give you a choice between reducing the longterm deficit and doing something to spur growth in the shortterm and the longterm, deficit or growth, you only get one vote. How many people would choose the deficit over growth . How many people would choose rose over the deficit . Here watching for 30 years. For much of that time we have been obsessed with reducing the deficit. That has been true in the last few years. You think that is a dumb idea and so do a lot of people here. Why . Guys are right. Guys are right. They are wrong. You guys are not getting your way. We have had 10 bipartisan budget processes, we have zero bipartisan growth processes. We have had budget some is summits up the union. Somehow, the business immunity was complicit because they have been substantial financial supporters and encouragers of it. We have gotten the idea that addressing the deficit is the defining challenge facing the country. There are three relevant realities. On the current forecast the debt to gdp ratio will improve of the over the next decade. The debt forecast online with the way they looked in terms of decline after the 1993 budget deal. For 10 years this problem is at hand. Second, basing policies on these that iss is longer than kind of a crazy thing to do. If you take the confidence interval around the deficit forecast, not 20 years out, not a 95 confidence interval but confidenceout, a 90 interval, that confidence interval is 10 . It is plus or minus 5 . If the geomet Climate Change people were telling us it was negative three degrees to plus 6 degrees we would not be acting on the problem and we do not know what the long room run deficit will be. The most important thing is if you take the longest run deficit , you take the official forecast of it, if we increase the growth 1 , pointint two of two of 1 to my you solve the entire identified fiscal gap problem. Im here to tell you that in a country that is stifling entrepreneurship in a variety of ways to my in a country that is star for Public Investment that lets canidae airport languish the way we do, in a country that is missing a huge opportunity on Immigration Reform, and a auntry that is maintaining regulatory and tax environment that does not recognize the confidence is that confidence is the cheapest form of stimulus, increasing the growth rate is easily attainable. The truth is that if we get past protracted perhaps bout with secular stagnation and get the growth rate up, that it the debt bubble will stay in control. And if we continue to the a country that does not increase the fraction of adults that are working mother does not catch up with its gdp potential, that grows at two percent or less what we can have all the entitlement summits in the world and we are gradually going to accumulate debt and have a serious debt problem and so we tot have gotten our focus the wrong thing. We should be focusing on growth. A virtual circle which creates more growth. Employers work harder to train the next generation of workers. In a growing economy, there are more ladders for kids to get on which puts them in a better position to lead 10 years down the road. There is more profit that can be reinvested in r d and longterm capacity. The growing u. S. Capacity, there is a stronger World Economy which is ugly to be a successful world. World economy. This is where our priorities should be and we have just in my to say, lostad track of it as a country. Why is it wrong to say that we know we have an aging society, we know we have some benefit promises that are going to be expensive to keep, and what he not be prudent to do something about growth and package that with things that we know take a long time to save money and do it now rather than bequeathing the problem . There were some real problems in the kitchen on the titanic. There were. They were the wrong problems to be working on given the challenges the titanic faced and given that management had only some much attention that he could vote itself to. It is the same thing. It would be better to be thinking about a range of long term adjustments about 2035. It would be. E really cannot do very much we had difficulty passing any legislation. Right focusext the is on what is most important. Things that contribute to growth. What is surely necessary is things that contribute to growth. I think that the odds are were going to need to make entitlement adjustments at given the uncertainties in the forecast, these forecasts are wrong by five percent of gdp all the time. They were wrong on the high side. The forecasts were to pessimistic in the 1990s, they were wrong on the low side, they were too optimistic in this period. When people are talking about entitlement reform, they are talking big numbers. Theyre talking about one percent of gdp. 1. 5 of gdp. It is the right thing to be thinking about. One thing a group like this camera member. It is the right thing to be doing. If you contribute the absolute maximum you are legally allowed to every year from the time your 19 to the time you are 65, your Social Security benefit is less than 40,000. And so there may