three point one percent during the third quarter even if his forecast proves correct u s economy still suffers from many fundamental problems in september payroll jobs fell by two hundred sixty three thousand while the unemployment rate rose to nine point eight percent the same wall street journal survey also forecasts their employment rate will rise to ten percent by december commercial real estate prices continue to fall because it collapse of the market for commercial mortgage backed securities many property owners cannot roll over perform in commercial mortgage loan mortgage loans at maturity regional and community banks are likely to suffer large losses on the commercial mortgage loan portfolios that may impair their abilities credit to families and small business i'm concerned that any growth in second half of this year may prove transience and consequently the unemployment rate may continue to increase well into two thousand and ten those in washington should not kill kid themselves the jobless recovery is no recovery for american workers during the last four months of two thousand and eight the federal reserve injected more than one point three trillion dollars of liquidity into the u s economy with the traditional lag between monetary actions and therefore and their effects becoming apparent in the real economy this liquidity injection last fall supported real g d p in the second quarter and should boost real growth in the second half of this year compared to the federal reserve's one point three trillion dollar adrenaline shot president obama's stimulus spending pales as of this month only one hundred seventy three billion dollars or twenty two percent of the program's total has been spent to the view of many too slowly to wastefully into and focused on jobs like the hunter in the party takes credit for every bird that falls stimulus promoters should be wary of taking credit for the results of unprecedented fed actions that are casting a far greater influence over the economy's performance but neither liquidity injections nor fiscal stimulus can treat as sustained as the chief executive and co chief investment officer of pimco noted these government interventions are unsustainable sugar highs if united states is to avoid slipping back into a recession the private sector must once again become the driver of economic growth it's unclear how this handoff will occur the balance sheets of u s families remain damage from the claps of housing prices and excessive debts accumulated during the bubble years the growth of personal consumption is likely to remain constrained by large him tory foreclosed homes is likely to dampen housing investment there for a sustained expansion must depend on business investment in net exports here is a major concern going forward entrepreneurs and business leaders make investment decisions based on their expectations of risk in return government policies affect perceptions unfortunately the obama administration and congressional democrats have simultaneously dampened the expected returns increased the risk associated with new business investment through their actions  in higher income tax rates and higher taxes on capital gains and dividends are set to begin in two thousand and eleven the white house and congress are proposing job killing energy and international tax increases that will drive investment in jobs offshore congress has not acted in a timely manner to extend the research development tax credit and the homebuyer tax credit as well as an increase in the net operating loss carry back from two to five years uncertainty about cap trade and health care legislation further depressed business investment firms fear the additional and the costs associated with many turn the cap and tax bill passed the house this summer and are unsure what the senate may do the various trillion dollar health care bills lee firms especially small businesses in my district confused and concerned about additional taxes and regulatory burdens and as a result many companies my district around the country are delaying important vestment decisions in the job creation that goes with it in short the government's uncertainty and interference is quickly turning a rescue operation into an anchor around the private sector's neck with u s consumer spending lagging a key opportunity to recovery lies in selling american goods and services overseas to recovering markets yet america sitting on the sidelines while other nations are aggressively shaping these new markets the doha round of negotiations remain stalled congress has not acted upon three completed trade agreements with colombia panama and south korea while competing companies countries reach agreements that leave american companies and farmers at a severe competitive disadvantage united states is on an unsustainable fiscal course according to the cvo projected federal deficits will swell publicly held federal debt from forty percent of g d p at the end of last fiscal year to nearly seventy percent at the end of fiscal y over the long term instead of resolving these imbalances and consequently protecting both beneficiaries and taxpayers president obama and congressional democrats are seeking to create new entitlement programs that would further damage our fiscal   you very much madam chairman dr romer thank you very much thank you for being here thank you for the leadership that you provide and thank you very much for the positive directions in which the economy is now moving and those positive directions are primarily based on the economic recovery act and the way in which that economic recovery act is being put into play and as we know the vast majority of it is still not in play only about twenty five or thirty percent of it  actually been out there and there's a lot more to come and we know how badly that's needed and we can see it very clearly and then speculate about it on the basis of chart that's up here and how during  the previous administration we not only experience no growth we actually saw the beginning of a serious decline in this economy and one of the main reasons for a decline in the economy is the failure of administrations to invest in our own country we saw huge amounts of spending outside of the united states of course in the bush administration on a monthly average it was something in the neighborhood of between ten and twelve billion dollars a month spent in iraq as a result of that illegal illicit invasion of that country and how that was costing us so much money and degrading the economy here internally within the united states so the investment recovery act the so called stimulus bill is critically important and we need to keep moving on it in a very positive and forward way and the consequence of that we will see the economy continue to grow however there are other aspects of the economic circumstances that we're that really need to be addressed as well one of the things that  right now is the fact that we see a concentration of wealth in the hands of fewer and fewer people more dramatically than we've seen probably since the one nine hundred thirty s and the concentration of wealth in the hands of a few multi millionaires  means that there is less money in the hands of blue and white collar working america and we know that blue and white collar working americans drive the gross domestic product and without their ability to function effectively and have money raise their families deal with all of those those issues then the general economy suffers dramatically and it will continue to suffer dramatically unless we're able to change the circumstances that were created during the bush administration with regard to the way in which the tax system in this country has been has been put together one of the other aspects of this of course was the repeal of the glass steagall act by the republican majority in the congress of the united states and unfortunately signed by the clinton administration the sachs bringing in very substantial amounts of money but also beginning to engage in the kinds of very complicated investment that we're engaged in prior to the collapse of this economy and which stimulated  so we are going to have to pay a lot of attention to that situation and focus our attention on the consequences of the repeal of that and focus our attention on doing something debt that they wouldn't be allowed to join because they had too much debt that we're on the same trajectory and building massive government projects that aren't creating the jobs and the growth in the economy and i would be that we we've learned this lesson globally and i would hope we would get back an economic stimulus and not a government stimulus and to respond to some of those thoughts thank you thank chairman thank you very much in the chair recognizes mr cummings but three minutes then will be followed by mr paul and then dr romer thank you very much madam chair i just want to start off by saying let's root for the home team that you root for the home team we get to a point where i see people with no insurance people losing their jobs people losing their savings people losing opportunity losing their companies we've got to root for the home team mr omar thank you for what you've done and what the president's trying to do and i'm not coming here saying that all is rosy we did not start with a rosy picture and we have come a long long way and we need to all admit that and we need to support this president he is the president of the united states of america let me go back and remind my colleagues that approximately sixt percent of this money was for tax breaks we seem to forget that we seem to also forget that twenty two percent approximately was to assist states almost every single state has had phenomenal problems almost every one of even those who don't want to act like you don't want to take the money we've kept people employed we kept people serving other people i know it happened in my state i know it happened in south carolina when my parents were from i know it's happened all over the place i know it happened in texas heard to check the governor of texas complaining but he was able to balance his budget with twelve point one billion dollars while he was complaining with stimulus money dot so you know as some point i think and is a recovery slogan is slow but just a week or two ago we had the bureau of labor statistics here and they explain to us that is going to be a slow process that the jobs are going to come they're not going to come just like that overnight we've come from a long way and i'm not going to sit here and blame bush anybody i mean what i do know is that i've got people in my district who do not have a job who don't have a job and some kind of way and then i've seen others when i we had mr low hood secretary la hood come in and just a wonderful gentleman the head  transportation came into the transportation committee which i'm a senior member of he came in the a few weeks ago you said you know what after our friends on the other side of the aisle was complaining about the sandwich bags he says let me tell you something is working he said when i travel throughout this country i see people that told me just a few weeks ago they were drawing unemployment and now they're working that's what looks it secretary la hood and so again you know i we say that we are this great country that we can accomplish anything but then when it comes to this kind of thing with it all the sky is falling will never get through what we will get through this is america the greatest country in a whirl and i thank you madam chair for but your  chairman maloney ranking members brady and brownback and members of the committee it is an honor to be with you today there is no question that the past year has been one of enormous challenges for the american economy the recession that began in december of two thousand and seven has been the worst that this country has faced since the great depression the suffering that it brought to american workers and their families has been terrible and the toll that  taken on american businesses has been great across the spectrum in my testimony this morning i want to discuss the economic crisis and the efficacy of the policy response i also want to talk about the outlook for the u economy and describe what i see as the key to the forecast and finally i want to discuss some of the policy challenges that are likely to face going forward let me start by talking about the shocks that hit our economy in this recession and i think one way of describing the severity of the crisis that we've faced that i find striking is to observe that the shocks that hit the u s economy last fall by almost any bars or what happened in the nineteen late one thousand the light blue bars are the most recent episode so that first side a key causal factor in both downturns was a decline in household wealth that lowered consumer uncertainty and restraining spending in both periods with volatility in financial markets the variance of daily stock returns as shown there in the middle column and what you see is that that variance measured using the s and p stock index was more than one third larger in the current episode than in the last four months of one thousand nine hundred ninety now if falling in volatile asset prices were important in both nine hundred twenty nine and two thousand and eight the defining feature of the crisis in both cases was a full fledged financial panic and one frequently cited indicator of the depth of the panic in september of two thousand and eight if you remember was the skyrocketing of credit one spread that we can actually analyze going all the way eighty seven basis points in contrast to spread rose one hundred eighty seven basis points between august and december of last year well the result of the shocks as we all know was a rapidly contract in economy real g d p fell at five point four percent annual rate in the fourth quarter of two thousand and eight and a six point four percent rate in the first quarter of two thousand and nine employment which had been falling by less than one hundred  fifty thousand jobs for a month before september an average of six hundred twenty two thousand jobs per month from october to march what kept the american economy from heading into a second great depression in two thousand and eight and two thousand and nine was the strong and timely policy response the federal reserve as has already been mentioned began cutting interest rates in late two thousand and seven and by december of two thousand and eight it brought its target to the federal funds rate essentially to zero as credit market after credit markets froze or evaporated the federal reserve created many new programs to fill the gap and maintain the flow of  credit congress's approval of the i think it's fair to say not always popular tarp program was another crucial step creating a program that could be used to shore up the capital position of banks and take troubled assets off banks balance sheets has proven both necessary and valuable similarly congress's willingness to release the second tranche of tarp funds last january gave the new administration the tools that it needed to further contain the damage and to start repairing the financial system now a key piece of the policy response again as has already been described was the american recovery and reinvestment act of two thousand and nine and in a report issued on september tenth the council thousand and nine along with estimates from a number of government and private forecasters what these estimates suggest is that the recovery act added two to three percentage points to real g d p growth in the second quarter and three to four percentage points to growth in the third quarter this him why is that much of the modification of the decline in g d p growth in the second quarter and the anticipated rise in the third quarter is directly attributable to the recovery act next table shows the council of economic advisors estimates of the effect of the recovery act on employment relative to what otherwise would have occurred without the again in the second and third quarters of two thousand and nine and again along with the estimates from a number of other forecasters but these estimates indicate is that as of august the recovery act had raised employment relative to the baseline by between six hundred thousand and one point five million  jobs well the other thing i want to talk about this morning is the economic outlook because of the un's precedented policy response the economic outlook has improved markedly in recent months the next figure sho u growth rate of real g d p since the end of two thousand and seven together the light blue lines are the blue chip consensus forecasts for g d p growth from two thousand and nine quarter three through the end of tw ten the path of actual g d p growth emphasises just how severe the current recession has been equally notable is the improvement of g d p performance in the second quarter of this year though still the moderation in the rate of decline with the second largest improvement in real g d p growth in twenty five years the blue chips for cash shows that g d p growth is anticipated to be positive in the third quarter and each subsequent quarter through the end of two thousand and ten there is a substantial range of uncertainty around any forecast however if g d p growth for the third quarter is indeed positive as anticipated this would be strong evidence that economic recovery is underway next picture shows the quarterly behavior of the unemployment rate beginning with the business cycle in twenty two thousand and seven quarter four and again continues with the blue chip forecast consistent with the recent cyclical pattern the unemployment rate is predicted to continue rising for two quarters following the resumption of g d p growth whether this happens and how high the unemployment rate eventually rises will obviously depend on the strength of the g d p rebound leaving aside timing issues the unemployment rate typically when g d p growth exceeds its normal rate of roughly two and a half percent  and rises when g d p growth short of this rate with predicted growth right around two and a half percent for most of next the next year and a half movements in the unemployment rate either up or down are likely to be small as a result unemployment is likely to remain at its severely elevated level this figure shows the quarterly average of the monthly change in payroll employment the enormous declines over the last four quarters are graphic evidence of how horrible this recession has been for american workers now because the blue chip forecasters not exist for employment we continue the graph here with the survey with consensus forecasts and the survey professional forecasters these forecasts suggest that payroll employment loss will slow substantially in the fourth quarter of this year and that payroll employment will likely turn positive in the first quarter of next year importantly as you can see from these numbers employment growth is expected to be quite low below about one hundred thousand per month through the end of the forecasts in the third quarter of two thousand and ten all forecasts are subject to angela margins of error and the errors are often particularly large at times like the present when the anime is near an inflection point for this reason i think it's important to consider the risks to the forecasts first there are reasons to think that g d p growth could be either weaker or stronger than the consensus forecast on the weaker side one concern is the leveling out of fiscal stimulus this cool stimulus has its greatest impact on grow around the quarters when it's increasing the most strongly when spending and tax cuts reach their maximum and level off the contribution to growth returns to roughly zero but this does not mean that the stimulus is no longer have been in effect rather it means that the effect is to keep growth above the level that it would have been in the absence of stimulus but not to raise growth further most analysts predicted the fiscal stimulus will have its greatest impact on growth in the second and third quarters of two thousand and nine and by mid two thousand and ten this cool stimulus will likely be contributing little to further growth related to this continued tightness in credit markets is a concern  measures of lending and issues of corporate debt remain low and small business owners in particular report significant credit tightening on the other hand as has been mentioned credit spreads are down dramatically from the fall of two thousand and eight suggesting some easing of conditions will tight credit market conditions are a factor that could hamper recovery of private sector demand and tamp down further g d p growth on the positive side surveys of consumer and business confidence have risen substantially in recent months and the stock market has increased as well for example the conference board c e o confidence survey and the business roundtable the economic outlook survey show that business leaders have become more optimistic in both the second and third quarters of this year the s and p five hundred increased them sixty two percent from its low point in march if such measures continue to rise strongly private demand could rise more strongly than anticipated which would raise now typically risks to the g d p growth would translate into risks to the forecast for employment not employment i p growth falls substantially short of two and a half percent per year the unemployment rate would likely continue to rise and employment to decline if g d p rises strongly labor market indicators could improve more quickly bars are recession period and what you see is that the recoveries from the last two recessions productivity has risen strongly this together was slow g d p growth resulted in unusually weak labor market improvement for several quarters following the business cycle trough in the last two recessions now in the current recession productivity has increased substantially if g d p growth comes in as expected in the third quarter the rise in productivity will be particularly large a continuation of this behavior could lead to worker that were weaker than expected employment gains and possibly continued job loss on the other hand because productivity has risen substantially during the recession it is possible that firms of push the productivity of current workers about as far as possible in this case g d p growth could again could translate particularly strongly into employment increases now while it's natural to focus most closely on real economic variables such as g d p and employment much recent discussion has focused on the possibility of inflation some have expressed concern that the unprecedented monetary actions taken by the federal reserve and the similarly unprecedented actions taken by the congress and the administration have created conditions likely to result in inflation such concerns in my opinion are unwarranted in the near and medium term historically for the united states the main determinant of movements in inflation is the relationship between output and the economy is productive capacity with additional influences from oil price movement and other supply disturbances output in employment are high relative to the economy as comfortable capacity inflation rises as it did in the late one nine hundred sixty s in the late one nine hundred seventy s when output and production and employment are low relative to capacity inflation fall as it usually does during and after recession economic theory and evidence suggests that there is a relationship between monetary expansion or budget deficits and inflation but it operates through the demand for good rapid money growth and large budget deficits lead to inflation when they fuel growth and demand beyond the economy is normal capacity well the behavior of inflation so far over this recession and forecast of it going forward with this view this last figure shows inflation measures both the consumer price index which is highly influenced by behavior food and energy prices and the g d p price index which is less influenced by those volatile components with the figure shows is that both measures of inflation have fallen over the course of this recession furthermore measures of expected inflation whether from professional forecasters as shown in the dash to lines in the in the picture surveys of consumers or our inference is based on interest rates on inflation protected securities all show that expectations of inflation remain subdued will likely economic conditions i think present policymakers with many challenges going forward first the switch from decline to growth may lead to calls for the end to rescue operations as the immediate crisis fades there may be a tendency to wish to return to more normal policy positions such a premature  stimulus would be misguided the forecasts that i've described are largely predicated on continued fiscal ease and the federal reserve announced policies that quote economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period excessive move towards fiscal policy tightening could lead to a return to output the quine an array acceleration of job losses the current policies that have generated a dramatic turnaround in the economy need to be seen through to their completion a second challenge as has been mentioned that we face is clearly the budget deficit the final numbers just released shows that in fiscal two thousand and nine the deficit reached one point four trillion dollars or about ten percent of g d p the mid session review released in august predicted a similarly large deficit in two thousand and ten and substantial structural deficit even once the recession is over and the economy is fully recovered such long term deficits are unacceptable and they need to be dealt with over the long run sustain deficits crowd out private investment and reduce long run growth given th current precarious state of the economy the stench will near term spending cuts or tax increases to reduce the deficit would threaten the recovery however the current efforts health insurance reform present a critical opportunity to improve the long run fiscal situation dramatically health reform that is at least revenue neutral in the short run and it genuinely slows the growth rate of costs in the long run is a crucial precondition for for reducing the long run budget deficit a third policy challenge that we face is the likelihood that labor market conditions will remain painfully weak through twenty ten the suffering and potential permanent damage that a sustained period of high unemployment will bring is likely to spur calls for further action to stimulate employment growth and cushion the effects of unemployment as policymakers consider the option rigorous evalu on of alternatives must be conducted particularly in the context of large budget deficits the efficacy of different options must be considered whether expiring programs or continued or new programs are instituted should be decided on the basis of their efficacy and putting people back to work and improving the future strength of the economy as i've described the last year has been one of extreme challenge and aggressive policy response that many analysts believe the low point of the recession has been reached is perhaps the most concise evidence that the policies are working a recession that showed no signs of ending last january appears to be firmly entering the recovery phase unfortunately despite this dramatic turnaround the u s economy still faces many challenges we enter the fourth quarter of two thousand and nine with the unemployment rate nearing ten percent and likely to remain severely elevated the congress and the administration will need to continue their excellent record of policy coordination to not just start the process of recovery but to finally finish it thank you funding that's been obligated but not yet put out we're looking at something in the neighborhood of two hundred eighty billion dollars out of the seven hundred eighty seven so we're talking about a small percentage of the available funding  the money to cushion the impact of the recession for those directly hurt the increases in unemployment compensation for example has been absolutely important our analysis as suggested does indicate that it has been incredibly effective in the report that we put out in september we looked at various pieces of it we looked for example at the state and local state and found that that showed evidence that it was act funds but we did add significantly to growth in the third quarter of this year absolutely we think that it has been important big going forward one of the things that we can look forward to and i described what has gotten out people i think it could have been much more effective if it had been specifically adopted to the kinds of spending that we need to create additional jobs that's the most important one of the things that have in the context of this economy which has been negative for some time investment outside of this country and wondering to what extent your recommendations or others may be focused on this particular issue very forward looking investments in health information technology broad smart electrical grid all of those are things that increase our productivity over time but also increase jobs right now as we put those into place but we also had in the act incentives for private investment the tax treatment of investment of research and development investments we think those are incredibly important again for encouraging firms to do the investment here and for creating the jobs right here also the recovery act unprecedented incentives for investments in particular areas like a widely exaggerated forty nine out of fifty states have lost jobs since the stimulus took effect the unemployment rate is far above the percent we are all promised it would be many look at this chart this is a comparison to the white house government significantly reduces its budget low current forecast over the medium term hamilton was secretary of the treasury the us government has been the world's most credit worthy so the question is what important the important thing to keep in mind is once the fed had gotten interest rates basically down to zero that is when they lose a fair amount of their ability to affect the economy and that's precisely because we f elt was out of firepower that we thought it was incredibly important to augment that with the other tool that we have which is the second thing is to talk about your graph about where we are versus where we had predicted i will be the first to admit that i didn't have a crystal ball back in december and in january i think it is actually very misleading to say that because the unemployment rate is higher than we predicted that's a sign that fiscal stimulus isn't working in the now it back in august that if you go to a doctor with a strep throat and he gives you medicine and the next day after you've taken the first pill your fever spikes you don't see the medicine didn't work you probably say my goodness i was sicker than my doctor and i thought it's very good that we got to the doctor and started taking the medicine and i feel that is exactly the situation that we're in the third thing about the budget deficit i agree it is large and it is a problem and we need to keep in mind why it is large now it was large really for three reasons one is simply the recession we know that nothing is bad for revenues as an unemployment rate approaching ten percent it is also high because of actions that were taken in the last eight years that we did not pay for things like the expansion in the prescription drug program  wars as has been described and tax cuts and then of course there is so anyway so we certainly and then there are the actions the unprecedented actions that we've had to take to try to get us out of the recession and the important point there is you know as big as the fiscal stimulus sounds or as big as the tarp money sounds the truth is those are onetime programs and when you look at what they're contributing to the budget deficit over the ten year horizon they're actually a very small fraction of it what do we do going to do to get it under control of the first that we have to do is get the economy recovered and that is precisely why we have focused thoroughly on putting people back to work that is good for people it's good for the economy and it's good for the budget deficit and then as i mentioned we are in the middle of the most important thing we could do on the deficit which is to pass responsible health insurance reform that doesn't add a dime to the deficit as the president said one thousand and twelve dollars which works out to about twelve thousand seven hundred forty four dollars annually we saw the president do us a flat two hundred fifty cost of living increase  for security retirees and beneficiaries that works out to one point nine six percent and you know when you think about it just the cost of medicine has gone up probably more than that i just want to know your feelings on consumer price there and what had happened was that it certainly gone up substantially in two thousand and eight and that's why social security benefits last year got a very hefty cost of living adjustment and then what you actually see is that the consumer price prices go down we don't reduce benefits obviously but it would have cause for it to be flat what the administration thought was that given we were in a recession given that we do know seniors are facing many special challenges given how hard this recession has been for everyone we thought a responsible way to deal with the fact that there was no cost of living by the law was to do an extension or a repeat of the one time payment that very hard hit by the recession and many states including my own of california has had very hard time with what's going on i think it's part of a general problem state revenues are down dramatically state place prices getting so high people didn't have any money left in their pocketbook so i would i would really urge you to look at those i know you're here to defend what's taking place today but as government and the government stimulus the whole reason that we're here the real reason we did something like the american recovery and reinvestment was precisely because the private sector wasn't spending we did see a dramatic decline in demand investment consumer demand and i agree completely we are all working towards a place where that private sector demand comes back and the government doesn't need to be there that is i think what we all want to happen and the question is how and when we get to that place that need the somewhat bigger loans but they're not yet the really big really big companies the other is a program to get more capital into the small community banks because we do know the main people that do a lot of the lending to small businesses are the small local banks and we've had as you mentioned important recovery measures where the big banks and trying to use some of the funds that we have small banks have a plan for doing more business lending if we can get a way to get them more capital so that they're able to do that and grow their businesses we think that would be the other thing i want you mention the idea of we need to get credit flowing before we get the private recovery and to a degree that's true but i think causation also goes the other way or we can get the economy going again i think the better that's going to be for the health of all of our banks the health of the financial system and so it does go both directions and i love one of the things that for the financial system for getting credit and it's still limited but it's a lot less limited than it was six months ago and finally your point on uncertainty and the big policy initiatives in that is a reason why we need to get in health care now this is one where i would think probably if we're talking to the same small businesses they tell us that what they're worried about is the rising cost of health care and the difficulty that they're having providing health insurance for their workers and of energy going forward exactly so that you do have the right incentives to make the big investment because we want to not only do nuclear but there's also so much want to do and encourage renewable energy of other kinds and  back started with interest rates low we had a severe financial crisis and that means coming out of this we've got lots of things working against this we still have trouble in our banking system where as you mention the commercial real estate loans are going to be another thing that's going to be holding back how much banks and be something else we're fighting against does in my mind it just makes it clear how hard this is and how important it has been that we've taken the very aggressive actions that we've taken and we are going to have to be vigilant and keep working  don't want the mission accomplished banner we have so much more to do could you talk about what you think the number one is happening in terms of the recovery act i think it was forecast to save three point five million jobs over two years whether we're on track for that and secondly what other tools but you may have in the economist toolbox that we could use absolutely i did that statement that i made i do think is important because when i talk about the recession is over or if you look at my testimony if you ask the blue chip consensus eighty one percent of them say the recession is over what that means is you've hit the bottom and you turn the corner there's a huge difference between that and when you're back to something normal and just you know one of the ways that i described this is we've lost seven point two million jobs since the business cycle peak back in december of two thousand and seven normally we would have added about one hundred thousand jobs every month so that you think about the job deficit we're probably at over nine million so that says even once you turn the corner you have so much work to do in terms of the recovery act it is all of our estimates suggest it's on track so you know that was a number that said as of the end of two thousand and ten we expected to have raised employment relative to the base by and by about three and a half million and it does look like we are going to meet that still i think as long as we have a credible plan for getting it under control over the long term health care will reform is going to be a big part of that announcing a sensible plan for once we recovered of how are we going to rein in spending or deal with revenues that's all important for making sure we retain credibility that everyone understands that the united states is the safest country put your money into by their government debt but there are things you can do whether it's more states  it is more investments in infrastructure whether it is another tax cut whether it is a tax incentives for businesses to hire all of those are things that i think should be looked at i know that the federal reserve is thinking and other ways to bring down our deficit and i think it's now more important than ever that we do that but my question in my remaining time here it's about unemployment benefits the house produced a bill that extended unemployment benefits which is good but it only included unemployment benefits for states that had eight and a half percent unemployment our concern on the senate side as someone so nicely put it in a letter a month ago to me even though our state may have eight percent unemployment in my household it's one hundred percent unemployment very difficult for me to explain to the people in northern minnesota where they border wisconsin where their unemployment benefits would be cut off and people just across the border we have a lot of issues sometimes between minnesota and wisconsin including  your first question even if we are starting to recover we do know that there are still over fifty million people who are unemployed we do know that there are people who are expiring their benefits it is still it's just a tremendous amount of suffering and that the recovery back to normal levels of unemployment is unfortunately going to be you know something that takes a long period of time and we have an obligation as a country to to cushion that blow for people so absolutely i mean one of the things of course we all know is is how much the recovery act did on this front unprecedented increase in the size of payments the length of payments and completely appropriate given the suffering that was going on and given that we needed the aggregate demand stimulus that was just a sensible program i think it's one of the ones that mark zandi says has the biggest bang for the buck because you give people their unemployment check they spend it that is incredibly important i think my main plea going forward is to think hard about what i  think it's exactly your question how do we devise this what do we what's the right length of extension what's the size i think all of that is something we should think about sort of as a coherent whole and figure out sort of what's the right thing to do it is true economists do sometimes worry about incentive effect one of the main lessons is when the unemployment rate is ten percent we're not really worried about people not getting a job that we're there that is very much we know that people are looking as hard as they can and and we're trying to do the best that we can to make the job be there for them but for now cushioning the blow so the details of how we deal with with with think the answer is probably a mixture we do hear from them that they are having trouble getting credit but we also hear the other side of it maybe they don't want to be expanded very much because they don't have the customers sort of a multifaceted approach makes a lot of sense the kind of measures we announced yesterday to try to get lending going more to small business but all of the other things that we're doing exactly the tax extension all of those things are designed to get people back to work a lot of those from small businesses just how important regulatory reform is in the middle the president has said and i feel so strongly that we need to use the pain that we've been through to some good and what we saw in the great depression they had the good sense to take that horrible crisis and stock markets work the securities and exchange commission so important we've seen that there are gaps in our regulatory framework what we learned last fall and how important it is that we do a comprehensive  and that's really what is starting this process that's going on in the house and in the senate so incredibly important the particular form whether volcker would say can we go back somewhat  to the old fashioned world where banks were one thing and you know investment banks or hedge funds were another thing or has somehow the world changed enough that they are kind of all it's hard to draw the lines that something will have to work out with the congress i think the important thing is to make sure everybody is regulated make sure everybody has good strong capital so that they have money on the line we hear so much talk about executive compensation and making sure that regulators work with the institutions they regulate  to do you have pay practices that are encouraging risky behavior all of that is going to be part of coming up with a system that i hope will be another eighty years without a major financial crisis i think that would be stabilize the economy for a long time and it seems to me that this is something that we need to do nevertheless there is a resistance and the resistance is coming largely from the big banks and that resistance coming from the big banks is having some