Transcripts For CSPAN Public Affairs 20130304

The speaker pro tempore the house will be in order. The chair lays before the house a communication from the speaker. The clerk the speakers room, washington, d. C. , march 4, 2013. I hereby appoint the honorable luke messer to act as speaker pro tempore on this day. Signed, john a. Boehner, speaker of the house of representatives. The speaker pro tempore pursuant to the order of the house of january 3, 2013, the chair will now recognize members from lists submitted by the majority and minority leaders for morning hour debate. The chair will alternate recognition between the parties with each party limited to one hour and each member other than the majority and minority leaders and the minority whip limited to five minutes each, but in no event shall debate continue beyond 1 50 p. M. The chair recognizes the gentlewoman from North Carolina, ms. Foxx, for five minutes. Ms. Foxx thank you, mr. Speaker. Every year washington imposes thousands of pages of rules and regulations on Small Businesses and local governments across this country. Hidden in those pages are costly mandates that make it harder for companies to hire and for cashstrapped states, counties and cities to keep streets clean and parks safe. Republicans and democrats alike agree that each regulation the federal government dictates should be deliberative and economically defensible. Thats why banded together with democrats loretta sanchez, Mike Mcintyre and mr. Peterson and James Langevin to introduce h. R. 899, the unfunded information and Transparency Act. This legislation will ensure public and bureaucratic awareness about the costs in dollars and in jobs that federal dictates impose on the economy. There is precedence for bipartisanship on this issue. In 1995, members from both parties got behind and president clinton signed the Unfunded Mandates reform act, umra, which sought to expose washingtons abuse of unfunded federal mandates. By forcing the federal government to estimate how much its mandates would cost, local governments and employers, regulations would necessarily become better and more efficient for everyone involved. And it has to a certain extent. But over the years weaknesses in the original legislation have been revealed. Weaknesses that some Government Agencies and independent regulatory bodies have exploited. The Unfunded Mandates, information and Transparency Act will correct these oversights and put some weight behind umra to ensure no government body purposefully or accidentally skirts public scrutiny when jobs and scarce resources are at stake. The spirit of the Unfunded Mandates, information and Transparency Act and its underlying principle that the American People would be better served by a government that regulates only with the best information is truly bipartisan. Lawmakers and unelected regulators should know the price of their dictates. So, too, should the people, private enterprises and governments, all of whom are being asked to foot the bill. Funds are very tight for families across this country. Millions of americans remain unemployed and many more still rely on Small Businesses and local governments for jobs, health care, Public Safety and education. Washington should think carefully before it decrees mandates that could stifen from the limited stipend from the limited government, job creators used to keep people employed. But loopholes within the original legislation revealed, federal mandates are not universally preceded by thoughtfulness. The Unfunded Mandates, information and Transparency Act, we have sbrofe deuced, will require that from government. I yield back. Introduced, will require that from government. I yield back. The speaker pro tempore the chair recognizes the gentleman from oregon, mr. Blumenauer, for five minutes. Mr. Blumenauer whats so maddening about the sequester drama, just like the earlier fiscal cliff drama and the looming Government Shutdown drama, is that it is hopelessly beside the point. The path to fiscal sustainability is not merely cutting budgets, raising tax rates or closing a few loopholes. Its about fundamentally doing business differently. Health care costs demand we accelerate health care reform, which were already working on in oregon and in a number of other communities and Health Care Systems across the country. These reforms have put into effect nationally would save more in Health Care Costs over the next 10 years than the entire 1. 2 billion in the sequester. Trillion dollars. Everybodys getting excited about acrosstheboard cuts in the department of defense, but no ones talking about how we fundamentally have to change our philosophy of military compensation, benefits and the size of the force to come to grips with the cost of an allvolunteer army. Of course at a minimum we should also dramatically shift and reduce resources away from the vast Nuclear Weapons stockpile and the three redundant Delivery Systems which we havent used in 68 years and probably never will. We have 10 times more nuclear firepower than we need for deterrence. Its pasttime symbol of the cold war and save hundreds of billions of dollars at no risk to american security. Its time for congress and the administration to work meaningfully for agriculture reform, to get more support for americas farmers and ranchers at a fraction of the cost. We should reform the outrageous, inefficient and unproductive Crop Insurance program. We should restore investments in nutrition, conservation, research and marketing that will make a difference for most farmers and ranchers, improve longterm productivity and support valueadded agriculture. This saves money in the long run and doesnt distort our trade position or make americans unhealthy. By all means, reform our tax code. But reform is not likely to raise anything near what a growing and aging america is going to need. Yes, close more of the egregious loopholes, but we need another broad based sort of revenue. A carbon tax would reform the bill, help reduce the deficit and help us protect the planet from catastrophic weather events and the budget busting Disaster Relief that inevitably follows. We should for the first time in 20 years increase the gas tax as recommended by the simpsonbowles report, a user fee that will help enable us to provide more support for transportation, put more people back to work rebuilding and renewing america. We should take a lesson from the history and our failed 14year effort to prohibit alcohol, where the government spent a fortune in a fruitless effort to enforce prohibition, lost a fortune in revenue and made a fortune for the mafia. The underworld cartels of the 1920s. We ought to treat marijuana like we treat alcohol. The federal government regulates and taxes while the states decide what they want to do to legalize for medical or recreational use. Given whats already happened in 23 states and the district of columbia, lets save money on enforcement, raise revenue from taxation and invest in drug treatment and efforts to keep drugs out of the hands of children. Lets take a break from the endless debates that are basically beside the point. Lets commit to doing business differently with health care, the military, enact broad based taxes to hope raise money and fix a broken tax code. Stop cheating the farmers and ranchers and the environment. This is not rocket science. We can start now if people address the big issues in a thoughtful way. Even when some of the measures may be controversial or hard, its a whole lot better than doing stupid things that alienate everybody. The speaker pro tempore the gentleman yields back. The chair recognizes the gentleman from massachusetts, mr. Mcgovern, for five minutes. Mr. Mcgovern i ask unanimous consent to revise and extend my remarks. The speaker pro tempore without objection. Mr. Mcgovern mr. Speaker, in our efforts to end hunger now, it is important to look at all aspects of hunger. Today i want to talk about hunger and obesity and to highlight the unfortunate paradox between these two conditions. How can an obese person be food secure . To put it bluntly, how can an overweight person be hungry . The kay may be simple but the answer is not. Unfortunately this link is all too prevalent among low and middleincome people. Hunger exists because people do not have enough money to buy enough healthy food, but obesity is more complex. Just because someone has enough money to have food doesnt mean they have the resources to buy nutritious food. Ultimately this is a problem of poverty in america. The families who struggle with hunger not only struggle to put food on the tables, but they struggle to make the food as nutritious as possible. For a variety of reasons, even welltodo families are finding it more difficult today to prepare nutritious meals. A big amount has to do with the widely, available, high calorie, high fat, low nutrient food and it has to do with time constraints on families today. But its more difficult for low income food insecure families because they dont have access to full access grocery stores. They dont sell Fresh Produce and the produce they do sell is expensive. In order to stretch their dollars, they buy food that is more affordable. Low income families are especially vulnerable to obesity because of the additional risk factors associated with poverty. When taken together, these risk factors make it easy to see how obesity and hunger are related. There are at least four general risk factors for obesity that are associated with poverty. First, low income neighborhoods are underserved by full service supermarkets. In inner cities, food is more readily food is most readily available at small neighborhood Convenient Stores where Fresh Produce and lower fat food items are most limited. In rural areas, full Service Grocery stores are many miles away. This is commonly referred to as a food desert, something that can exist in both urban and rural areas. Second, when food when healthy food is available, it is oftentimes more expensive than less healthy options. Low income families must stretch their budgets in ways that make it difficult to purchase higher priced, more nutritious food items. This means that these families are forced to buy cheaper, high calorie, high fat, high sodium food that lasts longer just so they can make their food budgets stretch through the month. Third, there are fewer opportunities for physical activities in neighborhoods and schools. Safe open space can be difficult to find in many of our neighborhoods where lower income families live, sometimes because of lack of parks and other times because of higher crime rates. Fourth, high levels of stress and limited access to health care can contribute to weight gain. Hunger is truly a health issue and it is important to note that stress and lack of access to Quality Health care can trigger physiological responses that can trigger to obesity. Mr. Speaker, i remind people that food is medicine. My grandmother used to say an apple a day keeps the doctor away. It used to annoy me but shes right. We missed the opportunity during the Affordable Care act to address the issues of hunger and nutrition. We must do so now. Adequate access to nutritious food can lower instances of obesity and heart disease. That will improve the quality of life for people but will also save us money from Avoidable Health issues. Hunger costs of us dearly and the cost to picks the problem is cheaper than the status quo. So with all my colleagues, i urge us to join us to end hunger now. It is the responsible thing to do. Yes, we have excellent antihunger safety net programs like snap and the School Meal Programs that help reduce incidents of hunger in america. Yes, the first ladys lets move campaign is working to address obesity in america primarily among children. But we must do more to address these two issues together. Because of all the because of all these factors, it is clear that we simply cannot address hunger or obesity. We must address both of these issues at the same time if we are going to end hunger now. It is why i believe we need a white house conference on food and nutrition, a president ial summit that brings all the stakeholders together, a forum where we can develop and agree on one strategy to reduce hunger and owe beity together. I plea with my colleagues to not cut our antihunger safety net programs like snap and w. I. C. , programs that provide a minimal food benefit. To do so would only worsen the problem of hunger and obesity in america. We must end hunger now but we cannot do so just by increasing access to high calorie, low nutrient food. It is a real challenge but one we are capable of meeting. We just need to muster the political will to make it happen. End hunger now. I yield back the balance of my time. The speaker pro tempore pursuant to clause 12a of rule 1, the chair declares the house in recess until 2 00 p. M. Today. Today, president obama nominated his next budget chief. A little bit more about her. She was in charge of the Wal Mart Foundation and she is a former deputy budget director for president clinton and chief of staff to robert ruden. They look forward to your testimony when she appears before the budget committee. Eric holder appearing before a long makers for an oversight hearing on wednesday. We will have live coverage of the hearing on our companion network, cspan3 at 10 00 a. M. Eastern. On friday come education secretary arne duncan and Kathleen Sebelius visited an Elementary School in tacoma park, md. A and they talked about investing in Early Childhood education and the automatic spending cuts that went into effect friday. The comments are about 30 minutes. [applause] this school where present so much of what we want the country be like, and i get to visit three schools, struggling schools, but the school has a high poverty rate, as many as 35 different languages spoken so a baby united nations. We ask them, do they like coming to school, and they say yes. Challenges of poverty, assimilating children, and they come to an environment where they can be successful. Board members, superintendents, teachers, staff it is fun to be here. Thank you for the hard work you do every single day. I this is a topic that we love to talk about, and government at all levels, federal, state, and local, investing in the education of our nations teachers, our children. This is one of the best investments we can make collectively. We are thrilled at about the president s landmark plan to create new partnerships with states to provide universal access to highquality preschool for all 4yearolds. It will provide the biggest expansion of Educational Opportunities in america in the 21st century. Parents who look for affordable learning programs, work tirelessly to provide opportunities, and Business Leaders all want children to have access to highquality preschool. The biggest beneficiary will be our children, particularly disadvantaged children, english language learners, and children with disabilities. Educational expansion is a win win proposition. It will make america more productive, and of the long haul will save millions in taxpayer dollars. It is past time to get our Public Schools and out of what we call the educational catch up business. America cannot win the race for the future by cheating children at the starting line. I hope everyone here today appreciates this is an extraordinary moment. It is not too often you find Government Departments with overlapping responsibilities, working together. I am grateful to my partner Kathleen Sebelius for her vision. She always puts children first. We worked on issues like the h1n1 virus. The president s plan will allow states to provide highquality preschool, up to 200 of the poverty line, and will provide incentives for all families who want to send their children to preschool. It would be an investment space that jump starts accessed the preschool and take leading states to the next level. States would use funds from our department to create high quality staterun preschool programs, administered with local providers. The urgent need for greater access to preschool for low and moderateincome students is not in dispute. Ask any parent or teacher about the gaps in development when children come to kindergarten. We know that on average children from lowincome families start and come into kindergarten up to 14 months behind their peers in reading and language skills. It does not have to be that way. No fewer than 30 of 4year olds are enrolled in high quality preschool programs. Our theory of expanding high quality preschool will be the same as it was during our first term. The federal role in education is support in partnerships to incentivize innovation to strengthen Educational Opportunities. That means we should be clear on goals, but loose on the ways to get there. Our Department Must set a high bar. We should leave it to local leaders to figure out the best way to achieve that high bar. Under the plan, states will be required to have benchmarks for outcomes, like having a highquality statelevel standards for Early Learning, wellcompensated teachers, and a plan to implement comprehensive assessment. The president has pledged to offset the cost of the Early Learning plan so it will not add a dime to the deficit. Skeptics question we should make a major investment in preschool in a tough time. In the end, i believe it is a false choice. In fact i would suggest all of you that we cannot afford not to make these investments in the future of our babies, toddlers, and 4yearolds. As the president has pointed out, if you are looking for a good bang for your buck, high quality preschool is a good place to look. If you want to invest wisely, save taxpayer money, this is the best place, the best investment we can make. I wish some of our friends on the hill today could have been with us and visited the school and would talk to governors across the country who are expanding highquality preschool programs in their states. They understand it is a great investment. I wish they could be with me as we watch children being engaged and having fun and excitement, have a chance to explore their skills. If we move forward with the topic of the day, sequestration, it is a real challenge and a lot of different levels. Honestly, too many members of congress are out of touch with the concerns of parents and teachers and students. They are out of touch with the realworld consequences of their actions. It is important everyone remembered that School Districts in Montgomery County, they spend 80 of their budget on personnel. Sequestration will have a big impact on school staff. Sequestration will cut title i money by 725 million. That blanket cut could affect everyone one. 1. 2 million disadvantaged students. If the budget cut was translated into furloughs, another way districts may have to make these cuts, it would be the equivalent of furloughing 541,000 teachers and staff for five days. Other cuts include 600 million for children with special needs. That will require distance to cover the costs of approximately 7,200 teachers and support staff. The furlough equivalent will be for 33,000 teachers and staff missing a week of school. Secretary sebelius will talk about the impact of education on head start. Cutting programs for children is economically foolish and morally indefensible. In his state of the union, obama called for smarter government. Sequestration is an example of dumb government. It is mindboggling that washington is manufacturing a crisis when educators and parents are facing challenges and doing so well every single day. These acrosstheboard budget cuts were not caused by some hurricane or by natural disaster. They are manmade. They can be fixed now, by men and women who have the courage, commitment, and willingness to come together to compromise. They can be fixed by lawmakers to do the right thing for children and keep growing americas middle class. This is not rocket science, not intellectually difficult, and must be done. Thank you so much. Now it is my honor to turn it over to secretary sebelius. Please give her a round of applause. [applause] good morning. I want to join secretary duncan in thanking the superintendents, School Leaders, principals, prek teachers, and the amazing kids who we have seen so far at this school. It is a truly great example of kids learning every day and learning lots of things that are going to make them world leaders. I talked to a young man here who has his eye on maryland state house, so i have to warn governor omalley. He has some competition. I have to tell you this effort is near and dear to my heart because i am a new grandmother and have had a 6monthold grandson. Early childhood education, always important to me, has taken on a brandnew meaning because i am seeing the world to the eyes of george. The secretary has mentioned we have had some great partners and champions in the United States congress from here in maryland, but i want to particularly single out congressman hoyer, who has not only been a longtime great leader, the judy center here at the school is named after his late wife, and it shows the kind of energy and commitment he has had all along. I cannot tell you what a great treat it has been during my tenure as secretary to work with a partner like arne duncan. There cannot be a better champion for children and families than arne, and he is leading this effort and an historic moment, and im glad to be partners in the initiatives with him. The kids at Rolling Terrace and across the country who benefit from the Early Learning programs are not just getting an academic foundation. They are gaining in social skills, learning how to interact with others, benefiting from services. I just saw the new Health Clinic that will help the whole family. As any parent knows, and the science shows, the first few years of a childs life are the most critical. That is when the most important learning takes place. We have evidence that when we invest in education during those early years, the benefits last a lifetime. Kids who attend highquality Early Learning and preschool programs are more likely to do well in school, more likely to maintain successful careers. That is what makes this investment so beneficial. These programs benefit all of us. We all gain when our country has a stronger, more Productive Work force. We gained what we have lower crime rates and less need for public assistance. That is why the president has announced historic investments in programs that help put more children on that path to opportunity. In our department, we have worked to strengthen critical programs like head start with more accountability and Training Programs to help spread best practices. As you have heard from the secretary, the president announced a new plan for the second term that would build on those efforts by making high quality preschool available to every child in america. These childrens needs begin earlier than preschool. That is why we are launching a new head start child care partnership. It will expand the availability of highquality Early Learning and opportunities for infants and toddlers, while we are expanding programs with resources needed to help thriving on it. We have a moral and economic imperative to ensure no child has fallen behind by the first day of kindergarten. That is what the last thing we can afford right now is the selfinflicted wound that you have heard secretary duncan describe. It occurs with blunt arbitrary cuts that congress is allowed to go into effect, the sequestration. In addition, to the cuts you have heard described, through k12 education, we have a situation in our department where we look at the possibility of 70,000 and children losing their access to an early start through early head start, where teachers are being laid off. With those services eliminated, it makes it more difficult for those parents to go to forward, so it has a ripple effect, damaging the fact, throughout the community. We know about 30,000 lowincome children and their parents would lose their childcare slots, which has a huge Economic Impact on working parents. That is up to 100,000 american children, some of the most economically deprived children, whose futures are put in jeopardy, and their parents ability to work every day is put in jeopardy. If we want to ensure the long term prosperity of our country, we should not be cutting back on programs. We should be expanding them, as the president has suggested. That is what this administration is committed to doing. I join arne on the notion that sequestration can be fixed quickly by congress coming together with a balanced approach to continuing to make smart cuts, smart reductions in programs that do not work very well, and Smart Investments in programs that have a huge payoff down the future. Arne called it dumb government. To me it is stupid government. We have a smart way to do things and a stupid way to do things, and what is unveiling today is stupid government. Thank you again to our host this morning, good luck with Rolling Terrace elementary, and the secretary and i will be pleased to answer questions. Secretary duncan, this week on a couple occasions, you said there are teachers being laid off because of the sequester. Are you prepared to say that that was an exaggeration on your part . That needs be clear. What i said is teachers are getting notices, and in the district we talked about, 110 teachers were getting notices. That is not what i said. Lets not lose the they are getting such notices now. That is where some of that misunderstanding is. The fact of the matter is whether it is what is already happening or what is coming across the country of the next two months, which i also said tens of thousands of teachers potentially are going to be getting these notices. The impact here is very significant. Both you and the secretary said this was dumb government. Didnt this dumb idea come from the white house . Actually, the idea was designed in such a way and really inserted in the bill by congress because they thought it was such a bad way to run government that it would never happen. Two years ago, congress agreed to give themselves this option which should never occur in order to force themselves to actually come up with a deal. If you remember, it was the failure of the supercommittee to reach a budget agreement that produced this methodology. There have been two years that have expired, and here we are on march 1, a day that no one ever wanted to see come, and everyone agrees it is a bad idea. It can be fixed. The president is meeting this morning with congressional leaders. He has put forward a proposal. One thing i think we need to make clear, government is being cut year in and year out. We at health and Human Services are operating on less resources than last year. 2. 5 trillion has already been cut out a Program Spending during the president s administration. It is not like we are spending huge pots of money we did not have. But making strategic reductions and making Smart Investments in things we dont work is the way we need to go forward. One more question. How did you come up with the figures of how the impact will be felt at local schools . It is important for the media to understand how School Budgeting works. 80 of 81 we did not plan that. On average, 80 of School Budgets are people. Most of the rest of them are paying the heat, school lunches, buses. When schools have to make commitments and cuts, and between title i and well more than 1 billion, they are not too many places to cut besides people. With people, you do two things you lay them off, so you are talking about potential layoffs, or you do furlough days. Theres not a better option. People said if you have control, what would you do . The majority of our funding from the department of education, the federal level, from the nations most vulnerable children, to english language learners, migrant children. The biggest part of the cuts are children with special needs and title i for poor children. Those cuts are 25 billion. If you are asking folks to choose, do you hurt more specialneeds kids theres no choice, but no right answer. When districts are forced to cut, because our funding goes down, they have very few places to go. One of the only places they can go, the vast majority of their budget, are people. What that means is potentially a lot less children, tens of thousands of children, having access to head start, lots of children with special needs and poor children losing access to services. What we have not talked about yet is as many as 70,000 young people try to go to college will lose access to work study and to grants as well. At every level, babies, k12, highered, at every level we will be taking a step back education. It makes no sense. The economy is starting to bounce back. Graduation rates are going up. The final thing i will say, as a nation were trying to keep good jobs. Good jobs, employers want an educated population. I promise you our competitors for those good jobs, singapore and south korea and india and china, they are not going through sequestration now. That is not their approach to education. They are doing more. For us to go backwards is mindboggling. Thank you. One more question. Are those 70,000 new slots or slots that have to be cut . These are slots of have to be cut, and again, first of all, sequestration does not give us discretion. We have to take 15. 5 billion out of the hhs budget out every agency, every department, every program, in seven months of the remainder of the year. It is a very arbitrary cut. Those are slots, child care slots, 30,000, and head start slots, about 70,000, that exist right now. We do not have a need budget. Congress has not passed a 2013 budget. Were talking about existing slots. We have to cut services that go to Public Health departments we know thousands of children will not have the vaccines that they need. That is a cut in the program. We know Mental Health services to the parents and children, which actually help to support the Behavioral Health issues that is to states. This has health and wellness implications, as well as teachers, as well as having a huge impact on parents ability to go to work. If you think about the youngest kids, if theres lots are gone for their children to be in a safe and secure learning environment, the parents actually then have a much more difficult time going to work every day. Thank you, all. [indiscernible] i want to thank you today because we are with you on pre k. We can see all the differences that prek makes. And i want to say all of us are teachers, are very proud to be teachers in Montgomery County Public Schools. We know now we are number one in the nation. I wanted to segue a little bit because all this new stuff about education is turning into all sorts of good ideas. What i want ask you is about teacher evaluations are a big deal now everywhere. With our administration and the teachers and representatives, we have developed in mcps a good teacher Evaluation System, very qualitative, more than a checklist, and we have worked with the administrators, and we feel we have a good Evaluation System that states are asking for how they would put forth their evaluation statement, and maryland has 50 of the evaluations that would include performance. So we want to know in your opinion is there room for the states to have wiggle room. We are helping, and dr. Starr asked for a moratorium for testing for three years, some of which speaks to this idea, so is there wiggle room for states to go less than 5050 . I do not know the details, but absolutely. Look at what has happened across the country. I have tremendous confidence in the board here, in the state. The folks here have to compromise, and those are complex questions, but we have never said 50 . Never said that once. Between the president and mcconnell and boehner, is this too little too late on both sides . I do not think it is ever too late. You have to keep working things through. I want to come back to the urgency to get this done. This is why i worry congress does not understand the real world. You have a really good board here, a fantastic superintendent. What are they doing now in march . They are planning for the fall, try to put their budgets together for all. They need stability, predictability. In chicago, we never had enough money. I wanted to know what i had so i could plan. These guys are doing the fiscally prudent thing, planning not have this money. Theyre forced the plan that way. You cannot plan for money that is up in the air. They have to plan on not having that money, putting in a budget cuts, and we saw in the district in West Virginia where they sent out 110 notices. We see notice is coming out across the country in the coming weeks. This has to do with the notification of the unions. Four districts that to go through this trauma, why put them through that . Lets fix it, fix and now, lets do it right away, today, over the weekend, and i do not think they realize the real world impact and stressed this is putting on working families, on teachers, on principals, on superintendents. It does not make sense. I would like to say that i am really proud of the my son attends this school, and i just made it to get him into the prek program, and i see results that are fantastic for him. Are there plans to help those middleincome people that live in highincome or highcostof living areas to get into the program . Part of what we want to do is make sure we have access for children who are living in poverty. We want to have incentives for states to make sure that middleclass folks that chance. The majority of children who need access to the, the majority do not have that. We are playing catchup. We have to get out of that business. If we can get babies up to a good start, status does not matter. It is a game changer for the country. On 3 and 4yearolds, they do not vote, they do not have lobbyists. This is 8, 10, 20 years down the track. We hope the country can come together in a bipartisan way. I am hopeful for all this current dysfunction. Were seeing governors across the country, republican and democrat, invest more in Early Childhood education. This is starting to be a bipartisan commission, which is very encouraging. Thank you very much, guys. Thank you for your hard work. [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2013] turning the capitol hill, the house will be in at 2 00 for speeches and legislative work will begin at 5 00 dealing with Disaster Response programs. They are expected to take up a stop gap spending bill to keep the government funded for the rest of the fiscal year. Funding runs out march 27th. You can watch live coverage of the house on cspan. Until then, here is a subcommittee meeting on measuring teacher performance and some of the efforts being made on the frequency of student and teacher evaluations. This is a little more than one hour. Quorum being present, the subcommittee will come to order. Welcome to our subcommittee hearing on teacher performance measurements. I would like to thank our witnesses for joining us today on how districts are working to ensure effective performance in our classrooms. Im sure not the only one in this room that can remember the teachers who inspired and motivated us as children. Now that im a father of two boys, and i am seeing the difference in an engaging teacher can make in the desire to learn. Over the next few months, we will renew our efforts to address the challenges facing k 12 schools. What better way to start than a look at how they about the way teachers and explore more Innovative Strategies . We all agree no child left behind help the nation take enormous step toward a better education system, but we now recognize the shortfalls. One primary concern is how the law defines good teachers it peaked and no child of behinds rigorous good teachers. Nclb changed the rigorous standards. It sounds great in theory, but it meant schools were forced to value and educators credentials over their ability to effectively and successfully teach children. We all want qualified teachers in the classroom, but we must recognize that it cannot recognize simply by degrees and diplomas alone. Recognizing antiquated teaching requirements alone are not helping them on this track in bringing promising teachers to the classroom. Some have been working on better alternatives. A growing number of states and School Districts have started developing new teacher Evaluation Systems to incorporate student performance data. Not only does this data help measure but a teacher success, and also provides educators with the buyout the back to analyze and revised methods. I am pleased to welcome one of my fellow hoosier educators and talk about the importance of teacher valuation at the local level. Tennessee became one of the first to implement a comprehensive Student Outcome based system. It places significant emphasis on student achievement data. The new system prevents an effective educators first thing in the kostroun buy directly addressing teacher tenure laws and the last italy, for stock policies that seemed profluent. Within one year of implementing the new system, tenn. Students made the single biggest single your job ever recorded. In my home state of indiana, we called upon School Districts to make their own plans for annual performance evaluations. It such requirements that every school must meet with flexibility to find a method that will help them meet those requirements similar to a th. Posalbased pas we worked on that as part of our esea reforms. Im looking forward to a productive conversation this morning. Very similar, i hope to our last committee hearing, i am here with our colleagues and Witness Panel about the way states and School Districts are continuing to think outside the box when it comes to recruiting, retaining, measuring, and supporting the most effective educators in the classroom. Now i will recognize my distinguished colleague, carolyn mccarthy, for her remarks. Thank you again for calling this hearing. Its very important as we go forward. I also want to thank our panel of witnesses, especially bright and early. The difference of one hour earlier is appreciated by many of us. I do want to make a note that even before we dive in to teacher performance, we have the duty to make sure the best and brightest are educating our children. This commitment began that a very early age. Im working on legislation to encourage states to follow best practices to commit to hiring teachers with at least a bachelors degree. That being said, it goes without saying that evaluating teacher performance is a tricky issue. There are many factors aside from student achievement that come into play when judging at performance. This isnt it these include classroom environment, resources, or a School Leader involvement. Let me break that down. Classroom environment where schools are located in the makeup of the class of play important factors. Coster resources how much fun in local schools are getting both federally and locally affecting how they are able to do their work. Last but not least, a School Leader involvement. Too often they get off the hook in underperforming schools. We need to take a look at how theyre being supported by School Boards and administrators when conducting an evaluation of performance. While taking these three factors into consideration, we must also recognize several important facts about evaluation. Systems must be done frequently with discretion and with the input and cooperation of teachers. Evaluation systems must allow for teacher improvement and they must be refreshed periodically to ensure their effectiveness. Additionally, evaluations should be familiar with the localities theyre working in. As with most issues involving standards, there must be a reasonable level of flexibility for states and localities to provide effective services. When the chairman mentioned addressing technology and innovation in classrooms, we heard testimony from mr. Smiths from rocket ship education. He noted that teachers receive realtime feedback for the had said. Im not suggesting this is a solution for every classroom, but it is precisely that kind of outside the box thinking that needs to be explored when it comes to teacher evaluation. Any legislation we endorse should provide a measure of flexibility. One bill i plan on reintroducing this congress that provides such flexibility is the teacher and principal improvement act. It provides grants for the purposes of professional development and evaluation. We, as members of congress, do not have all the answers. We rely on testimony, our own professional experiences, and believes. I look forward to hearing from the panel. Thank you again. I yield back. Thank you, ms. Mccarthy. Pursuant to rule 7c, all members can submit written statements. Without objection to, the hearing record will allow other extraneous material referenced to be submitted in the official hearing record. Its my pleasure to introduce our distinguished panel of witnesses. First, dr. Steve cantrell from the bill and Linda Gates Foundation where he manages grants and contracts bill and meLinda Gates Foundation. Thank you for being here. I will turn to dr. Roe to introduce our next witness. A properly introduced in his orange tie from knoxville, tenn. , the superintendent of the knox of the countys School System. Dr. Mcintyre knoxville countys School System. He was the chief operating officer for the Boston Public School system. During his tenure at the boston Public Schools, they remained one of the Top Performing urban School Systems in the nation. He has taught english, anatomy, and physical education in illinois. He has served on numerous state level working groups aimed at enhancing Public Education and was selected as a fellow in the Broad Foundation superintendent academy. Welcome, dr. Mcintyre. We also have dr. Rodney watson, the chief of Human Resources for the Houston Independent School district and he has served in several positions related to juvenile corrections and student support. And finally, mr. Harper is a french teacher at a Public Charter School in downtown indianapolis and an adjunct faculty member at Marion University and a teach policy fellow. Before i introduce you, you have five minutes and the light in front of you will turn green. One minute left, it will turn yellow. When your time is expired, the light bill be read. It sounds simple. Not necessarily always for us the light will turn red. Wrap up your remarks as best as you are able. Members will have five minutes to ask questions of the panel. Without further ado, i recognize dr. Cantrell for 5 minutes. Cochairman, Ranking Member mccarthy, committee members, i am the chief researcher from the bill and meLinda Gates Foundation. Thank you for inviting me to testify about the mat project. The measures of the effective teaching project sat out to answer one question is it possible to measure teaching effectiveness . The answer is yes. Drawing upon Data Collected from 3000 teachers, 300 schools, six urban School Districts, are researchers using a design that included a randomly assigning students to teachers, it demonstrated that effective teaching causes better learning. There are teachers whose students consistently learn more, and teachers whose students consistently learn last. These results are due to differences in teaching ability, not differences in student characteristics. The more and less effective teachers can be identified through a combination of class from observation, student surveys, and student assessment. Assessments. Indeed, the combination of these measures did a far better job in raising effectiveness and performance than masters degrees and years of experience. These measures have the potential to provide teachers with much better feedback and tailored supports. Feedback, and more given these results its now time for School Systems to put into practice feedback and evaluation giving multiple measu measures that teachers can trust. Alongside its findings the met project issued a second report entitled feedback for better teaching. In it are nine principles to guide those who develop feedback and Evaluation Systems. We organized the nine principles into three categories. Measure effective teaching. Ensure high quality data. And invest in improvement. As school sysms set out to measure effective teaching, there are three important considerations. First, the measures should emerge there and help establis expectations for what constitutes effective teaching. Second, since no single measure can fully capture the complexity of teaching states and districts should use multiple measures. And third, our research demonstrated that balance is best when deciding how much emphasis to place on any single measure. As School Systems collect effectiveness data there are three important considerations for establishing and maintaining trust in the data. First,he measure should be valid predictors of Student Learning. Second, the measurement should be reliable. And third, when data are used for accountability, there should be a good match between the Teachers Data and the students data. As systems use effectiveness data, its important to understand and communicate that improvement is the goal. Relatively few teachers in the met sample exhibited uniformly or or uniformly great practice. We found that most teacher scored average. And yet they displayed different strengths and different weaknesses. Still we know that average teaching is not good enough to get all of ou students career and college ready. And so improvement is necessary. That most teachers are in the middle means that School Systems need to share the responsibility to improve teaching by providing targeted and highquality support. If teachers are toelieve at the feedback and Evaluation System is designed to help them improve, then these three principleshould be evident. First, a system built for improvemt will not exaggerate small differences. But the performance categories will make meaningful distinctions between teachers. Teachers in adjacent categories should have democrat strabbly different impacts on Student Learning. Second, a system built for feedback and improvement will prioritize that in all its communications. And third, the measures of effective teaching naturally focus on classrooms. That information should be used at all levels of the system. How else would a School System know what professional development to offer which teachers and wther the professional Development Investments make a difference to improving teaching practice. In closing, i want to reiterate one important point. Better feedback and eluation systems are essential to improving teaching and learning. If done well in ways that teachers can trust, School Systems can use this information to provide better supports which, in turn, will lead to better performance for students. Thank you again for the opportunity to present. Thank you, doctor. Dr. Mcintyre youre recognized for five minutes. I thank you, chairman rokita, Ranking Member mccarthy, members of the subcommittee on Early Childhood elementary and secondary education. Good morning. My name is jim mcintyre and i have the privilege 6 serving as a superintendent of the knox county schools in the great state of tennessee. I appreciatehe opportunity to be here this morning to talk about this important issue. Over the last five years, tennessee has embarked on a remarkable journey of education reform, and improvement. Radically higher academic standards, support for performancebased pay, fundamentally restructured teach your tenure, and the introduction of an intestbased labor dialogue called collaborative conferencing are but a few of the significant policy initiatis that have been put in place to enhance schooling for our children. But perhaps no other recent change has greater potential to improve the quality of education in our state than the adoption of a new teacher performance Evaluation System. Tennessee law requires, now, a performance evaluation of every teacher, every year, and at least 50 of that evaluation must be based on student academic outcomes. The Tennessee Educator acceleration model or t. E. A. M. As the standard evaluation model is called is based on multiple measures much teacher effective, incorporating student academic results, multiple observations of classroom practice and indicators of teacher professionalism. The t. E. A. M. Evaluation system features an excellent classroom observion instrument or rubric, as its called, which begins with a detailed and Research Based definition of good teaching. And allows educators to understand how theyre instruction measures upgainst a very rigorous standard. The classroom observation protocol requires an objective assessment based solely on the evidence that an evaluator observes in the claroom or during lesson planning activities. Our new teacher Evaluation System now in its second year has several important strengths. First, requiring every teacher to be evaluated every year, based on multiple classroom observations, connects the performance the performance evaluation of our teachers to the daytoday work of teaching students. This was not the case in the past where performance evaluation was an isolated and infrequent event which had, at best, a marginal impact on student excuse me on instructional practice. Second, tennessees teacher performance Evaluation System incorporates both student achievement results, and student achievement meaning measuring stent learning at a poi in time, as well as valueadded growth outcomes, which is measuring learning over a period of time. Providing for aeasonable picture of teacher effectiveness. Third, i appreciate that a significant proportion of the teacher evaluation is nobased on Student Outcomes. This makes sure that our focus is not just on teaching the material, but ensuring that students actually learn it. Fourth the approach weve taken in knoxville and generally taken across the state of tennessee has been to ensure that our Evaluation System is a developmental process. Rather than a punitive one. That is the Evaluation System primarily is focussed on helping our teachers to improacheve the instructional practice. Finally i believe that our new Evaluation System is well aligned to the more indepth and rigorous academic standards that tennessee has adopted, and will better prepare our students for success in todays increasiny complex and competitive world. I believe the power of t. E. A. M. And any Strong Performance Evaluation System is that it provides consistent and useful information regarding teacher effectiveness, that can be utilized in Human Capital desions such as retention, termination, promotion, tenure, appointment to teacher leadership roles, and even compensation. In knoxville we use the data from teacher evaluations to support all of these critical personnel decisions. Team data is used to identify teachers who might ned additional assistance, or teachers who could potentially be effective peer evaluators. What we call lead teachers. Evaluation information is an important factor in the decision to terminate chronically ineffectual teachers and it is used to discover potential candidates for consideration in School Leadership roles. As i mentioned earlier, the state of tennessee has significantly restructured teacher tenure. In the past teachers were automatically granted tenure i they were on the job for three years and one day. Now, new teachers in tennessee are not eligible for tenure until after ve years of service, and only if they perform at one of the highest two levels on the new Evaluation System, for two Consecutive Years. In the knox county schools weve also developed a strategic compensation or performancebased Pay Initiative that relies heavily on the data from the eacher Evaluation System. In the knox and our outcome have been very good and chairman rokita made reference to that. In the interest of time ill leave that to the questioning. But our outcomes have been very good for students but certainly not where we like them to be yet but i do believe our teacher Evaluation System is an important strategy in our efforts to improve the quality 6 Public Education in knoxville and across the state of tennessee. Tennessees teacher Evaluation System is not perfect. But its a vast improvement over our previous evaluation process and i think it will prove to be a very valuable professional growth and instructional improvement tool. Thank you, dr. Mcintyre. Dr. Watson, youre recognized for five minutes. Thank you for the opportunity to testify today. My name is rodney watson. Im the chief Human Resources oefrs for the Houston Independent School district. Under the leadership of superintendent terry greer and our board of trustees we have been working to improve teacher evaluation and professional development for the past three years. This work, or the impetus for this week, stems from a major disconnect between our old teacher and Evaluation System and student achievement. In houston our old system gave teachers acceptable performance ratings so we had about 97 of our teachers who received acceptable ratings when, in fact, we have over 70,000 students that could not read at grade level. As a result, two thirds of houston isd teachers are aware of at least one specific area in which they need to improve. I would like to spend my time sharing with you a few of the most important lessons weve learned over the past few years which i think will help you as you make key and critical decisions as we tackle these issues. First, we have learned that better teacher evaluations are not the end goal. They are one part of a solution to most to one of the most critical challenges that most School Districts face today. Nothing we can do for our students matters more. In houston, our work on evaluations and professional development is just one part of our effective teacher initiative. Which we launched in 2009. Specifically, we have made Human Capital acquisition a focus as a district to recruit and select teachers earlier because Research Shows the earlier were able to attract and retain good teachers, the more likely they are to have success in the classrooms. We are also offering potential trips to campuses that are also likely to yield high performing teachers. Steps like these allow us to be able to compete with other districts, and Charter Networks who have historically sought out and hired the best candidates earlier. In addition, part of our effective teacher initiative, we are thinking how we can use compensation and Career Pathways to retain and reward our best teachers. Using data from our Evaluation System, we are able to identify our best teachers, and use a multipronged approach to retain them in hisd. For years our district has been a leader in the field of performance pay, by rewarding our Top Performing staff with significant bonuses through our aspire program. Second, we have learned that rigorous evaluations and better professional development go hand in hand. Some people suggest that these two things are mutually exclusive. That better evaluations undermine professional development, for example. But what we have found that nothing could be far from the truth. We expect a lot from our teachers. And for our new Evaluation System, our processes reflect that providing them with specific expectations for their classroom practice we are able to help them and support them as they reach their goals. But we also design the Evaluation System to give teachers more and Better Development opportunities than theyve ever had in our old system. In addition, all of our teachers have the opportunity to work with one of 130 Teacher Development specialists. Which are plastblas master teac specific subject areas whose job it is, which is their only job, is to offer advice and connect teachers with resources that can help them improve. This is a position that was created and staffed as part of our effective teaching initiative. Setting a high bar for excellence is critical to good Profession Development. Because we cant help teachers reach their full potential, unless we are honest about what they need, and how theyre going to improve. And its our responsibility to provide them with the necessary resources and also with a picture of what excellence looks like. Third, we have learned that better evaluations can help us hold onto our best teachers. A lot of people worry about the more rigorous evaluations will push good teachers out the door. That hasnt been our experience. In fact, we see teacher evaluation systs as a critical tool that helps us keep even more of our best teachers. After all, we cant retain our best teachers if we dont know who they are. As we began to look at retaining our highly effective teachers, our goal this year is to retain at least 95 of them after retaining last year. We are also taking steps to attract more promising teachers to our schools by offering signon bonuses up to 5,000 in our hardesttostaff subject areas in our schools. During the first year of implementation we made it a priority to gather feedback from our teachers and appraisers on their experience with the new system at several checkpoints throughout the year. We found that teachers who reported that their system that their appraiser consistently applied the expectations articulated in our rubric and who received useful feedback about their practice from their appraiser were ten times more likely to report that the Evaluation System was fair, and believed that their rating to be accurate, and an accurate reflection of their performance. I condition include with you the obvious point. This is extremely hard work. Getting the logistics of a teacher Evaluation System right is hard enough. But on top that, you are really asking schools across the nation to embrace an entirely new paradigm, a new culture, of honest feedback and accountability for results in the classroom. No School System can hope to get it exactly right on the first try. But perfection shouldnt be the standard. Our exrience in houston shows that it is possible make big strides in teacher evaluation and development right away. At the same time, keeping improvements going as you go along. Thank you very much. Thank you, doctor. Mr. Harper youre recognized for five minutes. Thank you. Chairman rokita, Ranking Member mccarthy and members of the committee, thank you for giving me the opportunity to speak on this important subject. As a french teacher in indianapolis its my priority to expose students to different cultures, as we become a more globalized society. Im also an adjunct faculty member at Marion University for transition to teach candidates and also a teach plus policy fellow. So, at my core im a teacher. And while there is no oath teachers take before entering into the classroom, for all of us, there is an abiding promise that we do and must make. One that has to transcend the ra rancor of socioEconomic Conditions and decades of preconceived conclusions. This promise we make as teachers is that every day we go into the classroom working towards ending the achievement gap that has, and continues to, jeopardize our students futures. Unfortunately, were here today because this promise has not been kept. Fortunately, there are at least two remedies. One, implementing stronger evaluative tools for teachers appropriately weighing student performance and student voice, and giving more local flexibility in gathering culture that drives student growth. I know this because as i began my first year of teaching at my first school, i recognized that enthusiasm was the bench mark by which teachers were deemed effective. No longer was the focus on how you taught, but how the administration thought you taught. It created a stagnant environment where students sat at their desks numb. And in this system, i knew that there were areas of growth for me that simply were not being addressed. Even despite my hard work. Without having an objective account of my practice, with substantive measurements and indicators, i was left to tease out my performance based on what i felt. It was unsustainable, and i decided to leave the school. So i spoke out against this ineffective practice by testifying before the Indiana House education committee, in favor of the newly implemented send act one which strengthens teacher evaluations. This new act based its effectiveness not on degrees and years in the classroomit on composites like Student Outcomes and observations. And it is schools like herren high school that i currently teach that are leading the way in this regard. Herren high school which is a Public Charter School located in the heart of downtown indianapolis has a mission to create world class citizens of the 21st century. In fact, u. S. News and world report ranked herren in the top 30 best high schls in the United States. This is possible due to a rigorous evaluation too used to measure our impact on students. With announced and unannounced visits, we are continually asellsed on our effectiveness. This maintains a constant loop of evaluation, critical feedback and actionable next steps. In the evaluation press, nontested subjects, such as french, undergo the same amount of scrutiny as tested subjects with curriculum and assessments, analyzed for their ability to ap exams. Thus with end of year performance kmpgss, teachers who continually meet our high instructional bar are rewarded with leadership opportunities and salary increases. Those who do not are either placed on a targeted and demanding teacher assistance plan, or removed fm the classroom. Retaining, and recruiting top talent translates to educating and preparing all students for colage which is our singular and overriding objective. But, if the system at large inhibits the cultivation and retention of Great Teachers, more rigorous evaluative tool will be for naught. Local flexibility and staffing will ensure that only the highest qualified teachers are selected to enter intothe classroom. And that herron our professional development is built around using our teachers as experts to increase student performance. We generate targeted cross curricular interventions for atrisk students and reinforce the vertical alignment of our disciplines to challenge all students, no one finies their crosswords in this space. Its eagerly anticipated and an opportunity to hone our mission of closing the achievement gap. And this is why i know that i dont make the promise to close the achievement gap in vain. It is possible, and its happening as we speak at herron and hundreds of other schools acrossed United States. But action has to be taken now for ourtudents to properly inherit what we all aspire to, which is the american dream. And it starts with me. It starts with me testifying here on the importance of stronger evaluative tools for teachers. It starts with us, allowing local schools and School Districts the flexibility to innovate and retain talent to drive student success. And it starts with reaffirming the right of every student to a highquality and rigorous edation and it must end with student achievement. Because, despite a students surroundings or background, graduating from high school, and college, empower to do anything they choose will be their destiny but only when we do everything we can starting to today to ensure effective teachers in every classroom. Thank you. Thank you, mr. Harper. Im going to resee my question time for a little bit later. And recognize instead mr. Thompson for five minutes. Thankyou, chairman. And thank you for putting together this subcommittee hearing. You know, i my experience is that, you know, an accurate, appropriate, thoughtful employee evaluation really is a baseline of, you know, of for proficiency improvement towards high performance, and were lking about teachers or whatever, whatever field, its extremely important toll, and sometimes we dont do that so well. And so i really appreciate expertise and thank the experience that all the panelists bring coming here today. I want to start with mr. Harper. Mr. Harper, how is, in your opinion, how is professional development at your School Related to the information gleaned from the evaluation . Cayou give an example of how it specifically targeted to meet your professional needs, and professional development . Thank you for the question. At Herron High School we collect data from assessments, and from evaluations th we take from our students. And friday, when we have our meetings, an hour and a half before school, we look over that data to make sure that the students who are coming up short are assisted by their teachers. So we ma sure that we target students who need fice hours, so those are reserved periods for teachers to help students individually, and we also have structured academic supports for oneonone meetings with students before and after school. So its really a time for us to analyze what we needo do as a school to make sure that were encouraging growth of all of our students. I know in my time i served im a recovering School Board Member, frequentlywe would get these requests during monthly, or bimonthly, they told me it was only going to be one hour a month which was a bit of a lie when i went on the board. You know, we would get those requests for continuing education, but they were sometimes i didnt find they were really related in any data sense to to kind of gaps or proficiency issues that our teachers had. Im hoping that whatever models are developed on School Districts or states tie in so were always looking to increase the performance level, you know, to, because no matter what you do theres always an opportunity to improvend to be better. 34r mcintyre or dr. Mcintyre, have your local teachers brought in and responded to the districts teacher Evaluation System and do they feel that it helps improve their practice in the classroom . Thank you, mr. Thompson. You know, if youd asked me that question in about 18 months ago id probably give you a very different answer. I thinat the beginning, there was a lot of uncertainty, and maybe even some anxiety about this new Evaluation System, and what it looked like, and how it was going to be implemented. But ill tell you, over time, having having worked through it, and lived with it, last year, and halfway through this year, i think the vast majority of our teachers have begun to see the value of this Evaluation System. They see that having lived through it they see that it is fair. Having lived through it they say that we really do mean that its developmental and meant to help enhance their practice. And that theyve learned a few things from it. I think that the experience of and i say this half in jest, that we didnt fire half our teachers this summer probably helps that they realize that we really do mean for this to be a developmental process. And i think that we saw some very strong outcomes for Student Learning last year. And i think we have were very fortunate in knox county schools to have extraordinary teachers. And if something is going to if they see that something is going to help them, enhance Student Learning, theyre going to be game for it. So i think i see, you know, the vast majority of our teachers, i think, have come to realize that there is value in this Evaluation System. Any time we implement change, i mean thats hard. Because its just the nature of it. You know, whether barriers or problems that you ran into in the implementation of this . And how did you address those . I think there always are. And i think that wh we tried to do was try to be as thoughtful as we could about the implementation. And i think thats one of the most important things as we think about teacher evaluation and nationally and think about how we implement it well in School Systems is to do it thoughtfully. I think you have to have buyin from leadership and make sure this is something that is important to, you know, district leadership, but alsour School Principals. Theyre key to making sure this is a process thats going to be valuablend helpful. I think communication is incredibly important in making sure that there is Information Available to teachers, that theres training available to teachers. As mr. Harper said, that theres professional development that actually is really rationing rationally related to the evaluation thats going to occur. Weve weve done a couple of things that i think have been very helpful. We had a what we called a scrimmage period gentlemen, times expired. Im sorry. See, its not that easy. No. Mrs. Mccarthy is recognized for five minutes. Thank you. Dr. Watson i want to thank you for your testimony and i appreciate your emphasis on teacher retention. As well as the inclusion process your School District embarked on when reexamining teacher evaluations. You mentioned in your testimony that two thirds of the teachers were aware of at least one area in which they needed to improve. Can you go in to that a little bit deeper on how you basically were able to improve on those certain skills once the evaluation had been made . And also, with the evaluations, number of you had said at the end of the year you look at everything, i think thats one of the biggest problems, trying to get the information to the teachers sooner, than at the end of the year. I dont know how we do that, meaning the hearing we had last week, that was using hightech technology to do a weekly evaluation which is obviously better for the student. But if you could answer my first question. Sure. Weve taken Great Strides in being able to provide our teachers with the necessary information they need to be successful. Paramount to that is our development individualized professional development plans. So at the very beginning of the year our teachers go through a goal setting process in which is the green light on . Can you share . Thank you. At which time they sit down with their administrator and they go through and develop specific goals. Now those goals can be related to the actual performance areas that they have shown to need development in, as well as other areas that they want to be successful in. Also, with our School Principals and our School Support officers, we sit down once a year at the very beginning of the year, as well as at the middle of the year and we do what we call a fall checkin or staff review. During this time we go through every single Teachers Data within that particular building and were able to talk about those Development Areas that teachers need. Now in my testimony, i specifically talk about, its not only our ability to be able to identify those areas of need, but also our ability to be able to provide specific support. So weve developed a litany of exemplar videos, based upon all exemplar areas in our fectual ratings, where teachers are able to go through and watch videos of best practices as it relates to instruction. You know, when you talked about your program aspire. Yes. Where do u find the funding for that . Because that seems to be the biggest problem on where were talking about any school developing programs for the teachers, money is always an issue. And recruiting early, too. Tell me how that plays into such an important part flp recruiting early is extremely important. As i said earlier, when we go out and select teachers, the earliest we can, were able to find the best teachers. As we know the best teachers are out looking for jobs right now, versus teachers that sometimes wait a week or two or month before school starts. And so by looking at how we recreate, how we go out and recruit teachers as well as what we do to recruit teachers weve been able to change our processes to free up budgets, campus budgets where principals are early to go through and look at who exactly what positions they need to fill, as well as those positions that they may not be filling on their campuses. Thank you. Just one quick question. And i know this is, you know, for Early Education that were working on, but you all mentioned about getting e best teachers from schools. How prepared are the teachers when they graduate . Have they had enough training . Well, i dont think you can ever have enough training. I dont think any college of Higher Education can ever provide enough. One of the things weve done is weve begun to be proactive and go out and network with area colleges and universities in our area and weve let them know specifically what we need teachers to be able to do. And so weve infused that and actually have had them go back and redevelop their programs to meet the needs that we have within our district. Dr. Harper very quickly because my time is running out when you went to your first school, how soon was it that you were into it that you saw that the school was not functioning well . Was it the atmosphere of the teachers . Or was it more on to the principal and the superintendents part . Thanks for the question. For me, i thrive on feedback and so, the m. E. T. Study and actually the teach plus policy study great expectaons found that teachers lik myself need feedback, effective feedback for an actionable next steps to be able to perform well. So when i was at my first school, i didnt have anyon come in to my room until the second semester. And they came in with a checklist and then went out and that was all of five minutes and i realized that that would be great if i was simply going in to teaching as a secondary job. But teaching is what i love and i want to make an impact onhe next generation and so i knew i needed to be in a place that would provide me with structural support so that i can get better and having a continued dialogue, and being able to be effective for my teachers, or for my students, was something of priority to me. So thats when i knew. Thank you. Mrs. Foxx is recognized for five minutes. Thank you, mr. Chairman. And i want to thank our witnesses here today. Dr. Cantrell, in your opinion, and using your knowledge of the m. E. T. Study findings, can we trust the results of teacher Evaluation Systems if implemented using multiple measures with balanced weights . Is it fair to use the results of teacher Evaluation Systems to make decisions about personnel, both positive and negative, to improve the teaching profession . Absolutely. Where the measures agree, we can have the confidence to act. One of the benefits of having multiple measures is the error is actually uncorrelated. So you know that at any single measure isnt going to be perfect. But when you have several measures, the mistakes that they make correct one another. And so the average from multiple measures is much more reliable than any single measure could provide alone. Thank you. Dr. Mcintyre, how does the knox county teacher Evaluation System interact with the state Evaluation System of tennessee . And were you given flexibility to implement specifics in a way best suid to your local needs . Yes, maam, thank you. The knox county schools Evaluation System is actually the standard or default system for the state of tennessee. The t. E. A. M. Model. Tennessee actually allows for different districts to define an alternative model as long a it meets the basic criteria of evaluating every teacher every year and at least 50 being based on Student Outcomes. So there are a few different models, actually, in the state of tennessee, but the vast majority of districts use the t. E. A. M. Model. We have been given some flexibility in terms of how we implement, in terms of some of the the measures that we look at. We have been given flexibility, for example, as to there is an opportunity to do fewer observations of teachers who are on the higher end of the scale. But thats an option. You can do that or you cannot do that. And because we believe that the evaluation process is delopmental weve chosen to continue with the number the same number of observations, even for teachers on the higher end of the scale because we think its beneficial. Even Great Teachers can become even better. Thank you very much. Mr. Harper, im so glad that we have a teacher here today, and i want to say to you, when i taught, i taught for 15 years at Appalachian State university. We were only required to do an evaluation eve two years, or three years. But i did one every semester. So i identify with you. I liked to get the feedback from the students, the student evaluation. And so, im glad to hear y saying you like to get that feedback. Talk a little bit, if you would, on your thoughts on teacher tenure and policies, such as the last in first out. How have you observed those, and what do you think about those as as the wayto operate in the School Systems . Thank you. I think teacher tenure is great only if the teachers that are retained are really effective teachers. And unfortunately, last in, first out, has negative impacted a a lot of School Districts because you see really motivated candidates who go into the classroom let go because of tenure. I think its important that we dont necessarily look at how long a teacher has been in the classroom but more so look at what impact theyre making. And allow that to be a really strong and driving force for how we evaluate whether or not they stay in the clsroom, because all of us are here because we want to make sure students make the appropriate gains, particularly if they come into the classroom lagging in certain categories and its important we look at not necessarily how long theyve been inside the classroom but how effective they are in the classroom. Thank yo mr. Chairman. I yield back. Mr. Davis is recognized for five minutes. Thank you, mr. Chairman. Ank you all for being here. I really appreciate it. I was a former School Board Member in san diego unified. This evaluation issue was something that i always felt was terribly important and i was quite frustrated we werent able to move forward. Of course a number of years have taken place. I wanted to mention along with mr. Polis, we have authored the stellar act which i hope you will all take a look at, securing teacher effectiveness, leaders learng and results act. What i wanted to focus on quickly are just a few issues. One is the federal role. In our experience, what this bill focuses on title i schools particularly, and putting in place over a period of time with teacher buyin and hopefully professional development, its flexible idea in terms of making certain that there is buyin and active participation in terms of the creation design. But im wondering what you think about that. I mean, do you think there should be a federal role in this and should we put some guidelines throughout and hold people accountable, if theyre not able to follow through . Anybody want to tackle that . Gosh, i think that if if there is a federal role to be had, its probably setting broad parameters and giving a lot of flexibility to states and localities. You know, i think that certainly we believe in tennessee, you know, having the flexibility to implement sl likeomething like h oar Evaluation System makes a lot of sense and there are, you know, differences in terms of what that might look like, even in knoxville versus memphis versus solutely. Nashville. I think perhaps either the federalevel or the state level setting broad parameters, making sure that there is, you know, adequate and appropriate evaluation of teachers but maybe leaving lots of flexibility for local School Districts to do what they need to do to make it work. That certainly is our intent. But i also see that sometimes School Districts and states as well get tripped up along this process. And thats, you know, thats very important to be sure that you have all of these elements in place. What is it, do you think, about trying to define and develop an Evaluation System that does trip up those organizations, school entities, trying to move forward . I would say one of the areas one of the areas that trips up is just the mere understanding of the various methods or measures we can tuday accurately eluate teacher performance. So long teachers have not had to use student performance as a measure of their effectiveness. Better understanding of that, the use of evos, one of the measures but the educational training needed to support teachers. More importantly, helping them to understand and link up the professional development to those areas that have been deemed to be highly effective or areas for improvemen in terms of professional development i think one of difficulty is to defing what is best kind of professional development and then do you have the resources to back that up . How do you how have you seen in your in your work that School Districts are able to carve out the resources that they need to actually provide the kind of evaluation or Teacher Professionalism Program that they know is best . You know in knoxville, we just we find there is extraordinary capacity and expertise already in our classrooms and seek to leverage that. A lot of our professiol development is teacherled. We provide opportunities for teach to step up and be in leadership roles, either in instructional coaching roles or providing professional development. Its incredibly high quality Profession Development when our teachers do it, because they take extremely seriously and its powerful when its teachertoteacher as well. Thats one of the strategies that we use. I wanted mr. One thing about evaluation, as professional development, too often we think about evaluation as something that is just about measurement rather than is about feedback and the ability to mark progress and improvement over time and to make adjustments and to see if youre changing outcomes you have for students is incredibly valuable. We think about professional development as something that happens to teachers rather than as a process of improvement that requires evaluation and good information. Thank you. Thank you, mrs. Davis. The gentleladys time expired. Well hear from dr. Roe. Sorry i had to step out. The transportation directors and out there. Any time you talk about roads, you talk to that guy. Dr. Cantrel, i want to thank you and the bill and meLinda Gates Foundation, Distance Learning in east tennessee, a phenomenal success. A personal thank you. On the evaluations, mr. Harper, dr. Mcintyre, any of youn the classroom, a narrative of what i see and hear from former patients of mine, teachers, many i know well. We go i went to read to a class, second grade class, and as i got up to leave i said, how this young fellow doing . My friend who is a teacher said hes going to be with me again next year. I said why is that . He missed 60 days of school. Rst thing a doctor asks, has he been sick. She said, no, his dads in prison and his mother wont get him out of bed to get him out the door to get him to school. Hes going to be held back. That evaluation, that student didnt make adequate yearly progress, so he didnt learn what hes supposed to learn. Yet teacher friend is being evaluated on someone else. How do you do that . Because i hear that from teachers. There are things totally out of their control that are societal issues they are being evaluated on. I absolutely think were in medicine right now, were doing outcomes base, meaningful use criteria, educations doing the same thing. Trying to standardize what were doing and put a metric here and see if weve actually made progress. Let me throw that out to anybody. Dr. Mcintyre, anybody, mr. Hunter . That happens in schools across the country. Im glad you brought that up. For me personally, even if you ha students who are coming from these difficult backgrounds ultimately the buck stops with me. If im not making appropriate gains for the students im ultimately held culpable. However itsmportant to recognize you look at students growth and progress and make sure thats taken into consideration on how the teacher is evaluated. Yes, will students come from disadvantaged backgrounds and extrainie extraneous situations, yes. Make sure theres a plan for these specific students who might need extra support. Your job is oosieasier if yo got a mom and dad helping you out, i can tell you that. I agree, sure. You described making your job of teaching, youre a french teacher. Correct. Much hard. Dr. Mcentire, when youo evaluations how do you yes, sir. I any that that certainly is an important consideration. And i think thats also why its important that you look at multiple measures. I think its important that you, you know, for the tennessee system, you look at classroom observation and you go in and look a instructional practice and do that frequently. You do that at least a couple of times, if not, you know, for newer teachers, you know, up to four times in a year, you have conversations with teaches about that. As mr. Harper said, if youre measuring student growth over time as well, and the tennessee value added assessment system is said to take into accnt statistically some of those challenges of where students start and where they end the year and make sure that that teacher isnt penalized based on if i student starts the year below proficient, if they start the year academically behind but that teacher grows them over time that they essentially get credit. That thats take noon account in the measurement. And certainly the issue that you raise around supports for students and families is incredibly important. And that shouldnt necessarily be our job, but if it impacts student learn, it sort of becomes part of our job. Having to work with our students and our families to Broker Services or provide support is an important part of what we do in schools today. Do you think dr. Mcintyre, we have enough data in tennessee to recommend i know our race to the tops called first to the top. Do we have enough data now to recommend this teacher Evaluation System or some variant of it to the rest of the country or should we wait more time on that . Any of you can take that. I believe the basics of the model in tennessee are the right ones. I dont think the system perfect. I think there are certainly some areas that need to be improved upon. There are some areas that need to be tightened up. There are some challenges that still need to be worked through in the system that we have in place now. And i think, you know, one area is teachers who dont have individual growth data, how to make sure we address that. But i do think that the basic parameters of what we put in place in tennessee is quite good. I think it is something that, as we look to replicate t model elsewhere, i think its valuable in terms of having support for teachers, providing experience where they get feedback on a regular basis, where theyre reflecting on their practice, and its i see it improving instructional practice in the knox county schools. I yield back. The gentlemens time expired. Thank you very much. Thank you, mr. Chairman, for holding is hearing. Good morning, everyone. I come from a place way out in the pacific where unlike many School Districts here, you can reach into the next county and pull teachers, and we dont have that capacity. I also like to say that we have some bright spots in our school syem and its still a rough diamond but tre are bright spots and potential. I noticed because of the federal mandates our schools where actually forced in some instances to take teachers and move them into a lower level in terms of pay and things like that, federal mandates have required that. And actually two of my best teachers wont qualify as teachers. They happen to be my parents and i also but for now, id like, mr. Chairman, yield my time to mr. Polis. The remainder of my time. I thank the gentleman i deeply appreciate the time. As mentioned by my colleague, susan davis, were working on the stellar act. And we know that teacher qualitys thesingle, most important inschool fact that affects student achievement. It requires teachers to work with student staff, implement fair teacher and evaluation programs. Its the flexibility to do what works and this is an intensely local discussion of course between teachers and principals and School Boards. And we want to make sure there is the flexible to work as systems like the one that dr. Mcintyres outlined. At the same time its reasonable to say theres nothing so special about any district they can argue in this area of the county teachers dont need to be evaluated, perform doesnt need to be tracked. So i think that thats a reasonable balance between a federal role and a local role simply saying this needs to be done. We also feel, again, leaving it entirely open, but the stellar act, performance data, achievement data, needs to be a part of the discussion. Now that certainly done mean, nor should it as a best practice, be 100 of anything. But i think in every instance where weve seen a real meaningful performance agreement, an Evaluation System that teach arizoers agree to, t been multiple indicators and certainly academic growth on student assessments has been one of the multiple measures as dr. Poe mentioned. Its never statistically perfect. Surely theres you know situations beyond any teachers control and it affects a student here, a student there, thats why in these numbers need to be looked at in an aggregate way, a way thats fair to teachers. Colorado has recently implemented a teacher evaltion system. We had similar discussions at state level whether this should be one size fits all for the state or diricts. Weve created are creating a default out of the box state approach and districts can, if they choose, do their own. For many smaller districts that have a few hundred or few thousand people, its much easier to take something fully formed if its agreeable locally. Most major district want to go through their own work. My question for dr. Mcintyre is, what do you think we can do more of at the federal level to help ensure that more districts move in the direction that you have and to facilitate that however we can . Thank you. You know, as i said, i think that ifheres a role at the federal level it probably is to just, you know, to encourage and support the evaluation of teachers across across the United States. I think that we have found, having an evaluationsystem that evaluates every teacher every year that incorporates student achievement data and its based on multiple measures is an incredibly important, powerful structure. And you know, again, i think that whether that comes from the federal level or whether that comes from each of the 50 states, you know, i guess im agnostic about but i believe the value of ensuring that we have those important evaluation structures and evaluation conversations because i think thats one of the most important parts and i think mr. Harper said as well. Getting that feedback, reflecting on practice is incredibly important and powerful, and that what happens moves the dial on instructional practice and therefore moves the dial ostudent achievement. I thank the gentleman r his time. I yield back. Thank you. The gentlemans times expired. The chair recognizes himself for five minutes. Again, id like to thank each of youer for you coming today. Mr. Cantrel, will the me start with you. You said thatstudent characteristics are a lesser matter compared to the effectiveness of teachers in realizing high student achievement. That is fair . Yeah. Absolutely. Can you go further in that . Happy to do that. Yeah, irrespective of the stents who came in to a teachers classroom, we could see high and low quality practice. So it points back to mr. Roes earlier question,s this fair. We saw there were Great Teachers in places where kids were really struggling and there were Poor Teachers in places where kids were really advantaged and it really didnt matter where a student was starting. Right. Okay. Thank you. Does anyone else want to react to that . Agree, disagree. For the record, im hearing three agreements from the other witnesses. Dr. Cantrel, you also indicated that students surveys, along with classroom observations, et cetera, do a far better job of predicting which teachers succeed in raising students performance. It wasnt so long ago that i havent forgotten my High School Days and what i did and didnt do during those day. I was never empowered to evaluate a teacher. Id say now for good reason. But you n. All seriousness ive heard anecdotal torys, make one or two, where teachers were said to be forging the surveys because they were fearful of certain or maybe most students in their classrooms, depending on the school or area, and that empowerment and that if their salaries or what are elsewhere dependent on this, the students knew that. And the teachers view would have sabotaged that . Is that black helicopter stuff . In the met project teachers werent held accouable for the survey, it was a study. Part of the feedback loop that youre talking about . We found when talking to students they appreciated the opportunity and took it very seriously, the opportunity to give voice. We werent asking students about to make judgments that they werent highly qualified to make. We were asking them about the quality of their instructional environment and thats something where theyre the experts. You havent heard any stories about the likes that ive been talking about . No black helicopters. Doctor . I think there are structures you can put in place to make sure those surveys are done by the students and were actually piloting some student surveys this year, they wont count toward the evaluation, but it will be interesting information and based on the met study, its said to be highly reliable. So well take a look that the this ye. Dr. Watson . I think that ones working for you. It up to you. Now youre in stereo, probably. Were going to implement student surveys this spring for the first time. No worries . No worries, yeah. Mr. Harper . Theyre powerful tool, i use them in my classroom. I nuse in my own practice. Thanks for clearing that up. I was intrigued when you said teachers dont take an oath i never heard of a teacher taking an oath, maybe there are some out there. Philosophical question to enout my minute or so of time left, should there be an oath . And if so, who gets to write it . I think oohty there should be a higher stander to which teachers are held accountable because i too often teachers dont have the support in the classroom or teachers dont have the feedback they need to make sure they make appropriate gains. So you know, i think there should be an oath but oath that should be made is to continue to increase student achievement in the classroom. Who writes that, thats a great question. Ill have to get back to you. Well expect it in seven days. Anyone else . Quickly. 30 seconds left between the 3 of you on that last question. I think most teachers are deeply committed to children and deeply commied to the work that they do. I think in a lot of senses they take an oath to themselves and froops perhaps to a higher power when they go into the classroom making that a formal opportunity might be an interesting and useful thing to do. Thank you, doctor. Dr. Cantrel, anything to add . Amen. Dr. Watson . They should have an oath. And i think they take that oath every day when they go. We need to make sure the oath they take and professional development and support match up so they can actually do it. Thank you. My times expired. I now recognize mr. Scott for five minutes. Thank you, mr. Chairman. Thank you for this hearing. Its interesting that all of the witnesses have confirmed that the teachers resume is totally inadequate measure of their effectiveness. You have to do more than just look at the resume to ascertain whether or not the teacher is a good teacher. One of the things that concerns me is we keep trying to improve teacher quality without talking about pay scales. Dr. Mcintyre, if you had more money and could offer higher salaries, could you get more teachers . Thank you for the question. You know, i think i think resources, in terms of compensation, certainly is is one thing that can be helpful. I dont think its the sole criteria. I dont think it in and of itself is going to make a defense. We have put in place a strategic when you get down to the last few teachers youre trying to hire and theres a quality challenge if you had higher salaries you could attract a better pool of candidates, couldnt you . Yes, sir. I think thats i think thats fair to say. I think where that would be valuable is in competing with some of the other industries that teachers have the opportunities to go into. We do weve put in place a strategic Compensation Initiative that recognizes great performance and provides centives and rewards for great teaching and Student Outcomes. Thank you. Dr. Cantrel, you mentioned multiple measures for teaching and student component would be part of. Do you have multiple meares for the students, including, as dr. Mcintyre mentioned, a growth model rather than a pass fail model . The met project looked two e different student assessments, state assessment and supplemental test that was different than the state test and allowed students to demonstrate an answer more complex problems. And we saw that the results were similar independent of which tests that we used. They both were adequate for identifying teaching effectiveness. One of the problems i see in were trying to get the best teachers and most Challenging Schools. What incentive would a teacher ha to foe ito a Challenging School because it seems to me if youre based on student achievement, a bad teacher at a good school would have a better chance of keeping a job than a good teacher at a bad school. So its nice about how growth models work is they dont privilege the status of the studt. They actually reward a teacher for making progress with the student. And so there is no real advantage. It would be very hard for a teacher to figure out which student, based on their prior scores, is going to grow more and yet we are going to leave the last few minutes of this hearing. You can find the entire hearing in our Video Library online. Legislative work will begin at 5 00 p. M. Eastern time. The speaker pro tempore the house will be in order. The prayer will be offered by our chaplain, father conroy. Chaplain conroy let us pray. Dear lord, we give you thanks for giving us another day. At the beginning of a new workweek, we use this moment to be reminded of your presence and to tap the resources needed by the members of this peoples house to do their work as well as it can be done. May they be led by your spirit in the decisions they make. May they possess your power as they steady themselves amid the pressures of persistent problems. May their faith in you deliver them from intentions that tear the house apart and from worries that might wear them out. All this day and through the week, may they do their best to find solutions to pressing issues facing our nation. Please hasten the day when justice and love shall dwell in the hearts of all peoples and rule the affairs of the nations of earth. May all that is done this day be for your greater honor and glory. Amen. The speaker pro tempore the chair has examined the journal of the last days proceedings and announces to the house his approval thereof. Pursuant to clause 1 of rule 1 the journal stands approved. The pledge of allegiance will be led by the gentleman from oklahoma, mr. Mullin. Mr. Mullin id like to invite the guests in the gallery to please join us for the pledge of the United States of america. I pledge allegiance to the flag of the United States of america and to the republic for which it stands, one nation under god, indivisible, with liberty and justice for all. The speaker pro tempore the chair will entertain requests for oneminute speeches. For what purpose does the gentleman from South Carolina seek recognition . Mr. Wilson mr. Speaker, i ask unanimous consent to address the house for one minute and to revise and extend my remarks. The speaker pro tempore without objection, so ordered. Mr. Wilson mr. Speaker, last friday our National Security was placed at risk when the president s sequester began implementation. Sadly, this nearly 600 billion budget cut was the third attack on our nations military. In 2010, the Defense Department experienced a 100 billion budget cut and again in 2012, in january, president obama removed 487 billion from our military in annual budget. Maintaining a Strong National defense is the primary function of the federal government. Removing these resources so drastically places American Families and our allies, such as israel, at risk of future attacks. In fact, nearly half of all of the reductions in spending are on the Defense Budget which was only 18 of the entire federal budget. As a member of the House Armed Services committee, i appreciate chairman buck mckeeons efforts that the budget will not hurt defense. I look forward to addressing the wasteful spending and not holding our National Security hostage. In conclusion, god bless our troops and we will never forget global war on terrorism. The speaker pro tempore the gentleman yields back. For what purpose does the gentleman from oklahoma seek recognition . Mr. Millin id like to ask unanimous consent to address the house for one minute. Mr. Mullin id like to ask unanimous consent to address the house for one minute. The speaker pro tempore without objection. Mr. Mullin i come not as a republican or democrat but an american committed to the United States constitution. We pledge allegiance to the United States of america, not our political parties, and president George Washingtons farewell address he said, with slight shades of difference, you have the same religion, manners, habits and political principles. You have fought together. The independence and liberties you possess are the work of joint counsels and joint efforts of common dangers, sufferings and successes. Washington was right. We are all united by common bonds. Although we have our differences, we are more alike than we are different. In his address, washington was not speaking to one party, but to all the people of the young republic. If we dont start putting this Country First and partisanship last, were going to ruin the country our fathers founded. It is no secret that were facing difficult decisions, but im committed to working with any member of congress regardless of party as long as theyre willing to put Country First. Mr. Speaker, i yield back. The speaker pro tempore the member yields back. For what purpose does the gentleman from illinois recognition . I ask unanimous consent to address the house for one minute. The speaker pro tempore without objection, so ordered. Mr. Speaker, a report issued by the centers for Disease Control on february 13 made headlines with the news that young adults account for 50 of all s. T. D. Infections. Mr. Hultgren this caught my attention, because as a father with two of my four kids in their late teens, i want them to avoid such risks. Im not alone. A recent National Survey revealed that most parents feel the same way regardless of race or political affiliation. They want their children to have the best chance for Optimal Health and so support risk avoidance education, sometimes called abstinence education, for their kids. However, there is a troubling 161 federal funding disparity between contraceptive centered education and risk avoidance education. Thats why i introduced h. R. 718, the abstinence education reallocation bill. The bill brings some parody to kids. Mr. Speaker, our teens deserve the best and most Accurate Information for their Optimal Health and i yield back. The speaker pro tempore the gentleman yields back. For what purpose does the lady from the gentlelady from North Carolina rise . Ms. Foxx i ask permission to suspend the rules and address the house for one minute, mr. Speaker. The speaker pro tempore without objection, so ordered. Ms. Foxx mr. Speaker, the president s wrong to suggest taking more money away from the American People would ease the effects of his sequester or correct the debt crisis his policies have exacerbated. Despite high tax revenue, washington has been overspending by at least 1 trillion each year of the obama presidency. When families run out of money, they do the smart thing, stop spending so much. Washington has to do the same, but arbitrarily cutting budgets through sequestration isnt the best way. Twice since last summer House Republicans passed legislation to achieve the same savings while completely removing the indiscriminant threat of sequestration. Our plans targeted waste and limited government growth. The president threatened to veto our proposals because they didnt include taxes, and the senate never agreed on a sequester alternative. As the president s sequester takes begins to take effect, i will continue to advocate for common sense, replacing the arbitrary cuts with less wasteful spending and reforms to debtdriving programs. And with that i yield back. The speaker pro tempore the gentlelady yields back. For what purpose does the gentleman from indiana rise . Mr. Speaker, i request unanimous consent to address the house for one minute and to revise and extend my remarks. The speaker pro tempore without objection, so ordered. Mr. Speaker, 85 billion is a lot of money. Yet it represents just 2 of the 3. 6 trillion this nation spends every year. I hold in my hand two pennies. Two pennies to represent the 2 of budget reductions were asking for in this 85 billion sequester. Does anybody in this country believe that our federal government is so efficient and so effective that we cannot afford to trim two pennies out of every dollar . Mr. Messer over the last four years, too many parents have had to come home and tell their children theyre out of work, and too many young people have had to come home and tell their parents they cant find a job. We need leaders in this nation that will go to work for the people who live here and trim the two cents off every dollar we need to restore a healthy economy and put folks back to work. I yield back my time. Thank you, mr. Speaker. The speaker pro tempore the gentleman yields back. For what purpose does the gentleman from texas rise . I rise to address the house for one minute. And to revise and extend my remarks. The speaker pro tempore without objection. Mr. Burgess i thank the speaker. The Affordable Care act passed almost three years ago and the Affordable Care act was going to lower costs and why wouldnt you like it . You get free stuff. How do you pay for that free stuff . Turns out five new taxes were started on january 1 of this year. What are they and who do they affect . Theres a big tax on medical devices. Now, everyone talks about wanting to encourage american investment, encourage american manufacturing, but with this tax were encouraging manufacturers to go offshore. Flexible spending accounts are now limited. Whos affected by flexible spending accounts . People with predictable recurrent medical expenses who might want to spend some of their dollars aside and spend with pretax dollars. People with chronic illnesses, families with special Needs Children will be affected. Theres a surtax on Investment Income. The economys trying to recover. Why would we tax Investment Income . Itemized deductions are now going to be limited for people who are who itemize their deductions. Who is affected by in a . People with the highest medical expenses. And then finally the medicare payroll fax hike. Might sound like a good idea. Medicare might need more money. This money doesnt go to medicare. This money goes to fund new programs. Look, three years ago we were all told if you like what you have you can keep it. If you like your insurance you can keep it. If you like your doctor you can keep him or her. Turns out what we should have been hearing is youre going to pay a lot more to get a lot less. I yield back. The speaker pro tempore the gentleman yields back. For what purpose does the gentleman from North Carolina seek recognition . I ask unanimous consent to address the house for one minute. The speaker pro tempore without objection. Mr. Speaker, i rise today in honor of the centennial of hayesville. A city between the mountains and valleys of clay county in western North Carolina. Located along an old trading route, asite of former cherokee town of quantice, hayesville became a place for settlers during the western expansion. The need for local governance increased. In 1861, state representatives george hayes introduced legislation. As a county and community continued to grow, a county courthouse in Village Square were established in the town and in march of 1913, hayesville was officially recognized asage Incorporated Town and the county recognized as an Incorporated Town and the county. Hayesville importance to western North Carolina only grew as it became a center of commerce, point between franklin to the east and murphy to the west. Mr. Meadows and communities in georgia to the south. Hayesville continues to be an important representative of the small town family values and our mountain culture, so important to all of us in the western part of the state. Im proud to represent such a Strong Community and it is with great honor i recognize the centennial of hayesville, North Carolina. I yield back. The speaker pro tempore the gentleman yields back. The chair lays before the house the following communication. The clerk the honorable the speaker, house of representatives, sir, pursuant to section 3166b of the National Defense authorization act for fiscal year 2013, public law 112239, i am pleased to appoint former representative Ellen Tauscher of washington, d. C. , to the Congressional Advisory Panel on the governance of the Nuclear Security enterprise. Thank you for your attention to this appointment. Signed sincerely, nancy pelosi, democratic leader. The speaker pro tempore the chair announces the speakers appointment pursuant to 22 u. S. C. 1928a and in the order of the house of january 3, 2013 , of the following members on the part of the house of the United States group of the nato parliamentary assembly. The clerk mr. Poe of texas, vice chair. Mr. Shimkus of illinois. Mr. Jeff miller of florida. Mr. Guthrie of kentucky. Mr. Mareno of pennsylvania. Mr. Cotton of arkansas. The speaker pro tempore the chair lays before the house a communication. The clerk the honorable the speaker, house of representatives, sir, pursuant to the permission granted in clause 2h of rule 2 of the rules of the u. S. House of representatives, i have the honor to transmit a sealed envelope received from the white house on march 1, 2013, at 2 22 p. M. , and said to contain a message from the president whereby he notifies the congress he has extended the National Emergency with respect to zimbabwe. With best wishes i am. Signed sincerely, karen l. Haas, clerk of the house. To the congress of the United States, section 202d of the National Emergencies act provides for the automatic termination of a National Emergency unless within 90 days prior to the anniversary date of its declaration the president publishes in the federal register and transmits to the congress a notice stating that the emergency is to continue in effect beyond the anniversary date. In accordance with this provision, i have sent to the federal register for publication the enclosed notice stating that the National Emergency declared in executive order 13288 of march 6, 2003, with respect to the actions and policies of certain members of the government of zimbabwe and other persons to undermine zimbabwes democratic processes or institutions is to continue in effect beyond march 6, 2013. The crisis constituted by the actions of policies of certain members of the government of zimbabwe and other persons to undermine zimbabwes democratic processes where institutions has not been resolved. These actions and policies continue to pose an unusual and extraordinary threat. To the Foreign Policy of the United States. For these reasons i have determined that it is necessary to continue this National Emergency and to maintain and force the saxes to respond to this threat. Saxes to respond to this threat. Signed, barack obama, the white house. The speaker pro tempore referred to the committee on Foreign Affairs and ordered printed. Pursuant to clause 4 of rule 1, the following enrolled bill was signed by the speaker on friday, march 1, 2013. The clerk senate 47, the reauthorize the violence against women act of 1994. The speaker pro tempore the chair lays before the house a communication. The clerk the honorable the speaker, house of representatives. Sir, pursuant to permission granted in clause 2h of rule 2 of the rules of the u. S. House of representatives, the clerk received the following message from the secretary of the senate on march 4, 2013, at 1 12 p. M. Appointments, mission on security and cooperation in europe, hell zingy helsinki. With best wishes i am, signed sincerely, karen l. Haas. The speaker pro tempore pursuant to clause 12a of rule 1, the chair declares the house in recess the house will be back at 5 00 eastern time for legislative work. Expect them to take up a bill dealing with medical Disaster Research programs. Later, a spending bill to keep the funding to keep the government funded through the rest of the year. Live coverage of the house is always here on cspan when they gaveled back in. Earlier today, Homeland Security secretary, janet a. Napolitano, talked about the impact of recent budget cuts on airport and budget security. Here is what she had to say. Washington is very concerned about the sequester. You are saying that you are already seeing some affect some effects. Writes. Now that we are having to reduce or eliminate, basically, over time both for tsa and for customs, now that we have institutionalized a hiring freeze and cannot fill vacancies, and we will begin today sending out a furlough notices, we are already seeing the affects at some of the ports of entry. The big airports, for example. Some of them had very long lines. Specifically where . I want to go say oh hair. I want to say lax. I want to say atlanta, but i would have to check. The new york airports. Through ok, but that could be temporary. We will see these effects cascade over the next week. Is kind of lines are we talking about . Twice as long . Three times as long . I would say 150 to 200 . So, twice as long. Im trying to give you your story. What it would really see mike is, look people. I do not mean to scare. I mean to inform. If you are traveling, get to the airport earlier than you otherwise would. There is only so much we can do with personnel. These to not yell at customs officers. They are not responsible for sequester. Is that going to happen . I have not heard yet today how it went from customer traveler interaction. Nobody likes to wait in line. Nobody likes to wait in long lines. As a matter of sequester, this is happening and will continue to happen. We will hear more from other members of the president s cabinet throughout the week. Attorney general eric holder will testify before the Senate Judiciary committee during an oversight hearing on wednesday. Cspan will have live coverage on our companion network, c span3 starting at 10 00 a. M. Eastern. I was fascinated by her feminist view. You know. Remember the ladies, you will be in trouble. I am paraphrasing, obviously. She warned her husband. You cannot roll without including what women want and what women have to contribute. This is 1700 that she is saying that. Abigail adams. Tonight on cspans new history series. First ladies called mrs. President. She was outspoken. As one of the most prolific writers of any first lady, she provides an interesting window into colloquial america. Join the conversation on Abigail Adams tonight at 9 00 eastern on cspan, cspan radio, and www. Cspan. Org. Earlier today, the vice chair defended the feds keeping the Interest Rates below. She spoke about business economics in washington dc washington, d. C. The doctor brings a bracket on uniquely a background uniquely here. After receiving a degree at brown and a phd at yell, the doctor help the various positions at m. I. T. Before becoming a professor at berkeley. Increasingly, over the past two decades, the doctor has scared has shared her skills in the policy arena. She was the chief of president clintons council for economic advisers. And then president of the San Francisco fed and finally vice chairman at the Federal Reserve. The doctor possibly miss to research and discuss some of the thornier issues of economics assures that she is consider one of the most important Monetary Policymakers of our time. As a business economist, i particularly value the doctors high interest in reaching out to people in this room to understand how Monetary Policy is impacting the real world. The doctor is no stranger, having received the award from our organization in 2010 and supporting us several times over the past several years. The adam smith award is well earned as one of my colleagues said last week, the pattern is that she always states out ground where she thought she was right at the risk of being unpopular. Whether you agree with her ideas or policies or not, it is difficult to deny that it is a courageous and authentic life. During these times of extraordinary Monetary Policy, from not only the Federal Reserve but from the ecb and doj, i look forward to hearing her thoughts on the challenges confronting Monetary Policy. Thank you. [applause] thank you for that introduction. Thank you for inviting me. I am really delighted to address a group that has done so much to promote understanding of the economy and the appropriate role of policy. My topic today is the challenges confronting Monetary Policy in what has been an unusually weak recovery from a severe recession. I will discuss the Federal Reserves ongoing efforts to speed the u. S. Economies return to maximum employment and stability. As you know, the committee has recently taken new steps to achieve this objective. In september, the Committee Approved a new program of purchases, pledging to continue the program contingent on favorable ongoing evaluations of its efficacy and cost until there has been a substantial improvement and the outlook for the labor market. In december, the committee announced that it would purchase longerterm treasury securities after completion of the maturity of extension program. At the same time, it revamped its Forward Guidance for the federal funds race, explicitly linking the path of that rate to quantitative measures of Economic Performance. My goal today is to explain these policies and why i consider them appropriate under current conditions. With respect to the Asset Purchase Program, i discussed several Economic Indicators that i plan to consider in evaluating the outlook of the labor market. Then i will offer my perspective on this programs efficacy and cost. I will continue updating in light of experience. The committees recent actions are shaped by the fact that the labor market is still far from healed from the trauma of the great recession. Espied some welcome improvement, employment remains well below its prerecession heat. Reflecting an economy that is still operating far short of its potential. At 7. 9 in january, the Unemployment Rate stands well above the 5. 2 to six percent which is the central tenancy of the normal rate of unemployment. With Economic Activity constraints like his occult consolidation like this consolidation fiscal consolidation, most reported instant december that they expected only a gradual decline in unemployment over the next two years to about seven percent by the end of 2013. The large shortfall of employment relative to its maximum level has imposed huge yurdens on all too manty american households and represents a substantial cost. In addition, prolonged weakness could harm the economys potential for years to come. The longterm unemployed can see their skills you road, making these workers less attractive to employers. If these jobless workers were to become less employable, the natural rate of unemployment might rise or to the extent that they leave the labor force, we could see a persistently lower rate of labor force participation. In addition, the slow recovery has depressed the pace of capital accumulation. It also may have hindered new business and innovation. The developments would have an adverse effect on structural productivity. In contrast to the large gap between actual and maximum employment, inflation, apart from fluctuation due to energy and other Commodity Prices, has been running for some time now a little below the rate of two percent per year that insistent with the Federal Reserves dual mandate. The committee anticipates that inflation will continue to run at or below 2 percent over the medium term. Moreover, expectations for inflation over the next 5 to 10 years remain well anchored, according to surveys of households and professional forecasters. With employment so far from its maximum level and with inflation running below the committees 2 percent objective, i believe its appropriate for progress in the labor market to take center stage in the conduct of Monetary Policy. Let me therefore turn to the fomcs recent actions and describe how i see them promoting this important goal. Ill begin with the committees Forward Guidance for the federal funds rate. The fomc has employed such Forward Guidance since 2003 but has relied more heavily on it since december 2008, when the target for the federal funds rate was reduced to its effective lower bound. In current circumstances, Forward Guidance can lower privatesector expectations regarding the future path of shortterm rates, thereby reducing longerterm Interest Rates on a wide range of debt instruments and also raising asset prices, leading to more accommodative financial conditions. In addition, given the fomcs stated intention to sell assets only after the federal funds rate target is increased, any outward shift in the expected date of liftoff for the federal funds rate suggests that the Federal Reserve will be holding a large stock of assets on its Balance Sheet longer, which should work to further increase accommodation. Starting in march 2009, the fomcs postmeeting statements noted that Economic Conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period, and in november of the same year added low rates of resource utilization, subdued inflation trends, and stable Inflation Expectations as justification for this stance. In august 2011, the committee substituted at least through mid2013 for the words for an extended period. This date was moved further into the future several times, most recently last september, when it was shifted to mid2015. Also in september, the committee changed the language related to that commitment, dropping the reference to low rates of resource utilization and a subdued outlook for inflation. Instead, it emphasized that a highly accommodative stance of Monetary Policy will remain appropriate for a considerable time after the economic recovery strengthens, clarifying the committees intention to continue to provide support well into the recovery. Finally, last december, the committee recast its Forward Guidance for the federal funds rate by specifying a set of quantitative Economic Conditions that would warrant holding the federal funds rate at the effective lower bound. Specifically, the committee anticipates that exceptionally low levels for the federal funds rate will be appropriate at least as long as the Unemployment Rate remains above 61 2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the committees 2 percent longerrun goal, and longerterm Inflation Expectations continue to be well anchored. An important objective of these changes in Forward Guidance is to enhance the publics understanding of the committees policy strategy and its reaction functionnamely, how the fomc anticipates varying its federal funds rate target in response to evolving economic developments. For example, the committees initial, calendarbased guidance did not clearly convey the rationale for the specified date. In particular, when the committee extended the calendar date, the public was left to infer whether the change reflected a deterioration in the committees Economic Outlook or, instead, a decision to increase policy accommodation. In my view, the language now incorporated into the statement affirmatively conveys the committees determination to keep Monetary Policy highly accommodative until well into the recovery. And the specific numbers that were selected as thresholds for a possible change in the federal funds rate target should confirm that the fomc expects to hold that target lower for longer than would be typical during a normal economic recovery. This improved guidance should help the public to accurately adjust their expectations for the federal funds rate in response to new financial and economic information, which should make policy more effective. In addition, i hope that improved guidance will help to boost confidence in the outlook and bolster households unusually depressed expectations for income gains, which in turn will spur a faster recovery. A considerable body of Research Suggests that, in normal times, the evolution of the federal funds rate target can be reasonably well described by some variant of the widely known taylor rule. Rules of this type have been shown to work quite well as guidelines for policy under normal conditions, and they are familiar to Market Participants, helping them judge how short term rates are likely to respond to changing Economic Conditions. The current situation, however, is abnormal in two important and related ways. First, in the aftermath of the financial crisis, there has been an unusually large and persistent shortfall in aggregate demand. Second, use of the federal funds rate has been constrained by the effective lower bound so that Monetary Policy has been unable to provide as much accommodation as conventional policy rules suggest would be appropriate, given the weakness in aggregate demand. Ive previously argued that, in such circumstances, optimal policy prescriptions for the federal funds rates path diverge notably from those of standard rules. For example, David Reifschneider and John Williams have shown that when policy is constrained by the effective lower bound, policymakers can achieve superior economic outcomes by committing to keep the federal funds rate lower for longer than would be called for by the Interest Rate rules that serve as reasonably reliable guides for Monetary Policy in more normal times. Committing to keep the federal funds rate lower for longer helps bring down longerterm Interest Rates immediately and thereby helps compensate for the inability of policymakers to lower shortterm rates as much as simple rules would call for. I view the committees current rate guidance as embodying exactly such a lower for longer commitment. In normal times, the fomc would be expected to tighten Monetary Policy before unemployment fell as low as 61 2 percent. Under the new thresholds guidance, the public is informed that tightening is unlikely as long as unemployment remains above 61 2 percent and inflation one to two years out is projected to be no more than a half percentage point above the fomcs 2 percent longerrun goal. The evidence suggests that the evolution ive described in the committees Forward Guidance, particularly the new thresholds, has shifted the markets view of how forceful the fomc intends to be in supporting the recovery. In the Federal Reserve bank of new yorks survey of primary dealers, for example, participants have repeatedly revised downward the Unemployment Rate at which they anticipate that tightening will first occur. I mentioned that the fomcs new Forward Guidance offers considerable insight into the committees likely reaction function, but i should note that the guidance it provides is not complete. For example, the committee has not specified exactly how it intends to vary the federal funds rate after liftoff from the effective lower bound, although it has stated that when the committee decides to begin to remove policy accommodation, it will take a balanced approach. This language is consistent with optimal policy prescriptions that call for lowerforlonger considerations to pertain to the path of the federal funds rate both before and after liftoff. In addition, the guidance specifies thresholds for possible action, not triggers that will necessarily prompt an increase in the federal funds rate. The fomc statement therefore notes that in determining how long to maintain a highly accommodative stance of Monetary Policy, the committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and Inflation Expectations, and readings on financial developments. For example, the committee could decide to defer action even after the Unemployment Rate has declined below 61 2 percent if inflation is running and expected to continue at a rate significantly below the committees 2 percent objective. Alternatively, the committee might judge that the Unemployment Rate significantly understates the actual degree of labor market slack. A decline in the Unemployment Rate could, for example, primarily reflect the exit from the labor force of discouraged job seekers. That is an important reason why the committee will consider a broad range of labor market indicators. I will discuss some of the additional indicators i plan to consider in judging the strength of the labor market in connection with the committees Current Asset Purchase Program. Turning next to that program, the Federal Reserve initiated a new Asset Purchase Program last september, extending it in december, under which the Federal Reserve is currently buying agencyguaranteed mbs at a pace of 40 billion per month and longerterm treasury securities at a pace of 45 billion per month. As with the guidance for the federal funds rate, the committee tied the new program to labor market conditions, stating that purchases would continue until there is a substantial improvement in the outlook for the labor market in a context of price stability. The fomcs earlier largescale Asset Purchase Programs, in contrast, were fixed in size and carried out on a specified schedule. The committee has also noted that, in determining the size, pace, and composition of its asset purchases, it would take appropriate account of the likely efficacy and costs of such purchases. The purpose of the new Asset Purchase Program is to foster a Stronger Economic recovery, or, put differently, to help the economy attain escape velocity. By lowering longerterm Interest Rates, these asset purchases are expected to spur spending, particularly on interest sensitive purchases such as homes, cars, and other consumer durables. Research on the effects of such asset purchases suggests that what matters for the reaction of longerterm Interest Rates to a Purchase Program is the extent to which the Program Leads Market Participants to change their expectations concerning the entire path of the Federal Reserves holdings of longer term securities. Other things being equal, the greater the effect that a Purchase Program has on the expected path of the Federal Reserves securities holdings, the more substantial should be the downward pressure on the term premium in longerterm Interest Rates. By linking the pace of purchases and how long that pace will be maintained to the outlook for the labor market, the program acts as a sort of automatic stabilizer, as Market Perceptions of the prospects for the economy vary, so too should expectations of the pace and duration of asset purchases. In stating that asset purchases will continue, subject to caveats pertaining to efficacy and costs, until there has been a substantial improvement in the outlook for the labor market, the fomc established a criterion that differs in three important respects from the Forward Guidance for the federal funds rate, it is qualitative, not quantitative, it refers to an improvement in the outlook for the labor market rather than an improvement in actual labor market conditions, and 3 it requires the committee not only to consider progress toward its employment goal, but also to evaluate the efficacy and costs of asset purchases on an ongoing basis. The public is, naturally, eager to understand how the fomc will approach such complex judgments. I cannot, of course, speak for the committee on this issue, but i can spell out some of the key factors that will guide my conclusions. The first imperative will be to judge what constitutes a substantial improvement in the outlook for the labor market. Federal reserve Research Concludes that the Unemployment Rate is probably the best single indicator of current labor market conditions. In addition, it is a good predictor of future labor market developments. Since 1978, periods during which the Unemployment Rate declined 1 2 percentage point or more over two quarters were followed by further declines over the subsequent two quarters about 75 percent of the time. That said, the Unemployment Rate also has its limitations. As i noted before, the Unemployment Rate may decline for reasons other than improved labor demand, such as when workers become discouraged and drop out of the labor force. In addition, while movements in the rate tend to be fairly persistent, recent history provides several cases in which the Unemployment Rate fell substantially and then stabilized at stillelevated levels. For example, between the Fourth Quarter of 2010 and the First Quarter of 2011, the Unemployment Rate fell 1 2 percentage point but was then little changed over the next two quarters. Similarly, the Unemployment Rate fell 3 4 percentage point between the Third Quarter of 2011 and the First Quarter of 2012, only to level off over the subsequent spring and summer. To judge whether there has been a substantial improvement in the outlook for the labor market, i therefore expect to consider additional labor market indicators along with the overall outlook for Economic Growth. For example, the pace of Payroll Employment growth is highly correlated with a diverse set of labor market indicators, and a decline in unemployment is more likely to signal genuine improvement in the labor market when it is combined with a healthy pace of job gains. The Payroll Employment data, however, also have shortcomings. In particular, they are subject to substantial revision. When the Labor Department released its annual benchmarking of the Establishment Survey data last month, it revised up its estimate of employment in december 2012 by 647,000. In addition, i am likely to supplement the data on employment and unemployment with measures of gross job flows, such as job loss and hiring, which describe the underlying dynamics of the labor market. For instance, layoffs and discharges as a share of total employment have already returned to their prerecession level, while the hiring rate remains depressed. Therefore, going forward, i would look for an increase in the rate of hiring. Similarly, a pickup in the quit rate, which also remains at a low level, would signal that workers perceive that their chances to be rehired are good in other words, that labor demand has strengthened. I also intend to consider my forecast of the overall pace of spending and growth in the economy. A decline in unemployment, when it is not accompanied by sufficiently strong growth, may not indicate a substantial improvement in the labor market outlook. Similarly, a convincing pickup in growth that is expected to be sustained could prompt a determination that the outlook for the labor market had substantially improved even absent any substantial decline at that point in the Unemployment Rate. Let me turn next to the efficacy and potential costs of asset purchases, a topic discussed at recent fomc meetings and that i suspect will be discussed at succeeding meetings as well. I see the currently Available Evidence as suggesting that our asset purchases have been reasonably efficacious in stimulating spending. There is considerable evidence that these purchases have eased financial conditions, and so have presumably increased interestsensitive spending. Research suggests that our purchases of mortgagebacked securities pushed down mbs yields and that mbs yields pass through, with a lag, to mortgage rates. Indeed, i see the recent strength in housing and consumer durables, such as Motor Vehicle purchases, as partly reflecting the effect of reduced borrowing costs. Plausible, albeit uncertain, estimates of the ultimate economic effect of asset purchases can be obtained from simulations of the boards frb us model. Such simulations suggest that a hypothetical Program Involving 500 billion in longerterm asset purchases would serve to lower the Unemployment Rate by close to 1 4 percentage point within three years while keeping inflation close to the committees 2 percent objective. One issue on which there has been considerable debate is whether low Interest Rates are doing as much to promote Economic Growth since the financial crisis as they would have before the financial crisiswhether the Interest Rate channel of transmission for Monetary Policy has been attenuated. I agree with those who think this channel has been partially blocked. Individuals who have impaired Credit Histories, have been unemployed, or hold underwater mortgages are experiencing great difficulty gaining access to credit, whether to buy or refinance a home, finance a small business, or support spending for other needs. Even those with good, but not stellar, Credit Histories and sufficient income are facing capacity constraints in the mortgage market. However, even if the Interest Rate channel is less powerful right now than it was before the crisis, asset purchases still work to support Economic Growth through other channels, including by boosting stock prices and house values. The resulting improvement in Household Wealth supports greater consumption spending. Turning to the potential costs of the Federal Reserves asset purchases, there are some that definitely need to be monitored over time. At this stage, i do not see any that would cause me to advocate a curtailment of our Purchase Program. To address one concern that i have heard, there is no evidence that the Federal Reserves purchases have impaired the functioning of Financial Markets, and, while we continue to monitor market function carefully, so long as we pursue our purchases sensibly, i do not expect market functioning to become a problem in the future. Further, ive argued previously, and still judge, that the fomc has the tools it needs to withdraw accommodation, even if the Balance Sheet at that time is large. These tools include a new one, approved by the congress during the financial crisis, which allows the Federal Reserve to pay banks interest on their reserves. A suite of supporting tools, such as reverse repurchase agreements with a wide range of counterparties and the term deposit facility, are routinely tested to make sure that the Federal Reserve is prepared to use them and that they will work as planned. Two additional costs have been discussed at recent meetings of the fomc. First, the expansion of the Balance Sheet has implications for the Federal Reserves earnings from its Asset Holdings and, hence, for its remittances to the treasury. Second, some have raised the possibility that the committees policies could have negative consequences for Financial Stability. With respect to the Federal Reserves remittances, Balance Sheet operations are intended to support Economic Growth and job creation in a context of price stability and not to maximize Federal Reserve income. There is a possibility that the Federal Reserves earnings from its assets and the remittances of those earnings to the treasury will decline later in the decade, perhaps even ceasing entirely for some period. It is important to note, however, that any losses that could conceivably occur would not impair the Federal Reserves conduct of Monetary Policy. Further, even if remittances to the treasury ceased for a time, it is highly likely that average annual remittances over the period affected by our asset purchases will be higher than the precrisis norms. Though our expanded portfolio of longerterm securities has in recent years translated into substantial earnings and remittances to the treasury, the Federal Reserve has, to be sure, increased its exposure to Interest Rate risk by lengthening the average maturity of its securities holdings. As the economic recovery strengthens and Monetary Policy normalizes, the Federal Reserves Net Interest Income will likely decline. In particular, the Federal Reserves interest expenses will increase as shortterm Interest Rates rise, while reserve balances initially remain sizable. In addition, policy normalization may well involve significant sales of the Federal Reserves Agency Securities holdings, and losses could be incurred in these sales. A recent study by the board staff considered the effect of a number of scenarios on Federal Reserve income, based on assumptions about the course of Balance Sheet normalization that are consistent with the exit strategy principles adopted at the june 2011 fomc meeting. The projections resulting from this exercise imply that Federal Reserve remittances to the treasury will likely decline for a time. In some scenarios, they decline to zero. Once the Federal Reserves portfolio is normalized, however, earnings are projected to return to their longrun trend. The study supports the conclusion that the Federal Reserves Purchase Programs will very likely prove to have been a net plus for cumulative income and remittances to the treasury over the period from 2008 through 2025, by which time it is assumed that the Balance Sheet has been normalized. Focusing only on the ebb and flow of the Federal Reserves remittances to the treasury, however, is not, in my view, the appropriate way to evaluate the effect of these purchases on the governments finances. More germane is the overall effect of the program on federal finances. If the purchases provide even a modest boost to Economic Activity, increased tax payments would swamp any reduction in remittances. By depressing longerterm Interest Rates, the purchases also hold down the treasurys debt service costs. These effects can be quantified through simulations of the boards frb us model. In the simulation i described earlier, a hypothetical Program Involving 500 billion of asset purchases would reduce the ratio of federal debt to Gross Domestic Product gdp by about 1. 5 Percentage Points by late 2018. The lower debttogdp ratio mainly reflects stronger tax revenue as a result of more robust Economic Activity. Finally, let me comment on the possibility that our Asset Purchase Program could threaten Financial Stability by promoting excessive risktaking, a significant concern that i and my colleagues take very seriously. To put this concern in context, though, remember that during the most intense phase of the financial crisis, risk aversion surged. Even in the aftermath of the crisis, businesses, banks, and investors have been exceptionally cautious, presumably reflecting their concern about future business conditions, uncertainty about economic policy, and the perception of pronounced tail risks relating, for example, to stresses in Global Financial markets. I see one purpose of the committees accommodative policies as promoting a return to prudent risktaking. Indeed, the return to more normal levels of risktaking and the associated normalization of credit markets have been vital to recovery from the great recession. Of course, risktaking can go too far, thereby threatening future Economic Performance, and a low Interest Rate environment has the potential to induce investors to take on too much leverage and reach too aggressively for yield. At this stage, there are some signs that investors are reaching for yield, but i do not now see pervasive evidence of trends such as rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would clearly threaten Financial Stability. That said, such trends need to be carefully monitored and addressed, and the Federal Reserve has invested considerable resources to establish new surveillance programs to assess risks in the financial system. In the aftermath of the crisis, regulators here and around the world are also implementing a broad range of reforms to mitigate systemic risk. With respect to the large Financial Institutions that it supervises, the Federal Reserve is using a variety of supervisory tools to assess their exposure to, and proper management of, Interest Rate risk. To the extent that investors are reaching for yield, i see the low Interest Rate environment and not the fomcs asset purchases, per se, as a contributing factor. It is true that asset purchases put downward pressure on the term premium component of longerterm rates, and that discontinuing purchases would likely cause term premiums to rise. But ending asset purchases before observing a substantial improvement in the labor market might also create expectations that the amount of accommodation provided would not be sufficient to sustain the improvement in the economy. This weakening in the Economic Outlook might bring down the expected path of the federal funds rate, with the result that longerterm Interest Rates might not rise appreciably, on net. Moreover, a weakening of the economic environment could also create significant Financial Stability risks. That said, Financial Stability concerns, to my mind, are the most important potential cost associated with the current stance of Monetary Policy. In these remarks, i have reviewed recent fomc policy actionsactions i have supported because i believe they will help foster a stronger recovery and keep inflation close to the committees longer run target. I recognize that the Federal Reserves highly accommodative policy entails some costs and risks. It will be important both to monitor them and to continue strengthening our financial system. However, insufficiently forceful action to achieve our dual mandate also entails costs and risks. There is the high cost that unemployed workers and their families are paying in this disappointingly slow recovery. There is the risk of longerterm damage to the labor market and the economys productive capacity. At present, i view the balance of risks as still calling for a highly accommodative Monetary Policy to support a stronger recovery and morerapid growth in employment. Thank you for inviting me to speak to you today at nabes spring conference. [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2013] in europe led all packets in your little packet there should be a piece of paper to write out questions. We are short on time. I will dive right in. You talked about the composition of asset purposes between mortgages and treasurys and how we think about that. Is it a decision based on the fire power of those purchases . Is there an objective difference between a mortgage purchase and a treasury purchase . As we see them but reasonably efficacious in taking duration out of the market and pershing. Erson down terms probably our purchases have been somewhat larger impact on yields. I think we have seen that there is some segmentation in the market. To the extent there is some segmentation in the market and pushing down mortgage rates, it seems like a particularly efficacious way of spurring recovery by urging a faster recovery in the housing market. I see that as an efficacious route as well. We have decided to pursue a diversified approach. This is one that i find very interesting. Given the strong recovery in in profits, why have we not seen that reflected . I think youre absolutely right. We have seen very strong growth in corporate profits. I think businesses have been very careful to control costs. We know that they are doing everything that they possibly can to ensure a strong bottom line. Earlier in the recovery, we saw very substantial productivity growth. I think the reason they are not higher, part of this reflects uncertainty and unwillingness to make longterm decisions, most important i would say is it just a shortage of aggregate demand. Their sales are not booming. Given the very slow growth of in sales that they see, they do not find it necessary to expand an a veryt at more the modest pace. Our objective is to get demand growth is growing. A shortage of aggregate demand reflects what households are trying to tighten their belts in the aftermath of the crisis. It also reflects a fiscal policy that has been much less committed as we have seen in past recoveries. Also, said the slowdown in the Global Economy we see is affecting their global sales. I will try to read this directly. Seem to review the reduction as the first step in tightening contrary to what you have stated. Tavis the plan plan to address this misconception given the drop in asset prices how does this plan to address the misconception given the drop in asset prices . Our asset purchases are continually adding accommodation as long as we engage in them. It is as though we are putting more and more accommodation into the system. The level of accommodation is increasing as long as those purchases continue. The fomc has made it very clear. Let me try to emphasize again my own view that once accommodation has peaked, when asset purchases come to an end, think of it as a level of accommodation has no now risen and pete. It the intention is to leave that in place until well into the recovery. Quantitative threshold we have offered with respect to the federal funds rate should make it completely clear that as long as inflation is well be hated the committee has no intention of beginning to raise its target to the federal funds rate until unemployment is declines to 6. 5 . When that is reached, that is not a trigger. It is a threshold for possible action and not a guarantee that action will occur. The committee has made clear that it intends to hold on its Balance Sheet of the assets that we acquire through this Purchase Program until after we began raising the federal funds rate. While our exit principles indicate that we anticipate slow, gradual at a particular rate sale of assets, we would not consider selling assets off until after the federal funds rate is increasing. That accommodation we expect to be in place for a long time. While i recognize that we have not provided clear, quantitative guidance as to how long asset purchases will continue, that is a complex judgment that involves a lot of piece, efficacy, cost, and a judgment about what it means to see a substantial improvement in the outlook. There may be uncertainty about it. We are continuing to add more accommodation as long as the program continues. The final question is, given the changes in the dojs mandate and the ecbs approach to Monetary Policy, how is the Federal Reserve coordinating with the other Central Banks and . We coordinate to the extent we make regularly and discuss the common set of issues that face all of our economies. For all of those that he mentioned a while europe has its own special set of issues that the United States and japan do not face, we all suffer from very slow disappointing growth and have a common desire to foster strong Economic Conditions. We compared notes quite frequently about the different programs that we are pursuing. If you look at our Balance Sheet, all three Central Banks have greatly increase our Asset Holdings. It is interesting to see in the United States and europe and many other advanced countries, the u. K. And others, longterm and shortterm Interest Rates gave a speech. These are the policies that we are all commonly undertaking. We face a common set of issues. Thank you again. Thank you for spending some time with us. [applause] we will have more from the Business Economics Group in just a moment. First checking in on capitol hill. The house will be back at 5 00 p. M. Eastern. We will have coverage here. Later, the house is expected to work on a bill to fund the federal government for the rest of the fiscal year. Current funding right out runs out on march 27. How rodgers introduced a bill that would fund the government through september. He said it will Fund Programs and services that is from the House Appropriations committee. I will bring you updates on the legislation as they become available. I was fascinated by kirk feminist view. By her feminist the view. Remember the ladies, you will be in trouble. I am freezing. Each cannot without including what you cannot rule without including what women want. This is the 1700s. Abigail adams tonight on c spans new history series. She was caught mrs. President by her detractors and was outspoken on womens rights. She provides a unique window into colonial america and her life with john adams. Join in on the conversation like tonight and 9 00 p. M. Eastern here on cspan and cspan. Org. Do you find that washington and Silicon Valley are on two different planets of . I think that is probably fair to say. The thais are probably getting closer. There is more interaction these days. In many ways, folks in Silicon Valley did not care or what to know what was going on in washington. Likewise, the folks in washington have been tone deaf to what is going on with the technology industry. Follow a Technology Columnist as he tours the ces show tonight at 8 00 p. M. Eastern on cspan2. Earlier today, the Congressional Budget Office director talked about bringing the budget on to a sustainable path. This is about 45 minutes. Good morning. I am president and ceo of the National Retail federation. It is a pleasure to be here as one of the sponsors of the program. It is a pleasure to be participating in the conversation with our next speaker. I am joined today by the chief economist jack, my colleague who is on the board of nave and is an elected officer and will be president next year. Thanks for all your great work. The National Retail federation represents 10,000 retailers of all shapes and sizes. From global brand names to local main street stores. All of those retailers are impacted often first and usually quite acutely by the type decisions that polity policymakers in washington make in do not make about the things we care the most about. In an economy that is driven largely by consumption, retailers to play outside rules and job creation economic output. Nearly 42 million jobs in this economy. The jobs are going from the entrylevel jobs to jobs that reflect the High Technology that is being applied. That is because of the relationship retailers have with their customers. When we talk about tax increases in Commodity Prices and energy prices, retailers feel that often first and acutely. Here we are on the first full business day in the post sequester era. I do not know if they were simply a cynical and they figured there would be a failure. Maybe they shorter the sequester deal. Either way, this is a terrific day for us to have him here with us. Doug is well known in economic circles. He has been in washington and has been influential for many years. He has an impressive biography. He serves in a senior position at the brookings institute. I have to say he is an expert on the workings of macroeconomic markets. The thing that i found really telling was the choice for a dissertation board against which he defended his pieces. At an early age he was willing to take on big challenges. He does not shrink from the challenge. He is the right man for the job for us to have a conversation. Please join me in a welcome for the director of the Congressional Budget Office, elendorf. Ug thank you very much. It is great to be back here picture the cbo release its latest outlook for the budget and economy a few weeks ago. It showed that the country continues to face very large budget and economic challenges. I would like to briefly summarize the budget outlook to talk about some of the consequences of high and rising federal debt and to present quite criteria. How large are projected deficit . Under current law this will shrink in 2013 for the fourth year in a row. A 845 billion, this will be the first year with a deficit under 1 trillion. This would be about half as large relative to the size of the economy. You can see in the picture our projection under current law shows deficits continuing to fall for the next few years before turning up again by the end of the decade in totaling about 7 trillion. Federal revenues of the lower line are projected to increase relative to the size of the economy in reached 1970 gdp in 2015 and beyond. Because of both the expanding economy and schedule changes in rules. A comparison average of about 18 over the past 40 years. At the same time, if current laws remain in place, federal spending will fall relative to the size of the economy and then rise again. The decline can be traced to be discretionary funding. That tend to go up when the economy is weak. Part of this is the return of Interest Rates to more normal levels and our projection that would push up Interest Payments to nearly their highest share of gdp in did years. Another of the decade a significant expansion of federal Healthcare Programs and rising healthcare costs per person will push up spending on the largest federal programs, Social Security, medicare, medicaid. By 2020. It reaches 23 a g. D. P. What does this mean for federal debt that we expect that will reach 76 of gdp this year, at the highest since 1950. We protect the dick predict it will be higher than the 39 average. It will be rising again as part of the economy. There are a few point worth making. There few consequences i want to list. There is the crowding out of capital investment. Second me that lawmakers will have less flexibility to use spending policies to respond to unexpected challenges like a recession or war. Debt was about 36 of gdp in 2007. It is not about to be 76 of gdp. We used a tremendous amount of physical space to respond to the financial crisis and for the automatic stabilizers. The options were much more limited its debt is standing above 70 of gdp. A third consequence is a heightened risk of a fiscal crisis. The government would be unable to borrow at affordable Interest Rates. A fourth point to make is that our projection of debt is a concern in part because that would be even larger if current laws were modified to delay our and do certain scheduled change shows. Suppose they eliminated the automatic spending cuts but left in place the original spending caps set in motion in 2011. They also extended all the tax provisions that are supposed to expire in prevented the sharp payment to doctors scheduled to take effect next january. If they make no other policy changes with offsetting budget affects, deficits would be a good deal larger than in our baseline projections. The public would reach 80 7 of gdp by the coming decade and said the 77 term that we project under current law. A fifth source of concern is that even the original would reduce such spending cuts to just 5. 8 of gdp in 2023, a smaller share that in any year has only been collecting data on discretionary programs for 50 years. This of be the lowest point of the share of gdp in the entire span. This is under the original, not even allowing for the effects of the sequestration that would puch those lines further down. The allocation is determined by annual appreciation no, appropriations act feared they cannot decide which ones will be constrained. Because they are so low relative to gdp, finding enough acceptable ways to constrain spending might be quite difficult. The sixth point i want to make about those consequences is emphasize the tenure projections do not fully reflect longterm budget pressures. Jacob presented numbers from last summer. We have not yet updated that to take account of Development Since then. We will be doing that again. In our last longterm budget outlook, we projected spending on Social Security would rise by about 5 a g. D. P. Over the next 25 years. It led to that shift in the distribution of pie charts that jacobs showed. Because of the aging of the population and rising costs per person, a wide gap exists between the future cost of the benefits and services that people are accustomed to receiving and the tax revenues that people are accustomed to sending. What might be done to reduce future deficits and debt . This is a hard but not unsolvable problem. Cbo estimates of the effects of many specific changes in policy but i will not try to run through the menu. Let me discuss some criteria that might be used for evaluating proposed policy changes. The first criteria is how much would that be reduced over the current decade relative to our projections under current law. The more that debt is reduced the more that the harms caused by high debt would be afforded. The greater the loss for the burdens on individual businesses of higher taxes. It is not clear how much Debt Reduction is appropriates. The cbo does not make a recommendation. What to give you a sense of these gale of the challenge. But of debt or 36 . We estimate it will be about 76 by the end of this year. That is an increase of 40 of gdp. Suppose you wanted to bring debt back down to earlier levels. They ought to do it gravelly gradually. That would require a reduction. It will be 68 by the end of the debt it. Weve read these reports a few weeks ago that looked at the economic effects of alternative but to pass their we did not try to specify the combination of those policies. This is a 2 trillion reduction in the primary deficits which would have positive of that in reducing Interest Payments. Path would bring the debt to gdp ratio down to about 68 of gdp by the end of the coming decade. It brings it back down to where it was six years ago 50 years from now. There are many alternatives that are available. Some had greater reduction deficits. We looked at one that had an increase. This gives you the budget challenge. The second criterion is how quickly would debt be reduced dads that is a tradeoff. Assume the deficit are cut. The greater drag on Economic Activity over the next few years. Several provisions of current law abri down the deficit and will weaken output and employment this year. Let me elaborate. The effects of the housing crisis appeared to be finally, it gradually fading. We fill an upswing in construction and equity prices and increasing availability of credit will help to spur a Virtuous Cycle of faster growth in Consumer Spending in Business Investment over the next few years. At the same time, the expiration of payroll tax cut in income above certain thresholds have just taken up that. They will restrain both government and private spending. On balance we think that inflationadjusted gdp will increase by about 1. 5 this year but would increase roughly 1. 5 faster than that it not for the fiscal tightening. Under current law we expect that the Unemployment Rate will stay above 7. 5 through next year. That would make 2014 the sixth Consecutive Year with unemployment so high. The output will remain below its potential until 2017, nearly a decade after the recession started at the end of 2007. The third criterion for evaluating the proposed policy changes is how with the resources be allocated. Under current policies, we are on track to have a thorough budget that will look very different from the budgets of the past. As population ages and Health Care Costs rise, a much larger share of federal benefits will go to particular programs whose benefits are focused on older americans. The total spending on Social Security and the Major Health Care programs. At the same time, a much smaller share of federal spending will go to other types of benefits and services. They include all of the means tested programs, food stamps, subsidized housing, a family support, defense, transportation, research, education, law enforcement. If additional deficit reduction was achieved by cutting benefits and services relative to what would happen under current policy, the country would move even further away. It is important to understand in the debates about what part of the Government People might want to make smaller or how much tax revenue should be increased to support Government Spending. The fourth criterion for evaluating policy changes is how would those changes the fact longerterm performance . It will reduce the amount of waivers supplied to the economy. Increasing marginal tax rates on capital would tend to reduce peoples incentives to save. Cutting government benefit programs would strengthen peoples incentive to work and save will reducing government investments in things like infrastructure and education could decrease future output. To assess the overall Economic Impact of the deficitreduction plan. Even if lawmakers reduced federal budget deficits to policy changes, the net impact on the nations longterm output in the positive. A final criterion is who would bear the burden of those changes . Most changes would affect how tax burdens and government benefits and services are distributed among people at different income levels. Many such changes would affect the relative burdens of taxes or benefits received by people love similar incomes. By people who have similar incomes. In addition to the considerations i have discussed before, about the allocation of federal spending, the effect of changes and the distribution are important consideration on policymakers mines. I want to conclude by emphasizing the key implications of cbo cost budget projections. Given the magnitude of the imbalance between revenue and spending under current policies, putting the debt on a sustainable path will require increases in taxes or cuts in Government Spending or services for people who consider themselves to be middleclass. Thank you. I am happy to take any questions that you have. [applause] i have a couple to start with. And then we will get some from the audience. People can write the questions down on the cards. What you were thinking about those, let me start with one about simpsonbowles and what could have been or what might yet be in terms of a deal related to simpsonbowles or Something Like that. Have you done any modeling or did you at the time to see what the implications would be had simpsonbowles been adopted . There is simpsonbowles ii now. We never did an analysis of the simpsonbowles proposal. It was never brought to us by the chairman or Ranking Members of the committees. For us to do an official estimate. The work they did drew on a lot of informal estimates that we provided to the congressional committees overtime. In the course of the past few years, as the congressional leadership and the ministration have worked on proposals, grand bargains, we have provided tremendous amounts of the estimates and analysis behind thescenes. The way cbo works, if the proposal is in the Public Domain, if someone has introduced a bill, our estimates of that bill are always public. In order to give the committees a chance to work on developing proposals, when people are developing proposals confidentially, i work for them in confidential. We have filled notebooks full the estimates over the past few years that are not in the Public Domain because the proposals were largely private as well. What one can take from the process is that there are a wide range of policy changes that can be made, but it will take a fair number of them and a fair number of significant changes in policy to add up to Something Like a trillion or 2 trillion or more dollars of the next 10 years. That is especially true today relative to a couple of years ago now that caps have been imposed on Discretionary Spending. Those caps are pushing Discretionary Spending down. Now that tax rates have increased, some of the first place this that the congress has gone over the past couple of decades, they have already gone. They have gone to a higher tax rates and hire people. They have gone to cutbacks in payments to providers and medicare. Both of the places of those deals tended to get to the money. Now that those pieces have been used, the difficulty of achieving a reduction is harder because policy makers are more likely to look at more substantial changes in government benefits or can taxes that apply to broad Cross Section of americans. One of the several of these relate to your last slide. It is the 64 question. Several of these asked about whether you might elaborate on that. The basic question, i think, is whether policymakers are being honest maybe i should not put it in terms of honesty. Are they speaking realistically it when they suggest to there is a path forward that does not include some of the best potential pain for the middle . Lass ta it is difficult to see how we can put the debt on a sustainable path without cutting Government Services or raising taxes. That does not mean that one cannot take action to reduce the deficit. One can raise taxes for higher income people. One can cut benefits for lower income people. The magnitude of the deficit reduction needed, the magnitude of a deficitreduction needed is very difficult to see how that can be achieved without making changes in those benefits. I would go back to the earlier slide about the distribution of Government Spending. But Government Spending is higher today than it has been on average. In 2012, Government Spending was about 2 of gdp higher than it was on average over the past 40 years. That 2 can be more than explained by an increase in cost. Everything else the government has put together is a smaller share of gdp in 2012 that it is been on average in the past 40 years. Everything together is a smaller share of gdp. The thing that has grown in the Social Security, medicare, and medicaid. Social security and medicare provide the deaths provide benefits to older americans. About twothirds of the money that one out of medicaid in 2012 was for the care of older or blind or disabled americans. Those are people who have run out of the income or wealth. Many of them are not poor. They have become poor in old age or through high medical expenses. It is hard to see how the debt cash can be on a sustainable path without raising taxes on a broad group of americans. If this were a room full of business economists that represent a lot of organizations, most of us believe that the problems we face would be addressed more comfortably if we could get the economy growing at something higher than the rate at which it is growing now. Some of these questions relate to whether recent changes showed the nearterm outlook has improved. And whether you might elaborate on some of the socalled fiscal multipliers that might have a positive impact of what these projections could look like if we were growing. Our forecast for 2013 is rosier than it was last august. Opposite forecast has to follow current fiscal policy. Last august, there was a tremendous fiscal cliff that would occur. As you know, congress and the president did agree to take away substantial parts of that cliff. That improved our forecast for 2013. They left in place a number of pieces of significant fiscal tightening, which is having a substantial effect on growth this year. If the economy grew more rapidly, that would be a very good thing for the budget and for everybody in many other ways as well. It is hard to see are forecast could be way wrong either by being too pessimistic or optimistic. The range of uncertainty is extremely large, what my previous roles was working Economic Forecasting at the Federal Reserve. That is a hard task. If you look at our historical record of accuracy, we have been labor a lot. Way wrong a lot. How one gets there, i think, is not obvious. We have over the past several years offered a number quantity of estimates of the number of fiscal policy options cutting taxes that we think will be good for the economy. If one does extra borrowing and does not implement other policies to pay off that debt, one is making the longer term worse. We have offered policymakers a set of those changes. Some policies have been put in place. The temporary cuts in the payroll tax. I would not speak at length about Monetary Policy. The other tool that federal policy makers have is federal regulatory policy the rules of the impact of those roles are coming out slowly. We think that has created some uncertainty that is restraining Economic Activity. How we quantified bad, i think, quantified that, i think, overseaes. There are a set of options that would spur growth over the mediumterm and longterm. The demographic point is really crucial. We expect even after the economy is back up to potential comment that potential will grow about 2. 25 at year. The difference in our projection is very largely in the growth of the labor force. With the retirement of the baby boomer generation and an end to the longstanding increase and womens labor work participation, we believe that Labor Force Growth will be much slower in the future. Bats can be affected a little bit by changes in part that can be affected a little bit by changes in policy. The economy is likely to grow much more slowly. What happens to technology . All the other factors that affect how labor and capital are put together. Federal policy can make some difference is there as well. Those things are not likely to matter a lot in the near term. You just reference to some of the references he did a number of slides for a spirit he did a number of slides for us. Folks on the health care cost, due to the demographic changes, and there are a number of questions here about Health Care Costs and cost curve. And whether the Affordable Health care act has started to bend the cost curve, whether that is in your projections and whether that will have a positive impact of how we go forward. Help cost growth in the country has been much slower over the past half we can sit back and the private sector, medicaid, medicare. We see its in medicare in part a, part b, and in d. The slowdown is fairly broadbased. It has been going on for several years. We are frantically trying to figure out why and what that portends for future growth. Our view is that part of that slowdown is due to the recession and a loss of wealth and slow income growth. A substantial part of the slowdown is due to structural changes. That leaves those whether the structural changes will be transitory or persistent. In the mid1990s, Health Care Costs slowed and then pick up again. We may be at a similar point now, we just do not know. And the spring of 2010, leaving aside the effects of the Affordable Care act, medicare and medicaid spending came in about five less in 2012. We have extrapolated some of that Slower Growth because we think part of what is going on the structural changes. If you talk to people in the healthcare business, they are very focused on ways to provide care more efficiently and ways to give providers and patients incentives to use the health care efficiently. We are still not sure im not before some time how and during the changes will be. Were also not sure on what role the Affordable Care at maybe playing in this. The slowdown, the beginning of the slowdown proceeds the Affordable Care act. The Affordable Care at the sets in motion a number of changes in a way providers will be paid. It focused the light of National Attention on the problems of cost growth. It is very difficult for us to untangle. You alluded to this in your slides. About the tradeoff between aggressive deficit reduction now and the impact that has that Economic Growth. Could you speak at all about the austerity and other programs that have been adopted in europe and lessons there are from that experience for this economy . We do not study individual european economies very carefully. We have limited resources and focus our energy on the United States. I do not want to speak to individual countries. The experiences in europe of the countries that have tried to reduce their budget deficits quickly and have experienced weak Economic Performance in the wake of that, those experiences are very consistent. And the short term, traditional expansionary fiscal policy tends to have expansionary affects on the economy. That is not true everywhere all the time, but there is a significant body of research about the ways anticipations of fiscal contractions, anticipation of deficits and debt by government been put under control can spur Economic Growth in the short term. Most of the cases were that policy has been successful, where the policy of future austerity has been successful, most of those cases the london economic circumstances that we do not have in this country most of the cases rely on economic circumstances that we do not have in this country today. We are a large enough economy that we cannot simply have the Exchange Rate decline. We are an economy with a number of weak economies so that demand for products is not likely to provide a tremendous support for the domestic Economic Activity. I do not want to speak to individual countries. They have arranged of situations and experiences. A range of situations and experiences. I would emphasize, the European Countries have had little choice but to proceed with top austerity programs because they have a level of debt, they face a fiscal crisis in which they were unable to borrow. That is a very important lesson for us in this country and considering how long we feel as prudent to proceed with debt exceeding 70 of gdp. In light of the fact that Interest Rates will certainly rise over the coming decade. Let me finish with this let me combine a couple. Wed already heard from the source on Monetary Policy earlier this morning. Everyone understands that the tv program has to end at some point. Qe program has to end at some point. What assumptions do you make in your projections about how that will happen . I guess, in your assumptions about Interest Rate changes. Our forecast expects the Federal Reserve to raise Interest Rates and start selling assets out of its portfolio in 2016. That is an expectation that is conditional on our forecast and on current policy. It is not a pure expectation. We think the Interest Rates will rise fairly rapidly to around 4 5 . The longerterm treasury rates will be about 5. 25 . Those are slightly higher real rates than we have had over the past several decades. The longerterm treasurybecauset will be out there. With federal debt so high, fairly small differences between our forecast and actual Interest Rates make a huge difference for the budget. Interest rates that berlin percentage point lower ridge dabber 1 lower, that would take about 8 1 trillion. We certainly see risks of rights being higher or lower than we projected. I think that is it for now. Thank you very much. We are grateful for your work. [applause] [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2013] we will do a 30minute break and the next session will be on the mezzanine level. The session wrapping up, and we will have more from the Business Economics Group in just a moment. We will hear from paul volcker. They will check in on capitol hill, at the house is scheduled to return in about an hour, 5 00 eastern. We will have live coverage here on cspan. The house is expected to work on a bill to fund the federal government for the rest of the fiscal year. The House Appropriations Committee Chairman introduced a bill continuing resolution that would fund the federal government through september. He released a statement that said this bill would fund essential federal programs and help maintain our National Security and take a potential shut down off the table. This package is the right thing to do and the right time to do it. The ranking democrat says we will continue to bring you updates on the legislation as they become available. I was fascinated by her feminist view. She warned her husband. You cannot rule without including what women want and what women have to contribute. This is 1700s. Either gail adams, tonight on the new history series Abigail Adams, tonight on the new history series. As one of the most prolific writers of the first lady, she provides a unique window into colonial america. Join in a conversation live tonight at 9 00 eastern on c span, cspan radio, and c span. Org. We take you back to the National Association of business economics. Former Federal Reserve chairman paul volcker talks about Long Term Debt bank of the u. S. It is a provision in the dodd frank Financial Regulation law that would ban banks from trading their own funds. He spoke for [applause] thank you. [applause] thank you. If this is a wellorganized affair. [laughter] it is really a special privilege and honor to be here. After all the years that i have been around concerning economic policy, i assume one major altercation for this award is that it is a lifetime award. You have to be at least 80 to receive it. It is now a competition a bit. [laughter] but i am really when i think of this, i am considerably above ats this point. Above 80 at this point. He was so active he had 16 different patterns. The only thing that came to mind was, oh, to be numeral ati again. To be 80 again. I certainly appreciate this award. Memory was good enough. I can now identify the year. For two years ago, 1973i received another first award from nabe. It happened to be the new york chapter who was inaugurating their award for one William F Butler who was wellknown to me me because he was my boss at the time. Thank economists were in a rather prestigious era after the war and in the early post war years. These banks were in competition with each other. Four or five banks, six or seven banks that consider themselves at the top of the league. They each had a sizable economic departments and pretty well known economists as their leaders. If you were a spokesman for the bank, you were an educator. You became part of the banks management. It seems to me, as i look back, this is an occasion where that kind of high point of business economists and Bank Economists became less usual. Banks undecided that their Economics Department was expendable. Things were in turmoil. Banks and other industries were more stressed. You did not hear so much about inc. Economists. I think it is fair to say that has now passed. In an area where economics and people with economic training are in fact very much in major institutions. That goes on about economic policy. There is not any significant area of economic policy, monetary, fiscal. They do not have a legitimate concern or legitimate point of view. There was aper period, as you know, where all of this was considered irrelevant. The government should retreat from markets as much as possible. With efficient markets and national expectations, you know the story. All the confrontations, all of the brilliance of a financial engineers, all of the premium on trading which arose very rapidly into 1980s, it was a different world. That confidence that feeling that markets can take care of themselves has evaporated at this time. It is the biggest crisis we have had in economics in may be short of 100 years. How many people anticipated anything like this situation 6 or 8 months before it got underway . It just kind of a commentary i guess on the state of economics and Economic Analysis and theory. I think you can learn something from this. Right now, i read almost every day. I was struck by all the great uncertainties that exist. Problems as far as the eye can see. The euro, a great recession, the rise of china. What uncertainties are there . I looked at a sheet i had gotten from a Major Financial Institution giving the forecast of their economic department. What struck me was the dissidents between all of the uncertainties that we all know about and the Economic Forecast when i could not from this years of performance. The continuity oh up from 2. 3 or 2. 5. Whether europe would be 0. 2. There is such a quietude in markets. I wish i knew how to analyze it all. Then i could Say Something useful to you this afternoon. [laughter] i tell you, i have two other things in my mind. At least one of them may strike you as a bit unusual, but i think it is a too much neglected subject, to fight the fact that it seems to me to have been in the making of the financial crisis we had. I am talking about the monetary system. As you know, it is hard to call it a system. The system concerns itself with parts and a mechanism that are working together to produce some stability and progress. That is hardly a description of the International Monetary system. The reason i say it, i am not going to write about it right now. Look at one characteristic of that system in the early part of the century. The biggest characteristic of the system was a big surplus on the part of china. A huge accumulation and u. S. Dollars. Looking at the other side, the United States it had gotten, in my memory anyway, the biggest economy in the world. Five percent, six percent of the gdp. Announcing most of the federal deficit by far. Happy to land very low Interest Rates in a seemingly prosperous world. Would anybody really designed a system that would commit the chinese to run surpluses and japan on top of it and trillions of dollars cumulatively over a few years . And we ran deficits of that size. Three at the time. Without suspecting that something is going to happen in a serious way to upset the system. It is all very nice to be able to finance your deficits, but what happens . Sooner or later, the world is giving you a lots of rope on this. At what part does rope get to the point that it strangles you . We tried to avoid that. I am not sure that is true yet. The lack of discipline in the system, which is replicated within europe, where deficits can go on indefinitely in the eurozone until finally something happens and we find ourselves with a degree of indebtedness that is not easy to manage. The other area is a lot more parochial. What is going on in our financial regulatory system in the United States . We had a daughter Frank Dodd Frank after considerable debate. I note is a complicated bill out but 2. 5 years later we cannot have a regulatory apparatus . By the most important piece of legislation in recent years . That suggests that something is rather wrong. Something is dysfunctional. Something is dysfunctional about the way. In 2013 we go around regulated Financial Markets with a very familiar agencies that were created in quite a different circumstances and have had their difficulties over the years where markets were a lot more primitive. I think demonstratively are having great difficulty in producing timely and effective regulation along the lines that we really need in this country. I know im supposed to have a little fireside conversation about the fire. [laughter] the fire has come in other ways. Those are two areas that i want you to concentrate on. I am not giving you much opportunity. We will have a discussion here and see what sense i am making. What i wanted was both of these areas it is affecting the whole world and affecting us. The other right here, not abstract at all. The regulation, i could parallel it with what is going on in european regulation. The contrast to a few years ago justified the declaration 150 years ago that money will not manage itself. So, i think we can have a little discussion about that. Thank you. [applause] thank you so much. You have no longer than almost anyone in the room, there is necessary as a free lunch. When i first came up, i thought you would not get lunch at all. Now you have to pay for lunch. Having this fireside chat, we just have a fire, but we have someone good at firing questions. The chief economist, cnbc, familiar to many of you who at on the other side of the firing line. Please welcome steve. [applause] thank you very much. Thank you for having me. It is a pleasure. I came many, many years ago. I got a lot of education and my education continues here. Ali the alkyl is they said about you all of the alkyl legs they said about you, only teterboro naval awards. When are you going to do something with your life . That is what is called the disarming question. [laughter] that is a eulogy. Anlets start off with important area of controversy that has your name attached to it the volcker rule. I imagine that is part of your complaint here. It is 2. 5 years and there is still no volcker rule. We hear from bankers it will hurt their business. We hear from regulators it is a hard role to implement. My question is this. Do you still indoors, indoors endorse . Of course. Let me make a point. The philosophy of the rule, which is adopted in the law, is that institutions that are being supported, defended, encouraged by corporate policy, namely commercial banks, who do have i think a general consent of some activities and their functioning that is sent that is essential to the operation of the economy, if they do have that kind of public support, which certainly now looks much more apparent than you would have thought 10 or 20 years ago. A direct way of reducing financial costs and continuity. It should not be expending their energy and their risks on proprietary trading and doing it for the benefit of the stockholder, perhaps. Hopefully, it should not be supported by public policy. Thats a view is, i think, widespread in europe. Looking at the same subject, they came up with a somewhat different approach but philosophically it is grounded in the same thing. In principle, it is adopted by the british government. They separate out not just proprietary trading, but all trading. All of their activities you loosely associate, away from the Core Commercial bank. Keep it in the same Holding Company and convinced that you can really isolate those two parts. You run into the same problems. There are some exceptions to that. There are some activities that are vital to the commercial think. They have not settled all those questions. All i am saying is that recognition of the efforts, the dangers of combining them, and these are two related efforts, people tell you they do not know what a proprietary trade is. It is a forum. You can have a litmus test from the head of a bank. I was a regulator. Mr. Chairman, do you know a proprietary trade is in your bank . I have not found one yet that says i do not know what a proprietary trade is. [laughter] if they said to me, i do not know, i would say, we should be looking for a new chairman. [laughter] it is not a question of having two. Look at every possible trade and decide. The question is whether it is a pattern of proprietary trade. I am confident that is attainable. It is a matter of the management insisting upon it. You have it in many, many ways. Theres not a trading bank bank that does not have a daily report on its trading positions. Where they are, what are the are, what the losses are. You give me those statistics. That is different from making a role which looks like it is running into several hundred pages at this point. Natatorium. No. It is mostly my job to interrupt you. How may times of i heard when that preliminary role came out, it was 300 pages long . I must say, i cannot read the thing it was so dense. They had an introduction which was not the role. Not a masterpiece of clarity, if i may. [laughter] they said, our preliminary role. Here it is. It was 35 pages. And, to be sure, there was an appendix. About turkey pages was the kind of statistics that they would want reported. 200 pages of questions from lobbyists. 200 pages about why lobbyists are not the role. Rule. I have no doubt that there were many that were entirely appropriate. 200 pages . How many lobbyists were writing this, not with the intent of clarity, but with the intent of obscurity . I hope that when they come out with the new one which obviously they are having difficulty with and this gets to the point. We have five agencies the rule is supposed to be common above those agencies. What does that mean . Any one of those agencies agencies can veto any one of those points that are made. Those agencies do not have the majority to do anything. This is been going on for weeks and months. How many times people tell me six months ago that it will be two weeks. It looks like it is right to their. Before the end of december. Before the end of january. You cannot operate an effective system when you have this so called fsock. They had this directive when it first fell. This is the way to approach. Go at it. Can i interrupt . I am anticipating your next question. [laughter] i am done here. You are permitted to refute what i say. Money market mutual funds. That was not my next question, but go ahead. [laughter] i hope it was a question. I am so old that i was there when money market mutual funds were created. I remember very well. I do not like them. I said this is pure regulatory arbitrage. Things could not pay interest. So, somebody came along and said, invest in the inks in banks nks cd in th ee cd. It has a little gimmick attached to it. He said, we are creating a special mutual fund that is not market to market every day. We will save is worth the dollar. They were given regulatory permission to do that. The act of value got within a very narrow percentage and 0. 5 . They maintained all of that. Because it was a great economic advantage, they grew. Rapidly. Now, the obvious regulatory advantage is gone because banks can do all of this stuff correctly for their deposits. A crisis came along. One of these funds could not cain kane that dollar value. Could not maintain that dollar value. Typically, they would put the money and to make up the difference. There were dozens of instances when that happened but you did not notice it because bear stearns or whatever it was put the money in. There was a big run. Hundreds of billions of dollars were taken out of money market funds. They were buying commercial paper. That wouldve been a guarantee for banks. The treasury and the Federal Reserve were forced to put in hundreds of millions of dollars to support the money market funds because the commercial paper market had become dependent upon these funds. The Legal Authority that either of those institution had to do this is interesting. The treasury used the Exchange Stabilization fund. Maybe thats because some of these money market funds had so many foreign Bank Certificates in them. [laughter] anyway, the situation was a stabilized but this cannot be a normal, satisfactory situation to have these essentially under regulated institutions, no capital, no expressed governmental support being able to invest in a rather interesting way, trillions of dollars. A couple of years ago, we found out that half of the assets of these major institutions were in european banks. People got a little nervous when it all came out. Not a great force of stability in Financial Markets. The interesting thing about this is at least four of those five agencies plus the treasury have said, that is correct lets directed the situation. One agency has held out. The situation. T one agency has held out. Nothing happens. It sounds like the way you are saying to speed up Regulatory Reform is to consolidate the agency. This is a very difficult, tricky problem. I do not profess to know the answer. I think it is an area that everybody thought needed examination when the crisis came. They had an opportunity and they did not take advantage of it. They had an opportunity and they they did not take advantage of it because they found it too difficult, too politically in christ it. He went ahead with subsidy too politically encrusted. Went ahead with a subsidy reform. It is not just the United States. It is true in europe and a lot of different countries. If you think it is easy, look at the uk which is fairly simple, theoretically. They are much they have a much more unified financial system. Five or six years ago, they decided the thing to do was put it all in one agency. And then take it out, central bank, leave it alone. All in one agency. The treasury will look at it a bit. Got into the crisis, it did not seem to work very well. Ets put it all back it is not so easy. It is more complicated here. It gets a very bureaucratic. Lots of reasons to complain. How do we get this political miracle of a little competition in the business. But not a degree of complexity that is necessary. Another unsustainable what people think is an unsustainable situation is what we call too big to fail. They envision handling large banks, but the problem is extra capital surcharges. Is that enough to solve the too big to fail problem . Should the big banks be broken up . There is a lot of uneasiness about this. Too big to fail is a big problem. It is related to banks that have access to the Federal Reserve. Everybody assumes they will be saved. They assume they will be saved and it affects behavior patterns. Big problem. Dodd frank did take this on headon. The Resolution Authority was established. It says in part deep lane english in it says in pretty plain english, a Significant Institution is on the brink of failure, the fdic will be an forced to take over that institution. It can provide enough liquidity to keep its operations going, but the institution would have failed in the sense that the stockholders will get nothing. Management will be replaced. And maybe secure credit is due, but unsecured credit will be at risk depending upon what asset value is left. That is pretty plain language. It seems to no line. Nobody believed it. Nobody believed it. It will be tested at some point, but we hope its never tested. I do not think people understand how much effort goes into and this legitimately takes a couple of years, in figuring out how to apply this. One thing you notice right away that justifies a lot of skepticism, that is great. The fdic, great. These are big, international institutions. You cannot handle it just by the fdic. They have operations all over the place. One of the most interesting things here is that the bank of england is working handinhand theres has been some public the about it they are working together to jointly develop a common approach that would satisfy both sides. The European Community beyond britain is on the same problem. But the philosophy is consistent. I may be quoting a more up to date figure. When the fdic began looking at this, they said, ok. For these american institutions, how big are their foreign operations . And they found, if you look at all their foreign operations, which are big, by asset size, 85 of the total is in one your one euros diction one jurisdiction the uk. Are you saying that you would not then recommend authorities taking action to physically break up the banks . You mean after they failed . Right now. Before they become a problem. I cannot myself, maybe i am innocent, systemically significant. It is not a 2 trillion institution. It is 750 billion institution. I do not know. You have to call these big things up big banks up. I do not want to call them up at all. [laughter] as a practical matter, i would love for them to be individually smaller. There are some limitations that will discourage them from being bigger. I cannot see how in practice you meet the problem by breaking them up. If everybody has had their coffee, i want to go onto another topic which you you may need the caffeine for. I actually can remember a time when we were making great progress in uniting in the International Accounting standards. It wasnt all that long ago, but then it just seemed to die. What has happened and why is it an issue that people should be thinking about right now . Thank you for raising the question. In my younger days, i was the chairman of the International Economy Standards Committee foundation. That is a mouthful. [indiscernible] in the hopes supported that this could lead to uniform accounting standards and is certainly for the financial world in particular. It sounds like a good idea. This new institution was established in london with a lot of american representation. I do not think i got fired. I got termthe limited. [laughter] a lot of progress is being made. There was a lot of momentum. Five years ago, four years ago. It is another example. I would add this to my institutional dysfunction in the United States. Partly because nothing has happened. A lot of people who were interested said, let it go. One thing you cannot say but you could say 20 years ago is that the United States clearly had the best and most disciplined accounting system. Everybody else ought to of. Ought to adopt u. S. Accounting. I cannot think you could say that anymore. I do not think anybody says that. Or that the auditing profession has been sacrosanct. None of these things are true. The argument, the basic argument and some Great International uniformity for companies will hopefully lead to betterinformed analysis. You are quite right. It has been on a low point. I have not given up hope. With fcc leadership, and this is really an fcc question. It could not be done fairly promptly. If it is not, than i am afraid the chances of ever doing it are a part. Lets turn a bit. Lets get to a subject you like talking about most in public, which is Monetary Policy. I love it. [laughter] i love talking about Monetary Policy 20 years ago. lets talk about 20 years ago. [laughter] more than 20 years ago you were chairman of the Federal Reserve. Time passes. [laughter] oh, to be 80. Whatever it was, at that time. , could you have imagined naked torry no. The answer to that question is clearly no. When i first got involved in the Federal Reserve in the 1950 loss, the big issue was something you long people you young people, it was something called the bills only doctrine. It was that the central bank should only intervene in the money market in shortterm securities. Without shelter never touch a treasury bond or a mortgage bond. Thou shall never touch a treasury bond or a mortgage bond. that youre going to come to we were done. Followup on that. I do not know. You never let me get a word in when i was on your show. I had a thing in my year. Blame the producer. I know that story. [laughter] exactly right. Now i blame the producers. You have talked about various areas of instability from accounting in the banking system. We look at the financial landscape here, do you see the feds Balance Sheet as a potential source of stability . It is obviously a potential problem. The way i look at this, they are obviously doing things it should be my imagination, some years ago, in response to a very unusual situation. They have a very large Balance Sheets. A very large amount of excess reserves. It is ok for the moment. They want to support growth of the economy and so forth. The crucial question for a central bank any time, but it will come in spades this time, ok. You had the easy money when you have a recession and unemployment, but at some point when the loan and turns the party is getting underway to use that old analogy, at what point do you begin to retreat . Do you retreat decisively enough . You can make a mistake or go too quick. A much more frequent mistake as you go too slow. There is a lots of liquor out there now. [laughter] mechanically, yeah. It can be done. Will it be done at a crucial time, and a delicate kind of way without creating expectations in the other direction . Thatll be a big challenge. What is your best guess . I do not think it is impossible, but it is a real challenge. Chairman, thank you very much. [applause] [captioning performed by national captioning institute] [captions Copyright National cable satellite corp. 2013] earlier today at the same event, Douglas Elmendorf discussed the federal debt and the current decisions that congress is now facing as they consider how to reduce it. Here is a look. I think it is very difficult to see how we can alternately put the that on a sustainable path without Cutting Services or raising taxes for people who consider themselves to be in the middle class. That does not mean that one cannot take actions to reduce the deficit that do not affect the middle class. One can cut benefits for low income people. But a pretty wide crosssection of americans consider themselves to be in the middle class. The magnitude that is needed, not this minute, not even necessarily this decade, but ultimately as one looks out, the magnitude that is needed is very difficult to see how that can be achieved without making changes in those benefits and services or those taxes. I will go back again to the earlier slide about the distribution of Government Spending. Government spending is higher today than it has been on average in the past. We do not show 2012 here. In 2012, Government Spending was about two percent of gdp higher than it was over the past few years. That can be more than by the increase in costs. Everything else the government has done puts together the smallest share of gdp in 2012 that is has done average over the past 20 years. Everything together is oa ballasts share of gdp gdp. The thing that has grown is Social Security and medicaid. Also, to blind and disabled americans. Even medicaid focuses on low income people. About 2 3 of the money. People on medicaid who have run out of income and wealth were not poor. They have become poor in old age or through high medical expenses. Given where the growth has been and how those programs are dominating the budget today and in the future, again, it is hard to see how the debt can alternately be on a sustainable path without those programs or without raising taxes on americans. Those remarks are from earlier today. You can watch the entire discussion tonight at 11 15 eastern on cspan or any time on our website. I was fascinated by her feminist view. You know. Remember the ladies or you will be in trouble. I am paraphrasing, obviously. But she warned her husband. Withoutot rolule including what women want and what women have to contribute. This is a 1700 that she is that. Abigail adams. Tonight on cspans new history series. First ladies. She was outspoken about her views on slavery and womens rights as one of the most politico writers of any are slated, she provides a unique window into cologne equal america colonial america. Abigail adams, tonight on c span, cspan radio, and www. C span. Org. Lawmakers are expected to take up a bill dealing with medical Disaster Response programs. Later this week, they will work on a stopgap spending bill to keep the government running for the rest of the year. Current funding wants out on march 27. Runs out on march 27. Here is washington current washington journal. Host from new york this morning, paul light is joining us. Were talking about federal contractors and the impact of sequestration on that part of the federal government. Lets just begin with the federal contractor work force. There are some people who say it is hard to find out how many contractors there are in the federal government. Is that true . And if so, why . Guest if your a contractor, you would not want people to know how many employees you have, perhaps. We know how much money they get. We are about 500 billion, more or less. We know that about twothirds of the money we spend on contractors goes to Service Industry people, computer programmers, a lot of employees to sit side by side with full time federal employees paid by an uncle sam. And the contractors paid through we just do not know. And the contractors do not want to tell. What i do is estimated total number of contractors based on a model of what we spend, we purchase, whether it is pencils or weaponry. We think there are somewhere around 7 million fulltime equivalent employees who work for contractors in one role or another. There are some that are full time. There are some that are only fulltime on a project. And there are some that are just a small percentage of a product project. You build a tank, u. S. Labor Cost Review Program a computer, u. S. Labor costs. And labor costs are going to bury, will vary, but when you add it all up, maybe 7. 5 million. About three contractors, perhaps, for every one federal employee. Host here is a story from 2011. In it, the executive Vice President of the professional services council, which represents business to the contract with the federal government, said his group regards your figures as astronomically high and inflated by a methodology that counts the indirect as well as the direct Economic Impact. I want to throw that out. What is your reaction to that as we discussed the federal contracting work force . Guest i say to all of the contract industry representatives, ok, show us your numbers. They dont like my numbers, they think they are inflated, lets see yours. And if they say, were not going to tell, or we do not know now, youve got to measure the total number of transactions that occur in the federal contracting process. That goes through contractors primes, as we call them, and then subcontractors and then subsub contractors. Maybe 1 of the total, maybe a little bit less are indirect costs. Like the sandwich maker down the street who makes a little bit of money from contractors who come in for lunch. It is a very small number, but if you do not like my numbers, get some yourself. Lets see full transparency on what the contractors do, how much they pay, how many people they employ. If the contractors are so proud of what they do, come on out. Lets see the numbers. What i say that to them, they are saying, gee, that is proprietary information. Take me on, but bring some numbers to the table. Host why isnt the government putting this information out . Guest again, weve gotten into a situation where what the government buys is done under proformance contract. We say, look, we want this many weapons systems, as much labor this much labor. We will measure our performance and we dont care how you do it. We will measure somethings about cost, but frankly, the federal government does not want to know either. And that is in part because the Contractor Industry is so very influential. When you look at the largest contributors to campaigns, youve got contractors all over the place, defense contractors and so forth. And honestly, the federal government does not want to know either. When you add up the numbers and you say, look, lets put the full time equivalent feds who are paid by of assam, and lets put the contractors in you are paid by by uncle sam, and thats but the contractors in who are paid, the universities, the nonprofits and so forth, we have a total workforce of 12 million. With the Postal Service in there as well, and amtrak. And we got a very large government in terms of total labor. That is not bad. That is not good. It is what we need to and deliver this huge mission that the federal government has. If you want to reduce the total size of government, youve got to reduce the mission. That is just the way it is. Nobody wants another totals. And frankly, i believe in full transparency. Lets see what we have and whether those jobs should be inside government, outside government, what the transparency issues are. Lets see it all. Host when it comes to sequestration, what is the impact on the contractor work force . Guest there are two impacts. One is that we are furloughing people inside the federal government you are overseeing contracts. That is plain ridiculous. We have a furlough in place now that shows absolutely no sympathy or concern for we are cutting. It is just across the board in most agencies. And it could not be done more for the four most agencies. There are some who have done a terrific job, but when you have a furlough that affects everybody and you do not distinguish between the good performers and the poor performers, that is just nonsense. We will free some contracts. We will not let our group some contracts. The amount of money for future contracts will go down. Yes, washington and the surrounding areas will be affected. The contractors will be affected. But honestly, as you see the world the federal work force go down with the furloughs, in some cases you will see more contracts coming out of government to replace those workers. The notion that we will have delays and air traffic control, that is pure scare tactic. We cannot allow that to happen. We can put i we cannot put contractors in those jobs because they are not trained to them. But we will see more contractors in some ways, but not in a transparent way. Very unsympathetic about all of that year is being shed by the contract community. They will be by all of the tears being shed by the contract community. It will be hurt, but not as much as the federal employees will be. Host we want to hear from you. The numbers are on the screen. Paul light is joining us from new york this morning, a professor at New York University talking about the federal work force and sequestration. On twitter, attorneys said this appeared contractors tony says this. Contractors spend our money. They should be transparent to us. Go ahead in new york. Caller im reading a book free lidge by David Johnston and they talk about when the government outsources something to a contractor is cheaper for one or two years. And then they end up giving the government off. Changing to going to all contractors is jusmovernnt. Money from the government. Sequestration made washington look really silly and stupid. Host paul light . Guest lets take it in reverse order. The first is that the sequestration, to me, feels a lot like dr. Strange love. Dr. Strange love designed it and slim pickens is right in the nucleolar the nuclear bomb all the way down. It is a fools paradise. Ive never seen anything like it and i hope i never will again. It is plain stupid that we are doing it, and it is damaging the governments reputation. Although lord knows, its hard to imagine how further down in trust the government could go. David johnstons book is terrific. I honestly, i do not agree with your notion that the jobs come in low in the first couple of years. The bid may come in a little bit lower, but contractor jobs are actually you know, when you bring someone in, the contractor themselves, they will make a little bit less than the fed. It is when you load up the administrative costs that these jobs go through their roof. If you want to read a wonderful study, wrote to a good website as gritty information on this, go to the project on government oversight pogo. Org. They have one study that shows a profit based inflation, the full loading that the contractors put on each job. It is unbelievable. We can harvest a great deal of waste. If you really wanted to cut the budget and hack away a little bit, we have an 85 billion target over the next seven months. Lets take 10 of what were putting in a Service Contract in. And just after contractors to cough it up. That is 35 billion, 40 billion, half of what we need. But we do not have the authority to do that. And obviously, the Contractor Community with its political muscle, is not quite to let anyone touch those profits. Host september, 2011, a report about what the government has found. The study found that in 33 of 35 occupations, the government paid billions of dollars more to hire contractors and it would have cost Government Employees to perform compare all services. Nat in st. Paul, an independent collar. Caller government should just do everything themselves. Build their ships, build the roads, everything. Guest government has been contracting out since the revolutionary war. We should not be building certain things. We should not be building dentures. The Veterans Administration got out of the venture making business decades ago we are not in the business of building tanks. We build some things like we build some things like Nuclear Weapons