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And I'm going to give you about 10 more seconds or so.
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All right, looks like we have our results. So after the event, were going to take another poll in the same manner. And we're going to look at how minds have been changed [inaudible]. Now, before we hand it over to the debaters, I'd like to welcome Dr. Bob Axelrod who's going to give a few opening remarks on cyber security issues. Thanks.
So I just want to give a little background and context. You may have seen yesterday's story the New York Times that the United States has established that cyber espionage has been going on for several years at a large scale. It has been traced to a unit of a Chinese army and therefore the attribution seems pretty clear and the question that the article raised was, is the Obama Administration ready to call the Chinese out on this and it says that they scale it back or else, and then what would be the or else? So the cyber security issues are with us daily but the espionage issue is one that has been on the forefront of the news media but there's others that can come. Now, espionage is traditionally being dealt with by everybody is denying they do it and everybody doing it. And then everybody when they find some--somebody committing espionage, they typically will deport a persona non grata any officials of the other government and then arrest and prosecute anybody else. And then the government whose officials were declared persona non grata typically takes exactly the same number of officials on the other side and expels them. This tit for tat has been going on quite all throughout the Cold War and the numbers are always precise. But with cyber, it's not so easy because there's nobody in particular to expel or to arrest or to prosecute. And nevertheless, the espionage goes on. And from the Chinese side, it's clear at least that they are after three different kinds of things. One is industrial secrets. For example, they went after Coca Cola. You may wonder why. Well, it's when they were negotiating to purchase an agreement with Chinese software--soft drink companies. So there were millions at stake in that. They've also gone after military secrets, of course. And they're going after the [inaudible] there, we help them identify dissidents, for example, the reason they--apparently reasoned they've gone after Google and New York Times and Wall Street Journals are to find out in the newspaper case when they publish stories about Chinese dissidents, who was it that provided those names and what were they and they want to get inside of the reporters and things. But, of course, cyber issues could become very much larger than the espionage. They could become part of a major conflict either independently. Cyber activities being in the fore or combining as what the pentagon likes to call Connecticut Task. Connecticut Task are things that go boom. So those are physical attacks and, of course, cyber activity could be part of those as well. And in the past, we have seen them used by the Russians for example in two cases. One against Estonia where the--they were denial of service attacks and its still ambiguous as to whether Russian government was directly supportive of that or whether it was sort of cyber patriots within Russia who are mad at Estonia. But it was also down against Georgia when the Soviet's--remember when the Russians attacked Georgia. There was also attacks on their government and industrial system that caused some damage. The Iranians have also used cyber techniques. For example the hijacking of the American Drone and have it land in Iran where they could display it and presumably sell it the Chinese. And, of course, United States and Israel apparently have used what's called [inaudible] to interfere with the Iranian nuclear program. And it was a crossing of a thresholds in terms of actually sabotaging an industrial system whereas other things have been strictly within cyber domain. A major question is can we prevent cyber conflict from getting out of hand by anticipating what some of the problems are and acting in advanced to had those off by some kind of mutual understandings or agreements and that's exactly what the debate resolution gets to. How can we go about in a cooperative manner reducing the risk of major cyber conflict and if so, what has to be done to make that even possible to start down that road. And with that, I'll turn it over to our debaters and maybe you're going to moderate that.
[ Inaudible Remarks ]
I noticed that Steven has more minds to change than I do so I feel the pressure. But my answer to the question is, yes, definitely we should begin negotiations. But I want to specify with whom and for what purpose and set a little bit of context. The internet is clearly one of the most remarkable phenomenon that we've ever seen. It began in the early 1970's with four people who imagined a network of 100,000 main frame computers world wide and did not fathom what was going to happen.
Thank you, Doctor Steinbruner. Hello, Doctor Bucci [inaudible].
Good evening, it's great to be here. And as mentioned I'm trying to convince you that I'm not opposed as in, no, we shouldn't ever do negotiations on the international scale regarding cyber but that not yet and the reason I say that is this. Right now in the United States, we have huge differences of opinion between men and women of goodwill from all over the political spectrum not broken down along partisan lines that disagree about issues of security versus privacy. Is security and privacy really--are they really the opposite ends of the spectrum of these issues? Should we use regulatory frameworks that try and increase cyber security or should we use market measures to do that? Who should be the lead in this area? Should it be the public sector or should it be the private sector, some combination of the two? And again, this is not a republican versus democrat kind of deal. If you look at the bills that have been tried to gotten through and have failed, everyone of them has had bipartisan support by the people who wrote the bills and everyone of them has had a very strong bipartisan opposition against them because there are actually some honest disagreements about the best way to go forward with this. Before we go into an international forum to try and negotiate with other countries who have in some cases very different visions of the internet that we do, we need to figure out where the heck we think we should be? You know, I realize there might be some value with starting those discussions to help us come to those conclusions of where we should be and I think we should have a conversation but I think it should be a national conversation first then followed by the international conversation. Because if you go into a negotiation not knowing what is important to you, not knowing what is critical, not knowing what's negotiable and what isn't, you're not necessarily going to come out with an outcome that is helpful or positive for the nation. I just want to point out that there has been growing internationally a particular divergence between the United States, the western democracies that stand with us and other democracies of the world and the vision that we have of the internet which is generally looked at as freedom, free speech, access to all information that's out there versus countries like Russia and China and Iran and some other more oppressive regimes in the world who look at that and say, "That's wrong, we've got to control this stuff. That people should only have access to certain types of information. We should be able to close off our part of the internet from the rest of the world," and they use it as a method of population control. You must remember that technology like this is amoral. You can use it for very, very positive things or you can use it for very, very negative things depending on the motivation of the people who are executing those policies. I realized that some people particularly when they get into the privacy versus security debate, many people are more concerned about protecting their information from our government than they are from anyone else. And I understand that, you know, I don't want big brother looking over my shoulder either even though I make a point of trying not to do anything that might interest them. But I got to tell you, if you don't have some degree of security, there's going to be a lot of people looking over your shoulder and a lot of them are not going to be from this country. So, we do need to come to that conclusion as a nation, you know, this is America, we're never going to work out all the details but we got to at least get in a ballpark before we step out into the international Fora and start trying to negotiate with the other folks out there who I can tell you when they come into the negotiations will have a very, very firm, very specific agendas that they are trying to push forward. So again, I'm not a, no, like never do this ever in the world, but we need to go a little slow and I would rather see us not achieve an international agreement if in achieving that agreement, it's going to circumscribe the freedoms and the benefits of the internet not just for our citizens but for many other citizens in the world. Thanks.
Thank you, Doctor Bucci. Doctor Steinbruner, if you'd like to respond to Doctor Bucci's opening comments?
Yeah, I'm not proposing that we negotiate about everything. We try to regulate comprehensively all internet activities. I say that we should focus on those things where we have very good reason to believe we have very, very strong mutual interest even if it is not well-articulate or realized. I think we do know already, we don't have to have a big debate that we have a huge interest in preventing deliberately distractive attacks on power grids, for example. And that--that I would be happy if negotiations focused exclusively on that or I would add other things to this category, critical infrastructure, financial clearing house transactions, in particular, to which the international economy is extremely vulnerable. So the proposal is that we don't try comprehensive regulation of everything the internet does but that we try to block off extremely dangerous destructive actions that are technically feasible and for which there is no single technical solution that we need.
Thank you, Doctor Steinbruner. Doctor Bucci, would you like to comment?
Can I sit here? Does that mess up the camera man? Okay. Okay, yes, we should participate in international discussions. I'm making a somewhat narrow distinction here between talking to allies, even talking to adversaries which is fine, it goes on all the time and in a formalized negotiating process that's out in the international arena. The reason I think we should participate in sort of more informal discussions of that nature is frankly, we do need to keep track of what others are trying to do to be able to see what these other block of nations that kind of has a different vision for the internet than we do and to protect our own reputation. If you don't come to the table, sometimes, you get kind of beat up by everybody else and the United States does have to guard against that. One of my main concerns with this is, well, in my heart of hearts, I agree with John about the importance of trying to keep these very destructive acts from becoming the norm. The problem I have with it is it's awfully darn hard to tell a difference between espionage probing and someone rummaging around inside your network just to steal your intellectual property or your data. You use exactly the same procedures to get in to do everything that you would use if you were going to go in there and do destruction. So it's very, very difficult, you know. I agree we need to exempt espionage because you're never going to control that, it's too ubiquitous, it's against the law anyway and everybody still does it. But the problem is, well, they're in there doing that espionage, how the heck are you going to tell a difference between that and when they leave something behind or at the time they get in there, they decide to, you know, metaphorically pull the trigger and do something destructive. Just getting the United States, China and Russia to say, "Okay, we won't do that," unfortunately in this world is not enough. They are the biggest players, they do have the most capability of any country out there. But I got tell you, you know, China can't control North Korea from doing nuclear tests. Russia doesn't seem to be inclined to try and keep Iran from supporting international terrorism, and the United States doesn't seem to be able to stop Israel when Israel thinks it's in their interest to do something. And, you know, these are three countries that are very closely related to those three big ones and there's a whole bunch of other folks out there that also have cyber capabilities. So, a laudable goal but I just don't think it's achievable and that's why I'm in no particular hurry to get out there and negotiate. I do want to say one thing real quickly. If you have not read John's paper, I don't agree with every single thing in it. It's really, really well-written and very comprehensive on this issue, so I would recommend it. He's probably too modest to say that, but it's really good.
Doctor Steinbruner, I wonder if you could respond to this notion of informal versus formal talks in discerning between internet freedom versus when you just got power grids security, things like that. What I'd like to do is try to get some sense of the texture of your different approaches to this issue with respect to those two dimensions, formal, informal allies, non-allies.
Well, what I would like to see happen is formal negotiations about a specific prohibition on destructive attacks on critical infrastructure targets. And so the agenda would be restricted to that. I would concede, however, as Steven is implying it, it may be very difficult to pull that off because the partners in particular and I kind of want to talk about the internet without also talking about political intrusion in their system and we're not likely to agree on that, we're certain not agree on that. Nor are they going to want to talk about cyber security without other security topics coming on to the agenda. So I would concede that it is not a trivial matter to get negotiations focused as narrowly as I've suggested and it may or may not be possible. All I'm saying is it's worth trying. Because in fact, the--I would say in reality, there is a mutual interest that we can play upon here. The three countries who are primarily involved in this, US, Russia, and China are preparing destructive attacks on critical infrastructure targets. I mean, we have to assume that that's going on. They haven't done it, however. And both--and all of them I think have some qualms about the wisdom of doing that. That seems to me would create a situation where we talk--have to talk right away before they have done it and try to establish the principle, thou shall not do what you could do. We are not going to be able to eliminate the possibility that, you know, the capacity is going to be there, we're not going to be able to negotiate that away. What we have to try to do is set a rule of behavior that says, this is out of balance, you don't do it even though you can. And you provide mutual reassurance that you're not attempting to do it and you collaborate to serve, enhance the protection of our respective systems in this regard. I will concede, however, that that's--you can't question whether it's practical to setup negotiations as specifically focused to that without dragging in other issues about which we are not doesn't need to agree any time soon and maybe it is not, all I'm saying is let's try.
Doctor Bucci, would you agree that he's narrowed out your point of disagreement here, which is that it's not practical to get them to talk about a specific--as narrowly focus the topic [inaudible]?
Yeah, it's going to be very, very difficult because again, I think, a lot of these countries have a set agenda, they've settled on it and, you know, they're--as soon as we say, "Okay, we want to sit down but we only want to talk about this, "they're going to come in and they might even say yes to that but when they get to the table, there's going to be a lot other issues that come up. You know, the thought struck me that, you know, cyber is difficult. It's kind of like the do use chemicals that, you now, have perfectly legitimate you know, civilian applications but they could also be used for something nefarious, building weapons, something like that. It's very, very difficult to monitor those things, you know, well, are they getting too much or they, you know, can we see that they're actually putting all those chemicals on their farm fields [inaudible] into their munitions plans. It's very, very difficult. Cyber, you can do a lot of good things with it but you can also turn around and do a lot of damage and cause a lot of mischief both to your own population and to the world at large. And it's really, really hard to monitor which one you're doing. And particularly, if you've already stipulated, we're going to let you do espionage or at least, you know, we're not trying to stop you but we're not going to go bomb you if you do that. When, you know, you don't know that it's destructive until it destroys something and that's tough, you know. It's not the same as we saw the launch and there's something coming over the polar cap so we now have, you know, an ability to respond. This is really stuff that frankly the humans are definitely the weak link in this chain because we can't respond fast enough to do some of these things. It's a scary field, and to be honest with you, all of you are the worst part of the security, me, too. It isn't the machines, it isn't even the software though we could get better with that. It's the humans and we just don't play the role that we should and it gives adversaries a way to come in and exploit it and they tend to take advantage of that.
Doctor Steinbruner, Doctor Bucci brought up a different argument here. He has pointed out that there is kind of a slippery slope between what we tacitly allowed espionage, these initial intrusions between that and to disable the power grid versus stealing, for example, IP. I think you'd agree. Could you address that one?
Well, it's certainly noted that there is European convention on cyber crime that declares as illegal particularly all the things you do either for espionage or for destruction, so it's already been declared illegal. And we are parties of--in some sense, in our convention, I think the Russians have, in some sense, exceeded to it as well. So already, there's the beginning of a discussion. And what I would emphasize is that Steven is correct that this looks like it's going to be difficult but that is not a reason to say our priority is impossible therefore don't try. And I do think that if we initiated a process trying to focus specifically on what I'll talk to is it's not clearly we couldn't pull this off. Yeah, we would have to fend off issues we don't want to talk about and that would be a problem. It's not clear to me there would be such an intractable problem that we couldn't come to terms on what we most have the greatest interest in and we--believe me, all of us do not want to see destructive attacks on power grids or financial clearing houses. Particularly, the ladder really does threaten the world economy if--And, so it looks like there are deep enough interest overcome, if you will, all the things he was rightly pointing to and at least we had to try to see if we could get agreement along those lines and you don't know until you've tried. The United States has a lot of leverage share if we initiate it because we are the big player after all. And that--and it's important for us even if we don't succeed to send the signal that this is the way we want the world to work, we do not want people preparing attacks or even conducting uncritical infrastructure. We want to set these norms because we need these norms and formal negotiation is a way of setting the norms even if you don't get final agreement.
Doctor Bucci, I wonder if you could address what some of the downsides might be to entering formal negotiations sooner rather than later. I would assume you see a certain sense of urgency in terms of preventing the attack from [inaudible], for example, or financial clearing house. But aside from the debate possibly dragging in other issues like internet freedom that we don't feel like addressing at the moment, what are the other downsides that you see, why shouldn't we do this?
The main reason is right now, we have more ability than anybody else and deliberately going into negotiations now and basically handing some of those abilities away, well, it sounds like a nice thing to do in the not so nice world of international politics, it's--I'm not sure if there's a lot to be gained from that. Frankly, I don't think some of these countries even if, you know, they sat down and sign an agreement that they would never do this stuff, that it's really going to stop them from doing it. So circumscribing our abilities and our options when we're sort of the wrestler are on top right now doesn't seem to make much sense to me.
Let me respond to that cause this really is the fundamental issue. We are better at it than other people. We're also more vulnerable.
And so we're more exposed and we're better. I think our political system is having difficulty accepting the principles that it is good idea to indeed, in some sense necessary to accept restraint in order to impose it. This is an instance where we have to do that and it is true that that accepting restraint, we will put greater restriction on ourselves in the sense that we have greater capability to attack than they do. I think it is overwhelmingly in our interest in this instance to do that and that's not the only instance. I mean, there are circumstances in which that principle, we do need to master that there are some things about which it's desirable to accept restraint on superior capability in order to impose restraint on inferior capability that nonetheless can cause us a lot of trouble.
Would you like to respond to that, Doctor Bucci, before we move on to audience questions?
I understand John's argument with that and while on an academic sense, I think it has a lot of merit. I'm not sure that in the real world, it plays out quite that way. You know, we have seen our negotiating skills with our previously with the Soviet Union and since then with the Russians and it hasn't always served us well. You know, we've had that desire, so, okay, we'll give a little bit more, we'll give a little bit more. And it doesn't necessarily work out to our advantage.
At this point, I'd like to move on to audience questions. I just got my first batch here and the first one is for Doctor Steinbruner. Even if Russia and China agree with us, the power grids shouldn't be attacked. How can we be assured that they are not appearing to do just that and likewise, how can we assure them?
Well, the declaration that you're not going to do it is the beginning. I mean, they will be preparing as well we be preparing to do it. That's not something we can prove since it can be done, they will prepare and we do, too, as to how we would do it. So the problem is how do you prevent people from doing what they could do and actually are prepared to do? The declaration helps, it sets the norm but I would go far beyond that. I would say let's establish procedures for a mutual protection to make it harder to do and the art here is to target this and not at ourselves particularly that a third party is terrorist, et cetera, who might do it to all of us. So let's establish mutual protection against this notion of third parties who might do this. To make it harder than it currently is, now, that would mean that we are constraining our own ability as they would be theirs but we're not going to be able to eliminate the potential for this attack. It's going to be there. What we have to do is regulate the behavior and the first step in regulating behavior is to establish a very clear norm of that.
Can I respond as well? Two points, one, just so everybody is clear, if you go any place else in America, we have a debate as to who the biggest threat is. Is it the Russians who are the most sophisticated, the Chinese who were sophisticated and there's a whole bunch of stuff going on or is it the Iranians who, you know, are not as sophisticated but have a lot more malice towards us. Everywhere else in the world, it isn't really a big debate. They all think we're the biggest threat because we have the most capability, and America can't think of ourselves that way but it's true.
How about the Israelis?
The Israelis are--well, I mean, some of their local competitors, we consider them a big threat but that has more to do with their kinetic capabilities than just their cyber capabilities. But the--we really need to realize that there's more folks out there in the cyber world than just the big countries. And it's really easy, you know, if you thought it was easy to do proxy warfare in a cold war using other countries and special operators and that sort of stuff, it's really easy to do it in a cyber world. I mean there is organized crime groups that get hired to do things and some of those have capabilities that rival a lot of nation states so it's--I just, again, I think it's a very laudable goal but I just don't think it's necessarily achievable.
Let me just point out that there's a benefit in that. We are all--three of the big players are subject to this, call it a terrorist threat or criminal threat. And it's useful to talk about mutual protection against that which is easier to talk about even though the effects of mutual protection against each other as well. There isn't any absolute solution here. The only question is can we do better than we're currently doing?
Just one last point on that. We've had one example of trying to do exactly what we're talking about here with the Russians. When the United States came up with the idea of missile defense, the more recent one not the ones when we're against the Soviet Union, and I was in the Pentagon and we brought the Russians in and we briefed them on everything we're planning on doing, where all the facilities we're going to go, we did everything but give them the technology. And we showed them, you know, was aimed at Iran and North Korea, it wasn't aimed at their stuff.
I would argue that that's a different circumstance and it would take us several weeks to work through all the details of why it's different.
Okay. Doctor Bucci, the next question is for you and it sort of takes us a little bit farther down the [inaudible] path than we've even been so far. Nations--nations always resort to their own interest in the end. [inaudible] policy for the US to engage its allies on this issue fully understanding that if a resulting treaty will be obligated if doing so is in the national interest?
Well, I mean it's, I'm not necessarily sure that's a useful discussion, I mean, nobody ever has to follow a treaty, there isn't an international policeman out there who's going to say, "Oh, wait a minute, you signed the paper and now you really can't do that." You know, if in the minds of the individual nation state, they decide that that's no longer in their interest, yeah, you're going to blow it off and you're going to do what you think is right. But to be honest with you, we kind of try not to do that. I mean we've done it often enough and so other people have done it just as much. but we really try not to sign up for something that we know ahead of time we're not going to follow. So I'm not sure if we have absolutely no intention of following it that were--it really is good form to sign up for it which is not what you try and do. Circumstances can change after the fact but going into it falsely, I don't think we prefer to do that.
Doctor Steinbruner, would you like to address this?
Just a comment. We live in a world that is going to need global norms and this is one of the areas of many of our needs and we're going to need to learn to how to do it. I agree. It's--you shouldn't--we shouldn't--we wouldn't sign up to something cynically and say, "Yeah, well, it doesn't mean anything." We're not--that's not the way we operate or should we operate it but we don't have to be completely reassured that everybody will adhere to our standards in order to try to set the norm, it's a process, and sometimes it take some time and, okay, people violate the norm, we catch some and we bring them up [inaudible] as a way of strengthening the norm.
Doctor Bucci, you've addressed this topic a fair amount in your writings and so I'm actually going to address this question first to Doctor Steinbruner, definitely to give you a chance to respond. Doctor Steinbruner, how should the US continue its engagement and relationship with China given the mounting evidence of Chinese government involvement in attacks of US networks?
That's the reason for doing it, we want to back them off, these attacks, and let me say that as--I think Steven pointed out, if you're in China, you hear about--a lot about US attacks. And if--yeah, there's not a fair court to sort things up but if there were, I think, and people were counting attacks, if you will, the US initiates most of them. China may be second, may be third. If China is third then Russia is the second, that's--So everybody is doing it, it is the answer. And the fact that the Chinese are doing it is not a reason not to talk to them about this, it's the reason for talking to them.
Just, you know, first of all, when we talked about this little before we started, you know, that the idea of every cyber incident is really not an attack.
You know, that we use that term very cavalierly mostly because we've haven't ever really defined it well. So, every newspaper person, it sounds much more dramatic that we had, you know, five million cyber attacks this week than we had you know, probes and scans and other things like that. Mostly, these things really are at worst espionage. They're in there trying to still data or spies trying to steal data from everybody else. We also steal from our friends and our friends steal from us, so that they're not just our adversaries. The--one of the biggest differences with China is that China, like other centralized governments, support their economic interest with that information. You know, we don't go and steal China's economic secrets mostly because they're ours that they took in and applied but also because we don't do that. We don't use our Intel community to, you know, to prop up our businesses. That's just not the model we use. Other countries and some of them our, you know, Western European countries do do that. And so there's a little difference and that I guess the breadth of the espionage that goes on, they have government assets that are--is that me? Maybe it is me. They have government assets that are doing industrial espionage. We don't have so much that ours is this national security espionage in the more normal sense of it. So, yeah, where you sit, it kind of depends on how you evaluate this and if you were sitting in Beijing, you'd probably look at this a little differently than we do.
Would you like to say anything?
It is true that there's a big structure of institutional difference here and that the US Intelligence Community does not pass on its information in the US Corporation systematically for their benefit, and the Chinese do. And, you know, that's just an inherent difference in the way the two societies work. I think it's fair to say that we certainly gather intelligence information about Chinese economic activities for which we don't pass it on the IBM but we use it, okay, and so they focus on that. Both of us are gathering the same kind of information, we use it differently.
One other point, a lot of people don't really understand, you know. We always--I kind of laugh at the Chinese sometimes with their, you know, it's like the lady doth protest too much kind of stuff, but, you know, that China is the most hacked country in the world by volume, by several orders in magnitude, mostly because they use a lot of pirated software and things that don't get updated. So they're actually very, very vulnerable and they're doing it to each other because they've got a very large decedent community who's trying to get away with stuff and trying to protect themselves. I mean, they do have a lot of stuff and there is some evidence that other countries like to route their stuff through China because they know once--whosever following it gets to China, they stop. And--because they're, you know, everybody thinks of China as the big hacker country. So I'm not defending China by any means. They're--I think they're pretty egregious violators, but, you know, again it doesn't make much sense to get all sorts of moral outrage over it because we all do it. You know, our country does it, all of our allies do it, all our adversaries do it that, you know, you don't have to sneak in to the Pentagon with a bag and empty out a file cabinet anymore. You just have to have some really talented people with a keyboard and hopefully someone at our end doesn't something stupid which is usually what it is. It's not somebody malicious on our end. It's somebody ill-informed, I guess, would be a kinder way to put it.
On a similar note, and I'll direct this to you first, Dr. Brucci, should the US government require non-governmental entities such as corporations to allow government laundering of their networks in order to detect and to prevent attacks on those networks?
I mean, there's a lot of things that our private sector could do and our public sectors should do together to add protection to our systems. You know, we--the private sector gets beaten up a lot because they say, you know, they don't share their information when they've been hacked, they don't give all the data to the government because in a lot of cases those companies consider, one, it ruins their reputation, two, it's proprietary information that once they hand it to the government, it becomes eligible for [inaudible], suits so that their competitors can get it. But on the same side, the government frankly is really, really poor at sharing information it has with the private sector. So whether having the government monitor their networks directly is going to help, they've been doing that in a defense industrial base, you know, company sign up and say, yeah, we'll let you look at all of our stuff.
Doctor Steinbruner, would you like to address this?
Okay, move on. Why since we are the most capable country in the cyber realm should we not negotiate as soon as possible from a position of strength rather than when another nations become more capable. So, I guess what's the [inaudible].
Let me just comment. There's a lot of talk here about sort of negotiation from strength and [inaudible] tactics as if the outcome were determined by relative strength. Most of the time that's not the case. Most of the time the outcomes or durable outcomes and negotiations are determined by reasonable equity because that's what gets people to adhere to it. And so usually and sort of bargaining tactics and sort of leverage and all that succeeds in either speeding up or slowing up the outcome that is determined in terms of reasonable equity even between countries that are a very different assets. So I don't imagine any agreement that is going to lock in sort of relative or sort of protect relative strength. An agreement that has any meaning and enduring power is going to have to establish basic principles that protect everybody and that's the only thing you can really enforce.
Dr. Bucci, why shouldn't we argue from a positional strength?
Because I've seen the United States over the years negotiate and when we go into something in a position of strength we usually end up giving away more. So we end up abrogating the position of strength to one of--at best parity and in some cases depending on how bad the negotiated settlement is, we end up weaker than the people we're negotiating with. I'm not a real fan of arms control negotiations so if you haven't figured that out yet, I'll be upfront with it. I just don't think it's necessarily the best solution and in this regular, you know, like nuclear weapons and conventional weapons are a lot easier to come to some sort of an agreement as you count the darn things other than all the ones everybody hides. A lot more readily than you can with doing this kind of behavior while doing that. I'm just not sure this is doable.
But just let me point out, I'm not proposing that we negotiate about relative strength and trying to adjust it up or down. What I'm proposing is that we regulate behavior whatever the relative strengths are. And let me suggest we better to learn to do that otherwise we're in very deep trouble.
Our next question, I'll also address it to you Doctor Steinburner. If an agreement on cyber attacks is reached but a signatory attacks anyway, how can the agreement's punitive clauses be enforced given the difficulty of definitive proof. In other words, plausible deniability is pervasive in its environment. How do you enforce it?
One of the things you would--first of all let me say it is important to establish as broadly normal as you can even if there are violations. I mean, we have laws against murder. People get killed all the time. We nonetheless think it's important to have those laws. But I would say that an addition to just setting a principle, we ought to establish the practice and as part of it of implementing it by neutral collaboration and enforcement and in particular in forensic investigation of possible incidents. It matters quite a lot whether the respective governments are contributing or collaborating in doing forensic analysis of intrusion or whether they're not. So, the agreement would set up the--yeah, all the situation in which, not that it's not impossible to violate and then maybe encounter violation but it's a lot more difficult to do it effectively without getting caught. So the point is just to make it more dangerous to whoever who's doing it. And, you know, with enough work you can get pretty close to identifying responsibility. It is, you know, it is admittedly difficult but it's not completely impossible.
And keep in mind in any international relations type of situation, you don't necessarily have to have a level of proof, you know, like you have to have an American courtroom to declare somebody guilty. It's always going to be an assessment and that there's interest that get factored in. There's timing that gets factored in and that, you know, if we had an agreement like this and the signatories decided that country A violated it even if they didn't have enough proof to get it through, you know, an international court or domestic court. If they felt it was in our interest to take action to punitive action against that country, they'd do it. American's tend to think very judicially at least as a population understanding the leaders about these things and I think we really, we got to have that proof beyond reasonable doubt and it'd be nice but we don't always have that before we take actions in the international realm.
And your ability--your ability to take action depends upon the strength of the norm. You have a strong norm, you don't need sort of a definitive proof in order to enforce it. If people really don't think that the action is justified, you can do a lot of things even if your proof is little squirrel.
And the proof will always, but at least, I think of--for at least for the foreseeable future, we'll continue to be squirreling in this realm 'cause it's really hard to get that definitive proof and while our forensics capabilities are getting better and better, the techniques people use to obfuscate the responsibility are also getting better and better. So it's another area in the cyber that's chasing itself.
So with respect to the capabilities, we have a question here regarding how you guys might best enhance their own capabilities. And so Doctor Steinbruner, I'll address this to you first but I'd like you both to comment. What will be the best means of integrating private sector into whatever US in the international agreements might be negotiated?
One of the things I think that we ought to fairly seriously explore is for--operating systems, infrastructure operating systems that carry heavy load for internatio--that we ought to try to establish basically trusted bank whereby sort of source codes are deposited and then you can check periodically against changes to those sort of scopes as a way of detecting intrusion. And there's a lot of complexity associated with that idea. You have to be very sure about the source code in the first place and you have to be very sure the repository is trustworthy. It's not itself a source of intrusion. But that would establish a higher standard and protection against those things that are really critical than we currently have. So that's one of the things I think that we are exporting. The other idea that people regularly have is, okay, disconnect from the internet those things that you don't want. That's easy to say and very difficult to do It's very, very hard to disconnect any current operating system from the internet absolutely because the internet is so efficient. But nonetheless you can think about the possibility of taking the power grid off the internet in some sense and how you would do that and could you do it and if these are productive discussions to have.
Yeah, the idea of taking things off the internet, everybody always has this vision that there's just some switch somewhere we just flip it in and--but, you know, if your adversary's intent is to lower your capability and take away from you all the advantages that you gained by using all these digital means, you kind of did his job for him when you say, "Oop, there's something coming. Quick, turn it all off." Okay, he didn't have to hit you, you turned it off yourself. I mean its--that's--I mean its--its an unfortunately naive view of how it works and it's also kind of productive. And I know you're not suggesting that so I'm not being critical of you. But it's just--Right now, we are really, really good at so many things in the world whether it's military, intelligence, commercial because we have bought into this digital world a 110 percent.
So, that's actually a bit the same to the next question which this particular audience member feels is core to this debate. And I'm going to address it first to Doctor Steinbruner. It seems there are two core questions. One, what should be impermissible even in war, i.e. Geneva concordance we have for POWs. And two, what should be impermissible outside on hostilities?
Outside of war, outside of our [inaudible].
Yeah. It's a very good question and the border line between war and not war is beginning to be an increasingly difficult question. What I would say is the reason for establishing sort of legal restraints is to stay out of war in the first place. And then I would concede that if you really get something that qualifies as war, fully declared and all that that most of these rules are in jeopardy including rules of war which are regularly violated.
But that doesn't mean that that doesn't undermine their utility, if you will, it just represents. So if you go--and but let me be a little be more specific. If we say thou shall not attack power grids, that's an act of war. It--and you--you establish that norm, it certainly discourages anybody from contemplating that because it defines that act as an act of war and it opens up all sorts of retribution as a consequence of that. So, my basic answer to the question is you set the norms in order to stay out of war. You would hope, of course, that they would contain any conflict that actually occurs but if we get war then, you know, there's a lot of destruction and this is part of it.
I mean, it's sort of the essence of deterrence. You have a declaratory policy, you tell people what is impermissible. In this case, I think that's a perfectly legitimate thing for a nation state to say, "You attack our power grid and we're at war." And don't matter, you know, we don't have to answer back with a cyber weapon system. We can come back at you with everything we've got. Now, there's new answers to that in our Department of Defense announced that a cyber attack would be considered an act of war. Now it neglected to define what a cyber attack was. I mean it was left deliberately vague so hopefully maybe you deter a few more things 'cause you don't necessarily want the bad guys say, "Okay, I know I can go all the way up to here and they won't come and bomb me. But if I go beyond that, I know their going to come after me." So you do leave some wiggle room there because that has an additional around the edge's deterrent turn effect. But you know it's--it comes down to them making an interest-based decision as well as to whether, you know, okay, we're going to see if they're really going to back this up because we think it's worth the risk to hammer them by doing that, And you hope it doesn't happen. I think, frankly, I think having a specific declaratory policy that you attack our energy grid in any way shape or form that we'll consider an act of war makes more sense to me than having a negotiation.
Well, there's a corollary to that is that we will not do it to you either if we consider it an act of war.
We're ruling that out of bounce. And, you know, that--that's way of--the point is to set the norm. How you set the norm, you can debate about how to set the norm. But it would be desirable to have sort of a legally and active agreement. This is the norm.
Thank you, gentlemen. We reached the end of our question and answer session. But we'd like to give each of you five minutes to give some closing remarks to sum up your ideas and leave us with a final question. So Dr. Steinbruner, we'd like to start with you. And you don't have to get up the podium.
Let me just say that there are deep issues were talk--I mean the cyber issue connects into a lot of other things as well. And cannot really in the end be separated from fundamental security relationships and all the interests associated with that. So part of what is behind what I'm saying is that we're living in world that is going to require more robust regulation, if you will, of some things than it currently has. And it is going to require sort of legally find security relationships among the major players in order to cope with mutual threats. Coming down the line in case you haven't noticed is the looming issue of global warming which although is controversial here is not going to be controversial forever. This is a very, very serious mutual threat. And that's going to change the security relationships of all countries over a two or three-decade-year period. And they're going to be driven into very intricate collaboration. And this is just one of the features of that. So what I'm saying here is that the recommendation of just talking about this is rooted in a larger situation in which we're going to have to learn to regulate our security relationships with countries that we have historically seen or like to see as enemies for mutual protection because we have overwhelming mutual interest looming here. And we have to learn how to handle it.
I just want to emphasize cyber threats are real, all right? It isn't hype, it isn't just, you know, defense contractors around the Northern Virginia area trying to get extra contracts from the government. There are real honest to God threats out there from nation states, from non-state actors, from criminal organizations, even, you know, they--everybody always laughs at the hacker, you know. It's that fat guy sitting in his mother's basement typing on his computer. Those guys still exist and they're frankly much more capable today than they used to be because you can just go online and buy stuff, I mean I could become a hacker and I'm not a tech guy. If I just went online to some gray sites and bought some tools. So the threats are real. The sky is not falling, however, all right? That, you know, the republic is not at risk today of collapsing under the way that the cyber attacks we're facing. It--it's--but what's happening does affect all of us. If you are like me and have either not much hair or the hair has turned to different color, you may take advantage of this and say, "Look, you know, it's not my thing. I'm just going to do what I do. I know other people are going to take care of it", that's the wrong attitude. You have to understand this problem. You have to get engaged with it. If you think that all the young people are going to take care of it for you, you're dreaming. The young people are very capable at using all these stuff and they have no culture of security, whatsoever. It's not a criticism, it's just a fact that's not important to them. So they don't think about the threats in the same way someone with that greater or less hair does it. So, you've got to have the mindsets of both together working to try and address this. If you don't understand the cyber issues that are out there, get the knowledge, dig in. The government has a wonderful program that it's close to put out awareness education and training, and I spoke with one of these senior people at DHS and I said, "Well, how's that going?"
Thank you both very much for coming here to be with us.
Mercifully, he did not do a poll.
That's right, he forgot to do that.
I'd like to thank our speakers again, Doctors Bucci and Steinbruner for coming here and engaging a thoughtful engaging discussion. I know I learned a lot. I think that's really widespread here. I'd like to remind everyone as they head out to get their M-cards if they have the iClickers and also I'd like to take one final poll, and if I can figure out how to do that. Oops, here we go. Technology, right? Okay, so if anyone wants to try voting out, there we go. Okay, so our resolution is here, so just so you can read it.
[ Pause ]
And looks like we don't have anyone undecided, so, that's good.
Oop, never mind.
It's both skewing [inaudible].
Well, once again I'd like to thank our speakers. Thank you very much. [applause] And I'd like to invite everyone to our last debate in the Ford Policy Union Series. It will be on March 26th on the topic of international drug treaties. And I thank you all for coming.
Federalism has been called many things. I'm not sure I've ever seen the title practice before, but it certainly fits this piece well now and historically. I must confess that there was a time a couple of decades ago when I was working on doctoral dissertation trying to come to terms with federalism. A little tiny slice of that involved Medicaid and not understanding what Medicaid was, why it was created, or how it worked. Did not understand it and I went into what is then and now one of the world's great bookstores, the [inaudible] Bookstore at University of Chicago and found this book. [Laughter] Policy and Democracy.
Blood red, notice.
It was all in bright red. As you can see the spine has been faded from [inaudible]. [Laughter] Chapter Seven. Medicaid and commercial market strategy for the poor, [inaudible]. [Laughter] It really opened up for me an understanding of how Medicaid came into being, how it works, and here we are a few decades later [laughter] with the [inaudible] version with all kinds of new content called Medicaid Politics, Federalism, Policy Durability, and Health Reform, just released late last year by Georgetown University Press by Frank Thompson. Frank, as many of you know, is one of our nation's leading scholars in the area of health politics and policy for the [inaudible] privileged to invite him here to the Ford school. He has served on the faculties of the University of Georgia and the State University of New York at Albany where he's held a series of administrative posts. Frank is a fellow at the National Academy of Public Administration and now is a member of the faculty at Georgetown, and so we're very pleased to have him here to talk about his book, but also put it into the immediate context whereby Medicaid has gained even new saliency in the directions that some of us probably could not have anticipated just a few years ago. We're also delighted to be joined by Scott Grier [inaudible], a colleague from the School of Public Health, the Department of Health and National Policy. Scott works in a number of areas directly relevant to this. It is also thought that issues of centralization and decentralization of how politics and policy in federated and multilevel systems including the European Union. Scott was a visiting scholar with us in Close Up during the fall term. It's great to have you here with us today. With that, we're going to ask Frank to provide extended remarks on his views on [inaudible] federalism and the future of Medicaid, turn things over to Scott for some reaction and reflection, and then as you can see, the table will allow for us to have some Q and A and hopefully we'll open this up for extended conversation. But before going any further, please do extend a warm welcome to Frank Thompson. Welcome to our campus.
[ Applause ]
Frank Thompson: Thanks, [inaudible]. Let's see. Thank you very much, Barry for those very kind introductory remarks. And let me say how much of a pleasure it is to be at the Ford School. I was telling the students I met with at noon that if we look at the top 20 research campuses in the country, I've been in every one -- had been in every one except, for some strange reason, [inaudible], so it's been a great, great privilege or treat to come and get acquainted with the campus. I would also note that I had the great good fortune, probably -- oh gosh, 25 years ago, to -- when Gerald Ford visited the University of Georgia and I was head of the Department of Political Science to actually sit next to him and moderate a session where he responded -- made remarks and responded to a lot of questions, and I've had very great respect for him and I'm very pleased to be here. Okay. Let's get the show on the road. And Barry, because I know we've got too many Power Points, I'm targeting to end about 10 to two. Does that sound -- Sound sensible and will give Scott a chance here. All right. So I wanted to open -- I know there's a lot of stuff to read in this thing, but I wanted to open with two themes. And the top theme is from one of the founders, James Madison which is all about [inaudible] federalism. Madison did not envision among the founders, that political parties would come to play as great a role in the political system as they've come to play. But I do like the line about the potential to resist and frustrate the measures of each other. They understood that they were building intentions in this federal system from the get go. The second quote is from Aaron Wooldovski [assumed spelling]. Aaron Wooldovski founded on of the first schools of public policy, at the University of California Berkley. He's the foremost authority in the budget process, a major political scientist. But some -- what is it, 25 years ago, he offered an observation about public service where you have a contentious environment where people -- the key sides of the political spectrum do not agree and the challenges that poses for people committed to public service and bureaucracies. And as I've interviewed and talked to people who were trying to implement the Affordable Care Act in a context where there is at -- where there is at least one party hoping that they will fail miserably at it, I thought that sort of captured a sense I have of public service being one of the hardest -- the highest service because it's the hardest service. All right. So, about Medicaid. A lot of you are familiar with it. You've read the initial chapters of my book, but just a sort of reminder, Harry Truman -- I'm sorry Lyndon Johnson goes off, signs Medicaid, Medicare legislation, and to Harry Truman's home in Independence, Missouri. And it gets going in 1965. The fiscal entitlement to the states. Big enrollments, over $400,000,000,000 federal and state moneys spent each year on Medicaid. A lot of it-- the majority of it going to long-term care. This is -- ensures that most people on Medicaid are getting sort of basic health care services. But the money is in -- substantially in long-term care. Okay. So a bit of -- a bit on the book, and it's sort of core theme. The first part of my talk today sort of draws from the book in a sort of once over lightly sense gets at some of the core themes. The second part, I want to consider where we are now with some of the developments that really happening after I finished the book, and we'll speculate a little bit on where Medicaid may be heading. But in any event, the book focuses, as those of you in various classes knows, on the period from Clinton and into the Obama years. And I make a number of justifications for why I think this is an especially fruitful period to study Medicaid. But the biggest single reason that I think its fruitful is that it was during this period, and it was Clinton-led, there was a major movement through waivers and other means, to do devolve authority to the states over the Medicaid program. The Clinton administration was a clear water-shed in this regard, and I think it makes for an interesting sort of period to follow. I then deal with this sort of paradox. There are a lot of pessimists about Medicaid. There are all sorts of reasons why people think Medicaid wasn't going to have much staying power or would constantly erode over time. There's a classic line -- a program for the poor is a poor program, by which they mean it's not only poor it helps the poor, but it just doesn't have any political muscle associated with it. There's a whole -- among ecomomists, a theory called the Libiason [assumed spelling] Theory which argues that, you know, states in their quest for economic development will gradually erode benefits -- redistributed benefits for poor or lower income people for the -- and there's a welfare magnet version of that, and it's sort of, you know, an oversimplified form there's this kind of race to the bottom notion whenever you turn programs for the poor over to the states. There's recent evidence that declining trust in government, which has been, as you know, quite marked since the 1960s, also has particularly negative implications for redistributed programs, those that take from people who've got money and shift to low income folks. So there was a lot of reasons in the literature to be pessimistic, that Medicaid wouldn't have much staying power. That it wouldn't just show a steady pattern of erosion over time. And indeed what I argue in the book is that there's a side of Medicaid in this period I was examining that eroded appreciably.
And that is Medicaid is a service entitlement. Now Medicaid as you -- I think most of you know, is an entitlement in a two-fold sense. One is a fiscal entitlement to the states. If Michigan spends x dollars on its Medicaid program, the federal government is required at a certain match rate to give Michigan the money. It's not that they can't cap it. It's fiscal entitlement. But the second sense in which Medicaid was historically an entitlement was as a service entitlement. That is, once a state, subject to a certain federal regulation said that certain people were eligible for some set of benefits, people all over the state had to -- were qualified to get those benefits and you couldn't do -- you couldn't cap them. You couldn't say, "Well, we're running out of money in the state so now we're going to start up a wait list and when time comes we'll give you these benefits." Once you were deemed eligible for Medicaid, it meant that the state was supposed to provide that service even if it was putting a lot of immediate fiscal stress on the states. In any event, the argument in the book -- a sort of once-over lightly here is that in this period from 92 through to the present really, or really 2010 I guess, there was a steady erosion in this sense of Medicaid is a legal entitlement to you. And a number of things were at work there. But principally it was waivers. And under waivers, which I'll talk a little bit more about later, states increasingly won the right to do certain Medicaid benefits in particular parts of the state, say managed care, but not in others. So the Medicare -- the Medicaid benefits of a state might vary appreciably by where you live, which county you were in in Michigan or whatever state you would want. So there was a paring down of this statewide requirement through long-term care waivers designed to create home and community-based -- more options for home and community-based services. States also won the ability to establish wait lists, for especially in the area of long-term care. So if there's an intellectually disabled individual who at the age of 18 wants to transition into a group home and receive home and community-based services in that home, there's often a significant wait list. Depends on the state. Medicaid is all about state variation, as you know. But wait lists became much more prominent than they had been before. Another development to weaken Medicaid is this service entitlement was a set of statutory decisions of the repeal of something called the "Borne Amendment" in 1997, which had given providers of services access to federal courts to complain that states weren't living up to their obligations under the Medicaid law. And as a result of the appeal of that amendment and then a set of court decisions that I won't belabor with you here, the ability of providers or Medicaid enrollees to go to federal courts to enforce their Medicaid rights increasingly diminished. So the story -- so there was a lot of recapitulate pessimism about Medicaid's staying power. And if you just look at the sort of legal service entitlement aspect of it, it's a case of erosion. But -- and this is sort of the story line of the book, if you look elsewhere about Medicaid, it's a story of growth. It's a story of expansion. In the book, I show how, in all 50 states, even the most conservative, Medicaid expenditures and enrollees per person in poverty steadily increased over this period from 1992 into 2010, and then finally we had -- and this I had no idea was going to happen when I started writing this book, but sometimes you get lucky. And finally we had the Affordable Care Act, Obama Care, applies in 2010, and low and behold, of the 30 plus million people that were slated to gain coverage over -- under Obama Care - he now endorses that term, half of them were to gain through a Medicaid expansion. And the specifics of the Affordable Care Act are that if you -- than any individual under 133% of poverty with some manipulation on how they count income -- it goes up to 138%, anyone under that income level would be then eligible for Medicaid. And that was -- Medicaid then was to be the floor of a national -- it's not quite, there are gaps in the coverage, but in a substantial expansion in the insurance coverage in the United States. So there was this huge -- in terms of enrollments, spending, Medicaid increasingly took off. I look at other markers in the book, too. I don't rely purely on these numbers, and I argue that, for instance, Medicaid made a lot of progress in being smarter about long-term care, it used to put everyone in institutions, nursing homes. It increasingly, in the Clinton period, we grew the amount of long-term care provided in a home and community, rather than in a nursing home or another large institution grew from about 15 to 45%. I think, although the evidence is somewhat mixed, that the movement of Medicaid enrollees to managed care was on the whole a good thing. There were other signs and evidence that Medicaid, for all its problems, I'm not portraying this as the kind of insurance program you'll all want to get on, but it -- for all its problems, it was yielding positive outcomes in terms of access and in terms of health outcomes. [Pages turning] Okay. And I mention a couple other things there. Let me move on here. And so, so the case is that Medicaid sort of confounded some pessimists and was remarkably durable and sort of a growth story. And so what's going on? Why would this -- why would this pattern unfold? And the top line on this chart just refers to that, sort of the constraining model of federalism. You know, the welfare magnet, states are not good to design each of your programs to. But there is an alternative sort of perspective that the federal system -- my colleague Dick Nathan is a big proponent of -- a former colleague Dick Nathan is a big proponent of this, but others, too -- that the dynamics of federalism, rather than leading to the contraction of the welfare state, in a certain sense lead to its expansion. There's some work out of Europe too to this effect. So this notion is that federalism can be catalytic. It would fit more easily with the sort of growth and what I argue is enhanced durability during this period. But the literature of sort of catalytic federalism is in my view sort of underspecified. What are the more precise dynamics that are interacting to drive, in this case, Medicaid growth? And so you'll see listed there on the Power Point what hit me as -- and they weren't unique to me, by the way, some of them, others I think I played up a good bit more than it had been in the literature. But it's sort of a list. So there's no question, the Medicaid funding source -- or I'm sorry, the Medicaid formula is a fiscal stimulus. If Michigan is considering expanding its Medicaid program, it knows it will only -- you know, it will pay, I guess now people were telling, I forget -- Medicaid matches a little above 50% in the state [inaudible]. So at a minimum, it knows for every dollar it invests in Michigan, it leverages a federal dollar. In the case of the Affordable Care Act, federal policymakers, even if they might have in a dream world preferred another kind of health insurance expansion, they knew they could leverage a certain amount of state effort and preserve a certain amount of state effort by working through this. So the funding formula is huge in this equation. The second point toward positive social construction -- Medicaid increasingly, I argue it partly because of the wealth, it became de-linked from the notion that there were a whole bunch of poor women -- you know, welfare folks that it moved forward. Also Medicaid increasingly in long-term care became a program for the middle class. And so, much more positive social construction than you get oftentimes for programs that serve the poor. I know we've had a lot of talk about takers in the last campaign, but still, I think Medicaid is -- it came over time to be viewed more positively. I won't go into the supporters, providers, and advocates.
Obviously, there whole set -- I mean, for nursing homes, Medicaid is huge. Hospitals, it's huge. There's a whole community and there's advocacy groups out there, especially for people with disabilities, that fervently support Medicaid. We had -- part of the Affordable Care Act expansion is just this fleeting period when the democrats ran things. That's what the fourth bullet -- I think many of you know the last time the democrats had a democratic president and essentially a filibuster proof majority in the Senate was under Jimmy Carter in the first term, 1977-78. And at that point, there were a lot more conservatives in the Democratic Party. Now we've had, of course, this sort of polarization and an ideological sorting. So it's very rare. But let me -- yeah, I think I've got the time -- just pick up on the last two items on this list that I think create a sort of catalytic forces for growth, because I think I've -- my work does more to develop than heretofore in the Medicaid literature in any event. So let me turn the page. The intergovernmental lobby. Governors to the floor. And the reference to Sam Beir [inaudible] there is simply to Harvard professor, great student of federalism, very [inaudible] as well, who in 1978 wrote an article in the Political Science Review, and there was a lot of concern that with all the great society programs of Lyndon Johnson, the federal government was just becoming so powerful and the states were this puny force that was not able to influence things much. And Sam Beir said there's too much anxiety about this, that states are still have a lot of clout within our federal system, and one reason is federal government relys on them to implement things. There's a huge amount of influence that can be exerted if you're the implementing agent of a federal program." And then the second thing he pointed out, which is really what this slide is about, is the role of the -- what he called the "intergovernmental lobby," and I focus on governors to a great degree. And in the book, I argue that while governors are -- and what the governors want, and partisan factions of the governors' want is certainly not determinative in terms of what happens to Medicaid policy, but that there is a strong preference on the part of federal policymakers, members of Congress or our President when they want to do things to Medicaid to at least have significant support, especially among members of their own political party, governors of their own political party at the state level when they do things. Governors -- if you think of them, and I'm not going to go into it in the interest of time, but they have, when they speak, they're not just any interest group. They have a good bit of legitimacy. They command a lot of media attention. And for federal policymakers to ram a federal change in Medicaid statute through with great opposition from governors, especially those of their own party, is not something that federal policymakers consider lightly. So this relates to what I'm going to talk about in a few minutes. So I want to -- if you look at the Power Point, it talks about gubernatorial preferences during ordinary political times. And in general, governors prefer -- they like all the money Medicaid gives them, and they prefer the more money -- the second point, the more money the better. If they could get an even better match rate, that's terrific. And then they want -- they don't want any strings attached to the money. They'd love to be able to spend it most any way. And I'm not impugning them, they're -- for good reason they think they know how to spend it better than the federal government often does. So during ordinary political times, this is the way governors tend to behave. And I argue in the book -- the book, as those of you in the class know, goes into some length about the failed efforts of Newt Gingrich who was driven by a set of republican governors to get Medicaid converted to a block grant in the 1990s. And this was led by John Engler. He's a major figure in the book, as well as Tommy Thompson. But I argue that in the period after that failed, that gubernatorial preferences turned kind of ordinary in the sense that I'm using the phrase here, and increasingly Clinton -- you remember this devolved more and more give them waivers kind of approach have. It was kind of, to use a phrase that's much in the news these days, a certain kind of grand bargain. Governors, I'm going to give you all sorts of waivers. You're going to be able to shape it more the way you want. And increasingly governors, and including republicans, lost much incentive to go after a block grant because if they could get Medicaid as a fiscal entitlement and still have a lot of flexibility, why bother to spend all your time then, you know, working on a block grant which almost always means less money? So I argue then that in that period afterwards, there was a sort of spirit of acceptance of Medicaid. And if you look at the major Medicaid expansions, whether it's Weld and Romney in Massachusetts, Christie Todd Whitman in New Jersey, Governor Petocky in New York, a lot of them were the, you know, these expansions under waivers were led by republican governors. The final bullet is just -- and I'll come back to it -- whether in these intensely partisan times, whether governors will behave more now as members of a grand -- republican governors in particular -- as a grand party coalition. I am a faithful member of the party and we don't like Obama Care. Or whether the sort of pragmatism that I've found in republican governors during these ordinary political times will reassert itself. Okay. So let me see how I'm doing on time. Let me move on here. Let me go to the waiver part of it. Remember there were sort of six variables I looked at. And I think my analysis of waivers is that it was a major sort of fuel for the Medicaid expansion, partly for the reasons I've alluded to earlier. But there are two basic kinds of waivers as the first two items on this slide indicate. There were the 19 -- Section 19 -- Medicaid is a Section 19 Social Security Act, and these waivers passed in -- authorized in 1981 were designed to move people from institutions into home and community-based services. There are about 300 of these waivers -- states operate home and community-based service under these waivers. About 300 of them out there now. Two thirds of all money that Medicaid spends on home and community-based services is done under waivers. So it enticed states, for reasons I won't get into here, my argument is, to do a lot more home and community-based service delivery than would have ever occurred if they had to stick within the broiler plate of the Medicaid statute. The other kind of waiver, which are the real big enchilada waivers, are the demonstration waivers which were approved Section 1115 Social Security Act was around in 19 -- it was approved in 1962 before Medicaid's birth. But the bottom line here is that for the first, what 25 years of the Medicaid program, the federal government was very reluctant to grant these major demonstration waivers. Some of the -- Bruce Flattick, a former official who ran the -- was in health care financing administration estimates there were about 50. Clinton came in and says to the states, "Come one, come all. I''m..." You know, he had stipulations. It wasn't any old thing. But he got behind giving states much more discretion making and much easier to get these kinds of waivers. And as a result, we had some of the -- a lot of innovation by the states. Those republican governors I mentioned. And of course then we had the big bang of states as laboratories of democracy. Romney Care in Massachusetts, which was a product of negotiation -- the Bush administration did not want to renew a demonstration waiver that Massachusetts had since the mid-90s to do managed care and expand enrollments. And in the wake of that negotiation, Mitt Romney, working with Ted Kennedy, came up with this template for virtually, almost universal healthcare in Massachusetts. And then that became, of course, the foundation for Obama Care subsequently. And the last couple of points -- I'm not going to go into them now, but the argument of the book -- in the interest of time.
But the argument of the book is that this waiver -- willingness to use waivers, facilitated a kind of policy learning. It facilitated this grand bargain between the governors and the federal government that I mentioned a little while ago. And was a source of growth and expansion in the program. Now however, we turn to the sort of looking forward part of the talk. And so we had this -- in this period I studies it, I argue a pretty stunning move forward by Medicaid. And so now I turn to the issue of will this have staying power in the current era. And of course in the case of Medicaid, as you all know, in the wake of the 2012 Supreme Court decision, the Medicaid expansion essentially became an option for the states rather than mandated. And so there are a range of issues present now that we're present in the past. We have enormous federal debts. States, for a whole range of reasons, are in some of the most precarious financial circumstances that they've been, easily over the last 20 -- 30 years. And so, just looking at the debt issue alone, we have this issue of how -- what is the federal government going to do to cope with the debt. And I look at a couple of what I call bipartisan approaches. And [inaudible] Simpson, in terms of how they would treat Medicaid, [inaudible] Simpson leaves Medicaid alone pretty much. It's about a $60,000,000,000 savings over a 10-year period. But another bipartisan -- good faith bipartisan proposal, [inaudible], really does alter Medicaid a good book, and I think would alter some of the dynamics that fueled Medicaid's enhanced durability. And then we come to a parts approach, I argue, in this period. And that is the republican initiative to retrench Medicaid. In the book, I talk about how after Gingrich failed to get the block grant going and, you know, follow John Engler's lead, you know, or to see John Engler and Tommy Thompson, that the republican governors pulled back from any desire to see Medicaid block granted, taken away as a fiscal entitlement. And in 19 -- so in 2003, when President Bush came up with his own version of a block grant proposal, the republican governors -- very difficult to find anyone who wanted to support it. Moreover, there was this sort of bizarre almost [inaudible] congressional appearance by Tommy Thompson, who was then Secretary of Health and Human Services, in which he denied that the proposal was a block grant at all. And it led to this -- if you like reading congressional testimony -- it led to this, this is not a block grant says Thompson and Henry Waxman says "Yes it is. No it isn't. Yes it is." This goes on for about a page. Denying that -- you know, you'd even want to mention the phrase block grant. I mean, how ugly and politically unappealing. Well, let me just say that that changed when the Tea Party had a big victory in 2010 and Mr. -- Representative Ryan's proposal obviously for Medicaid is -- would not only convert it to a block grant, but would carve $800,000,000,000 out of the program over a 10 year period, compared say to Simpsons [inaudible] 58 or even the [inaudible] 100 -- $200,000,000,000 in a 10 year -- in a 10 year period. So what -- and of course Romney and Ryan ran on this, and I guess what is interesting to me and other colleagues like my friend Colleen Grogan at Chicago who's been saying, "It's getting risky for politicians to attack Medicaid in these times" -- that at least among the [laugh] leadership of the republican party, they don't think it's very risky to attack Medicaid. How, if they ever got close to doing this block grant, the republican governors would respond, whether as pragmatists, because this would be devastating fiscally for them, or whether they would be loyal members of a partisan coalition I think is a very interesting question. Okay, so by my reckoning, I've got five minutes here. And let me see what I'm going to pick to do. Let me just -- I want to focus on this just very, very briefly. And I realize that Mitt Romney did not win the presidency. But what Mitt Romney quotes here, and then the republican party platforms endorsement indicates, that presidents -- and I would argue Clinton, with waivers, have without gaining congressional approval for action, enormous discretion to shape the context of a policy, and to see whether it succeeds or fails. I doubt legally whether Romney could have done what he said he did -- you know, what he promised to do, if he'd have one the election. But could he have severely impeded, assuming he couldn't get it repealed in Congress, the implementation of the Affordable Care Act? Absolutely. I made an argument elsewhere that I won't go into today. So I'm sort of highlighting then, and this is my particular research interest for the moment. I'm going to very briefly barrel on. So one of the things I'm looking at now that wasn't in the book and I still haven't researched adequately, is the Obama administration's strategies for dealing with the implementation of Medicaid, and now needing to coax the states to do it voluntarily. Originally it was, you've got to do this if you want to keep your Medicaid program. Now, the Obama administration confronts a circumstance where, you know, it has to think its Medicaid strategy. And I'm not going to go into the first -- these are things I'm writing about, but I'm going to leave them aside. I'm going to go to the strategies in the wake of the Supreme Court ruling in June 2012. And essentially what the Obama administration has done -- you know, a lot of states, especially those that didn't like it so much, said, "Oh, now that the court has ruled, you'll let us do half the expansion. We won't have to do the whole thing. We'll do a partial expansion." The Obama administration has just ruled that out. It's all or nothing. You've got to do the whole 138% of poverty or forget about it. And -- but I would point to one additional strategy here before I move on, since I've talked a lot about waivers. In the last couple of weeks, there's a possible leverage point on the waiver front. The state of Oklahoma, Governor Mary Thalin announced, we don't want to be part of this Obama Care. She's actually very pragmatic, reasonable in a lot of senses. She's under a lot of pressure. But she said, "We do want to renew a waiver that has covered a certain group of people up to 200% of poverty. And the initial response of the Obama administration is, we don't see a reason to extend this waiver. If you want to cover these people, sign on to the Medicaid expansion. And I was listening to Scott Walker -- I didn't listen, but I read the clip on Scott Walker in Wisconsin or Mike Penstone in -- Governoror Penstone in Indiana. They all seem to be saying, "Oh we don't want to do this Medicaid expansion, but we do want to continue these nice waivers we have. The degree to -- one of the things I'm going to be watching is the degree to which the Obama administration plays hard-ball on waiver renewals in an effort to sort of put the screws on governors to opt for it. I don't know the degree they'll do it, but the Oklahoma case intrigued me. All right. Racing on. I'm down to about my last two minutes here. So I -- this -- I think there's a case that over time, most states will participate in the Medicaid expansion. And if you look at the early Medicaid program, it took a while for states to sign on. That is, in 1965. but I do think, as I mentioned before, that partisan polarization to a degree we remain as polarized, and Obama Care is seen as the end of freedom in the United States in certain Tea Party circles, and in certain states it may make it harder. It may be the buy-in we saw after 1965 won't be as great. And this is -- am I on the right slide? Yeah. Right. This is the grand finale, so to speak. So the early returns on state participation in the Medicaid program, you know, obviously you say, well, the democrats it's sort of assumed will eventually sign on in this period. There have been by my count, at least among the governors, six republican governors who've signed on for the Medicaid expansion. There was a group of governors out west -- Nevada, New Mexico, and then Governor Jan Brewer in Arizona, who signed on and the sort of working assumption is that they're looking at Latinos as the demographic and Latinos want this. There's North Dakota that's signed on. And then your very own governor, Governor Snyder has signed on, and John Kasich of Ohio has signed on.
So there is some movement. What Chris Christie will do in New Jersey is still a great mystery. We're all waiting, and we'll have to see. But let me just conclude then with the comment, but the last item on this slide, that one of the -- you know, one of the big issues in terms of whether we achieve national goals with this Medicaid expansion is what large populate -- the 10 most populous states do. And in that regard, Florida, Georgia, and Texas may be critical to whether the ACA's enrollment goals are met because these -- and they've all rejected, at least to this point, the Medicaid expansion. And they are home to over 20% of the people in this country who lack health insurance and would be eligible for Medicaid coverage. So that's it. Thank you.
[ Applause ]
I didn't clear the thing for you. Sorry.
That's fine. I just need a clock so I don't rabbit on. So first I want to second what Barry said and what I'm sure you've already concluded, which is that this is a wonderful book. And one of the reasons that it's a wonderful book is that it's based on knowing a lot about policy, which necessarily involves understanding politics, but also knowing what the politics are about, because ultimately this is about the disposition of a whole lot of money, a whole lot of interests, a whole lot of waste, which is also known as a revenue stream for many people, and a whole [inaudible background talking] lot of people's lives. And the reason that matters is that we're having a temporary inconvenience in political science, which is presently the study of the Democratic Party. It paints a traditional picture of American politics as negotiated with weak parties, lots of transactional behavior, side payments, pork barrel, and so forth. As a Europeanist, I quite prefer the political system we appear to be living in now, at least among the republicans, where you find out what the party leadership says and then you recognize that the legislators will weakly march to do what they're told. And I say that because most of what I'm going to say is, political science in the sense of the study of the Democratic Party politics. And I want to highlight something that Frank mentioned, which is just what a series of near-misses the entire Medicaid program and the Affordable Care Act has recently experienced. If the election had gone differently, we could be looking at vast, vast changes in every aspect of health policy passed as the Ryan budget under reconciliation, and well, we'd have a lot to do. [Laughter] So, [turning pages] sorry -- I changed the order of the things I'm talking about. What I want to focus on primarily is what this teaches us not just about Medicaid, but about federalism. And federalism, as Frank said, gets blamed for a lot, right? It gets blamed for race to the bottom, that if you entrust some sort of a tax to the state or some kind of a regulatory authority to the state, they will rapidly compete it away. It used to be that if you wanted to charter a corporation, you had to have a public purpose. Delaware said, "Hell, you don't need a public purpose." And that's why practically every place you -- every company you know of is headquartered in Delaware formally. Likewise, we used to -- many states still do, regulate credit cards and how they can behave towards you. South Dakota decided that they didn't need to regulate credit cards, and the result is that you send all of your credit card statements, or bills, or payments, to South Dakota. They get blamed for inequality. Well, that's by definition. If you're going to have a federal country, you are accepting the proposition that a sick baby will have different life chances based on where its parents live. Okay? Deal with it. You have another option. It's called France. [Laughter] And, of course, it brings complexity. I mean, just try to explain the Affordable Care Act to somebody who isn't -- at least to some extent, a junkie for American politics, American public administration, and American health policy. And look at the simplifications even among very savvy people. We talk about implementation of the Affordable Care Act. Oh, that's how it looks from Washington, right? They got their legislation passed. Now they're going to implement it. Well, from the point of view of Lansing, this isn't implementation. This is actual legislation. This is one of the bigger and more consequential things that the legislature in the state of Michigan has had to argue about. And I don't think they saw it as their role to meekly put through whatever emerged from Washington. So complexity, inequality, and potentially a race to the bottom. These are all fairly heavy charges to levy against federalism. But you could argue in response that in no sense is it the problem. And this is where I become contentious I think. Because across the board, if you want to look at the structure of American public policy, it's not so much in the states frustrating each other as it is in way that our fragmented executive system-- or relationship between executive two houses of a really fractious legislature and the courts managed to check and balance each other. That whole thing you hear in high school. Politics still works extraordinarily well. And you see this in most [inaudible]. Sub-national governments, which we politely call then in order to disguise all the different variations between Polish [inaudible] and the Flemish community and American states, generally exercise the autonomy that they have within the framework set by larger government, by federal government in the United States. They exercise it within their capacities as a lobby. The national government as an association is a lobby. Washington has many lobbies. After financial services, health is the largest source and employer of lobbyists. And there's wonderful stuff about -- in the book about the reverse lobbying to which the governors were subjected. Because if you're a lobby with enough clout to get attention such as the AARP or the NGA, you're also a lobby with enough clout that people who want to influence your decisions are going to intervene seriously and try to modify what you do. And there's wonderful and highly instructive stories about that. Quebec incidentally considered joining the National Governor's Association. And because somehow they think that the United States would be more friendly to a small Francophone society. [Laughter] And they pretty rapidly ended the experiment when they realized this is a lobby. You know, we might as well hire [inaudible] or Webber [inaudible] to represent us, because in Canada, Quebec swaggers in and they have practically diplomatic relations. Joining the NGA, different thing. So here we have Medicaid as basically a nice example. Right? The states vary within what they law says. The states vary within what inter-government relations says. As was pointed out, Massachusetts' behavior has in large part been triggered and shaped by the structure of Medicaid and Medicaid waivers. It's not just that a bunch of democrats and Mitt Romney decided that they were going to restructure the healthcare system. And this -- what matters is flexibility, money, legislation. And that also brings to bear a rule of politics which is nobody actually cares about federalism. People care about politics. Notably this is why state's rights is a technical term for racism. The only exceptions are the Quebec's of the world, of which there are none in the United States, where their political agenda is precisely their own autonomy. [Pages turning] Now what does that mean? That means that it's actually Medicaid is pretty rational. It doesn't look rational, but it is, because fiscal federalism 101 says that you want to do two things at the largest possible level. Set basic citizenship rights and pool risks. It says you don't want to administer and make little decisions at the largest possible level because Washington is a very, very long way away from Ishpeming and Escanaba. So is Lansing, but that's a different question. [Laughter] So from that point, and that's what federations are. When you actually compare them, federations are pretty good about moving the money around at the biggest level and having delivery and policy experimentation and implementation at much, much lower level. Now that points to executive federalism, which in the context of the very polarized American politics with the extraordinary level of party discipline that I mentioned might not be such a bad thing. Because think of the Canadians. Canadian party politics are obscenely complicated and I don't recommend studying it unless you like real head-scratchers. [Laughter] But Canadian voters, it turns out, have a much simpler problem than American voters if they don't like something. They have to apportion blame between Ottawa and their [inaudible] premiere. That's a much simpler problem then figuring out why we don't have the public option or why we don't have Medicaid block grants in the United States. And it's messy. Well, so what? Are you going to redesign your constitution because it's ugly? Politics-- it'll rapidly become encrusted and barnacled with all sorts of other fixes. If you get the basics right, if the money is being distributed on a level that prevents the thing essentially a bad insurance scheme, and you deliver the policy on a level where people have a chance to experiment, where failure is confined, where disappointment is limited to a single place, then you've actually done a pretty good job and you've done what pretty much all the other decentralized countries in the world come up with. It's frankly infantile to say you want to throw that all aside and, you know, decentralize insurance regulation to the states in the theory that we'll have some nice clean market, because rapidly again it will become complex.
So one of the things that the Scottish government, of all people, like to say, and I've never seen an academic patent put on this, but it's beautiful, and I'll leave you with it, is that in making policy, there's a trilemma. Trilemma is when there's three choices and you can have two, right? Good, cheap, and quick. Choose two. Well, the federal-- the policy trilemma is agreed, everywhere, and now. You can have your policy agreed and now in some places. Texas doesn't agree. You can have a policy that's agreed everywhere and that's Germany and that's why their policies take 30 years to pass. You can have a policy that's everywhere and now and come practically to the brink of a civil war. And you might argue that the structure of American federalism and the structure of Medicaid is not just rational in the sense of getting the money and the laws in the right place despite the ugliness, despite the fact that none of you ever want to be on Medicaid. But also because it's a pretty good reflection of the ultimate decision that even if we tried to order pizza, we couldn't achieve simultaneously agreed, everywhere, and now in this room. [Laughter] Thanks for the opportunity to be here.
You want to stay up?
Thanks to you both. You know, I hadn't realized we were going to be talking about Uzbekistan, but...
About seven years ago, the state of California launched a nationwide effort to create a coalition of other jurisdictions that would join them [inaudible]. That process has begun and the only other partner that California has is Quebec. [Laughter] So federalism [inaudible]. We wanted to allow for both presentation and opportunity for a series conversation and question and answer. If you would like to take questions from the floor, when you are recognized, if you'd just [inaudible], Brian will bring a microphone. If you'd identify yourself and ask your question, and we'll get going. Who would like to begin the conversation? Please. [Pouring liquid].
Hi. I'm [inaudible], an assistant professor here and [inaudible] depends on this topic because like I studied [inaudible] differences in federal taxation, spending, and also half French and half Southern so I have a very complex relationship with federalism, both centralist and de-centralist, and I've lived in both Quebec and in California, so I'm all over the map. So one thing I thought was really interesting, and I talk to people about waivers. I'm still trying to understand how waivers work. But one thing I do understand is that the matching rates in America are very unequal.
Depending on the state. So [inaudible] New York, the federal government matches one for one for every dollar the state spends. In Michigan, we get two dollars for every dollar that we spend. And in Mississippi, you get three dollars. So I find that pretty interesting, on top of the fact that the poverty line isn't indexed for local cost of living or local age levels. And so it's a lot easier in a sense to qualify. And some of these [inaudible], which are already getting these big matching grants. So I think it's kind of fascinating that the political equilibrium that we've seen has been the blue states that are kind of more liberal, right, getting lower matching rate, having lower eligibility rates, but these red states that don't care so much, okay, but they support the matching system because they're coming away with huge amounts of money, right? And so, at least that's my guess. And so what I see in the future, all right, is that we have to deal with some way of reforming the system, because the trajectory of healthcare costs over the next 30 or 40 years. In Canada, they actually decided to apportion the grants on a per capita basis so that they don't have -- they have basically a block grant per person, okay, regardless of where they live. I think that's a much better system, in a sense. Although it'd be even nicer to say, hey, Florida's got a lot of old people, so maybe the fact that they have more people in long-term health care. Maybe they should get more money. So do you think there's any -- I want to rephrase this to a question, okay, so [laughter] if we -- there is a lot of concern about the [inaudible] healthcare [inaudible]. We probably need to do something about containing the costs in the long term. And what I'm curious is how do you see the politics of this changing as sort of, you know, the Ryans and the Romneys of the world trying to find solutions. And as states like Georgia and Texas, their incomes are rising, it seems like. And so maybe then the red states are going to start becoming less advantaged with these programs. I'm not sure that's going to happen. But as we've [inaudible]. And now I'm not sure that's going to happen anymore. And so, what I'm curious is what do you think that A, Medicaid has become a wasteful system because of the matching system, especially in some of these states? And B, do you think there is a way for it in terms of reforming it to sort of deal with the long-term prospects over the next 30 to 40 years?
Well, I'll start. Let me go to one. And I may not have heard you right on your empirical assertion, and then I'll try to deal with the waste thing and hold my feet to the fire if I forget -- if I forget the question. But you're right on the federal match in places like Mississippi and so forth in the deep south and other places have much more fiscal incentive to do Medicaid because the record is that they do not do it. That the sources -- you know, they look the gift horse in the mouth. And it's a testimony to political culture and political ideology. So the formula, if one defines a successful formula as convincing the sort of poorest states to get benefits up where richer states have them, it's been a miserable failure. In the book, I trace every state increase their expenditures in a [inaudible] per poor person. And I asked, well is there a convergence? You know, are we getting more alike? But no, you know, the coefficient of variation is as high as ever on that kind of front. So let me go to the waste question. Obviously, there are all sorts of issues we face in trying to contain costs in this country and so on and so forth. Is there waste in Medicaid. You know, they have -- there's some calculation of fraud among government programs and I think Medicaid probably is up there at the top. But I would argue, if you look at Medicaid, plenty of warts on this program, but it is a bare-bones program. What Medicaid pays per -- and they have different kinds of enrollees. Taking care of people with disabilities, as well as, in long-term care issues are expensive. I would argue that it is really a bare-bones program. Costs per beneficiary are less than Medicare, God knows, private insurance. And they don't pay, you know, provider network adequacy is a real issue, because they don't pay a lot of providers. They pay worse than the other programs. So, when I hear the sort of Ryanesque, oh, we can take 800,000,000,000 over 10 years and everything -- you know, we're going to figure out a way to make Medicaid more efficient, I just don't know -- it's a really bare-bones program. Is there waste? I'm sure there's some waste. But I -- I think if you try and cut it, you really are, there's going to be a price to pay in access or health outcome. You know, that's just a take on it.
I'd also say the book is very good. You know, buy the book. It's very good about how Medicaid's actually not the terrible program that we've been repeatedly told it is. Again, I don't think any of you -- I don't recommend it to you. But it's not the Hell of bad care and endless waits that it's often portrayed to be. I would just say, being comparative again, the US has a small distinction in compared to federalism as being the only country that doesn't have any kind of flat-out redistribution for no particular purpose from sub-national government to sub-national government, right? We have no equivalent of just slicing off a big chunk of revenue from [inaudible] and [inaudible] in order to keep Berlin stylish. And a lot of the time, that's because we pass our programs as being about redistribution to people, right? This is the ecological fallacy of red and blue states, is that programs will often redistribute successfully to poor people in red states who are either voting democratic or not voting because there are various red state issues. And that's why the federal government has transformed the south, you know. Look at the south before The New Deal and you can see very clearly the long-term, you could argue, Democratic Party incentive, or liberal democratic party incentive, to spend a lot of money creating a welfare state in the south over the objections of the people who run most of the south. It's also never a technical discussion. You don't hire economists to design [inaudible] compliance system that will deliver the correct incentives. That's the fantasy of the IMF. You can only do that if you're the IMF lording it over poor countries. In rich countries, you hire the economists for the specific purpose of telling you how your side will win and lose in a particular negotiation.
Hi. I'm Adrianna McIntyre, and I'm a [inaudible] degree student with [inaudible] public policy.
I had a question about the durability of Medicaid, and I was wondering what you think the implications are of the demographic shift with baby-boomers reaching 65 in record numbers and essentially feeding a growing dual-eligible population. What does that mean for the program in the future?
Well, I think if they're aware -- if they stay aware of what Medicaid can do for them, it'll be a further force bolstering Medicaid durability. These numbers aren't precise, but something like 65% of middle class people enter nursing homes paying for themselves and within a year, they wind up on Medicaid. Medicaid has become a major long-care -- I mean it is the long-term care program for people who've essentially never been on welfare, are not one of these -- what's the phrase, dependents, sort of takers, who nonetheless at the end of life, run out of luck. And somebody's got to take care of them. So I would think that that's a force, and the duals as well -- a force for enhanced Medicaid durability. Middle-class people needing the program, on the other hand, getting people to recognize what Medicaid is -- how Medicare doesn't really give you long-term care, that isn't easy. Although I must say, in terms of Kaiser Polling, it is quite amazing the number of people -- I think it's 50-60% who've been on Medicaid or know someone who's been on Medicaid. And I know in the context of middle-class parents with intellectually disabled or developmentally disabled children, great numbers of them know a whole lot about Medicaid and they are as ferocious of defenders of the program as I think you'll find anywhere.
David Pelton. [Inaudible] the likelihood [inaudible] with gun control, the likelihood that some states will move further [inaudible].
Will reject that care [inaudible].
In the direction of [inaudible] and socialism. [Inaudible] two states right next to each other, say maybe Michigan and Illinois [inaudible] state and one where it's [inaudible].
If I understood the question correctly, I think in terms of this sort of polarization that's going on, and there's the literature which I haven't read that talks about not only are we ideologically getting that way, but that people are literally voting geographically with their feet, that you know.
[Inaudible] mass migration.
Yeah. You know, that conservative people live more in Texas and if you're liberal, you know, you live more in New Jersey. I haven't [inaudible] analyzed that very carefully. But I do believe that unlike the first Medicaid program, where it took about five years to get -- it was 65 this was passed. Five years for every state except Arizona to sign on. That this time could be different. That there may be ideological hold outs in places like Texas or the deep south which are really unified republican governments now contrary to what it was for most of our history, the republicans control both houses of the legislature and they run the government. So it'll be interesting to me whether, you know, they ever do come on board and whether this variance that I think you're talking about as a result gets wider and wider.
Hi. I'm Ruth Deagen, a student here at the school [inaudible]. You're talking about [inaudible] expenditures over time as a sign of Medicaid's durability and I wonder if you also think of that as a threat to its durability given that as it takes up a larger and larger percentage of the state budget, it becomes a target for cuts.
There is a down side as well, as an upside. Peter Orsock [assumed spelling], who's, you know, the -- worked for President Obama, has been very much in the forefront of those who argue that Medicaid is hurting higher education and other functions. And especially with the cost growth that you mentioned, the sort of relentless increases of costs, even to what I would argue is a relatively bare-bones not so wasteful program, there are really hard choices out there in terms of how much you can -- the states I'm thinking of in particular, put into Medicaid. And I have no -- other than that the higher education community is a whole lot weaker politically than the Medicaid community, I'd probably -- that's not a right or wrong kind of an answer, but it's just, you know, it is a down side, you're right. People do talk about cutting it. But again, I'm struck with the Ryan program, [inaudible] in Washington, a policy player said that no governor in his or her right mind would possibly support the Ryan plan if it ever became possible. Now it's been all sort of talk, and nobody was going to pass it. Now what we mean by right mind in these times is up for grabs, but it would have devastating impacts on the fiscal pressures that states would face if anything like that came to close.
[ Noises ]
Thank you. Hi. Jason Buckbem [assumed spelling]. I'm a student in Health Management and Policy. My question for the panelists is around some of these odd incentives that you get for duals, where a state might invest in better long-term care, pay more out of its own pocket even though it's getting the match, the savings accrued in Medicare. And I know there's been more attention to this in recent years and the duals demos and the special office created in the ACA, but it still seems like a fundamental tension, and I can't think of any other state-federal partnership program that his this kind of terrible incentive built in. I was hoping to hear you thoughts.
There's got to be some other program that does it [laughter]. I don't know what it is, though. You've got me there. But I disagree with you. If we get a system where we don't put people in the hospital so much, we keep them in the, you know, reduced hospital re-admissions for the elderly, say, and states are absorbing the cost and Medicare is getting off scott free-- or not scott free, but with less expenditure, there ought to be a way of sharing the savings. And of course they're working on it. And I don't-- there's obviously been no breakthrough. Hope springs eternal, but you're right on the basic dysfunction in the incentive structure.
David Jones, School of Public Health Doctoral student. I was at a speech-- or at an event recently where I saw a republican congressman give a speech, and he said that one of the reasons that the implementation of the ACA is failing so miserably is because states were involved in the drafting of the legislation. So, strong assertion. I'd be curious to hear you talk a little bit more about the role of states in the legislative process. You talked about the governor's association and...
...from that point moving forward, what, if anything the Obama administration or Congress could have done that would have led to different outcomes.
I-- you know, I hear the argument from time to time that if only there would have been greater reaching across the isle, and we would have come up with something. But I find -- and I'll get to your more specific point in a minute, but I just -- having read countless books on the past -- or some books on the passage of Obama Care, and then focused on particular on Medicaid, I just don't think this if only they would have tried to reach out to us. I just don't think it's true. In the case of the states, the governors, for understandable reasons, were very, very concerned about whatever the match rate would be. And there were some certifiably crazy proposals out of the US Senate. Some by democrats, which argued that they didn't want to give this very enhanced 100% early 90% match and they even talked about, well, states could borrow money to cover their you know, share of the -- and really, just terrible ideas. And the governors fought back on that front very fearful of an unfunded mandate and were quite vigorous. And people on the Hill began to read it.
Early on, the National Governor's Association tried to get, you know, a group of governors together to offer sensible input, but by I think the middle of 2009, this Obama Care, or the health reform had taken off into the realm of ideology, symbolism, if we can break Obama's back on this one, he'll be one-term president. I just think it got elevated by July to never never land, and so when the democratic governors by and large said, "Oh yes, we will endorse -- we're for Obama and we'll endorse this," and the republican governors I think uniformly opposed it. By that point, it had just come caught up in sort of I'm for it, you're against it. And I think they governors had less, other than around the match rate, less influence than they otherwise would have.
Right here. Sorry. So, my name is Claire Hutchins and I'm a first-year at the Ford School. Kind of building off of, I believe your name is David -- comment, question. Do you think that governors and states would have had a very different approach to the implementation of the ACA had this happened in better economic times? I think a lot of states, they come back and say, you know, we're really worried about the fiscal implications, but had this been legislation of the late 90s, would they have looked at it differently.
Well, you jumped in too. I think economic-- better economic times would have helped, but I really think this ideological shift or polarization we've seen over the last 30 years -- and political scientists have really sort of studied this fairly carefully -- you know, whether Rick Perry and the people in Texas would have liked this -- I mean, times there were as bad as a lot of places. It helped, but I think the political ideology really does matter.
My name is Justin Ladder and I'm a grad student in the econ department. So one thing that I noticed with sort of medical expenses in the United States, especially in the last several decades is that they're being driven more and more by chronic, long-term illnesses like Type 2 Diabetes, heart disease, and various forms of cancer. Many of these diseases are also highly correlated with poverty. [Inaudible] people have Type 2 Diabetes because they can only afford to eat crappy food and live a crappy lifestyle basically. And I'm wondering if there's been any serious discussion on policy of using consumption taxation to not only create the money to pay for these diseases but also to discourage those behaviors as a form of containing the cost. I know that's something [inaudible] a lot, but I don't hear it on national stations at all.
Right. [Inaudible]. There is an effort within some Medicaid -- some states to make Medicaid patients more individually responsible about their health and there's sort of a notion that if they're having a health problem, a lot of it is due to bad habits. But the level of sort of penalty or sentence structure they set up, it's not clear to me whether, you know, how much of an impact it's had. Beyond that -- I don't know if you have anything, but I take you point, but I haven't heard anything very major, especially around a consumption tax in that respect, at least in the Medicaid realm.
I think the last place I would look for comprehensive coherent tax reform would be Washington. It's hard enough to do it on a state level, if you were in Michigan over the last couple of years. So I think you'd look for individual governments trying it out. New York State and New York City seem to be particularly fond of such experiments. And potentially it would diffuse. I don't think the diffusion literature tells us that's true or not. I'd also say that that's part of a broader subset of things that everyone in the world is dealing with which is that we have a lot of welfare states and health programs that were set up essentially on the premise that you needed some kind of cover for when you were off work. Then you needed some kind of cover for the medical bills. And then they usually add something for doctor bills. That's the rough progress of health insurance development in the US and that's the rough progress of its development in a lot of places. The problem is this does not produce a system in any country that's particularly well suited to complex co-morbidities, chronic problems, or anything to do with the long-term care wave that's coming at us. The Class Act, which has now been cut, was an intellectually interesting effort to try it. The United Kingdom's commissioned a number of reports which they've run into the sand as soon as they saw the budgetary estimates. And the result is that I think you have a lot of ferment, and as far as I can tell, no really good ideas. On what you do about systems that are very, very good at paying, you go to hospital, reasonably good at paying you to go for episodes of care of the doctor. Largely poor, despite all the PR, at getting you to do, you know, live a healthier lifestyle. And absolutely out of ideas on questions of long-term care. And that includes going back to what do you do with dual-eligible's. There's a range of other ideas world-wide which range from even more expensive and silly than dual-eligible's through to throw grandma off from a train.
I would like to ask about what happens when governors and legislatures are on a different track. In Michigan, we have republican governor, republican legislature. But they don't agree about what to do with Medicaid. Do either of you have any suggestions of what's likely to be the next step and what might be done?
I don't -- certainly don't know the case in Michigan. Jan Gruer in Arizona has a similar problem. You know that -- it will be very interesting. There's a book out recently on whether governors get their way with legislatures, and one part of it deals with sort of the non-budget items and have, you know -- there's variance of course in particular circumstances. But they have a hard time winning on a lot of their sort of substantive proposals, and this is in the aggregate, so I'm not talking about Medicaid in particular. When it comes to budget items, however, and budget proposals, governor -- the track record of governors is pretty impressive dealing with legislatures, and I don't know where, you know, it's obvious it's got budget implications, and it's obviously a substantive proposal. I don't know how strong the Tea Party is among the -- you know, sort of the republicans of Michigan. But you're right. Came out we had this separation of power fragmented system. So what governors want may not carry the day.
In 30 seconds. There's also executives have to have some kind of outcome legitimacy. They can do something and claim credit for it. You can say want Rick Snyder did, and then do you like it or not? Legislators, being in the House of Representatives or being in the Michigan Assembly, the main thing they do is take positions and they're often fiercely policed by all sorts of factions within the party for the positions that they take. So structurally, it's much easier to look like a sensible person and leader as a governor than as a member of the House of Representatives, where you're pretty much condemned to look like a blow-hard much of the time. The other point is, who would be a member of the Michigan state legislature? Or the California state legislature? You're good enough to run an enterprise of that scale and complexity. You're personable enough to get elected, and what at age 40 you're going to abandon your obviously successful career for an eight-year term limited career break, so you can be surrounded by a rabble of ideologues in their 20s quite frequently. I mean, who would be a legislator in these states?
I wanted to go back to Affordable Care Act and the expansion of Medicaid and the -- certainly based on Massachusetts' experience the requirement for vastly increased numbers of primary care physicians...
...because of the expansion and what the potential is there for addressing some of these behavioral issues from in effect going to a public health model rather than the [inaudible] to get more families started on the right foot from birth, but everybody's covered but birth now just because of reimbursement requirements. But the whole point of having that coverage more comprehensively and perhaps messages more comprehensively developed from a public health perspective.
That model. I think it's an absolutely great idea and I'm beginning to follow this and the degree to which states attempt to encourage that kind of public health model I think will be very -- it's tricky. It's not going to be easy given the sort of interests that are running around in that system.
The other point I would make, and I think this is part of your remark is that I am hopeful that, you know, as the demand for sort of primary care providers increases, that nurses -- at least nurse practitioners will gain more ability to deal with certain, you know, basic sort of health issues which could also, if done right, might facilitate this sort of public health kind of perspective. And we'll see, there's certainly movement. I think some movement in that direction, but I haven't tracked it at all [inaudible], but it's -- you're right. It'll be a real pressure point.
There's also a case for more efficiency and better use of people because we're in a world-wide healthcare workforce shortage. And given that the United States is a country with essentially no concept of cost containment, we've been hoovering up medical professionals from the entire planet. Well-- particularly India, at some point, India's actually going to have enough jobs for all those access doctors, and if China doesn't start exporting doctors, we're in the soup. The whole world's getting older together. Much of the world is getting richer, and the United States is structurally dependent on essentially pillaging India, and I don't think that's a long-term viable strategy.
And so we come to the end of a conversation [laughter].
On pillaging India [laughter].
[Inaudible] remarkably durable [inaudible] but the fault lines are really extraordinary, whether that is within the state, between state and nations, and even, and we didn't have time for conversation, what happens when a second-term termed limited president does not like the reaction of some governors, and the very possibility, which I hadn't thought of before, waivers being withdrawn or made more difficult when normally the presumption of waivers is they are expanding exponentially. Does that become even still a kind of a bit of an intergovernmental power play and tool? I guess we stay tuned as we move into another decade of Medicaid. With that please join me in thanking our panelists.
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Dr. Kenneth Lieberthal: Thank you.
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[ Applause ]
Christina: Dr. Lieberthal my name is Christina. I'm a second year Master of Public Policy student at the Ford School. Thank you on behalf of the students for coming to speak to us today. The first question we have here is in response to the latest North Korean nuclear test, how can the U.S. further pressure the Chinese to rein in North Korea? Are there any specific policy ideas beyond dialog and what is stopping China from taking action?
Christina: The next question is what are the implications of China's aging population for China's rise?
Dr. Lieberthal: China, let me give you one ratio, one set of ratios just to highlight what the issue is here. Currently in China you have one retired person for every five people of working age. I'm sorry, one dependent for every five people of working age, but those dependents overwhelmingly are retired, not children. By 2030 you will have one dependent for every two people of working age. Between now and 2030 China's demographic pyramid its age distribution becomes the same as Japan or Italy or Florida. [Laughing]. Okay, I'm serious. The, for the first time last year China's working age population shrank. That was only a marginal portion of one percent. That shrinkage will accelerate phenomenally over the coming 25 years, phenomenally, and you know it. One thing about age is you know you can tell the future right, and the future is very, very grim on that. So they are going with unprecedented speed from being a country with a demographic surplus, which is to say as compared with other countries at their level of GDP, having more people working age population than the normal one does and fewer dependents. They are transit-they have enjoyed that for several decades. They are now transitioning at literally historically unprecedented speed to the opposite. Not quite the opposite, you know, where they have a demographic deficit, fewer people working age as a percentage of the population than almost any other country in their category in GDP, for anticipated GDP. That has consequences. The price of labor will go up, the ability to support double digit increases in their military budget will be, there'll be a lot more competition for those dollars, they have to improve health care, they have to improve all kinds of services for the elderly. We're talking about retirement of our baby boomers. It is not nearly as dramatic as the transition occurring in China. And so how they work that out is not fully clear at this point. Frankly the politics are such that they still haven't dropped their one child policy which is frankly insane. Politics are a funny business right, and they just haven't been able to do it. So you know you don't know for sure, but what you do know for sure is they can't continue the development strategy they've had to date. That has to undergo major changes and that will require a lot of investment and a lot of very difficult policy decisions and we'll just have to see how it works out.
Christine: How can the U.S. mediate between China and Japan without alienating China regarding the Diaoyu Islands and also is it [inaudible] security issues in the South China Sea?
Christine: China is now the world's largest producer of solar and wind systems, yet it still relies on coal for 70 percent of its electricity generation. This has colossal impacts on both the environment and global climate change. How can this be dealt with?
Dr. Lieberthal: How can it be dealt with?
Dr. Lieberthal: Well, first of all let me say China, there's one statistic that's wrong there, it relies on coal for over 80 percent of its electricity generation for 70 percent of its total power, total energy use. It relies so heavily on coal, A because it's the most, if you don't price out the externalities of burning coal, that is if you assume asthma treatment, all the things that happen including global climate change, that happen, should not figure into the price of coal, then coal is the cheapest source of energy by far. And China is a development country, their energy demands are expanding at a phenomenal rate and so they grab coal. Also, coal is the only source of energy they have in relative abundance domestically. So there's an energy security dimension to this too. They in fact have bought into the need to transition both for energy, both because of, of environmental degradation and because they are realizing now that they do not have as many years of coal use ahead of them as they thought they had. If you go back a little more than 10 years, the Chinese thought they had, the usual figures 900 years if coal reserves, in any case, hundreds of years of coal reserves. That figure is now down to 40 and dropping like a rock. Down to 40 for two reasons. One is their energy demand is just expanding much faster than they anticipated it would so you need more coal. But secondly, to mine coal you need water and most of China's coal is in the North China Coal Basin where they have a dramatic water shortage. And what they're finding is their lack of water is now limiting their capacity to exploit coal in the North China Coal Basin. They have now become, I think, the world's largest coal importer in the last five years. So they are trying to transition away from coal. That's the good news. The bad news is they've been trying one way or another to transition away from coal for at least 15 years and they have totally failed. It's in part, again, because their overall energy demands have been growing so rapidly, that even as they rapidly develop solar, some wind energy, they're going in for biofuels, they're trying to develop natural gas, they're importing motor oil and using motor oil for firing power plants. They're doing everything they can. The figure I've been told, I don't know if it's accurate or not, is they spend about nine billion dollars a month on building non-coal energy sources. And the result of all of that is that the percentage of energy that derives from coal is the same as it was before they started. So they are in deep, deep trouble on this issue and I think at the end of the day they aren't going to get away from coal until they begin to really run out of it. So the focus really needs to be on more efficient exploitation of coal. You know, super critical combustion, carbon caption sequestration, you know these kind of, some of these things are well developed, something like carbon caption sequestration is in the early days but it's the kind of thing, those are the kinds of things that limit the externalities from the use of coal, and I think that they just have to put a lot more money into that and focus on that much more effectively. Let me say I think we have a role to play in a lot of this because we have a lot of--we're farther along in some of these technologies than they are, but they can scale them up faster than we can so if we get together we can do some things that actually would benefit both sides.
Christine: The Chinese are doing a lot of development and resource extraction in Africa that run counter to U.S. interests. Can you speak a little bit about this and about U.S. policy towards China and Africa? Are there specific policies that have been developed to address the relationship in this context? If so, what are they?
Dr. Lieberthal: China began to move into Africa in a major way just in the last 15 years or so. They've had a presence before then and certainly a political presence but they're investment presence is relatively recent and it's scaling up very, very rapidly. Our big concerns about it have been mostly that they really have not the kind of conditionality that we put on aid or that the World Bank puts on loans, this is environmental, our governance standards, things like that. They go in and pay off everyone in town and get the resources they want. The, what they do contribute is they build a lot of infrastructure and that infrastructure has contributed in a significant way I am told. I am not an African specialist, so this is all what I'm told by people who look at this. That infrastructure has contributed in a significant way to the rapid growth of Africa's GDP over the last decade. So I'm not sure if I would look at this as solely what they're doing is not in America's interest if it enables Africa's economy to begin to really get on sustainable development path. I'm not talking, when I say sustainable I don't mean strictly environmental I mean get to a kind of take off and it's self-sustaining. I think that's a very, very good thing. What the Chinese are finding, very painfully, is that a major reason why a lot of western firms are not in Africa, or not in particular parts of Africa where the Chinese go, is because they're very high risk. And they're high risk for a reason. So the Chinese are now finding that they have problems of mine managers being beaten to death, Chinese workers being kidnapped, people being shot, local governments, you know, local political leaders campaign against the rape of the land by the Chinese and kick the Chinese out. You know this kind of stuff. You know it's the kind of stuff you run into. And bribes don't always square the circle. So they've begun to become much leerier about continuing to ramp up the way they have been in Africa and they're becoming more sophisticated about it. We and others are now talking with them in much more detail than we did before about aid program cooperation, aid program standards, how you manage these things in a way that minimizes risk. Keep in mind for China and Africa, most of what they do in Africa is through their corporations. So it isn't government aid it's corporate investment backed usually by loans from the China Development Bank, from one of their policy banks or something. So there's government money behind it but the purpose is profit. And there may be some strategic element to it. Certainly these companies are encouraged to go out and bring resources in because China is a tremendously resource scarce society in terms of natural resources. But the companies don't want to go where they're going to lose money and get their people killed, so we're finding after this initial rush, there is now some rethinking and I wouldn't be surprised if within a decade we have a somewhat, a clearly adjusted approach by China in Africa.
Christina: I think this will be the last question. What do you foresee as the biggest challenge in U.S. China relationship in the next five years and what advice do you have for China and the U.S. government separately to create a win-win situation?
[ Applause ]
Well that was terrific and very timely, thank you very much. I wanted to thank all of you for joining us and for a really wonderful set of questions. I'm sorry we're out of time because I know there were a number left. I hope you will come back and join us for other policy talks at the Ford School. Just a final round of thank you to Ken Lieberthal. [Applause]
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We're also very honored to host Judge Willis Ford's grandson, Buzz Thomas, who has had--
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He spent 14 years in the Michigan legislature as democratic floor leader in the senate and as democratic leader in the house. So very special welcome to both of you for joining us this afternoon. We have some other special guests with us today and I'm very pleased that the creator of our documentary could join us. We have the director and producer, Brian Cougar, and writer, Buddy Morehouse. So welcome to both of you.
< Applause >
Also with us are two of the sports historians that you will see featured in the film. We have journalist and author, John Newbacon
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I'm delighted that the director of the Gerald R. Ford Presidential Library and Museum, Elaine Didier, could be here to join us. Elaine and her staff have brought a really special treasure for us to have on this afternoon, which you see there on the table. That is one of the footballs that was used in the game around which the Black and Blue Documentary is centered, the 1934 matchup between the Wolverines and Georgia Tech. The football is on loan to the Ford Museum from Susan Ramino
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So it's a special pleasure to have Jenna with us here today. I hope that as you came in, all of you took a button. You'll see many of us who are featuring our special buttons that just arrived today hot off the press, as a kickoff to our celebrations for 2013 for the Centennial of President Ford's birth. We have hosted a number of Ford legacy activities this past fall as we headed into this special centennial year including the university's tribute to Mrs. Betty Ford and a visit from President Ford's, Frank Zhar
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I'm Barry Ray. As Susan Collins mentioned earlier, I'm a faculty member here at the Ford School and also direct CLOSEUP, The Center for Local, State and Urban Policy. And to paraphrase Steve Ford, it's a nice day to have both Buzz and Steve with us. In a moment I want to introduce them. I want to just begin by offering a word of thanks and just a couple of observations before we invite them to the podium to share some reflections and then open time up for some questions. First of all, a word of thanks. We really have a remarkable group of individuals who have convened here today. This is in effect, to some extent, the family that has come together around this film and as the story that you first heard begins to reach a ever-larger audience. And so to reiterate what Dean Collins said earlier, we're deeply honored to have so many members of this particular community, the Black and Blue community, with us and look forward to hearing from a number of them in a moment. I'd also like to thank the members of the Ford School community who helped make this possible. Dean Collins mentioned a number of them. From the standpoint of CLOSEUP, I'd like to particularly note the role of Bonnie Roberts, whose done really an extraordinary job in bringing all of this activity together and thanks to her. Then I'd also like to share just two observations. One is that while the heavy-lifting and athletics on this campus is done father south on State Street, it should be noted that there's a really strong athletic interest within this school, the Gerald Ford School of Public Policy, in ways that might not be fully realized. This is a relatively small college among the colleges and schools that comprise this great university. But through intramural activities, units like the Gerald Ford Superstars, or the Gerald R. Superstars and other often go deep into intramural competition. And if you've ever been around our courtyard when the weather is a little nicer, you often see our students out there playing every game imaginable often wearing t-shirts, hats and even bringing athletic equipment that bears the name and likeness of President Ford. In a way, some are comparable to our button. So one word of warning, just for any of our athletically-minded students, you can't touch the ball. And as much, and I've had more comments on this today than you would ever imagine when hearing the ball was coming, you can't take the ball outside and play with it, as tempting as that would be. John Bacon talked several times during the film about the tough decision, the tough moral decision that Gerald Ford had to make in this case. And during the last year, I've had the privilege as serving as chair of a faculty and staff and student committee convened by Dean Collins to think about ways that we might appropriately celebrate not only the centennial of this school in 2014, but beginning in 2014, the centennial of the birth of Gerald Ford, this being the first in a series of events. I think one of the themes that we'll be talking about certainly today, but at subsequent events is that that theme that John talked about, hard decisions, hard moral decisions were evident throughout President Ford's life. The decision to give up legal practice and run for a congressional seat that politically he had realistically no chance of winning, largely driven by his decision to support the Marshall plan as it was moving forward in congress. The challenges that a president faces when he must make the decision on whether or not to pardon his predecessor under exceedingly controversial circumstances, even though taking that action may end his political career, decisions on whether to involve the United States formerly in the Helsinki Accords even though that would increase the likelihood of a primary challenge in his effort to seek a full-term in office. And the stories go on even in the post presidential years, as was noted in the film. The decision on how to constructively engage on the issue of Affirmative Action at the point that the university that he deeply loved was becoming involved in the Affirmative Action case in ways that go far beyond, in new complexities beyond the Willis Ward story. And so our hope is that this event is the first in a series of events over the course of this year, and probably spilling into next year, that we do indeed continue to celebrate the legacy of Gerald Ford. And with that, go back to the many, many touch decisions that whether he was a 19-year-old or a 20-year-old at this campus playing football, or moving into the presidency, or in the latter years of his life, he routinely and repeatedly took on and took on with great, great dignity. Finally, a word of introduction and really welcome. It is often said at events like this that there is really is no need for introduction and I kind of think that's true today. You have the bios before you. You know that Steve Ford and Buzz Thomas have led significant lives of public engagement across sectors whether it is currently running the Gerald R. Ford Foundation, they're being actively involved in the lives of all of the institutions that advance the memory of President Ford and help future generations think and reflect upon that life, or service in the legislature, or in other arenas of politics. Really, don't want to review the bios other than to say we are deeply honored and pleased to be able to welcome both of them to share the reflections and thoughts both in comment as they take these chairs and begin to respond to questions. And at this time, we just ask you to join me in formally welcoming again Steve Ford and then Buzz Thomas to our community and to our stage.
< Applause >
Thank you, Dean. Appreciate it.
< Applause >
Thank you for that introduction. And I know I'm going to speak for a just a minute up here and then Buzz is going to come up. And then we're going to sit down and answer some questions. And that's where always the interesting stuff happens when we get to hear what people are thinking. Dean Collins, thank you for doing a great job running this school and putting this program on. Brian, buddy, we were talking in the hall out there a year and a half ago, Buzz and I did those interviews and nobody ever had an idea that we were going to end up with such a great film. And it just makes people rethink this issue, and their lives, and it speaks to every one of us in a different way. So congratulations to you guys. It's a honor working with both of you so. And young lady, young lady, wow. You got a Willis Ward Day. That is so cool and I think you're going to be in politics someday. I just, I have a feeling that you're going to do big things so I congratulate you. I just think that's a neat, neat thing so hats off to you. Let me take a couple minutes, just give you my reflections on dad and this story and how it affected us. You know, first of all, dad was probably never supposed to be at the University of Michigan. When he got out of high school it was the Depression. They didn't have any money. There was no money to go to school and he was not going to college. And his high school principal called him in and said, Jerry, what are you going to do now? You're graduated from high school. And dad said, well, we don't have any money. It's the depression, can't afford to go to school. And his high school principal said, Jerry, I want you to go one year at the University of Michigan. And he had motives because he wanted dad to play football there. There were no scholarships at that time, but he was going to figure out a way to get dad to Michigan so he could play football for the University of Michigan. And dad said, well, we don't have any money. And he says, I'll tell you what. I'm going to loan you $100. We're going to do a fundraiser. You're going to be the first recipient of that $100, which will pay for your first year at Michigan. Now, I know it costs a little more than that now.
< Laughter >
But back in 1930, '31, you could go to Michigan. It was 100 bucks. So they did that. They raised money for dad. The high school principal invested in his life. And dad got here and then figured out a way to afford the next three years and went to school here. But he used to tell the story when they dedicated the school that he used to walk across the campus as a young freshman on a cold winter day, probably not as cold as today, but cold winter day. And he said there used to be this big empty lot, a pile of dirt on Stage Street. And he goes, I used to wonder what the heck they're going to do with that piece of ground. It was back in 1931. And he said at the dedication, he talked about here I stand, you know, 60, 70 years later and you've built a school with my name on it because one man loaned me $100. That's investing in people's lives. And I think if I were to sum up dad's life, the reason and the way he got to Michigan, the way he got to know your grandfather and how they interacted together, both of them great gentleman, honorable gentlemen, was he had great people in his life early on that invested in his life-- his parents, his high school football coach, his church pastor, his boy scout leader. All those people invested in dad's life and got him here to the University of Michigan. And Michigan invested in him and it turned out, it was a tremendous story about character and integrity and a story about friendship with your grandfather. You know, I didn't know the story about Willis Ward in the field of play at football. The way I knew about your grandfather was at dinner dad would always talk about he was good friends with a guy that beat Jesse Owens. And I knew who Jesse Owens was and so that was a big deal. But I'd never really heard the story about the game with Georgia Tech. So that was a big moment for me. Dad was very humble about that story. He was more impressed that his good friend, Willis Ward, had beat Jesse Owens. And that's how he talked about it. Again, if there was one story, and when we did the Larry King Show, that was kind of what I told Larry King, is that if there was one story and you said, you can only tell one story about your father's life, what would it be? It would be the Willis Ward story. I think that is the pearl of who dad was. I think that one story resonates and ripples out into every other area, whether it be the supreme court case here at the University of Michigan, the law school. I think it ripples out his compassion dealing with the pardon. Parts of that story, the Willis Ward story, I see in the fabric of so many other decisions. When he gave the pardon for Richard Nixon, what most people forget is on that same time, same day basically, he wanted to give amnesty to all the draft dodgers in Vietnam that had divided this country in the war. And his feeling for healing of a nation was not just about trying to find grace and forgiveness for Richard Nixon. It was about grace and forgiveness for many other people to bring a nation back together. But the pardon is what got the highlight. It wasn't the young men that had to flee and go to Canada to avoid the draft for the Vietnam War. That was a period when dad felt very strongly. The whole country was so divided that these acts of grace and mercy needed to happen to bring a nation back together again. They weren't very popular decisions at the time. But that was the fabric of who he was. Let me just close by saying, I was always amazed when I heard that story that, I think it was 1961 or '62 before there was a college in the ACC Atlantic Coast Conference. I think it was the University of Maryland in 1962 that had a black player on his team. That was 30 years after the Willis Ward incident. So these two young men, your grandfather and my dad, and many other people on that team as you guys know, dad was not the only one that was fighting to get Willis on the team to play that day. It was 30 years later at the University of Maryland before he had a black player. These guys were forward-thinking people. And Buzz, we didn't know who you were until the vote came up and we were shocked to find out, who's this guy, this democratic senator from Detroit. And it turns out, you know, to see our next generation get back together and kind of go full circle and keep this going. I think your grandfather and my father would both be very proud. So that's your introduction. Why don't you come up here.
< Applause >
Well, thank you very much, Steve. I couldn't have a better introduction. Thank you very much to the Ford School for having me here today. Thanks for all of the diligent efforts that went in to planning this. You know, when you have a program, you really don't know how long it takes them to do this. But they've been working on this for the past several months. And so your staff really is to be commended. Let me also say to Buddy and Brian. They're not just filmmakers that made a movie and, you know, they've moved on to the next project. They are living and breathing the history and the elegance of Willis Ward. A couple days before Christmas, I get a call from Brian. It's like, hey, Willis is turning 100 on December 28th. We're getting together. I'm up in Ann Arbor with Buddy, and John, and Greg and we're going to toast a drink. It's like, I need you to be there. It's like I'm sorry. I can't be there. But that's the type of guys that they are. They're the ones that are still going to Willis' gravesite and making sure that it's cleaned up, and that it's looking right, and that it's being taken care of. So they really have made themselves just integral parts of the legacy of Willis Ward and I want to thank them for that. Also I want to thank Jenna for her work. It's very difficult lobbying the legislature.
< Laughter >
There are people that are paid an awful lot to professionally lobby legislatures all the time that do not get the success that she had first time out, going and having the legislature in a very speedy amount of time pass Willis Ward Day in the State of Michigan. So there are very few people that will have that tribute forever. And so we're all very, very grateful to Jenna for the work that she did. And then I also want you to meet someone. The University of Michigan is really lucky that it has another Ward that is a student here. Melanie Ward is Willis Ward's great niece. We're not exactly sure, but she's a graduating senior here and she's applying to graduate school. I don't know if she's applying to Michigan, but I hear she's a really good student, Michigan.
< Laughter >
So it would be nice to keep a Ward in the tradition. And it's really nice to see Professor Bacon and Greg Dooley. I've not met you, but I read you. And I'm a pin Quaker. And so Ivey League athletics are not like Big Ten Athletics. So I still root for the University of Michigan. So it's really quiet a privilege to be around you guys. Like Steve said, I never heard the story from Willis Ward. He didn't talk about this episode in his life. He talked about his friendship with Jerry. And you saw the movie. I didn't know until actually Willis was dead also that Jerry was Gerald Ford. And he spoke elegantly of his love of the University of Michigan. So he was never bitter to the point that he didn't respect the education and the opportunity that he was given in life. You'll notice that I called him Willis. I call a lot of folks in my family by their first name. My grandmother was Margaret. I called her Monner
< Laughter >
Don't tell your grandmother because he wasn't supposed to do it. And I'd say, hey, don't tell me mother. And there we would savor those moments of just eating that delicious, crispy skin. You know there were other things that he enjoyed eating like head cheese and other I that I didn't develop a taste for. But just those little moments are things that you never forget. The other thing that I would never forget about Willis Ward, frankly is I think that this episode and this time in his life really did instill a sense in him that you had to be excellent and as an African-American, you had to be more excellent. And so that you had to create a space for yourself where someone couldn't take anything away from you. And so it was always, always instilled in any part of any family discussion that your education and where and what you did, and how you prepared yourself needed to be a part of that. And the other big takeaway for me is his sense of loyalty. There was never any question that his friend, his lifelong friend was the President of the United States, was Gerald Ford. And people ask me, why did you, you're a liberal democrat from Detroit. Why would you stand up for a republican from Grand Rapids at the time that you did? And it's very simple. It's because, what you're supposed to do. Families come together often times in many odd ways. And sometimes it's just important to remember that families come together, and that you stick together and you stay together. You know, I don't know how I feel necessary about all of the politics of Gerald Ford. But if you were on a ballot today, he would get my vote. And that would just be because that's what I'm supposed to do. And I think that's incredibly important. And as we listen to the politics of today, remembering that loyalty and seeing that elegance of the relationship and the friendship, I think would serve us very well. And so thank you again for having me. And I look forward to our question and answer session. Thanks again.
< Applause >
< Silence >
We do want to allow time for questions from the audience. But given the fact that we have two people who are absolutely instrumental to this film and telling the story, we wanted to invite Buddy and Brian to respectively ask the first questions. I would also note that they have graciously provided an autographed poster from some of the principals of the film, which we accept and receive with honor. Buddy, the floor is yours if you'd like to ask the first question. I think a microphone is right there.
Yes, is this on? It's a tad related, but it's something that you told me in Washington that I'm intrigued with. You went to high school at the high school where Remember the Titans was going on at that time. Is that correct? Can you speak at all to maybe relate the film to what was going on at that time with racial relations at high school and blacks and whites?
Yeah. It's interesting. We grew up outside of Washington, D. C. This is before dad became president. And I'll go back one step further because I think it ties in with what dad wanted for us children. Part of the character of who dad was, I think, got decided as a young man. He had a choice which high school he could go to in Grand Rapids. And he chose South High because it was much more diversive as far as a population of the students. And he wanted to be challenged and he wanted to learn about the world, and he wanted to, you know, be with everybody. And so he asked his father, who was really his step-father, if he could attend South High, and that's where he went to high school. Now when I went to high school, dad wanted all us kids to go to a public high school. We did. I went to a school, T.C. Williams High School, which was the high school that was, for anybody that remembers, the high school where Remember the Titans, that story took place of trying to integrate an all-white school. I played football there. I wasn't on that team. I was captain of the junior varsity team. But all my friends were on that team that was highlighted in the movie. We went through that force busing, all those. Dad wanted us kids to be part of that. He thought that was part of our education as citizen. You know, you shouldn't isolate yourself. So yeah, I remember being put into that situation, force busing. It was congress wanted to use our school system before they had force busing in Boston. They could use us as an experiment. They could watch it from across the river in Washington, D.C. And so we were the force busing before actually Boston was years later so.
To me, one of the more interesting parts of the film is where John talks about, despite what happened to Willis in 1934 and the events of that game, that neither one of them ever lost their love for the University of Michigan. And indeed, through the years it even got deeper. And to me that was pretty amazing, especially given what Willis had gone through and the stand that your father was willing to take. What do you think it was about their character that allowed them, despite what happened in that game, to never lose their love and even grow their love for this university?
Well, I think Willis had a healthy respect for the education that he received and the reputation for the University of Michigan. This is the University of Michigan. And so it did, everyone, I think, remembers very fondly most of the experiences that they had in college. I think it also gave him an opportunity to create a very special friendship that was soul defining to who he was. So it was really an inevitable relationship that would exist with him and the university because of that shared experience. This was just such a defining moment that sometimes the great times and even the worst times because those really defining moments that you never forget. And I think that just, the university became Willis Ward.
You know, I think it's kind of like a family in that in any family, nobody does everything perfectly and you're constantly in growing motion. Hopefully you're growing towards greater maturity. I think Michigan, at that time, both men, your grandfather and my dad, understood that it was a growing time for the University of Michigan. And the University of Michigan wasn't the only place. This was happening all over the country. And so I think both of them had the type of character that had a grace and forgiveness of we're in it, we're going to learn together. We're going to be better on the other side of it. And no doubt, that did happen.
With that, we'd be happy to take questions. Once you're recognized, we do have a portable mic and we'll bring it to you. Would anyone like to ask a question of our guest? Back there.
Thank you. We all know that there is a physical plaque or something on the track that Michigan commemorating the athletic victories of Jesse Owens. I'm wondering if there's anything physical on Michigan's athletic area, or world, commemorating Willis Ward? Willis Ward Day is fabulous, but is there anything physical here to say who he was and who he beat because Jesse Owens is in Ohio State, I believe.
I don't know the answer to that, but if it isn't we're going to get Jenna to start working on it.
< Laughter >
Yeah. To my knowledge, there is not. So I know that there is some in this room that are going to be doing some work on changing that. And I suspect that we'll have some probably willing supporters in this room that might want to pitch in with that.
So Jenna, your work's cut out for you.
You know, it was interesting when we were talking about how our families came together. And again, to me, the other part of this is to now know Buzz and to see our families together, the next generation, and our parents and your granddad would be so happy with that. Again, I think it was in the nature of these two men that there might be differences politically or things like that. But they knew how to get along. And that's an example for all of us today. I mean, look what's happening in Washington, D.C. in politics and these lines in the sand. When dad was a congressman and then president, his best friend was Tip O'Neil, the democratic speaker of the house. And Tip O'Neil used to come by our house all the time. Dad and him would fight on the floor of congress about ideas. They would find compromise. And then Tip O'Neil would be at our house for dinner, or a drink, or something like that. And there was a respect for each other to find those compromises. I remember, there's a great story about dad and Tip O'Neil were on the golf course together playing golf, and this is when dad was president. And Tip O'Neil looked over at my father and he said, Jerry, isn't this a great country? We can go out and play golf together, be great friends. And he said 18-months from now I'll be traveling around the country trying to kick your ass in the election. And they just had a wonderful friendship, but a respect for each other. So yeah, it's an interesting time.
Yeah. Well, and Willis was a republican. Don't make no mistake. He was a republican. He probably would not like my party affiliation by any stretch. But, you know, just a testament to the family relationship. I recently had a flood in my house. And so I had all of my memorabilia, everything that I've stored from my 14-years in office here in Michigan, and I watched it just kind of floating away. So, you know, everything's gone. But Steve mentioned that he made a point of writing some notes to me along the way as we had these debates and discussions, just as President Ford and how I actually learned about this, President Ford wrote a note to my grandmother just reacquainting her and introducing himself and saying how much, you know, it meant to have that relationship with Willis and that he had heard that she was ill. And so he just wanted to wish her well. So the only thing that survived this floor are the notes that Steve sent to me. So my remaining legacy of my years in the legislature are Steve Ford's notes to me. The Fords continue to be very special to us.
Gentleman right here.
I'm researching the Senior Honor Society of Michigan. And so I'm writing the history on that. And I point out that the students that disrupted the rally, the Pro Willis Ward Rally were actually Michigan Man members and they were sent to disrupt the meeting by Yost because Yost thought that the students were going to organize a sit-down strike in the football field so that they couldn't play the game. And actually the captain of the track team got up and said, you know, you guys don't know this, but Willis Ward doesn't want to play. Well, he was a Michigan Man member, okay. So Michigan Man has a strong connection. Yosh was Michigan Man. Kip was Michigan Man. Igler, who was chairman of the board of athletics was Michigan Man. Ruthfund
We'll let you guys answer that.
We don't know what his response was. We know that Gerald Ford eventually then did, in research and I know that John actually, he might want to address this because he actually interviewed President Ford about this topic. But we know that then he went to Willis Ward and Willis Ward told him that he wanted him to play in the game and not sit out. So John, I don't know if you want to--
My source in this would be John B. He has great books written four years ago, not to great public attention but they're very well done. In that, he suggests that of course, Kipke tries to talk him out of it with limited success. This is where I think when you're talking about a conversation between two men that is probably going to last five minutes and it's probably going to be heated, followed by another one with Willis Ward in a dorm room somewhere, documents only get you so far. And to my strong hunch there is that Ford was upset. He definitely want, expressed the willingness to drop out. Kipke was equally upset, did not want to lost his MVP center, of course, and urged him to stay. And then the final decision was not made according to the records until he talks to Willis Ward. And part of that comes from President Ford himself through my conversation. So I don't know if you can make it all black and white as far as absolutely quit, absolutely talked him out of it, absolute this. But those are all the thrusts at play at that time. And there's no question, one certainty is that Willis Ward did not talk him out of it. I do believe, and this is where I think the courage really is manifest. If you're Jerry Ford and you're 22-years-old and you are there in party to football and that's paying your bills, you are willing to risk that at that moment, and we all know how the story turned out. It all turns out very happily for all involved ultimately-- a judge, a president, etceteras. They knew none of that at that time. And actually risk the idea of not only losing your place on the team for which you are going to be the MVP, but perhaps the money to go to school. And then of course with it, your political career down the road. All that, he was willing to put on the table at that moment. And that to me, if that's not courage then nothing is. So we don't know the exact dialogue of those conversations. We do know that he is willing to risk it all and he did.
I would say this, in that knowing dad and his ability to generate some anger very quickly--
< Laughter >
It all makes sense that that version is probably the version that happened. Once dad would calm down, he would have gone to Willis, talked to Willis, things like that. But his mother would tell you that as a young man growing up, that was what she struggled with the most with my dad, was his quick temper and making decisions that way. And so yeah, that all sounds very true.
Additional questions? Gentleman in the back.
Thanks. Just want to make one comment to on the last gentleman's comment that Jerry Ford was actually a proud member of Michigan Man
You know, I never got to meet, even though I was there at the White House when Willis Ward came and visited dad, I didn't never personally meet him. Again, my reference was, that's how dad lifted him up all the time is he knew the guy that beat Jesse Owens, you know. And we all like to think we know somebody famous or has done something kind of neat and it was interesting to see that that meant so much to dad that he was friends with this guy who had beat Jesse Owens. I mean, Jesse Owens was a legend. I think you can tell from the pictures. When I was watching, every time I've seen this film, both men have such big smiles on their face and they look to be very vocal. That's how I know my dad. He loves telling stories and being part of a good story. And that's what I sensed about your grandfather, was when they were standing there, they were reminiscent of these great stories. To hear you talk about how he was a center of attention because he always had these great stories, I think they shared that and that was not a difference.
Yeah. I don't know of any differences. I mean, there was never a cross word mentioned of the President. It was just my friend, my friend, my friend, you know, all the way down to wearing his Gerald Ford presidential cufflinks that Willis often wore. So I can't think of anything different. I mean, those pictures, yeah, they spoke a thousand words. Those were two imminently successful men that seemed really happy to be together spending some time enjoying each other's company and probably reminiscing.
I found it very interesting that your grandfather went to work for the Ford Motor Company and sort of an affirmative action of the time, and the dad to be back in with the University of Michigan later a supreme court case that involved affirmative action. So they seem to have parallel roads together in a lot of different areas.
Yeah. In fact, Brian let me in on a little history where later in life, Jesse Owens, was fairly down on his luck and Willis gave him a job at Ford.
I would also like to ask about the role of the president at the university at that time. As we know, at Penn State both the football coach and the president kind of got caught up in power politics. And it doesn't seem like, we've not heard about where our president was at the university in this controversy?
John, you might want to take that one.
Sure you don't want to have that one, buddy?
One final question.
I know that President Ford used to come visit the football team. When I was a child and he was president, I lived on Dewey Street and the motorcade came in front of my front porch, unannounced because he had to be all secret about everything and I ran down there and I got to watch President Ford come out and Bo greet him and then meet with the team. I'm just wondering, did Willis Ward maintain any relationship with Michigan football or Michigan track? Did he come talk to athletes ever at Michigan?
Not to my knowledge. He watched games on Saturdays.
That's interesting. I mean, was there a reason for that? Was there a wound there that made him not want to come back and intermingle the way the president did, do you think?
Yeah, I don't know.
There was one thing. There's so much that we weren't able to include in the film. But Willis Ward continued to, despite what had happened to him, he continued to have a great relationship with the University of Michigan. And one of the things that happened was in 1979, it was the hundredth anniversary of Michigan football. And they put together this huge program that took place at Chrysler Area. And it was actually Millie Shumbechler
You know, dad had a great relationship with Bo. And he used to come back and Bo would invite him to lunch with the players. And he would talk to the players afterwards. And he always wanted Bo to bring over the center, because dad was the center. And he wanted to see how big he was because when dad played he was 195 pounds, I think 6'1. And every trip dad would come back to Palm Springs, he'd be telling mom and the kids, god, I met this center at Michigan this year. He's, you know, 6'3, 340 pounds. He goes, I don't know what Bo's doing to grow them like that and he just was fascinated with how big these football players have gotten. And every time they would play Ohio State we'd sit with dad and he'd watch that game. And we were so afraid he was going to call Bo and try to tell him a play or something, you know. We'd say, dad, just calm down. Calm down. In the final tribute to Michigan, and particularly Michigan football was when we came back for his funeral in Grand Rapids. We had the funeral at the National Cathedral in Washington, D.C. and we were on Air Force One bringing in casket to Grand Rapids. And the pilot of Air Force One came back to my mother and said, Mrs. Ford, would you like us to make one last pass over the stadium, the big house? And I'm going to get tears thinking about it now, but mom had tears in her eyes and she said, Jerry would love that. And they brought Air Force One, and a lot of you know that, brought Air Force One down and the problem was they didn't call ahead.
< Laughter >
They didn't tell anybody and so many stories in this town of all of the sudden they saw this huge 747.
It scared the heck out of Dewey Street. I can tell you that.
I know. Yeah. So it was a great thing for dad and we know he was smiling when that last pass over the big house so. He loved Michigan football.
One last comment I would make is that throughout this project, one of the film clips that I found the most interesting is, and it doesn't appear in the film, but is watching the commercial that the Ford Campaign put on all national networks for 30 minutes the night before the 1976 election. At that time, that is what you did and you threw as much resources as you could in an allotted 30 minutes of time. It's a fascinating little piece and yet very people appear in it. There is a democratic legislature, not Tip O'Neil, but another talking about President Ford. Joe Garagiola, the baseball player hosts it. It ends with President Ford sitting in a jet talking about what he would like to do in a full-term in office if he had been elected and yet there's one other prominent individual that appears repeatedly through that clip and that is Willis Ward. It's so interesting to think on the eve of the 1976 Election who would be selected to speak. Looking forward, there is indeed much to think about as we continue to reflect and celebrate the life of Gerald Ford going forward this year. And would only note, with directors and film writers with us, that there is a sequel already in progress. Without going into too much detail, will focus an even greater depth on the life of Willis Ward to which we can all look forward. You are all cordially invited to join us in the Great Hall for reception where we invite all of our guests to spend some time. There will be a couple photos with those who are allowed to get close to the ball. But before we adjourn for the day, please join me in thanking or welcoming.
< Applause >
Susan Collins: Hello, everybody. We're going to get started. I'm Susan Collins, the dean here at the Gerald R. Ford School of Public Policy, and it is wonderful to see all of you this evening for the third in the series of the Ford Policy Union debates. As those of you who have been here before know, you are in for a very kind of interesting format and an interesting exchange of ideas. And the audience participation is an important part of that, so we really are delighted to have all of you joining us this evening. The policy union series is essentially one of the major initiatives of the Ford School's International Policy Center, and it is also a partnership with the International Policy Students Association. And so I would particularly like to thank both of those organizations for their role in organizing and planning and putting on both this evening's event, but also the series more generally. So, before I turn things over to our moderator, who will be Katie Goddard [assumed spelling], who will actually more formally introduce our guests and say a little bit more about what the plan is for this evening, I did just to welcome our two guests. Let me start to my far right with, well-known to all of us, my colleague, Alan Deardorff, and then there's a very, very special welcome to someone who was both a colleague in different ways, and a good friend of mine from my Washington, D.C., days, Thea Lee. And again, you'll hear more of an introduction for her as well, but it's a great pleasure to welcome her here. Well, as you know, the topic is pros and cons of free trade. And so, before I turn things over to Katie, I just want to say a little bit about some of the things that you might think about in context as you get ready to listen to our debaters. You know, as an international economist myself, one of the things that we stress when we talk about trade issues is the face that there are winners and losers. And those of us who are international trade economists are very well aware of the theoretical dimensions and the fact that, in many circumstances, if not most, it is certainly possible to compensate losers. But of course, reality is not always the same as theory. And so, I hope that you think about, essentially, some of the issues that have to do with how the various trade developments might impact different stakeholders and perhaps think about some of the extents to which we recognize that markets function in a variety of different ways. And international trade is very much about markets, and they're very powerful and are helpful for accomplishing a number of things. But because they don't always work well, there are opportunities and important dimensions in which one needs to intervene and what is theoretically is the frst, best option is not always the option that weighs alternative considerations in a political context as well. So, again, lots and lots of important issues on the table. I'm sure that they won't all get resolved this evening, but I look forward to an lively interaction. And with that, I will turn the floor over to Katie. Katie, welcome.
Katie Goddard: Thank you. Good evening. My name is Katie Goddard. I'm a first-year, a master of public policy candidate here at the Gerald R. Ford School of Public Policy. As a student with a particular interest in international policy and development, I'm privileged to serve as a moderator for tonight's debate on free trade, which is the elimination of import tariffs and other artificial barriers to international trade. I want to welcome you all to what will be a very interesting and engaging debate, followed by captivating audience questions. The Ford School -- the Ford Policy Meeting debates are intended to bring leading voices on key international policy issues to the Ford School and contribute to a wider, more informed discussion as part of the Ford School's mission to educate the policymakers of the future. I would just like to reiterate was Dean Collins said and welcome Thea Lee and Professor Alan Deardorff. And before explaining the mechanics of the debate, just a formal introduction. Alan Deardorff is a University of Michigan's Gerald R. Ford School of Public Policy assistant dean and professor. And from the American Federation of Labor and Congress of Industrial Organizations, the deputy chief of staff, Ms. Thea Lee. Please refer to the event program to read their full biographies. Our debate today will be conducted in a fashion similar to a competitive forensic debate, with the difference that there will be participation by the audience. Today's debate will be over this resolution. The United States federal government should pursue free trade agreements with willing countries.
Professor Deardorff, a noted international trade scholar, will argue that the U.S. should actively pursue free trade agreements with any country that is willing, and it should focus those agreements on reducing barriers to international trade rather than -- rather than on other issues sought by domestic interests in the U.S. Ms. Thea Lee, an expert trade economist, will argue that the current U.S. trade policy and so-called free trade agreements reinforce corporate power structures and exacerbate inequality in the U.S. and abroad. In all rounds of the debate, Alan Deardorff, as the advocate, will go first. And the debate will begin with each debater giving an eight-minute statement of their argument. Following these two statements, the debaters will then pose two questions to each other and offer both answers and rebuttals. At this time, participants will have the opportunity to submit questions, and we have Andrew and Alex at the back, who will go around the room and take the questions. You should have received a note card when you came in. Feel free to ask a question. They will collect them from you, and them I will receive them to ask the questions at the front. We fully encourage you to utilize the opportunity to pose questions to two leading experts in trade policy. We will then collate and prioritize them, and as I said, we will -- I will pose the questions to the two debaters in the front. And in addition, we also encourage you to join our technologically savvy Madeleine. She will be on Twitter, and we have the Twitter hashtag, hashtag-FordPolicyUnion. And you're welcome to submit your questions in that form as well. Many of you also have iClickers. These will be -- we will be taking polls before and after the debate in order to discern how many members of the audience may have changed their initial opinion.
Finally, both Professor Deardorff and Ms. Lee will have the opportunity to present a five-minute closing statement. And following the statements, we will take a second vote, and using the iClickers again to decide whether these same opinions remain or we've successfully persuaded people one direction or the other. So once again, welcome to our ongoing series of international policy debates. And before I turn it over to our guests of honor, let's quickly take the first poll.
So, with your iClicker, please turn it on, and the debate the resolution, the United States federal government should pursue free trade agreements with willing countries. A for affirmative, B for negative and C for undecided. And we will start now.
[ Pause ]
All right, I'm going to stop it. So, we have 52% saying that, affirmative, the United States federal government should pursue free trade agreements with willing countries. 16% negative, and there's an undecided 32%.
So, the pressure is off me, and I'll turn it on to you.
[ Pause ]
Alan Deardorff: So, it's time for me to start, right?
Katie Goddard: Correct.
Alan Deardorff: Okay. Is my microphone on as it's supposed to be? Okay, well, first, let me just say thank you to Thea for accepting our invitation to come and do this. From the introductions, you might have guessed the reason that she came is that she's a pal of Susan Collins, but in fact, I've known Thea probably longer than Susan has, because she was a student here, and she took trade from me. And I've also known her more recently, because we both serve on a board of directors of the NBER. So, I would like to say it was my idea. I may regret that now but that was the [laughter] -- that was the idea. All right. So, I'm here to try to argue in favor of free trade. It sounds like we have a fair majority already in favor of that, so let's see if I can increase that majority. First of all, just to be clear, what do I mean, or what we mean [inaudible] by free trade in this discussion? In its extreme, and its most ideal form, free trade is the complete absence of any artificial barriers to trade -- any tariffs -- taxes on trade -- or quotas or any other non-tariff barriers that might interfere with trade. That's the ideal, at least from an economist point of view, of free trade. But, practically speaking, we're certainly never going to get there anytime soon. And so, free trade has a couple of other interpretations that I think we'll be talking about more here. One is a reduction in trade barriers without going all the way to zero applied to, say, imports from all countries of the world. That sort of multilateral trade liberalization is the preferred approach to free trade amongst economists, but much more common, as I'll explain more about in a few minutes, is not that, but more or less complete elimination of barriers to trade but with just a few partners -- with a single other country, or with a few other countries, what are called free trade agreements, or free trade areas -- FTAs. And so, that's, in fact, what we're going to be talking about here is -- because it's the much more likely thing to happen, which is the expansion of the number of FTAs that the United States might belong to. Now, trade economists like myself have, for -- not like myself, over two centuries, been arguing in favor of free trade. This goes all the way back to Adam Smith, who, you might say, founded economics. It was refined, importantly, by David Ricardo, also about two centuries ago. And ever since then, economists have been further developing their ideas, and expanding them, and bringing in new ideas. And every time we do this, we get a better understanding of the sources of benefits from international trade. We now have, just in the last 30 years, a bunch of new ways the country's gained from trade that Smith and Ricardo didn't know about. So, we are convinced, on the basis of all of the theory that trade is beneficial, as we argue for free trade. There's also evidence that at least some pieces of those arguments are, in fact, empirically correct Furthermore, there's quite a long history now in the -- in the last half-century of so, at least, that countries that have had open markets have done better, have prospered better than countries that have kept their markets closed to international trade. So, economists feel there's both a strong body of theory and a good deal of experience to suggest that free trade is a desirable goal.
Now, what do we mean by benefiting from trade? Well, I want to make clear one thing Susan already mentioned. We're not saying that trade benefits everybody. No responsible trade economist would say that there are not losers from changes in trade. What we are saying, the criterion that we use for evaluating trade policy is the same criterion that economists use for evaluating all sorts of other policies. And that is that we recommend policies if they stand to increase the aggregate welfare of an economy -- of a whole country or, for that matter, of the world. The aggregate welfare -- what does that mean? Well, it doesn't mean that the policy isn't going to hurt somebody. There are going to both winners and losers from just about any policy you could imagine. And this is true in trade, but it's also true at every other policy area, pretty much, that there are always going to be winners and losers. So, what do we argue for? We argue that a policy is desirable if it benefits the winners so much that they could, in principle, compensate the losers and still be better off, all right? In principle. We don't say that the policy has to actually have that compensation take place. So, we're not saying there aren't going to be losers. There are going to be losers from just about any policy we might imagine, and although many of us would push for ancillary policies that might help some of the losers lose less, we don't realistically expect that we're ever going to find policy proposals, in the trade area or anywhere else, that aren't going to harm some people. So, how can we live with ourselves with that as our objective? Well, by applying this, not just in the trade area, but in all areas of policy, we can argue that, every time we do that, by raising the aggregate welfare, we're also going to raise the average welfare, for what that's worth. And furthermore, because we apply it with lots of different policies, the losers from some policies will be winners from other policies. And so, a lot of people will end up being better off, even though, from individual policies, they might clearly lose, overall, this approach to policy is going to benefit the most people. Still probably won't benefit everybody. But it is -- could be the best that we're able to do. And furthermore, if we didn't take that approach to policy, if we didn't willingly accept policies that are going to have some losers, we'd never do anything at all. Well, of course, doing nothing at all is a policy as well, but it would be hopeless. So, we have -- that's the criterion that we use.
So, that's the basis for most, if not all, economists' preference for free trade. Based on that, the best thing that we could do, economists agree, would be multilateral free trade or multilateral trade liberalization -- lowering the barriers to trade against all countries. And that has been done. Indeed, that was done for 50 years, starting from World War II on. Round after round of trade liberalization was negotiated internationally and then implemented, initially, amongst the rich countries, mainly. But it gradually spread to include more and more of the developing countries. And trade barriers -- tariffs, specifically -- fell dramatically over that 50-year period. The U.S. average tariff was about 1/10 today what it was in the mid-1940s. And the same is true for the Europeans and the Japanese and so forth. So, that could work -- did work, but doesn't seem to be working anymore. The latest attempt to negotiate such multilateral liberalization in the context of the World Trade Organization, called the DOHA Round, it's been stalled now for over 10 years, and it doesn't look like it will ever finish. Instead, what we're getting is, a proliferation of these free trade agreements -- agreements where individual countries or individual small groups of countries -- pairs of countries or small groups negotiate to get rid of the trade barriers amongst themselves. Those are not ideal. They're not even necessarily, by an economist's criteria, necessarily a good thing. They may not raise aggregate welfare. And therefore, we very much prefer multilateral liberalization, but that doesn't seem to be on the table. Fortunately, I think, because so many countries are negotiating these FTAs with so many other countries -- there's hundreds of them now that have been negotiated and are in place amongst the countries of the world. Virtually every country of the world is a member of at least one of them, and then we're getting more of them every few months. So, we're moving in the direction where we may end up with every country having an FTA with every other country, and that's getting pretty close -- it's not the same, but pretty close to the ideal of multilateral free trade. So, that's the reason why I, and I think most other economists, especially trade economists that teach in academia and don't have to real world, as some people do, favor the objective of free trade. Thank you.
[ Applause ]
Thea Lee: Thank you very much. And it's a particular pleasure and an honor for me to be here tonight in Ann Arbor at the University of Michigan and sharing a podium with Professor Alan Deardorff, who taught me both international trade and international finance. And despite what you might think, he did an excellent job [laughter], and he should not be held responsible for any disappointments I may have caused him over the many years since then or tonight. So, I've been in Washington now for about 20 years, first at the Economic Policy Institute in the early '90s, and, for the last 16 years, at the AFL-CIO. And for much of that time, I've been engaged in what I would call the trade wars -- these huge legislative battles over trade policy. And I won't say that what I learned at Michigan wasn't useful to me, because it was tremendously useful to me as -- engaged in those debates, but I would say, when you're in the rough-and-tumble of Washington, and Susan knows this, watching the sausage get made, watching the policies get hashed out between the business lobbyists and the government folks and everybody else, there's a lot of blood on the floor at the end of the day, and very little of it resembles what we learned in graduate school or undergraduate school about the benefits of free trade.
I've had the privilege of representing working families in the globalization debate, not just in the United States, but also at various WTO Ministerials. I was in DOHA in Cancun, Hong Kong and other places. I've debated the Chamber of Commerce, the National Association of Manufacturers, the Business Roundtable and U.S. trade representatives of both parties as well as testified before Congress. But let me say one important thing at the outset, as I start on this, which is that, this is not actually a battle between free trade and no trade. And it's not even a battle about whether you're pro-globalization or anti-globalization. The labor movement is actually pro-globalization in the sense that we working people. We live, work, breathe and shop in a global economy. We produce the exports, we consume the imports, and we understand that we are in a global economy irretrievably. That's not going to change in our lifetimes, nor should it. So, we're not trying to shut down trade or globalization. But what we are saying is that we need our government to do a better job than it's done in shaping the rules of globalization to protect the interests of American workers, jobs, wages -- to address the burning issues of inequality, of climate change, of human rights abuses, to strengthen democracy, not weaken it, and to ensure that our own economy is healthy going forward, that we are creating the jobs we need to employ our population and that we also have a healthy macroeconomy. And I would submit to you that our current trade policy does none of that. That it is a shallow vision of what free trade is, whether it's the -- two words, free trade, in a free trade agreement, but that masks the fact that trade policy, at both the national level and the global level, is, today, largely about corporate interests, about protecting and strengthening corporate mobility, corporate flexibility, corporate profits, and not about what it should be about, which is delivering benefits to average people -- average working people, whether here in the United States or in other places. And when we -- when the United States negotiates a free trade agreement, so we see the initial statement, "with any willing country," we should negotiate free trade agreements with any willing country, there are an infinite number of choices our government makes when choosing a partner to negotiate a free trade agreement with. Do you choose a human rights abuser? Do you choose a democracy? Do you choose a country that has complementary industrial strengths or competing industrial strengths? What kind of trade balance do we have with that country? How is the trade balance likely to change? And what are the chapters of the free trade agreement? What are the provisions? Now, economists -- academic economists have the luxury of maybe abstracting from what's actually in the trade agreements, or actually reading the free trade agreements -- the many chapters that go in. How strong are the investment provisions versus the intellectual property right versus the labor and environmental provisions? That's my world. My world is fighting every single word of every single free trade agreement, on behalf of working people, to try to change the terms of globalization, and not to just say, well, we have a template that we call and FTA and we developed during NAFTA, and now we should just make minor changes and keep on negotiating with any country that the USTR took a plane to and people came up and said, "Let's do an FTA."
So, our priorities and our outcomes need to shift in favor of working people, take into account the job impact. And let me just say one thing about jobs. I know it's -- that's one of the things economists hate to hear is, you know, why would you think about job creation when you're negotiating a free trade agreement? It's so good. The benefits are so strong. Jobs are the last thing you should think about. Let me tell you that every other government in the world is definitely thinking about the domestic job impact of the trade policies it puts in place. And that leaves the United States in sort of a funny place, where we're looking out for our corporations and whether they can outsource jobs, whether they can move jobs around, make big profits and bring the goods back into the United States. Other countries are being more strategic and more targeted in trying to create jobs at home. And that leaves us a little bit naked in the world, in a mercantilist world. But the other kinds of concerns around the environment and climate change, around democracy, development and human rights, are things that do not naturally take care of themselves in the kinds of free trade agreements that the United States government has negotiated. It's not enough just to say, it's got two words -- free trade -- in it, and we're economists, and so we support it. But trade agreements, if you actually read them, and anybody in the room -- all you policy students, I hope you pick up the NAFTA or the Peru FTA and actually read through it, because a lot of it is about global corporate rights, about investment rules that give corporations the right to sue governments over regulations they don't like, whether it's an environmental or a public safety or a labor regulation. In the pre-trade agreements since NAFTA -- not before then, but since NAFTA, every trade agreement that the United States has done, with the exception of Australia, has investor state dispute resolution. It is a provision that can be very undermining of democratic decision-making by democratically elected governments. It's a way of empowering corporations over governments. Intellectual property rights provisions are very strong in the free trade agreements -- the so-called free trade agreements that the United States negotiates. And that can have the impact of redistributing income from consumers -- poor consumers in poor countries, to the richest -- some of the richest companies in the world -- that is, the U.S. pharmaceutical companies. For example, in NAFTA, the U.S. government's negotiating priorities require both Canada and Mexico to change their own intellectual property rights laws to raise prices of pharmaceutical products for consumers. So, in this disguise of a debate over free trade, we are instead having a discussion over how the U.S. government uses its economic and political power in the global economy, essentially to sell access to the U.S. consumer market. That is something that every country in the world would like more -- access to the U.S. consumer market. And the question is, what are the conditions that we impose on our trading partners in exchange for access to the U.S. consumer market? What is the quid pro quo? And it's essentially a corporate wish list.
When we ask -- so, free trade -- neoclassical trade theory essentially is based on some very powerful assumptions. And, you know, I haven't kept up with all the free trade theory in the 30 years since I left graduate school, but I know, essentially, you have full employment, balanced trade, perfect competition, no externalities and a predictable relationship between tariff reduction and trade flows. And not much thought to currency values, which we assume are determined by market forces. And yet -- and yet, the -- and I know that, within trade theory, there are ways of relaxing one assumption at a time -- I still remember that -- the imperfect competition, three countries instead of two, and so on and so forth. And yet, a lot of the strongest neoclassical trade theory results fall apart at that point. And even then, even within the strongest free trade model, the model acknowledges, as Professor Deardorff said, that there will be distributional impacts of increasing trade, even if you assume that that's the world we live in. And I think it's totally inadequate, in the world that we live in, in the U.S. economy, to assume away the distributional impacts of increasing trade liberalization. That that should be something that we take as a starting point. I don't think it's enough to assume that, if you have a bunch of policies, and they all have a distributional impact, that those will wash each other out. I don't think that's the empirical result when we look at the incredible growth in inequality in the U.S. economy over the last couple of decades.
Katie Goddard: Thank you, Thea.
Thea Lee: And I'll stop now and look forward to the rest of the discussion in the Q and A. Thank you so much, and I look forward to your questions.
[ Applause ]
Katie Goddard: And what we will do is, we will let Alan pose the first question to Thea. And Thea, you'll have three minutes to respond. And then, in turn, you will have the opportunity, and we'll do two questions apiece.
Alan Deardorff: Okay. The format, I realize now, is kind of odd, because, of course, she's just said a whole bunch of thing that I could imagine responding to right now, but no, I'm supposed to ask her a question. So, I will. I will ask a question [laughter]. Sort of. In the position that I took, that was read at the start here, I said I was in favor of negotiating FTAs with all willing partners, and I said -- and I didn't get to this in what I was able to say earlier -- try to limit those agreements to just the trade barrier removal and not bring in lots of other issues that domestic might want. And Thea's touched on a couple of the ones that I have also shared with her tremendous concern about -- the investment provision of the NAFTA, I've been unhappy with ever since I heard about it, although now I understand it is common, not only in other FTAs but in our bilateral investment treaties as well. So, I don't suppose we're ever going to get away from it. The things on intellectual property, I've actually written and published my skepticism on some of that. So, it's precisely because, when you open these -- I am not asking a question, am I [laughter]? When you -- when you open these agreements to other issues coming in, the domestic interests push for a bunch of things that I think are solely for them and are not going to benefit the world. And that worries me a lot. But let's get back to the question of the effect on jobs. You're right that we economists quite often assume away jobs as an issue. I would suspect that, in my teaching you the course in international trade, I probably said on the first day, "We're going to assume full employment," and then we did, for the rest of the term. That was the trade course. You said you also took the international finance course, and in that, we didn't do that at all. Although, from what I hear about the world of international macroeconomics, I think they're back to assuming it. But back then, we had models that did address that. But on the issue of jobs, I know from our conversation at lunch, and a little bit from my memory, you were very critical of NAFTA and the effect that it was going to have on jobs. And I understand, when it hadn't gone into place, that we -- there were lots of things to consider, and we who did an analysis often didn't consider some of the things that were relevant. But look what happened? I mean, we had unemployment rates at historic lows in the late '90s and again in the early 2000s. I mean, we had a dip at around 2001, and of course, a big dip lately. But you surely can't blame -- certainly this latest thing, and I don't think the one in 2001, on NAFTA. So, is there any way that you could argue that NAFTA, in fact, hurt jobs in the United States?
Thea Lee: Well, yes [chuckles].
Alan Deardorff: Oh, okay.
Thea Lee: There is. And you know, one of the measures that was used, and we did talk about this at lunch also, about what the job impact of NAFTA was going to be, it's kind of hard to measure, because we don't have a laboratory where we can run counter-factual scenarios. So, we have to live with the world with all the complexity of what happens. But, you know, the model that was used to predict that NAFTA would create jobs was the Hofbauer-Schatten model, which I know you don't like, but it looked at the trade balance between the countries and projected that the United States would run a trade surplus with Mexico for nine to 12 years, and that that would be the basis of creating a couple hundred thousand jobs. And that was the model that was used by the Clinton administration, by the business community and by many others to sell NAFTA, that it was a job-creation agreement. In fact, if you look at the trade balance between the United States, Canada and Mexico, we had a small trade surplus with Mexico prior to NAFTA that went almost immediately to a deficit and grew fairly large, partly because the peso devalued. And you can say that wasn't NAFTA's fault that there was a peso crisis, but it's also true that NAFTA didn't incorporate any snap-back measures and any countervailing measures to deal with currency movements, and obviously, that's a weakness of the free trade agreements that we do negotiate. When you look at what happened in the United States, it certainly was true, and I know Public Citizen did some research on this, that of all the corporations that lobbied for NAFTA, and they lobbied for NAFTA saying they wanted to export more to Mexican consumers, virtually none of them exported more to Mexico after NAFTA. What almost all of them did instead was move factories from the United States to Mexico, causing job loss. And it's hard. As you say, the economy's growing for other reasons. You know, we had a lot of other things going on, including the dot-com bubble and, at some point, the housing bubble that was, you know, keeping the economy going. But if you look at the U.S.-Mexico-Canada trade balance, you saw that there was actually a big shift of jobs from the United States to Mexico, to the maquiladoras. Some of that, subsequently, left Mexico and went to China, which was, I think, a disappointment to a lot of people in Mexico. And one of the arguments that we would make about so-called free trade, and free trade agreements, is that they're not a gift to workers in our trading partners, either. A lot of people said, oh, you know, it's rich American workers who hate poor Mexican workers, and if we care about Mexico and we care about development, we have to be for NAFTA. You look at the results of NAFTA, and you actually had some pretty rough years in Mexico for working people. You didn't have any strengthening of worker right or protection of worker rights, because the NAFTA labor and environment side agreements were so weak that they had no enforcement mechanisms whatsoever. And even though we, the AFL-CIO, brought a lot of cases under the NAFTA labor side agreement, there were no trade sanctions. And the companies and the government paid no attention to them. So, if you contrast within NAFTA the strength of the IPR and the investment protections versus the labor and environment protections, you see an enormous contrast and a lopsidedness where the corporate concerns were taken care of, and the labor and environment were not. So, on balance, I would say that there definitely was a big exodus of jobs from the United States to Mexico. And that's part of what we don't do a good job -- trade economists don't do a good job taking account the impact of investment flows and production location decisions as a result of trade agreements as opposed to just the lowering of tariff barriers.
Alan Deardorff: So, now I respond to that? Is that right?
Katie Goddard: You're welcome to.
Alan Deardorff: Okay. Well, there's a reason why I asked you about jobs in the U.S. -- not in Mexico. I agree. It turns out to be very bad in Mexico. I blame that more on the peso crisis, not on NAFTA, but that's a separate issue. But you're doing exactly the same thing that analysts at the Economic Policy Institute, where you were, at that time I think -- maybe you were the one that was doing this -- and that I teach my students that they shouldn't do, which is to add up the exports, attach job numbers to those exports, add up the imports and attach job numbers to that and say, that's the effect on employment. Well, if you do that, based on what you've just described, take the number of jobs that you are saying were lost due to NAFTA, if we hadn't lost them, who would have filled those jobs? Our unemployment rate soon became so low, we couldn't possibly have accommodated all those...
Thea Lee: I think we could.
Alan Deardorff: What?
Thea Lee: I think we could have.
Alan Deardorff: You're kidding.
Thea Lee: No [laughter].
Alan Deardorff: Not without inflation. I mean, we were at historically -- there was very big concerns that we were way below the natural rate of unemployment, and...
Thea Lee: Well, we never did see that inflation, did we?
Alan Deardorff: No, we didn't. That's true.
Thea Lee: So, we were obviously not below the natural rate of unemployment.
Alan Deardorff: Well, but there -- we were -- we were closer than we'd ever been to full employment.
Thea Lee: Why don't we wait until we get the influence before we start worry about the natural rate of unemployment.
Alan Deardorff: Did you really think we could have...
Thea Lee: Yes.
Alan Deardorff: ...employed that many people? I...
Thea Lee: I think we could. I really do.
Alan Deardorff: Okay, well, I don't [laughter]. Now, it's her turn to ask a question. Is that right?
Katie Goddard: It is.
Alan Deardorff: Okay.
Thea Lee: Okay, so I think this is an interesting about, you know, the ancillary provisions of trade agreements, and you know -- so, and I know a lot of economists don't like the investment provisions or the intellectual property rights provisions, but the truth is, you support them even though they have those -- I mean, you support NAFTA.
Alan Deardorff: Oh, support NAFTA -- yes, yes.
Thea Lee: Yes, exactly. So, you support the NAFTA, so you know, the trade agreement -- part of -- you know, my job is to engage around the content of the trade agreement, to fight as hard as I can for better provisions and different provisions and to try to change the balance within the agreement between the corporate interests and the working families' interests. And when I lose, I oppose the trade agreement. You know, and so, a lot of people think, well, labor is protectionist and business is free trade. But really what's true is that labor's interests are just ignored more often by the people who make trade policy, and business interests are sort of internalized in the way the U.S. Trade Representative's office or the White House does trade policy. And I'll just give one example, which is the Jordan free trade agreement, which was towards the end of the Clinton administration, where we worked with the Clinton administration, and they strengthen the labor and environment protections in the Jordan agreement, and the AFL-CIO actually supported the Jordan agreement. And the Chamber of Commerce opposed it, because they said, unless the labor and environment provisions were stripped out, they didn't want to see it. So..
Katie Goddard: Thea, I'd love for you to pose a question.
Thea Lee: The question for you is, given that you can't change the fact that the FTAs include these investment, IPR, should they also have binding labor and environmental protections?
[ Pause ]
Alan Deardorff: I think I want to say no. But I admit, it's a -- it's a tough question. I'll tell you my concern about strengthening the labor/environmental protections of these free trade agreements, and I've said this to my students as well, is that, once those are in there, domestic companies -- corporations, in fact, will see the opportunity to use weak labor standards in other countries as an excuse for protectionism that they're going after just to increase their profits. Now, maybe it will help American workers, but it will hurt those other countries, and it's going to be most seriously felt in developing countries. So, that's what concerns me is that it will unleash the constraint on protectionism that an FTA is supposed to provide and be very harmful, to some extent, for our consumers, who of course include labor. But more so, harmful to the people, and I think mainly labor, in the developing countries who will have their adverse working conditions used as an excuse to stop buying from them and put them out of work. That's what I worry about.
Thea Lee: I can put your worries at rest.
Alan Deardorff: Oh, I'm so...
Thea Lee: Because corporations hate the labor and environment provisions and would never dream of using them. They have many better tools -- no, I'm -- we bring a lot of labor cases, and the companies scream and yell and kick and scream. They can't stand the labor and environment protections. So, I don't think you need to worry about them being used as disguised protectionism. And when the -- when the AFL-CIO brings them, we bring them in conjunction with our union counterparts in those countries to make sure that their interests are being taken care of as well. So, you don't need to worry about this, this misusing the labor and environment chapter, because they hate it.
Alan Deardorff: Well, I'm glad you have such trust in business [chuckles].
Thea Lee: I have such experience with business.
Alan Deardorff: Okay. Well, speaking of that, so you see the benefits of free trade primarily -- and free trade agreements, primarily going to corporations and at the expense of labor. And I certainly don't entirely disagree with that. I totally agree that corporations have played -- have had way excessive influence in the drafting of these things and the things that they say. But I'm wondering how far you'd go with that concern about corporations. My impression is that Ralph Nader -- I'm guessing you know him.
Thea Lee: I do.
Alan Deardorff: I don't [laughter]. That he views anything that's good for corporations as simply bad because it's good for corporations. Do you accept the possibility that trade could be beneficial both for corporations and for labor and that there might be a way of tailoring freer trade to that purpose?
Thea Lee: That's a really interesting question, and absolutely.
Alan Deardorff: Okay.
Thea Lee: You know, and I think labor can't be anti-corporate, because those are our bosses. We want our corporations to be successful. We want them to be profitable. But we do have a difference in a globalized economy, between whether they're going to be profitable by sending good jobs overseas and taking advantage of lax regulations overseas and lax protections for workers versus being profitable on American soil. And our worry is that U.S. trade policy creates so many incentives and protections for offshoring -- we give tax breaks for offshoring. We negotiate free trade agreements that protect investment abroad and intellectual property rights abroad and move the risk for companies of going abroad. I've often made the argument, and I'm dying to find corporations who will agree with me on this, that actually having strong labor and environment protections in our trade agreements is good for U.S. corporations and could be good for them. And every once in a while, I find somebody who agrees with me. They just don't end up lobbying Congress or the White House on this behalf. But the reason is that U.S. corporations are operating in the global economy. They producing other countries. And even those companies that have good, high standards that want to treat their workers well and protect the environment are then undercut by bottom feeders -- by unscrupulous companies that violate those provisions. And then, they have a choice, which is that, in order to compete, they also need to violate workers' right -- you know, hire children or forced labor or violate the environment and have unsafe production methods in order to be competitive, because there's no, you know, national labor laws. There's no international protections. And so, I think the idea for us of having internationally enforced minimum labor and environment protections, the idea is to create a framework where those things are not part of competition. You know, that you don't get ahead by hiring child labor or by trashing the environment. But you get ahead by having the best product, getting it to market quickly and treating your workers well and operating in a good environment. And so we should have enforceable worker rights and environmental standards. And it could be good for business. And I would love to see business join in demanding that our government negotiate a different kind of trade agreement.
Alan Deardorff: Actually, I'm a little bit surprised that some of them don't, because one of the things that we do know, and I'm sure you do, too, is that multinational corporations do have -- pay higher wages...
Thea Lee: That's right.
Alan Deardorff: ...have better working conditions, just across the board, everything is better than their local competitors in developing countries. And you would think that, given that they're going to do that anyway, now we could try to figure out why they do that, but there's, I think, a bunch of reasons. But given that they're going to do that anyway, I agree. They should be more supportive of trying to get their competition to do the same thing. I do still worry, though, that if they succeed in that, the result may actually be fewer jobs for workers in developing countries if you push the standards too high. And that's what I'm afraid might happen.
Thea Lee: Well, part of raising the standards is about creating a middle class of workers in those countries, too, and then you create a better market. So, if you have workers who are not just disposable workers who you try to pay the least possible amount to and treat as badly as possible and assume that there's an army of other folks out there to take their jobs, but rather, you know, you give them the wherewithal to have a middle-class lifestyle, they become your consumers, and that's a win-win.
Alan Deardorff: Well, that's a win-win if it works, but it's not going to -- the math can't possibly work to make that happen. You've got to raise the productivity of the workers...
Thea Lee: Well, of course.
Alan Deardorff: ...of you want to treat them better and give them better pay. And that's a struggle in developing countries, because productivity for workers comes from all the things they have to work with, and they don't have much to work with.
Thea Lee: But when a multinational corporation goes to a developing country, they bring the technology...
Alan Deardorff: They do. They...
Thea Lee: They bring the capital. They can do the training. And so, they have every possibility of raising the productivity that -- what they don't want, they tend not to want, is workers who can have a union, have the protection of a union, have maybe a democratic vote. I mean, what about, you know, corporations who take advantage?
Katie Goddard: And Thea, is that your last question? Will that be the question you pose?
Thea Lee: That isn't my -- here's my last question. So, in terms of the question that we were asked that the U.S. should do free trade agreements with any willing country, is there any country in the world with which the United States should not negotiate a free trade agreement, and what would be the criteria that you would impose -- you know, democracy, human rights, treatment of workers?
Alan Deardorff: Well, North Korea, I would say, we couldn't do one with [laughter].
Thea Lee: Is that it?
Alan Deardorff: I don't -- let me think a little bit more [laughter]. I guess Cuba, unless they become more a market economy. I think...
Thea Lee: What about China?
Alan Deardorff: It does -- what about China? Yes, I think so.
Thea Lee: China's...
Alan Deardorff: I mean, we're already trading massively...
Thea Lee: We are.
Alan Deardorff: ...with them. And having that trade be free trade, I think, would be better.
Thea Lee: Why?
Alan Deardorff: For both sides. Well, for all the reasons I talked about before.
Thea Lee: Well, we have a $200 billion trade deficit with China. And if we were to take the tariffs down to zero, it's possible that China has more non-tariff barriers in place that are not actually amenable to negotiation through a free trade agreement. We've had this experience -- I think we're having it right now with Korea -- where we negotiate these free trade agreements, and I'm not saying that our negotiators are idiots, but what I am saying is they're a little bit naive. So, that the kinds of provisions that we put into our free trade agreements don't do a good job in addressing non-tariff barriers or state-owned enterprises, for that matter. So, if we were to negotiate a free trade agreement with China, do you think that the trade deficit would grow or shrink, and do you care?
Alan Deardorff: Those are two questions. I don't think it would be affected by what we did with the free trade agreement. I don't think trade imbalances, especially bilateral ones, are about the trade barriers or their absence. It's about levels of spending relative to income. It's a macroeconomic phenomenon. Now, do I care? I've been struggling with that question for years. As long as we can get away with it, more power to us. As long as they're willing to hold our useless paper and never try to cash it in, which I don't think they dare do, because they'll just destroy their own wealth, then we're living wonderfully off of them. Now, because I care more about the world than I do about -- well, I love the United States, but [laughter] -- but we're rich. Let's face it. The idea that a rich country is living off the labor of a billion Chinese, that's just not appropriate. So, I don't like the fact that we have that big trade imbalance, but I don't think it has anything to do with trade barriers. It has to do with the level of spending in this country and the level of savings in that country and similar things in a lot of other countries.
Thea Lee: Does it have anything to do with currency manipulation?
Katie Goddard: Thea, now...
Alan Deardorff: It does -- the currency manipulation is relevant, and I would like to see something take place on that front.
Katie Goddard: I appreciate you giving your opportunity for the rebuttal to pose another question. And it was great, because that was one of the concerns and questions was about China. But we would like to have an opportunity for some of the people in the audience...
Alan Deardorff: Sure.
Thea Lee: Okay.
Katie Goddard: ...to pose their questions for you. And this question will be for both of you. We will allow Alan to speak on it first. And the question is, "Given that there are winners and losers from free trade, how realistic are the prospects for compensating the losers enough, given U.S. political institutions and policies?"
Alan Deardorff: There's no chance that we will ever compensate the losers enough so that they won't lose. There's no chance. What there is the chance of is that we can improve our policies, both related to trade and not related to trade. We have adjustment assistance policies that could be expanded, and probably should be expanded. We have a very minor piece of almost experimental wage insurance that applies, and I'd like to see that expanded tremendously. But none of the -- nothing we might do with that will ever prevent there from being losers from trade. And so, we also just need a society that provides better for those disadvantaged at the expense, hopefully, of those of us that are advantaged. So, I'm all in favor of a more progressive income tax, or what they sometimes call the negative income tax, and various policies of those sorts. You know, universal health care -- I mean, I used to be a Republican, but [laughter] not anymore. So, I think we need to do a lot of things along those lines. But we're never going to prevent losers from trade from some of them turning out to be losers.
Katie Goddard: Thank you. Thea?
Thea Lee: I agree with Alan that it's totally unrealistic to think that there will be compensation of losers from trade policy, but I also think that that should lead us to another question, which is, do we need to barrel ahead with more free trade agreements that are going to exacerbate inequality in the United States when we already have inequality at what I would consider totally unacceptable levels? If you actually looked at the real median wage of a full-time equivalent male worker, there's been no gain income since 1975 for the median male full-time worker. That is an extraordinary indictment of something wrong with our economy that is not delivering benefits to average working people. And trade is one part of what's happened over the last couple of decades. You've had a lot of other -- a lot of other things happening at the same time -- the attack on unions and other ways of undermining the bargaining power of working people. But I would argue that trade and globalization and the way that the United States government has engaged in trade policy has exacerbated inequality and undermined workers' bargaining power in a way that should be unacceptable. Now, we should think twice that it's an important question about, if we want to enter into infinite numbers of new free trade agreements, we need to think about the distributional impact and think about something more than, hopefully we'll have more progressive income tax policy in the future. I think that's inadequate.
Alan Deardorff: Could I say a little bit more? Responding to that or not?
Katie Goddard: I'll allow you -- we'll go with 30 seconds for both of you if you'd like.
Alan Deardorff: Okay, well, the studies that I am aware of that have been done about this increasing inequality do, indeed, say that trade is a part of the cost -- something like 30% of the increase. Issue of the unions, not -- haven't shown up from what I've read as part of it. The real other cause that has been pointed to as more important than trade has been technology. Technology has evolved in a way that favors the high-skilled, highly educated workers at the expense of the low-skilled.
Thea Lee: And Thea, would you like to respond to that?
Thea Lee: Yeah, and just to say one thing, which is, I agree with you that that's what the studies show, but a lot of times, technology is also induced by globalization and by trade and by outsourcing in the sense that companies adopt more capital-intensive and skill-intensive production processes in response to import competitive pressures. And that was one of the things in that paper that I was telling you about that [inaudible]. So, technology can actually be related to trade.
Katie Goddard: And this question will be for Thea. "There's been a lot written over the past few years about the race to the bottom in the U.S. Michigan is currently losing scores of jobs to other states. And why is free trade between states acceptable but not between countries? Do you think that Michigan should erect trade barriers with the rest of the U.S. [laughter]?"
Thea Lee: Very interesting. Well, there are a couple of things that are different about competition between states, and one of them -- certainly we share the same currency, and we have the same basic labor and environment laws. There is differences between states. Some have, you know, better -- different minimum wage and so on. But I think that that is one difference. When we talk about -- one of the challenges of globalization is how competing regulatory regimes survive in a global economy. You know, if one country wants to have more stringent environmental or consumer or worker protections than another country, should that be a competitive disadvantage? Within the United States of America, we do have different labor laws between states, but it's a minor -- there's a floor. And that's part of what we're talking about when we're talking about changing the rules of international trade is to create some kind of minimum standards across nations.
Katie Goddard: Thank you. This question will be for Alan. "How have the owners of capital fared compared to laborers in the age of trade liberalization and globalization? And on a related note, is there a link between the specific factors, trade theory and increased income inequality between capital owners and laborers? How can we better share the gains to capital owners with laborers?"
Alan Deardorff: Okay. How have the owners of capital fared? I think they, by and large, have fared well, although it's not, by any means, monotonic or always going in the same direction. I mean, in the -- in the global recession, the owners of capital lost a lot. But then they came back, gangbusters, in fact. So, they are subject to greater fluctuations, I think. Now, I'm supposed to relate that to the specific factors model?
Katie Goddard: "And how can we better share the gains to capital owners with laborers?"
Alan Deardorff: Right, that -- but those are two different things. The thing with the specific factors model, I don't think you really mean, because -- or, whoever wrote it, because the specific factors model has different capitalists in different industries all getting different returns, and so -- or, maybe that's what I'm supposed to say. But anyway, otherwise, I don't see the connection with that. But then, how can we redress this or improve the distribution of income between -- oh, this is probably stupid, but the best I can say is, it would -- you try to make sure that labor owns some capital. In other words, don't try to reduce the return to capital, but try to share the ownership of capital more broadly in the population so that it's not such a clear division between those who own no capital and those who get most of their income from capital. Then it wouldn't matter so much if those balances changed.
Katie Goddard: Thank you.
This question is for Thea. What would an ideal FTA look like from the perspective of AFL-CIO?
Thea Lee: Oh, what a fun question [laughter]. Well, what we would like to see -- first of all, I actually agree with Alan also that, in an ideal world, we would have multilateral trade liberalization that would incorporate very different sets of protections. And so, maybe I'll answer the question that the ideal trade agreement would be a multilateral agreement that would protect core workers' rights and environmental standards as a starting point. It's not the only thing, and it's -- you know, in some ways, it's kind of a minor thing, but the idea of using trade agreements to protect workers' rights is that we have an international consensus through the ILO -- the International Labor Organization -- about what the core fundamental human rights that a worker deserves are -- freedom of association -- the right to bargain collectively, and protections against child labor, forced labor and discrimination in employment. And if you take those as fundamental human rights and you think about harnessing the power of the trading system to protect those rights, that is talking about giving every worker in the world the right to have a voice at the workplace and a voice in the political system so that they can fight for their fair share of the wealth that they create without getting thrown in jail or beaten up by company thugs. And that happens every day, pretty much. And it happens with the goods that you buy. In the -- in the United States of America, you buy goods who are made by workers who don't have that right. They don't have the right to form a union. They don't have the right to get together with their coworkers and say, hey, instead of each of us going to the boss by ourselves and asking for a bathroom break or safety goggles or a raise or health care, let's go together and use collective power to ask for basic protections at the workplace. And that is, I think -- that would change the global economy in a way that would really help workers build their own democracy, build their own power and fight on fair terms for wealth. And the same with environmental standards. And the reason I would say that is, you know, if you look at the challenge of climate change that we all should be looking at, we all should be concerned about, it's actually hard to see how you're going to address climate change, where you need international coordinated action, if you don't use trade agreements to make sure that countries are not disadvantaged. By imposing higher environmental standards or carbon controls, and raising the costs of production, and they're in a global economy. So, if you don't do that, what's going to happen is that the countries that act first are disadvantaged, because they've raised their own costs. And then, a lot of production will move to the countries that act slower. And you'll actually end up with more carbon emissions from a free trade system if you don't address it explicitly through global trading rules.
Katie Goddard: Thank you. Another question for you, Thea.
Thea Lee: Okay.
Katie Goddard: "Are you worried that restricting trade might protect old economy jobs at the expense of slower innovation?" And the example here given was the raising the price of electronic components could have -- the trade restrictions could have slowed the Internet revolution, thereby delaying the establishment of companies like Google.
Thea Lee: I'm not really worried about it, because I'm not arguing for trade restrictions. You know, I'm not arguing for cutting off trade, and I'm not even sure how, you know, the electronic commerce is impacted through trade. I'm all for -- I think innovation is a wonderful thing. And I actually think that, if you had a different kind of trade policy that was maybe more deliberate, more strategic, part of -- what I'd like to see for the United States is more of a comprehensive economic strategy around trade and investment and education and in infrastructure. And I think those things could be very good for innovation and for technology. But I think the -- actually, the system that we have now, in some ways, disadvantages U.S. inventors. There's sort of -- there's issues around patents and differing patent regimes in different countries that are not very good for U.S. inventors. Even though a lot of research happens here in the United States, sometimes the fruits of that research end up going elsewhere, and that's a problem. Because I think it's important to reward innovators.
Katie Goddard: Thank you. This question is for you, Alan. I think this is someone in a statistics class currently, who said, "Free trade raises the average welfare, and by average in this case, if you're meaning the mean, that means that a few positive outliers would skew the average positively, including things such as corporations' profits. Is that really the type of average you want to look at? And should we focus on the median?"
Alan Deardorff: Yes [laughter]. Okay. The point is a very well-taken point. Yes, what I was describing was the mean, because I -- all we know from theory is that the aggregate, the sum, is going to go up. And that certainly means that when you divide it by N, if you don't change N, it's going to raise the mean. Furthermore, and I will shoot myself in the foot by going further to say that basic trade theory does suggest, for a country like the United States, that freer trade is going to lower wages and raise returns to capital. And it's pretty darn obvious that more people earn their living from wages than from capital. So, yeah, the median goes down. And that is a problem. I don't deny that that's a problem. That's why I would like to see other policies used to try to address that sort of thing. But I don't want to reduce the aggregate in order to accomplish that.
Katie Goddard: Thank you. And we'll go with the last question for both of you. And this is going back to China and the discussion you were having previously. "The U.S. has been criticizing China for currency manipulation and illegal subsidies, lack of labor standards. At the same time, we should also be aware that the U.S. does not have a free trade agreement with China. So, the question is, would a free trade agreement be a better and more effective venue for the U.S. to level the playing field and hold China accountable?" And we'll start with Alan.
Alan Deardorff: Yeah. It can't be worse. I mean, we have no leverage over China right now with regard to their currency. There's no international rules that allow us to really take action. There's domestic rules. I mean, if we declare them a currency manipulator, our Congress could respond, but then I think that WTO would strike it down, so we'd lose that fight. And on the other areas that you mentioned, if we really want to change what goes on there, the multilateral system doesn't give us any leverage for doing that. So, yeah, a free trade agreement with addressing all these other issues, if we could get them to sign on to it, could certainly allow us to accomplish more. Now, I may some doubts about how many of those things I think we'd be wise to accomplish or that are desirable to accomplish. But some of them, certainly, yeah.
Katie Goddard: Thank you.
Thea Lee: I think it's very unlikely...
Alan Deardorff: Well, yeah.
Thea Lee: ...that we would be able to negotiate a free trade agreement with China that would address any of those issues effectively. And we've negotiated a currency manipulation provision in any of our FTAs, even though we ought to have, because there's -- you know, currency swings can really swamp any changes in tariffs. So, we negotiate for these dinky little changes in tariffs, and yet, the year after a trade agreement goes into effect, as with NAFTA, you know, the country can devalue its currency massively, or experience a devaluation, and I think it's unlikely that -- you know, we've never done it up until now. With respect to worker rights, I think the issues in China, frankly, are too deep to address through a free trade agreement. Because, if you talk about freedom of association, the right to organize and bargain collectively, and forced labor and child labor, this is a clause in a free trade agreement. And I think it's very -- I mean, the whole -- for China, China's not a democracy. And China has no independent unions today. And so, you're not going to change that by signing a free trade agreement and getting China to -- you need to have that dialog with China today. The U.S. government should be using its negotiating power and its influence on China to begin moving towards democracy and better protection of worker rights and better human rights. We need to use the WTO mechanisms to counter the illegal subsidies. And I think it's a real indictment of our international trading system that we don't have any provisions through the WTO or the IMF that address currency manipulation. It's ridiculous. And I think that doing an FTA with China would be very unlikely unless we're negotiating something massively different than what we've ever had in place to address those concerns. And if we negotiate it, China wouldn't sign it.
Katie Goddard: Thank you. And both of you will have an opportunity to provide a closing argument, or persuasive piece. And we'll start with Alan.
Alan Deardorff: Oh, we're doing that already? So, now I thought I would have time to think about it [laughter].
Katie Goddard: And you have five minutes.
Alan Deardorff: Oh, boy. Okay. Well, let's see. What are some of the things I was thinking about that I didn't ever get a chance to say? I mean, I have not changed my view.
Thea Lee: Oh, darn.
Alan Deardorff: I doubt you have either. I still think that trade is broadly beneficial for the world and for the U.S. and has been hugely beneficial for the United States, in fact, over the decades. So, I certainly would like us to continue moving in the direction of freer trade. The only way I see to do that these days is through free trade agreements, so I'd like to see us negotiate more and more of them. And I'm still skeptical that adding extra things other than just plain old trade barriers to these agreements is a desirable thing to do. Unfortunately, I do agree that it gets done more when the corporations put forth than when the unions do. My preference would be to get the corporations out. Thea's would be to get the labor unions in.
Thea Lee: I'm a pragmatist.
Alan Deardorff: Yeah. But that would be the ideal that I would like to look towards. I guess I'll just say, finally, something that the trade economists have been saying -- this isn't going to fill my five minutes, I don't think -- for years. But the way trade economists look at freer trade is that it -- even though it's something that happens in the worlds of the economy through the markets and the exchange of goods, the effect that it has is to allow countries to convert things that they can produce cheaply into things they can't produce as cheaply. It's like a technology. That you put something in one side and out comes something else on the other side that turns out to be more valuable than what you put in. that's what trade does. And free trade frees up the use of that technology. Most of us, I think -- I mean, there have been people in the past who might disagree with this, but generally speaking, most of us see technological progress as something that's good, even though it quite often has a lot of the adverse effects on labor and on inequality -- I think it's been having that -- that trade does. But I don't think we mostly hear people say, "Let's stop the technology." Maybe we will. I don't know how many of you saw "60 Minutes" on Sunday, but they had a segment on robots. And in fact, one of the things that looks like it's going to happen, is happening, is manufacturing's coming back to the United States, at least in small ways. Apple's going to do it. And I think I heard that General Electric has done it. And one of the reasons some of it's -- there's a lot of reasons, but one of the reasons is that you can make things more cheaply with a robot than you can with an Asian worker. Okay? So, that technology is taking us in the direction that manufacturing's going to come home. But is it going to employ people? Not directly. Should we therefore say, ban the robots? I think that's -- maybe has been tried, and it didn't work. Now, we're not going in the direction of Hal, I don't think -- that was the computer that killed the guy in "2001" -- but we are probably going in that direction. And it's going to have a lot of the same effects, I think, that trade is having and that we are concerned about. If we don't want to stop the technology, I don't think we ought to want to stop the trade.
Thea Lee: Okay. Well, let me start by just saying, I think there's a difference between technology and trade in the sense that, you know, when I was a kid, our teachers told us, oh, you know, robots and technology, and we're not going to -- everybody's going to have long vacations and everyone's going to be rich. You know, that you won't have to work as hard, which, ideally -- the idea of technology in principle is that, if everybody shares in the fruits of higher productivity growth and new technology, then we could be very wealthy as a society. We wouldn't have to feel so poor. And yet, what we've seen with globalization, and I don't mean just globalization, but I mean the current set of globalization-related policies is that, it has exacerbated the inequalities to an extraordinary extent and that it's -- very little is being shared. It's fine to say, you know, workers should own the corporations, you know, but they don't. And you know, short of, you know, more redistributive policies, I think we have to think before we move forward with more trade liberalization what the options are in terms of doing this differently. Some academic economists have pledged allegiance to the flag of free trade, and they put their reputations and their prestige on the line in its defense. And this is something that, I think, is frustrating in the -- in the real world, because it's -- there is no such thing as free trade. There's managed trade, and there's investment policies that change the terms. And we have tax policies, and we have infrastructure policies, and to the extent that we use the rhetoric of free trade just to say, everybody do whatever the heck you want, whether you're moving production and, you know, using sweatshop labor and trashing the environment and making a ton of money, it's all going to work out, because it's called free trade. And I think the real world that we live in, and the kinds of challenges that we're facing, both in the United States and in the global economy, should lead us to a more thoughtful and strategic set of policies, both for the United States and globally. So, the -- and I think the weakness of labor markets in the United States -- the 2001 so-called jobless recovery, there's a paper by Justin Pierce and Peter Schott from -- that NBER just published, that talks about how granting permanent normal trade relations to China in 2000 -- in 2000, taking effect in 2001, had an enormous impact on increasing imports and decimating manufacturing employment. Manufacturing employment is crucial to the health of the U.S. economy. And I think -- and they calculate -- and this is NBER. It's not the AFL-CIO, and it's not the Economic Policy Institute. The calculated 4 million fewer manufacturing jobs in the United States in the year since PNTR went into effect, as a result of offshoring, essentially of companies -- U.S. companies taking advantage of that trade policy. But I think that, if we look at the issues that we're facing -- slow emergence from a long, deep recession without the kind of job creation that we need, and I don't think we can abstract away from the trade deficit and the current account deficit. That is undermining our employment possibilities in the United States. And one of the things it does is weaken our economic recovery. So, when the economy begins to recover, is we spend all of our consumer dollars on imports, then you don't see the kind of -- the cyclical upturn that we used to see in the past. And I think there are a lot of people who would say, too, that the kind of global economic imbalances that the U.S. runs, and China, contributed to the financial crisis in the sense that there was so much excess money sloshing around in the United States that it contributed to the housing bubble. But you look at climate change and the urgent need to take coordinated international action, global poverty and unemployment. And I would argue, too, that our current trade policies, and the kind of globalization policies that we have at the World Trade Organization are not just not helping, but that they are exacerbating the power imbalance between multinational corporations and average working people, and that that is the challenge that we need to take on, is how do you create the countervailing power for working people, whether they're in a sweatshop in Vietnam or in a auto factory in Michigan, that global corporations have become so enormous economically, and so politically powerful, that they are writing the rules. They are deregulating economies, and they are using trade policy as a tool to undermine workers' bargaining power and to deregulate in ways that are detrimental to the environment and consumer safety and workers. So ,we need a trade policy that is strategic, that recognizes and counters the bad actions of some of our trading partners, that recognizes that we live, to some extent, in a mercantilist world, and we need to counter that with policies other than naive free trade. We need to negotiate deals that benefit workers in both the United States and in developing countries and that protect the environment, consumer safety and worker rights. And with that, I thank you all for your attention. I thank Alan for his thoughtful engagement. It was just as much fun to be here -- oh, it was actually a little more fun than to sit in the classroom [laughter], because I got sort of equal time here, and that was -- that was a real pleasure.
Alan Deardorff: Thank you, too.
Thea Lee: Thank you.
[ Applause ]
Katie Goddard: And with that rousing debate, thank you both very much. That was exceptional. And we'd love to hear the opinion of the audience now. So, if you'd take out your iClickers once again. We're going to do a final poll on the question. The United States federal government should pursue free trade agreements with willing countries.
And please choose now, A, B or C.
[ Pause ]
I'll now stop it.
[ Pause ]
So, this is at the end of the debate. We have 55% with A, 36% with B and 9% with C. And just going from the beginning, with question one, it looks like a few more of the undecideds were decided.
Alan Deardorff: A lot more. Yeah.
Katie Goddard: Yeah, actually, certainly quite a few more.
Alan Deardorff: One could say we both won [laughter].
Thea Lee: It was a win-win.
Alan Deardorff: Yeah.
Katie Goddard: And with this debate, yes, you both turn out winners.
Thea Lee: Thank you [laughter].
Katie Goddard: I'd like to thank all of you for coming. We really appreciate having you here. And it's been an incredibly thoughtful and engaging debate. And thank you, audience, for the questions you've posed. Please remember to collect your M cards when turning in your iClickers. And we do hope to see you again. The next Ford Policy Union debate will be on February 20th, which is a Wednesday. It will feature Dr. Steven Bucci, who is the director of the Douglas and Sarah Allison Center for Foreign Policy Studies, and he's at the Heritage Foundation, and John Steinbruner, who is a professor of public policy at University of Maryland and the director of the Center for International and Security Studies. And they will be debating cyber security. So, we hope to see you February 20th. Thank you very much.
[ Applause ]
Good afternoon. My name is Katherine White and I'm a member of the University of Michigan Board of Regents. And first, I would like to recognize our president of the University of Michigan, Mary Sue Coleman, who's here with us.
[ Applause ]
And we also have two Regents Emeriti, Philip Power and Neal Nielsen here with us today. So, thank you.
[ Applause ]
And so, on behalf of the University of Michigan, I would like to welcome you all here this afternoon. It is a tremendous honor to have Federal Reserve Chairman, Dr. Ben Bernanke, as our featured speaker. Chairman Bernanke will be introduced more thoroughly in a moment by today's host, Dean Susan Collins from the Gerald R. Ford School of Public Policy. The first portion of our program will consist of a conversation between the Dean and the Chairman. And as such, let me take a moment to introduce Dean Collins to you. Dr. Collins is the Joan and Sanford Weill Dean of Public Policy and a professor of Public Policy and Economics. The Ford School is one of the top Public Policy programs in the nation. The Ford School is known for its excellence, from its faculty that is outstanding, to its firm grounding in degree programs in Social Science Research. And additionally, the Ford School has remarkably strong connections and affiliations with scholars, programs, and opportunities from all over the nation and the world. Dr. Collins' area of expertise is international economics including issues in both macroeconomics and trade. She's currently a nonresident senior fellow at Brookings and Vice President of the Association for Professional Schools of International Affairs. Just last month, Dr. Collins was appointed to the Board of Directors of the Federal Reserve Bank of Chicago's Detroit Branch. And she joins a group of private sector leaders, scholars, and analysts whose responsibilities range from general supervision of the bank to making recommendations on monetary policy. And very importantly, Dean Collins and her colleagues continually share their understanding of our region's economic conditions to advice monetary policy. Her work on the board and indeed today's event itself are clear examples of the University of Michigan's strong commitment to helping our state and our region grapple with its urgent policy challenges. And now, to begin our program, let's welcome Dean Susan Collins to the stage to formally introduce Chairman Bernanke.
[ Applause ]
Thank you very much, Regent White. It is also my great pleasure to welcome all of you here today. And on behalf of the Gerald R. Ford School of Public Policy, the University of Michigan is extremely honored to welcome the Honorable Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System. Today's conversation is the latest in our series of distinguished lectures, Policy Talks at the Ford School. We're so pleased that Regent White could introduce today's event and were also very pleased to have President Mary Sue Coleman with us today, as well as Regent Emeritus Nielsen and Power who are already mentioned to you. We also have several of the university's Executive Officers and Deans. And I would like to welcome all of them and thank them for joining us today. Well, it's an honor and truly a personal pleasure for me to introduce our special guest. As the Central Bank of the United States, the Fed's charge is to promote a healthy economy and a stable financial system. This is a complex and critically important mission, and that makes the person at its home one of, if not, the most important economic policy makers worldwide. Chairman Ben Bernanke was first appointed Fed Chair in 2006. And he has served in that role during the most challenging period for monetary and financial policies since the Great Depression, the financial crisis, the great recession, very slow recovery with persistently high unemployment, evolving global challenges, and the very contentious situation between congress and administration which continues to stymie fiscal policy. Chairman Bernanke was uniquely prepared for this extremely complicated role. As a highly respected economist, he taught at Harvard, MIT and Stanford before joining Princeton's faculty. He had already served as a Fed Governor and chaired the President's Council of Economic Advisers. He's an expert on the role of central banks and he is renowned for his research on policy during the great depression, specifically how the Fed could have handled things better. In fact, in 2000, he wrote a paper entitled "The Crash Course for Central Bankers," which was published in Foreign Policy. He has a deep and long standing commitment as well to education, and I know he recently took time out to do a town hall meeting for K through 12 teachers. And so, I'm particularly pleased today that joining us in the audience is an advanced placement economics class from Chelsea High School, a special welcome to you. We're delighted to have you with us. A word about our format, for the first portion of our time, Dr. Bernanke will join me here on the stage in a conversation about a number of economic issues. For the rest of the time, he has graciously agreed to take questions from the audience. And so at around 4:30, our staff will be coming through the aisles to collect question cards from you. Those of you who are watching online or even those of you in the audience are welcome to tweet your questions to us as well using as a hashtag, Ford School Bernanke. Professors Catherine Dominguez and Justin Wolfers will select questions along with two of our graduate students, Hayden Allen and Kirby Smith. And now, it is my great pleasure and honor to welcome to the stage, Chairman Ben Bernanke.
[ Applause ]
Susan, before we get started, I wanted just to take a minute to remember Ned Gramlich who taught here in the University of Michigan [applause] for more than 20 years and was one of the first deans, if not the first dean of the-from the policy school here. I knew Ned as a member of the Board of Governors of the Federal Reserve in Washington. He was a terrific colleague. He was one of the first people to figure out the sub-prime issue as you probably know. And it was a great loss when he passed a few years ago. So, I just wanted to say that and to thank you for inviting me here to Michigan.
Well, thank you very much. Both, we are delighted to have you here, but also for your special words about Ned Gramlich who has played such an important role in the Ford School development, and we're delighted to have you recognize that. Perhaps, a good place for us to start our conversation is with something that I'm sure many in our audience have been paying close attention to in recent weeks and that is the fiscal cliff. I actually believe that that's a term that you're credited with popularizing last February. You've stressed that uncertainty about fiscal policy is one of the real concerns that is slowing economic growth. Well, a deal was struck recently, what are your views of the outcome?
Well, when you think about fiscal policy, there are a whole lot of issues. But I think the two big issues right now that we need to think about first is the long run sustainability of our debt. As the Congressional Budget Office and a lot of other experts have shown, if there's no change over the next couple of decades, deficits will rise, debt-to-GDP ratios will rise, and our debt will become unsustainable. So, a very, very important objective for policy is to find a plan to bring the federal budget under control over the next few decades. The second issue though which, in some ways, seems contradictory to the first is that as, you know, we're still in a relatively fragile recovery and we want to avoid taking fiscal actions that will push the economy back into recession. And that was one of the risks that the fiscal cliff posed, that if tax increases and spending cuts of that size were all to occur in the short run, the CBO and others estimated that unemployment would rise, and we very well might go back into a recession. So the challenge is to achieve long run sustainability without unduly hampering the recovery which we have.
Well, a number of people have expressed concern about how much of the challenges actually were addressed in the deal as you've mentioned it. Certainly, it went part way, but it leaves a number of issues still on the table, and additional negotiations are looming, would you characterize that as an additional cliff that is facing us, or do you think that it's not as concerning as it was when you raised that term initially?
Well, as I said, the fiscal cliff, if allowed to take place, would've probably created a recession this year. A good bit of that has been addressed. But nevertheless, we still have first, a fairly restrictive set of fiscal policies now. It's estimated that federal fiscal policy will subtract from real GDP growth, something in the order of one to one and a half percent this year, quite significant drag on the economy. And at the same time, we have quite a bit to do to address our long-term sustainability issues. There's a lot more work to do. Let me be very clear about that. But it's going to be a long haul. It's not going to happen, you know, overnight, basically, because the government budget represents the values and priorities of the public. And decisions being made about what to spend on, what to tax, and so on, are very difficult and contentious decisions that are going to take some time to address.
Well, those issues, of course, are not the specific purview of the Fed. And so, why don't we shift gears and talk more explicitly about some of the things that the Fed is doing and things that the Fed might do. Perhaps, a way to introduce that is to say that the Fed, of course, has been keeping interest rates at close to zero since roughly 2008. And it's dug pretty deep into its arsenal and very unconventional policies more recently in terms of, in particular, the very massive asset purchases recently launched its third round which are intended to bring long-term interest rates. Can you tell us how well you think that is working?
So, to go back just one step, as you said, we've brought the short-term interest rate down almost to zero. And for many, many years, monetary policy just involved moving the short-term, basically, overnight interest rate up and down and hoping that the rest of the interest rates would move in sympathy. Then we hit a situation in 2008 where we had brought the short-term rate down about as far as it could go, almost entirely to zero. And so, the question is, what more could the Fed do? And there were many people--a decade ago, there were a lot of articles about how the Fed would be out of ammunition if they got the short-term rate down to zero. But a lot of work by academics and others, researchers at the central banks suggested there was more that could be done once you got the short-term rate down to zero. And in particular, what you could do is try to address the longer term interest rate, bring longer term rates down. And there are two basic ways to do that. One way is through talk, communication, sometimes called open mouth operations. [Laughter] The idea being that if you tell the public that you're going to keep rates low in the long-term, that that will have the effect of pushing down longer term interest rates. But the quest--the one you're asking about is what we call at the Fed large scale asset purchases or otherwise known as QE. The idea there is that by buying large quantities of longer term treasury securities or mortgage-backed security so that we can drive down interest rates on those key securities. And that, in turn, affects spending investment in the economy. The latest episode, you know, so far, we think we are getting some effect. It's kind of early. But overall, it's clear that through the three iterations that you refer to that we have succeeded in bringing longer-term rates down pretty significantly, and a clear evidence of that would be mortgage rates, as you know, a 30-year mortgage rate is something like 3.4 percent now, incredibly low. And that, in turn, makes housing very affordable. And that, in turn, is helping the housing sector recover, creating construction jobs, raising house prices, increasing activity in that sector, real estate activity, and so on. So, I think broadly speaking, that we have found this to be an effective tool. But we're going to continue to assess how effective, because it's possible that as you move through time and the situation changes that the impact of these tools could vary. But I think what we have decisively shown is that the short-term interest rate getting down to zero, but economists call it the zero lower bound problem, it does not mean the Fed is out of ammunition. There are still things we can do, things we have done. And I would add that other central banks around the world had done similar things and have also had some success in creating more monetary policy support for the economy.
So, you had mentioned that, of course, there's been evidence at the longer term interest rates, market rates had come down through the initial rounds. A concern is that the unemployment rate remains very high. And to further increase activity, to try to bring that down, one would hope to see some additional movement from the most recent round. Are you suggesting that one would need to be patient, or can you say a little bit more about how you would asses whether this most recent round is having the kind of effect that you would expect or anticipate?
Well, as I said, we'll be doing that on a regular basis. We'll be looking first at the impact on financial markets, and we do see some impact there. We'll be looking to see, whether or not the labor market situation is improving. There has been some modest improvement. When we first began talking about the latest round, unemployment rate was about 8.1, now it's about 7.8. There's been some movement. But we would obviously like to see a stronger labor market. A labor market with nearly eight percent unemployment, with 40 percent of the unemployed having been out of work for six months or more, that's not, you know, that's not an acceptable situation. That's the situation where there's too many people whose skills and talents are being wasted, who are suffering significant hardships. So, we are looking to see improvement in the labor market and into the economy more broadly. So, we'll continue to evaluate. I can't give you specific criteria, except to say that we'll be assessing the impact of our actions on financial market conditions and looking to see how those link up to developments in labor markets and in the broader economy.
So if--so certainly, hopefully, there will be more of an impact going forward to continue to bring the unemployment rate down more quickly, you mentioned that you were looking at the kinds of tools that are available. Is there more in the Fed's toolkit that might have the kind of power to have additional effects?
Well, first, on the pace of improvement, that's an interesting question because the pace of growth of economic growth over the last few years since beginning the recovery has not been as strong as you normally would think would be needed to get really big improvements in the labor market. Nevertheless, we have seen decline in unemployment from 10 to 7.8, which is, you know, fairly significant. And we hope to see ongoing improvement there. So, it's a little bit hard to judge exactly how much more improvement we'll see. But certainly, we want things--to keep things going in the right direction. In terms of additional tools, as I mentioned earlier, once you get the short-term interest rate down to zero, there's basically two principal approaches, either securities purchases or communication. There are few other things that are smaller magnitude, like the interest rate we pay on the excess reserves, for example. But I think those are the two basic approaches that we have. Of course, we could continue to try to improve our communication, look for ways to be more effective. But there's no--as far as I'm aware, there's no completely new method that we haven't yet tapped.
We have--I just had a meeting of the Detroit Board of Directors of the Chicago Fed, as you know, which provide some information about the conditions, more explicitly in this region. And certainly, the conditions across the country are quite varied. And I wonder if you could share how you factor in the differences across different parts of the economy when making decisions that, of course, are more aggregate.
Well, first, thank you, Dean Collins for joining the Detroit branch. People probably don't know unless you had been studying this, but every Federal Reserve Bank around the country, the 12 reserve banks and a good number of additional branches, each one has a Board of Directors drawn from the private sector. It could be academics, it could be business people, it could be community leaders, nonprofit organizers, and so on. And we draw these people in primarily to get their input and their insight. This is a very large and complex economy. There are many different sectors. And it's very helpful to us to have people from--leaders from different parts of the economy, from different parts of the country providing this input and giving us somebody to bounce ideas off of to help us make a better decision, to understand what's going on. So, that's very useful. And I attended the--at least a part of the meeting this morning with the Detroit branch, and I heard from a number of people about the auto industry, healthcare, academics, industry, and variety of things. So, that's actually very useful. Now, in terms of the local economy, you know, Michigan is still not withstanding that it's become much more diversified. It still has a pretty significant reliance on auto production. And because auto sales drop so sharply during the great recession, the unemployment rate here grows, I think, like to 15 percent or something like that, compared to a 10 percent national peak. It's now come back quite a bit as the auto industry has improved. And so, we are seeing, I think, some strengthening, although, conditions here are still not where we'd like them to be. Housing market also, I think, has come back some in Michigan. But like many other industrial parts of the country, like Pittsburgh steel plants and other places, Michigan also is diversifying and it's bringing in high-tech various kinds of services, healthcare, education, and so on. And places like University of Michigan and Arbor are a tremendous resource for entrepreneurs, people trying to develop new high-tech businesses. So, it is a good sign to see that America still has a powerful industrial base, but it is diversifying into a wide range of new types of industries. So, it is a large and complex economy. I'm don't know if you want me to talk about the broader economy or not, but we can come back to if you like. But the, you know, we have been seeing some improvement in the labor market. It's still not where we'd like it to be. Growth has been moderate. There are some positive signs to look at. And I think one of the key positives I already made reference to is housing. As you know, house prices in the US fell about 30 percent, and the money construction fell extraordinarily over this recession. And now, for the first time, really, since 2007, 2006, we're starting to see increases in production, high rising house prices, that's going to affect household wealth. So, that's one positive factor that's going to help us have, I hope, a better year in 2013 and then in 2014. A few other things that are positive, just to point out, one is that state and local governments which have been in a very contractionary mode because of the laws of tax revenue during recession, and laying off people, having postponing spending, they are in much better shape now than they were a few years ago including in Michigan, I think. And as a result, they're not going to be the drag on the economy that they've been for the last few years. Energy, you know, the energy industry in the US is looking much stronger. Consumers are more optimistic. The University of Michigan publishes the index of consumer sentiment, which is one of the very best guides to how consumers are feeling. And as long as the fiscal policy things, they're getting too messed up, the consumer seemed to be a little bit more upbeat. So, there are some positives. But I want to be clear that we've made some progress that it's still quite of ways to go before we're where we would be satisfied.
Well, let me shift gears a little bit. Certainly, as you well know, there are some very local critiques of Fed policy. And I wonder what you might say to those who argue that, for example, the policy that has maintained interest rates at such low levels is actually taking some of the pressure off of Congress to try to address these fiscal challenges. And that the massive asset purchases have created extremely high risks, perhaps, under appreciated risks for future inflation.
Well, the critiques on both sides, you know, you should--they should give the other guys a chance. [Laughter]
I'll get there. [Laughter]
You'll get to them later, okay.
I'll get there later. [Laughter]
Well, let me first say that as we think about the cost and the risks of any policy, we should also think about what we're trying to accomplish. And I had made reference already, but the Federal Reserve has a dual mandate from the Congress to achieve or at least to try to achieve price stability and maximum employment. Price stability means low inflation. We have basically taken that to be two percent inflation. Inflation has been very low. It's been below two percent and appears to be on track to stay below two percent. So, our price stability record is very good. Unemployment, though, as we've already discussed, is still quite high. It's been coming down but very slowly. And the cost of that is enormous in terms of lost, you know, lost resources, hardship, talents and skills being wasted. So, our effort to try to create more strength in the economy, to try and put more people back to work, I think that's an extraordinarily important thing for us to be doing. And I think it motivates and justifies what has been, I agree, an aggressive monetary policy.
Well, as I mentioned in my introduction, you came to your position with a real expertise as one of the world's experts on the Great Depression and how policy makers should react in the midst of a crisis. Now that you have actually lived through a major global crisis, I wonder if you could tell us what surprised do you most?
The crisis. [Laughter] I was very engaged. I'm very interested in financial crisis. As an academic, I worked on the Great Depression. I did theoretical work on the role of financial crisis in macroeconomy. And I was very interested when I came to the Fed in addressing issues related to potential crisis. But obviously, you know, we--this was a very large and complex crisis that was more severe than I anticipated, certainly, and I think be fair to say that most people anticipated. But we did learn some things from history. And I think there's a lot of value to studying history, particularly from our perspective economic history because it helps you see what your predecessors did wrong and did right. Two things we learned from the Great Depression, one was not to let monetary policy get too tight. In the '30s, the Federal Reserve did not actively try to expand monetary policy accommodation. And as a result, there was a deflation, about 10 percent a year deflation, falling prices, very damaging. The Fed also did not do very much in the '30s to try to stabilize the banking system which, you know, about a third of all the banks in the country failed. So, those were two lessons that we really tried to learn from. We, of course, would have been as we are discussing very aggressive on the monetary policy side, and we took strong actions to try to stabilize our financial system, because we understood that if the financial system collapses, then the economy is likely to collapse as well. So, we took those actions learning from what had happened in the '30s. A couple other things, I think, that were useful, during the '30s impart because, obviously, the world was still recovering from World War I. There was a lot of international enmity. Cooperation among central banks, among governments was not very good. In fact, you may know of about--your audience may now about the Smoot-Hawley Tariff, and of tariff wars, and all the other things that happened during the '30s. It's very important, if you can, you know, global crisis like this one, to cooperate, to coordinate as much as possible with the policy makers around the world. And that was something that we did quite actively, both in terms of banking and the financial regulation, stabilization and even to some extent, in monetary policy and when they--five or six of the world's largest most important central banks coordinated on an interest rate cut. We've also worked with other central banks in making sure that, for example, that they have enough dollars to lend for banks that need to use dollars in their transactions. So, cooperation has been very helpful in the latest episode, and that was another thing that we learned from the '30s. One last thing that occurs to me, one reason that the Fed and other policy makers didn't take more aggressive fundamental action to try to end the Great Depression was they were afraid to do anything that was unorthodox. There was the gold standard. There was a whole variety of standard practices. And given the great uncertainties that they face, and I'm not being critical because it was an incredibly difficult period, they often maintained a very orthodox approach. The person who changed that in the United States was President Roosevelt who did a lot of different things, you know, many--some of which didn't work, some of which did work. But sometimes when you're in a very severe situation, you need to consider unorthodox approaches. Then the Fed and other central banks did undertake some unorthodox policies which not all of them worked, but a lot of them did. And we did help to stabilize the global financial system and begin a process, still underway of bringing our economy back to where we like to see it.
When you raised the issue of what's going on globally and the cooperation that has emerged which certainly is a very positive thing, but of course, those global linkages are very important in terms of prospects for US growth. And if you look in--over the medium term, where would you see a kind of plausible scenario to generate the demand for the growth that we hope the US is able to achieve? We aren't eager, I think, you would agree to go back to the very high household consumption levels that were arguably unsustainable, given the challenges in Europe, and swelling growth in China. It's not so clear where that growth might come from. And I wonder what your thoughts are about that set of concerns.
Well, it's true that global growth is been somewhat slower for variety of reasons, different reasons, one is the European situation which you alluded to, Europe, much of Europe is in recession at this point following the very difficult financial problems that they've had. Some emerging market economies have slowed for, again, for variety of reasons. They slow down in China, was at least partly a policy goal to try to create a more sustainable and stable growth path and to try to shift the sources of demand in China from foreign buyers, exports to domestic demand. So a variety of things have happened to slow overall growth and we saw in the US, just the last reading, we saw pretty weak export numbers. And that's--for us, that's a loss of, again, potential growth from our perspective. So there are couple of challenges, when globally, the different parts of the world that are facing slowdowns, each has to address its own set of issues. In Europe, some progress has been made in addressing their sovereign debt and banking issues that they have. You know, the European Central Bank is taking some important steps to try to stabilize the financial markets there, a bit helpful. They're working on improving their fiscal arrangements both to create longer terms sustainability in individual countries but also to put up a set of agreements under which countries would be willing work with each other on fiscal matters. They are working to develop a banking union where bank regulation would take--be done throughout the Euro zone by the ECB or some other agency and that would strengthen European Banking System and make it less dependent on individual countries. So steps are being taken in Europe which I hope will help stabilize that situation over time. In the emerging markets, again, you have a variety of different stories. But I think the fundamentals there in the emerging markets are pretty good as you know. And even if there is some moderation of growth in some countries, the--we are seeing overall or rather remarkable transformation of places like China and India which is in the biggest antipoverty program in history. The growth in those countries has lifted many millions of people out of poverty. So I think the growth will proceed in those areas as well with each country, each region, Latin America, Asia, dealing with different sets of issues.
Oh, I know that our audience has many questions to pose to you. Perhaps let me ask one final one before I turn over to our students, to read questions from the audience. And that is, given all of the range of the things that we have already discussed, is there--are there one or two particular things that keep you up at night?
Well, we have a dog like this big that sleeps with us. [Laughter] I try to get as much sleep as possible. I think that's probably good. It didn't work out this--today because the airline canceled and it's long story. But--no, I, you know, I want to see our economy recover and I'd like to see this--I'd like to see stronger labor market. I'd like to see fiscal policy address the issues that I mentioned. There are a lot of obviously difficult issues out there. But I didn't think things are moving, you know, not as fast as we would like, but in the right direction. And I'm therefore cautiously optimistic about next couple of years.
Thank you. Let me--
[ Applause ]
Well, as I mentioned, I'm sure that there are a great many questions that have already been shared with our presenters. So let me turn the floor to them.
Thank you for your comments, Chairman Bernanke and for you questions, Dean Collins. My name is Kirby Smith and I'm a master's student at the Ford School of Public Policy and Ross School of Business. And the first audience question is that, if treasury had [inaudible] trillion dollar platinum coin [laughter], would the Fed have accepted it and credited treasury's accounts? If not, why not and what does this mean for the independence of the Fed moving forward?
Well, as you--I'm not going to give that any oxygen. [Laughter] As you probably know, the treasury and the Federal Reserve over the weekend, the treasury issued a statement which the Federal Reserve approved stating that we didn't think this was the right way to deal with this problem. I mean, there are legal issues or policy issues. I think the right way to deal with this problem, as I said earlier, is for Congress to do what it's supposed to do and needs to do and authorize an increase the debt ceiling so that we can pay our debts, we can pay our bills. And that's the right way to do it. And, you know, I think that's what will eventually happen. But I don't think that going off in that other direction would really be all that helpful.
Hello. Chairman Bernanke, my name is Haven Allen [phonetic]. I am a second year MPP at the Ford School and also studying for a graduate certificate in science and technology. Second question from the audience. Does the debt ceiling still have a practical purpose and could it be eliminated without much consequence?
Does what have?
The debt ceiling.
Oh. No, it doesn't really have, you know, it's got symbolic value, I guess. But what--no other country, I believe, and maybe one or two other countries but, I think, essentially, no other countries in the world have this particular institution. Just so everybody understands what it is, the Congress appropriates 100 dollars, tells the government to spend 100 dollars on whatever. And then it raises 80 dollars in revenue through its tax code. Now, there's arithmetic here. So that says, you know, you got to borrow 20 dollars, right? No, the Congress has to give a third rule which says that 100 minus 80 equals 20. There really is--if the Congress is approving spending and it's approving taxing and those two things are not equal, then it's kind of logically that there's got to be something that make up the difference and that difference is borrowing. Now, I'm not saying that deficits and debts are good thing. I am not saying that at all. But the way to address it is by having a sensible plan for spending a sensible plan for revenue and make decisions about how big the government should be or how small it should be. But, again, as I'm saying before, this is sort of like a family saying, "Well, we're spending too much, we stopped paying our credit card bill." That's not the way to get yourself into good financial condition. So, yes, I think it would be a good thing if we didn't have it. I don't think that's going to happen and I think it's going to be around. But I do hope that Congress will allow the government to pay its bills, not raise the possibility of default which would be very, very costly to our economy. And then address very seriously these fiscal issues. I am not saying we shouldn't do that. Absolutely, there are a lot of important issues and very basic fundamental values involved. So let's do that but we don't need to do it in the context of the debt ceiling.
Do you believe that the Fed should actively prevent future asset bubbles and if so what tools do you have to do that?
Well, asset bubbles have been--they're very, very difficult to anticipate, obviously. But we can do some things. First of all, we can try to strengthen our financial system, say, by increase--as I mentioned earlier, by increasing the amount of capital liquidity the banks hold, by improving the supervision of those banks, by making sure that every important financial institution is supervised by somebody. There were some very important ones during the crisis that essentially had no effective supervision. So you make the system stronger that if a bubble or some other financial problem emerges, the system will be better able to be more resilient, will be better able to survive the problem. Now, you can try to identify bubbles and I think there has been a lot of research on that, a lot of thinking about that. We have created a council called the Financial Stability Oversight Council, the FSOC, which is made up of 10 regulators and chaired by the Secretary of the Treasury. One of whose responsibilities is to monitor the financial system as the Fed also does and try to identify problems that emerge. So, you're not going to identify every possible problem for sure but you can do your best and you can try to make sure that the system is strong. And when you identify problems, you can use--I think the first line of defense needs to be regulatory and supervisory authorities that not only the Fed but other organizations like the OCC and the FDIC and so on have as well. So you can address these problems using regulatory and supervisory authorities. Now having said all that, as I was saying earlier, there's a lot of disagreement about what role monetary policy plays in creating asset bubbles. It is not a settled issue. There are some people who think that it's an important source of asset bubbles, others would think, it's not. Our attitude is, that we need to be open-minded about it and to pay close attention to what's happening and to the extent that we can identify problems. You know, we need to address that. The Federal Reserve was created in about 100 years ago now, 1930 was the law, not to do monetary policy but rather to address financial panics. And that's what we did, of course, in 2008 and 2009. And it's a difficult task but I think going forward, the Fed needs to think about financial stability and monetary economics stability as being, in some sense, the two key pillars of what the Central Bank tries to do. And so we will, obviously, be working very hard in financial stability. We'll be using our regulatory and supervisory powers. We'll try to strengthen the financial system. And if necessary, we will adjust monetary policy as well but I don't think that's the first line of defense.
Okay. This question comes from Twitter. Since the Fed declared it was targeting a two percent inflation rate in January of 2012, the FOMC has released its projections five times. And each one of these projections, the inflation rate has come in below this target. Why then has the policy been set to concessively undershoot the target?
Was that 140 characters?
[ Laughter ]
I suspect many in our audience had related questions. [Laughter]
Yeah. That's a very good--it's a very good question and let me try to address. As I said earlier when Dean Collins was asking me about the risks of some of our policies, I was pointing out that inflation is very low. Indeed, it's below the two percent target and unemployment is above where it should be and therefore, there seems to be a pretty strong presumption that we should be aggressive in monetary policy. So, you know, I think that that does make the case for being aggressive which we are trying to do. Now, the additional point that I made, though, was that, you know, the short-term interest rate is close to zero and therefore we are now in the world of non-standard monetary policy [inaudible] asset purchases and communications and so on. And as we were discussing earlier, we have to pay very close attention to the costs and the risks and the efficacy of these non-standard policies as well as the potential economic benefits. And to the extent that there are costs or risks associated with non-standard policies which do not appear or at least not to the same degree for standard policies then you would, you know, economics tells you when something is more costly, you do a little bit less of it. We are being quite accommodative. We are working very hard to try to strengthen the economy. Inflation is very close to the target. It's not radically far from the target. But in trying to think about what the right policy is, we have to think not only about the macroeconomic outlook which is obviously very critical, but also the costs and risks associated with the individual policies that we might apply.
So, I'd like to follow up on that question a little bit. One of the things that you mentioned earlier which is in the tool kit and which you have been trying to use in a variety of ways is the way that the Fed explains its policy to the public. First, there was a number of announcements that set dates for how long interest rates would remain low. More recently, the move to making it conditional on performance and a variety of changes such as more information in the minutes about the kind of information or the kind of discussion that has happened at the Fed. And I wonder whether that increased information about what the Fed's thinking, you see, is helping to be more effective or perhaps being--complicating the message to some degree.
Well, of course, that's up to some extent in the--up to the auditors, the beholders to determine whether they think it's helpful or not. But I think that to address your specific point, that switching from the date, you know, when we started out by trying to convey to the markets when we thought, you know, short-term interest rates might start to rise, initially, we gave a date which was just our best guess. And as conditions changed, we changed the date a couple of times. A better way to do it in my view is instead of talking about a date which is a very non-transparent way to explain what you're doing, people say, "Well, how did they get the date? What does it mean?" Instead, what we've tried to do in our more recent evolution is to try to explain what we'll be looking for in terms of--unemployment and inflation are two main mandate objectives before we would begin the process of raising interest rates. So that is, first of all, much more transparent, it helps people understand what our thinking is and what we're looking at. But also, if the outlook changes, suppose for example that some really good news comes in, I hope it does, some really good news comes in about unemployment, if we we're using the date, people would know how to adjust that. I mean, what--how do we change that? Is the date still valid or not? But if we're using these guide posts in terms of inflation and unemployment, then the investors in the market can say, "Well, the date where we get to 6.5 percent unemployment, it seems to be a little closer now than we thought and that would allow us to change our estimate of when the Fed is going to respond." So, that should allow a greater clarity about how policy will evolve over time. And that's our goal. I mean, we have worked as a committee. We have--it's not easy to work with 19 people, all who have very strong opinions. But over time, we have tried to increase our clarity and try to communicate more clearly and each individual change can be debated. But I think if you look at the broad sweep in what we've accomplished in the last 15 years or so at the Federal Reserve in terms of communication, there's just been an enormous change and we are just much, much more transparent and easy to understand, I think, than it would have been the case 15 or 20 years ago.
So, the shift from Fed speak to talking about fiscal cliffs is really quite striking.
This question is from an audience member. What's one aspect of financial policy that you think requires reform, but which isn't currently being discussed in the media?
Well, I think the main area that has been put aside for the time being is that government sponsored enterprises, Fannie Mae and Freddie Mac which were taken into receivership at the very beginning of the crisis because of the loses that they suffered on mortgages and because of their low levels of capital. I think there's a pretty wide spread agreement in Washington that reform is needed for those institutions. And the treasury has put out some alternative suggestions, other suggestions have been made by members of Congress, but so far, not too much progress has been made in that area. And I think that's one pretty obvious area that needs to be addressed. But I would say that, you know, the bill, the Dodd-Frank Bill, of course, is very broad and has covered a lot of the major parts of the financial system.
This question comes from an audience member. How do you respond to the people who question the constitutionality of the Federal Reserve and would like to severely weaken it? And furthermore, how do you respond to members of Congress who wish to audit the Fed?
Well, I'm not a lawyer. So, I do know Article I Sec--never mind. [Laughter] I'm not a lawyer, but the Fed has been around now for a century and nobody so far has--had a Supreme Court case so I'm not going to get into that issue. I think the Fed performs the critical role of managing the monetary system which is, of course, a power the Congress has to delegate which it is done. I mean, talk to the other issue which I think more substantive. As you know, there are bills in Congress that would "Audit the Fed" and it sounds like something how can anybody object to auditing the Fed? I mean, don't you have to look at people's books and see what's on their books? Well, the trouble with Audit the Fed is that it's not what it's about. That's a misnomer. The Fed's books are thoroughly and completely audited. We are audited, first, by an outside private sector accounting firm which gives us a clean bill of health. Secondly, all of our books, all of our financials, everything is open to the GAO, the Government Accountability Office, which is, you know, works for Congress and for the government, and can look at anything it wants to look at. And third, we also have an Independent Inspector General that is able to, you know, evaluate any aspect of the Fed's financials or activities that it would like. If you like to see more about this, the Fed's website, federalreserve.gov has a detailed discussion of all the various audits that the Federal Reserve goes to. So, all of our financials, all of our activities are thoroughly audited with one exception. And that exception is that in the law which created the Government Accountability Office, the GAO, there is an exception made for monetary policy. You know, the GAO can do anything it wants at the Federal Reserve, but what it can't do is go in and audit a monetary policy decision. Now, what the Audit the Fed bill would do is very simple. It would strike that clause. So, if the Audit the Fed bill passed, then a Congressman who didn't like the Fed's latest interest rate move could say, "GAO go audit that." And what that would mean would be the Government Accountability Office would send its staff into the Federal Reserve to look and see, you know, "Why did you guys raised interest rates?" and begin to investigate that decision. And it seems to me that's the first step toward basically the Federal Reserve no longer being an independent central bank. Now, there's a very strong agreement around the world that if you want monetary policy made based on long-term considerations and not based on short-term political considerations and the Central Bank needs to have some independence in making monetary policy, what this bill would do is strike it, the very heart of that independence. So, it's my opinion that many people who'll support the bill just think it means what it sounds like which is something about the financials. It's nothing to do with the financials. It has to do with whether or not Congress can ask the GAO to investigate a decision by the Fed that it doesn't like. And, again, I think if you want a healthy economy, you want to have a strong and independent central bank and that is not consistent with that bill.
This is the last question and it comes from Twitter. So, if there's a vibrant discussion of macroeconomic issues on social media, do you get any information from these discussions and if so, how?
Well, you know, I read blogs. I have to say the 140 character kind of limits the discussion on the Twitter. So those--I mean, I think blogs have become a pretty important source of intellectual exchange. The same way, there was a very important step, Dean Collins would remember this. It used to be that years ago, way long time ago, if you were an academic and you wrote a paper then you had to submit it to a journal and took two years, and then got published and, you know, it was like three years after you wrote the paper before anybody knew what you were working on. And then, came the internet and working papers and so on, and pretty soon, you know, papers were available almost immediately for professional evaluation. But even that, of course, involved the long delay involved in doing the research and writing the paper, and so on. But if you had a shorter perspective, a shorter idea that you wanted to put out there, well, again, the internet has provided useful ways for people to communicate, to discuss interesting ideas in monetary policy or anything else, I follow a lot of baseballs blogs myself actually. So, that's just the next natural step to creating a conversation among people. And I, you know, I think that's been very constructive. So, there are few Federal Reserve blogs. The Atlanta Fed has one. The New York Fed has one and we have Twitter. We have Facebook. We are really moving along here. [Laughter] So, we're still a little bit old-fashioned, but the--I think the social media do provide a really convenient way to communicate quickly to a group of people, to exchange ideas, and to keep track on what's going on in a particular area. So, you know, I think there are some positive developments there.
Well, perhaps we should encourage you to follow the Tigers while you're--
Unfortunately, we are out of time. I'd like to thank our questioners for posing their questions. Id' like to thank all of you in the room and online for joining us in today's conversation. You can find information on Future Policy Talks at the Ford School on our website and through our Twitter site, and I hope you'll follow us. We certainly are--we'll be following the Fed. Chairman, thank you very much for joining us today. We are thrilled.
[ Applause ]
I want you to congratulate them on that. Well their latest book is The New York Times bestseller " It's Even Worse Than It Looks: How the American Constitutional System Collided With the New Politics of Extremism." And in it, Mann and Ornstein explore some of the most critical issues that face our country, namely the hyper partisanship that we have all been reading about and so many of us have had great concerns that seems to continue on and on. The gridlock that's so and thoroughly disenchants so many and so much of the American public with Congress and with so many of the important policy issued of today that seemed to be making very little headway. Well today, we'll hear their thoughts about both the origin of the dysfunction and potential solutions, some of which are very much in the hands of voters and all of us. And in particular, I prodded them to suggest how policy school and policy students might make some in rows in that agenda. Well, at the Ford School, we're very proud of the reputation that our name sake, President Gerald R. Ford had for working across the isle. And in their book, they refer to President Ford as among the group of Republican leaders who were and I quote, pragmatic institutional figures who found ways to work within the system and focused on solving problems. Well that's a model that our faculty and our students really do take very seriously and so much of what we do and so we couldn't be more proud today to be hosting this conversation with experts on that very important set of topics. Tom and Norm had been very generous with their time, they've already met a number of our undergraduates and our faculty as well as delivering their public address today. And they've graciously agreed to take questions and so, you should have received if you were interested a note card when you came in today. Around 4:45, our staff will be coming down the isles to pick up your questions and a member of faculty, Professor Ann Lin as well as two of our graduates students Claire Hutchinson and Kelvin Vuong will be selecting questions and then posing at the end of our session today to both Tom and Norm. And so with that, it is my honor and great pleasure to welcome back to the University of Michigan and to the Ford School, our distinguished speaker today.
[ Applause ]
Thanks so much Susan. For both of us, it's thrilled to be back in Ann Arbor. Many of our friends and mentors and some of our former employees now back as graduates students are here and we're delighted to be associated with Susan and with the Ford School. I actually got to know Gerry Ford much better after he was out of government. Every year, AEI with which I am identified would hold a world forum in Beaver Creek Colorado in which Present Ford would preside. And so every year, I'd spend 3 or 4 days together with him and it was remarkable to watch him well up into his 80's. I think even more informed and lucid than when he had been in government talking to everybody and then you could see all the qualities that made him a role model really for public service. Thank you for mentioning the 100 global leaders at foreign policy that's the good news, the bad news is that Dick and Liz Cheney ended up ahead of us. [Laughter] Don't ask me how. And for mentioning the book which by the way makes a great holiday gift as we enter the holiday season. The timing is good. We are three weeks after the election. We've actually had some other seminal events in between. Just last week we had the 40th anniversary of Sesame Street, and I called up Big Bird, and congratulated him. He said it was big day but no, we are near as big as November the 6th. He had suffered a near death experience going into the election. There is other good news. As of today, Florida has finished counting its votes. [Laughter] And the interestingly, this morning in attic, they found 586 votes for Al Gore. [Laughter] Little too late. The election of course came as a shock to a number of people including of course Mitt Romney himself, Dick Morris, and Karl Rove. I actually saw Karl two days after the election in Erie, Pennsylvania where I followed the amount of platform and commiserated with him, but I said there is some good news to immerge out of this. I've investigated it, it turns out that depression is fully covered under Obama care. [Laughter] So, he will be okay. Of course, he got it all wrong as did Romney's own pollsters and Dick Morris and many others. But, you know, we can't vote too much, the fact is all of us who get involved in public commentary and many of us an academia make predictions. And we aren't always right, and I told Karl that I'd actually--I had a confession to make, I'd been wrong on the vice presidential choice for Mitt Romney. I did not pick Paul Ryan, I was confident in believing that Romney would--would pick Newt Gingrich as his running mate, I thought you got the perfect balance ticket of a Mormon and polygamous. [Laughter] And I was wrong. So, I was wrong about the marijuana initiatives as well, I predicted that they would fail. I figured though that on Wednesday after the election in Colorado and Washington, large numbers of people would wake up and say, "Hey dude, was that election thing like yesterday?" But, it turned out they actually did show up at the poles. We're happy to be here on a beautiful sunny, yet crisp, we've been doing a lot of traveling. Actually, I came just a couple of days ago from Los Angeles where it was 82 and foggy just like Clint Eastwood. [Laughter] And of course as we think back through the sweep of the last year, the highlights of the campaign, Clint Eastwood's appearance of the Republican Convention in Tampa was one of them, the Tampa Convention, of course dominated by the weather, was hurricane Isaac, the weather threats were so severe that Donald Trump cancelled his Bollywood splash in appearance of the convention, nobody every talks about the good things that can come with hurricanes. But my favorite moment at the convention was when I saw reporter interviewing Herman Cain about the weather and ask if he remembered Katrina, and he said, "I don't know her, I've never met her, there's no proof anywhere." [Laughter] There was some overreaction to the threat of the weather, I thought it was a bit much when I saw Rick Santorum at the Tampa zoo gathering up to of every creature, I thought that was maybe a little bit overboard. From there, I went to Charlotte for the Democratic convention. My highlight there actually was picking up campaign buttons, I like when I go to these things, the buttons, you know, they are really interesting and come collectors items, and I scored unusual button there, it had a big picture of Jenna Jameson on it. Now, I know nobody here knows Jenna Jameson is, all right, well obviously one person does. [Laughter] She is the most successfully porn star in America and she had endorsed Mitt Romney saying, "I'm rich so I'm going to vote for Mitt Romney." And the button had a big porn stars for Romney. And I look at the button and I though the Democrats are loosing the porn star vote, this never would have happen under Bill Clinton. [Laughter] So, but I got the button.
[ Applause ]
Susan, thank you so much for your hospitality, you and the Ford School. Feel converse, it just does my heart so much good to see you out there and to think back to my days, our days as graduate students here. It's wonderful to look around the room and see many friends. Many of whom I've already chatted with before we began. Michigan is a great and beautiful university and I think I can speak for Norm in saying how grateful both of us are for it having given us an opportunity to build very unusual but fascinating and rewarding careers, largely in Washington but with the opportunities like this to travel around. Now, this past year has been as fascinating and rewarding as any in our long careers and I'd like to talk to you a little bit about why that is so when might have thought given the obvious dysfunction of American politics the almost disdain and discourage man about Americans and looking at our system that this would, you know, this would hardly be the kind of topic that would engage us in a way that has proven as interesting and rewarding as it has but appearances can be deceiving. Take the election that just ended a couple of weeks ago, you could say 6 billion dollars. The pain of having to listen to all that punditry out of which we manage to garner so little to help us think about our choices on election day or in early voting, all the noise, the sound and fury, and we seem to have ended up where we began. If I'm not mistaken, a 112 Congress the worst Congress ever wrote my colleague or at least his editor and title of his piece as I recall have Barrack Obama Democrat as President, the Democrats controls the Senate and the Republicans in the House.
[ Applause ]
Hello. My name is Claire Hutchinson and on behalf of the students of the Ford School, I'd like to say thanks again for coming today, really enjoyed your talked. So we have quite a few questions from the audience, and the first one is what do you think is the most effective way to fix our problem of Congressional gridlock right now? And we have three kind of suggestions from the audience. One was filibuster reform, the reform of the apportionment of Congressional districts, and the third was the introduction of a strong third party.
We address all of this. You know, half of our book is actually what to do about this. Well, recognizing that there is no panacea, there is no magic bullet. Part of it is it's a cultural problem as much as it is a structural one and changing culture is much harder. There is also a section called bromides to avoid, and we were quite harsh in the book about the third party movement, the Americans Elect movement. Our system is not setup structurally easily to have a third party. It's a very high hurdle to overcome and the idea which I think has been common especially over the last year or so and it was picked up on by major thought leaders and pundits like Tom Friedman was the yearning for somebody riding in on the white horse to change everything. But it's a nightmare if you think about what happens if there's a third party candidate who pulls a plurality of electoral votes or wins at least enough to send it to the house where you'd select the president from the top three by state, what the state having one vote and the third party candidate would have not a single person who would be an adherent there much less the governing difficulties it would follow. We need to look to our parties and what we basically say is we don't want to see a Republican Party disappear we wanted to back as a vibrant important competitive party, but one that is a conservative not a radical party and is a problem solving party. So, that's the first one, redistricting--we thought long and hard for redistricting reform, it's also no panacea. For some of the reasons that Tom mentioned about the way we are sorting ourselves out in the districts, but also once again the culture. It wasn't redistricting that had Bob Benenett one of the five most conservative members of the Senate from Utah unable to win even the ability to run for his own party's nomination because he had work with a Democrat, Ron Wyden to try and find bipartisan health policy. It wasn't redistricting that got Arlan Specter to leave the Republican Party because he couldn't win a statewide nomination in the party that he had been a part of for many decades. So, it's deeper than that. We do believe that some of the ways out of this that were external to the Congress or the politics in Washington, and I would just say first among them we want to make voting easier and we want to win large the electorate. It is not healthy to have a political system where a tiny share of the electorate dominates the process especially the primary and caucus process in choosing the candidates where in framing the choices that we have and I won't spend time going over the things that we would do there, but we can talk about it later if we want to. And on the filibuster, it's been used in ways that it unprecedented in history. It had been a pure weapon of obstruction and it's been a partisan weapon which is not the way it worked in the past. Civil rights issues, it wasn't a partisan issue, it was faction basically, it was conservative Southern Democrats who filibustered civil rights, and voting rights issues and it was a bipartisan majority that overcame them ultimately. This is unusual and different. And reformers called for even though the rule hasn't change since 1975, the practice has in the last 5 or 6 years. But once again, it's no panacea and particularly, if you have the House of Representatives controlled by Republicans, if you made it much easier in the Senate for them to pass legislation, that's not going to solve the problems right now and the way you go about it becomes important as well. But we've been working hand in glove with many Senators, now mostly democrats, we hope that this could be done with some bipartisan support to return the filibuster to what it was originally or at least over many decades use as which is a very rare way for a minority that felt deeply and intensely about an issue of great national significance to bring things to a whole for a while and to focus attention on it. We've gone away from that, there are ways to deal with it. But whether what they're talking about now works problematic.
My name is Kelvin Vuong and I'm the master of public policy candidate at the Fourth School, the next question from our audience, do lobbyist and lobby groups contribute to our current dividing Congress, and how has there role change with regards to this in the past 10 to 20 years?
Lobbyist are source of our problems and absolutely essential participants in the Democratic process, the right to petition government for the redress of grievances is a constitutional right. The fact is without lobbying public policy would be dumber than it often is. When policy makers, legislators desperately need relevant information of problems, and how policies would respond to the particular conditions that that exist out there. But we have this dilemma of the intertwining of interest representation and campaign fundraising. It's so close and its members who are more likely to importune lobbyist to come to their fundraiser and get their pack to make a contribution, they are usually the drivers of this system. You can set up rules dealing with the conflicts of interest. Obviously, there are laws against bribery and extortion. But as Bob Kaiser said, they're so damn much money. And now, to be competitive for subcommittee or committee chairmanship, the important area one has to be known is a good party fund raiser. There's enormous redistribution of resources, so even the many safe members feel obliged to raise a lot of money. And so, they--because the party expects it to then redirect it to competitive suit, so members go looking for money from the people they see and we have no rule as some states too prohibiting fund raising while the legislature is in session, and there are perfectly legal ways of contributing and bundling money and engaging in a whole host of other activities. It's now becoming further complicated since the citizen's united decision with the proliferation of allegedly independent spending only committees which can raise unlimited sums from any source and spend it in campaigns asking their 501c4 affiliates. And there, the problem is more pernicious. I mean if you're a member of Congress from a, you know, a reasonably safe seat, you won with 58 percent of the vote, 60 percent.
All right, the next question is very relevant to a lot of the things that people are thinking of this week up to the end of the year. What are the prospects of the Congress in the Obama administration to be able to come together on a bipartisan agreement on new legislation to avoid the fiscal cliff?
It was interesting to see some of the dynamic of that election and Republicans being stunned by the defeat. It was a particularly interesting phenomenon. I think if they have been realistic, you know, one of the real losers on this campaign was Romney's pollster Neil Newhouse who has become famous. He was a good pollster but he's becomes famous for saying, "This campaign will not be bound by fact checkers." But he also was one of those who told Romney go and ride up until the middle of election that they were going to win and win easily. And if you go and thinking gee, you know, we could win but we may very well lose and it might not even be that close we might lose. You're going to have a different attitude. If you really think you're going to win and win big, and you lose big, it disorients you, it makes you rethink a lot of your own suppositions. And the very direct strategy that we've talked about of using obstruction to try and bring down Obama and then bring on a new team that could implement a revolution went out the window. And that combine with that final week in the Cristie Obama dynamic changed a lot of thinking and changed people on the Republican side in Congress and they're thinking gee, you know, maybe we better get this one out of the way then we'll get immigration out of the way. And then maybe we can find a different stabilization in where we are and where we're going. So, I think the sentiment to do something in this area now is fairly great. But I'll take you back to what we were talking about earlier. The pathologies are still there. And for John Boehner who'd like to cut a deal just to see what it'd like to cut a deal a year ago but couldn't get pass his own leadership team, Eric Cantor and Kevin McCarthy would be among them. Much less the outside force is like Grover Norquist now we may not have quite the same problem with these other leaders. But the fact is if you're going to come up with a deal and we know what the deal is and we know that this is a deal that whatever the ideological gulf every group that has span the spectrum comes up with the same template, 4 trillion dollars over ten years, roughly a third from revenues and then everything else gets a haircut here and there. But to get there means that you're going to be taking on the club for growth and your members are not worried so much about the broader public backlash as they are about what happens in their primaries coming forward. Lift your head out of that foxhole, it gets shut off. So, it's still very difficult to do. The substantive difficulties are enormous as well. You've got to decide how much money you're going to raise out of that 4 trillion. And then how you're going to raise it but in a way that hits the rich significantly more heavily maybe not just by raising rates and that's not easy to do. You got two weeks to come up with the dollar amount and the formula even if you don't have all the specifics and then move some of those pieces around. The way you do it is you pass a new budget with reconciliation instructions so that the committees have to do all that fill in the details a few months down the road. And then you've got to decide if that dollar amount and the formula is enough that you can do commensurate things on the side of entitlements, Medicare, but also possibly social security, and how you're going to deal with the sequestration by coming up with an equivalent amount and cuts in discretionary spending, domestic and defense, but without the mindless across-the-board nature and also without taking it--having it take effect immediately facing it in so that you can have an economy that keeps moving, and you got to deal with the debt limit because otherwise you could do all these and then have another crisis two months down the road. If you have infinitely good will, that's tough to do but it's not there. And now you have the complication of the filibuster where Republicans in the Senate are ready to go to war, go to the mattresses as it were if it's--if their changes made without their participation. So, I think the incentive to come up with a deal is enormous. The business community is involved for the first time. Tom mentioned the business community. They've been a part of the tribal politics and part of them still are, the Chamber of Commerce frankly is still a wholly on subsidiary of the Republican Party. But other business leaders are involved now. The markets are waiting for reaction. But I will be stunned if we have a resolution of this wrapped up with a bow before Christmas, and it's going to be some heavy issues and difficult waters before we get there. And don't be surprised if we end up with something. It can do what happened with TARP, if you recall at a much worst time, we are really just about to go over the edge. And remember that the TARP built put forward by President Bush and his treasury secretary supported by the two presidential candidates and every Congressional leader and every outside figure of substance failed in the House because the House Republicans voted no. Then the Dow drops 750 points. Back then that was a big deal. And they came back and passed it. It would be surprising to me if we didn't have at least one of those setbacks where you get an adverse reaction before they come back to the table and get it done. By the way in this, I would just end by saying it's not just the problem on the Republican side. Every second term president faces enormous challenges from his own base. They think now he is one re-election, he doesn't have to worry about that anymore, we can get everything we want. And they're already hardening positions. This has to be a deal where everybody gives something painful and any deal that gets through the House is probably going to have equal numbers of Democrats and Republicans, getting the Democrats maybe just as difficult as getting Republicans before we're done.
Let me just add a word to that because it's so visible and so important. I mean sort of ironic that it's so important. For the last few years, the sky has been falling we were told because of our runaway deficits and debt, right? Set that aside, never mind. Now the sky is falling because we are cutting deficits too much and too quickly. Well, let me try to get my bearings here and see what the problem is there is some truth to both of those but the exaggeration of each is sort of problematic as well and we need to sort of keep, sort of keep that in mind. Listen, Obama would like nothing better than putting this issue off to the side. That is dealing with it now that it last us for decade and then we get to the real drivers of our fiscal problems, healthcare cause. He would love it because he could move on to things that he thinks are important including research and development, and immigration, and energy policy, and on and on. They are very exciting and interesting things to do instead of this, so I think he'll probably bend over backwards even taking some heat from his party to get something done. But don't ignore the possibility that in the end, it's not an even balance of Democrats and Republicans that the Republicans as a party state dug in but a substantial enough number of them break off to build a cross party, if not bipartisan collision. I don't know how it's going to happen, I know it's going to be difficult, it's going to take longer, it's going to be messy and we're going to have another explanation of how the sky is falling before we get it done.
Okay, changing back towards cycle of political parties. This party polarization in Congress just reflect fundamental differences and beliefs about federal versus state power and is it possible that federal gridlock will create more empowered states with very different policy choices from the state to state?
Well that's a very interesting question. It probably came out of Barry's course on federalism. [Laughter] It's a fascinating question. You know, there's something nice and wanting to believe that the polarization in Congress leading to inaction will see a transfer of authority to state governments where all those state legislatures are operating so wonderfully. The partisan polarization has hit the states certainly in legislative politics. We've seen it in governorships. I guess the only place I see really pragmatic problem solving is in metropolitan areas, you know, in the cities and the broader areas where you actually get business people and universities, labor, and government set various levels working together. I mean they have to trade agenda, they have a genuine economic development agenda. Things are low enough, close enough to the ground that you can't live on ideology. You've got to begin to deal with real practical problems. So, I actually and there's then the case that, you know, we have this interest incession running around. Texas is the hot bed, I want you to know they took an informal vote in Washington and everyone was waiting goodbye to them, you know, inviting them to leave. But listen, there is such variation among states that it's hard, there are clear limits to the degree to which power can be devolved. So I'm skeptical and my ray of hope is with the metropolitan governance.
Let me just add couple of points. One is there are stark ideological differences here but they're not as stark as they seem. There's a lot of talk in the republican side about the Tenth Amendment and the importance of federalism except when Oregon voted in a referendum to have an assisted suicide law, you had and enormous move to try and block it and repeal it. It's we are for the states doing what they want unless they do something we really don't want. And you see the same thing with tort reform. It's--we need a federal step here because we don't like what the states are doing. So, there's--it's not quite us diverse ideologically. The other side of it is that we are going to see vast differences with the states but the states are going to have a tough time of it. They would have had in frankly and much tougher time of it if Mitt Romney had won and the Ryan Budget had been implemented. Cutting Medicare by--Medicaid by 25 to 39 percent and saying now the states can do whatever they want and there'll be magical formulas where they can provide those benefits was nonsense. And the idea now even that states are going to reject as the Supreme Court has allowed them to do, the expansion of Medicaid as part of the Affordable Care Act which means that all of those people who--some of whom are on Medicaid, others who would have gone on who will be uninsured and will be going to emergency rooms into public and community hospitals which will have to pay for them. They're not going to be terribly happy with their states and if we cut back on the loop holes and exemptions in the tax code, the mortgage--excuse me, the municipal bond deduction, if that goes away then states are going to immediately have much higher burrowing cost, 2 percent or more cut a way on the sate local tax deduction, and they're going to have a hard to time raising revenues. It's going to be tough for those states. Some of the states however are going in a very different path and some of that is being governed by the Koch brothers and the Post-Citizens United money. Koch brothers bought Kansas for about 3 million dollars several weeks ago, it was cheap. Because basically they went into Republican primaries and knocked out all the moderate Republicans to elect people who would work with Governor Brownback to turn it into and experiment. And what you're going to see in Kansas is an experiment of whether or more radical set of policies can work. They're doing the same thing and moving in the same direction in Arkansas. And we're going to see some states where you're going to have that federalism of 50 laboratories and we'll see how it works and that may govern in different ways. But otherwise, I think ultimately, many of these governors who've taken more radical postures can't move in that direction if they want to do anything for their states. Because those realities that Tom said will intrude.
This our last question for the day and I think it safe to say that it's the most popular one, we had five from the audience and one on Twitter on this specific topic. So why the Republicans show such loyalty to Grover Norquist No-Tax Pledge, is there a loyalty to cause of polarization or is it just a symptom of it?
I thought it would be boxers or briefs. [Laughter] I'm wrong again. We can both answer that. You know, we did in keen of this book a long piece on the Washington Post Outlook section in which we pointed to a couple of people who have significant responsibility for this tribal dysfunction. One was Newt Gingrich and the other was Grover Norquist. And you can blame Grover only so much. You know, you can't force people to sign pledges or to abide by pledges. But coming up with the idea of a pledge mobilizing people behind it, making it very difficult if you didn't sign it and some of you may remember vaguely even Bob Dole in an early bid for the presidency in a New Hampshire debate being ask about signing a pledge and sort of dancing around it, and being vilified because of basically money was for raising taxes. And that led to a stampede of people willing to sign the pledge and Norquist who got plenty of money from big outside groups who build his own close relationships with Jack Abramoff among others and has prospered with his group but he's used it for enormous leverage as well can't be counted out even now. Even as you get people getting a little distance from him but watch carefully what they're saying as they get there distance from him. Some I think very courageously Saxby Chambliss of Georgia who are already as people lining up to run against to them in a primary. Taking it on when he's up in two years, there's a profile encourage really. But they're all saying, you know, we'll for revenues but they're going from revenues the same way that Mitt Romney he said he would go for revenues. We don't need to, we can't raise rates. We can get it through economic growth by closing some of the loop holes. So, we have yet to see how much they're going to violate that particular pledge and whether he will be discredited enough that he becomes a kind of footnote in history. But it's a key point and it's a key point as well because the Republican Party now in some ways has defined itself through we are the party that wants to cut taxes, under any circumstances we want to cut taxes. And if that gets out to a public amplified by the media into an almost religious belief, that is the one thing to do and if you violate it, you are basically committing apostasy. Overcoming that is enormously difficult, the failure to overcome, it means you can effectively participate in the bargaining table to govern them.
Grover is a entrepreneurial policy and political activist, he really has build something of--that's lasted low these many years. He's a very unassuming, you know, unimpressive person. He's not a party boss but he's clever and he convinces a meeting, a regular meeting of conservative groups who talked together. And these include the groups that raise and spend money independently and in Republican primaries. It's the club for gross that are, that will threaten and if necessary, deliver on their promise to oppose incumbents who violate their pledge to never raise tax rates and never by eliminating deductions or loop holes raise any new net revenue.
I want to add one more thing. We point out in the book, you know, the part of the course in culture that we have where, you know, saying outrageous things brings no sense of approbation or shame. A comment made by Steve Schwartzman who is a billionaire and one of the founders of the Blackstone Group and when the idea of changing the tax rate for carried interest that the hedge funds use up to the same level as other income came up, he lightened it that moved to Hitler invading Poland which is just, you know, over the line and beyond the pale and all the rest of it. But it's a reflection or something else here which is the inequality that we have now which is sharper than we have ever had before. And that group that's not the one percent but the one-tenth of one percent. That includes business leaders now who make 10 to 50 times as much CEOs as their predecessors did 20 years ago. And for whom, you know, the realities of capitalism don't apply. It's not if you succeed, you'll be rewarded, if you fail, you'll be punished. If you succeed, you'll be rewarded, if you fail, you get a golden parachute and you might get even more coming out of it. And the same with people who basically churn money and don't produce anything but can make fortunes has warped I think the sensibilities of the country. And one of the test I think for the Republican Party now and it was interesting to hear Billy Crystal say, you know, why are we tying ourselves to these multimillionaires is to get back to a notion of capitalism, that is a much better notion where you get rewarded for the success and punish for failure and not tie yourselves to a group of people but unfortunately in the Post-Citizens United world, a group of people who even more leverage than they had before, and change the dialogue. If they can do that then they've got a chance I think even with the demographic challenges facing them that this selection made so clear of becoming competitive again. And if they can't then we're still going to see wild distortions in our politics and policy arena but it's not going to be a very pretty picture for them over the long run or for us frankly.
Dick Costolo: Lecture by Dick Costolo (BS '85), CEO of Twitter
Susan Collins: Hello, everybody, hello and good afternoon. I'm Susan Collins, the Joan and Sanford Weill dean of the Gerald R. Ford School of Public Policy, and I am so thrilled to see all of you here with us this afternoon. It is my very great honor to welcome you here today as the University of Michigan celebrates the return to campus of one of our most distinguished alumni, Mr. Dick Costolo. He is, as you know, the CEO of one of the world's most innovative and most talked about corporations, the social media giant, Twitter. And we are so pleased that so many of the universities' executive officers and deans could be here to join us today. So welcome and thank you very much for joining us. It is -- so today's event is cosponsored with the School of Information. And in just a moment my colleague, Dean Jeff MacKie-Mason will give a more complete introduction to our speaker, but first on behalf of the Ford School's students and faculty here today I just wanted to say how delighted we are to bring Mr. Costolo back to his alma mater.
We've all seen that Twitter and other social media tools are so incredibly powerful, and they have really, really taken forward the potential in the policy round that I think many people had not really envisioned at all. And that is the extent to which coalitions of citizens can now organize overnight around shared political goals, and that governments must respond to their constituents politically and in real time, and that that proverbial town square is now not just centered in a very small locality but really is as wide as the world itself. It's a place where dialogue and debate can lead to consensus and better informing us about important issues, and can lead us towards much, much better public policy. And that's inspiring, and we're so proud that today we're able to co-host today's exploration of those really, really important issues. And so now to introduce more formally our speaker, I'd like to call to the stage Jeff MacKie-Mason. Jeff is the dean of our School of Information, and he is Arthur W. Burk's collegiate professor of information and computer science. He's also a professor of economics and a professor in the School of Public Policy, and he earned his master's degree at the Ford School and remains a very good friend to the school. And so I'm particularly delighted to be cosponsoring this event with him here today. Jeff, would you like to introduce our speaker?
Jeff MacKie-Mason: Welcome to all of you, and thank you for being here. As the dean of the School of Information it's my great pleasure to introduce you to today's speaker, Dick Costolo. Dick Costolo graduated from the University of Michigan in 1985 with a bachelor's degree in computer science. Since then well he took it seriously, leaders and best [phonetic]. Now, you might think with a degree in computer science and a future in the technology industry Dick did the usual thing, he geeked out, he became a contact programmer in a cubicle for Microsoft, and then gradually worked his way up to the big time. Big-time, yes, code monkey, not so much. Dick started his career in Chicago in standup in improv comedy. He had filled out his degree requirements with forces in theater here at the University of Michigan, and he spent years touring comedy festivals in the US and Europe. But then in 1996 he looked ahead and he saw that this -- at the time rather small thing called "the internet," seemed to be on a roll so he jumped in with both feet. He started and then sold three companies, Burning Door Network Media, Spy-On-It, and FeedBurner. FeedBurner he sold in 2007 to Google for $100 million.
In 2009 Dick took on a temporary assignment as the COO, chief operating officer, of Twitter. He agreed to serve for a year while his friend and the cofounder of Twitter, Evan Williams, went on paternity leave. Dick's first tweet after joining Twitter, with 70 characters, was the following, "First full day as Twitter COO tomorrow. Task number one, undermine CEO, consolidate power, ha, ha, ha, ha," as we say online. Once a standup, always a standup. But not so fast. One year later he was the CEO of Twitter. He was dead serious. His friend, Evan Williams, went onto other projects, by his choice, or so they say. Since assuming the leadership of Twitter, it has grown to over 500 million users who generate over 350 million tweets on a typical day. It's one of the top ten visited sites on the internet. But more important, it's evolved into a communications tool and medium of enormous importance throughout all aspects of society today. It's used in crisis and emergency management. It's used as an educational back channel. It's used in presidential town meetings and to spread breaking news.
On November 6th of this year, President Obama sent out a short tweet late in the evening, "Four more years." And that was re-tweeted over 760,000 times in the next 20 hours. He also received congratulations from world leaders via Twitter. So what's it like to lead this social media juggernaut and where is it headed? We're about to hear. Dick Costolo, welcome back to Michigan.
When I got my degree here during the Roosevelt administration, it was in the Literature Science and Arts School, and it was called, "computer and communications sciences." So my junior and senior year, as the dean said, I had all these arts credits that I had to have while I was taking operating systems and assembler language, programming, et cetera. And to be perfectly frank I looked for what are the things they're going to have like the least homework and not have to get in the way of the CS work I'm going to do? And I started to take these theater classes to flush out my arts credits. And I loved the first one I took so much I took another one, and another one, and I took a couple more my senior year. And I fell in love with it so much that the beginning of my senior year I started doing standup comedy at the student union here in Michigan Union. At the time these are affectionately known as the good old days, there was a bar in the student union called "the U Club" where students would go and drink, which is what you do in a bar. And on Wednesday and Thursday nights there was -- we did standup, and you could just sign up and go up and do five or ten minutes. And so I started doing that in my senior year, and that in conjunction with the theater classes led me to conclude when I received my CS degree that I would call my parents and tell them I was turning down all my job offers and going to go to Second City in Chicago and study improvisation, at which point there was a long silence on the other end of the line.
But that's what I did; and I say that because when you looked at the list of CS graduates in '85, which is when I graduated, and looked at what they went on to do, I was going to be the person at the very, very bottom of the list of most likely to be running a major technology company 20 some years from now. So it's just a reminder to all of you to always do what you want to do and follow your passion and the thing you're interested in, not the thing you think you're supposed to do, because it will likely all work out in the end anyway. And you can just tell your parents that I told you that. [Laughter] Here's proof that I actually went to Michigan. This is my student photo. [Laughter] I don't know why everyone laughs at that when I show it. But yes, so that's my 1985 student ID card in the computer science department. I show this to people once in a while because there is a Wikipedia page for me in which someone keeps adding that I got my master's in CS at Cal-Berkeley, and I've never stepped foot on the Cal-Berkeley campus. And I keep on having it deleted, at which point someone adds it back in. So [laughter] I know that someday I'm going to get appointed at some position and someone's going to come out and say, "He lied on his resume. He never went to Cal-Berkeley." So that's that.
All right. I want to talk to you about what I want to talk to you about, what I came here today to talk to you about, and that's Twitter and how we think about Twitter within the company. And the really, really fundamental implications for public policy and government communications and all sorts of broadcast media around the world and the way it's going to change all of those and already is changing all of those in dramatic fashion. And so I'll start by talking about the Greek Agora. And so the Greek Agora was this meeting place or marketplace in ancient Greece where, you know, after dinner people would get together to debate and have dialogue about -- and discourse about whatever the political issues of the day were in the community, whatever the news was in the community, you know, Umenity's [assumed spelling] goat died, my aunt broke her ankle, whatever. And that's how information was exchanged and how news passed around the community and how political discourse happened. And so the interesting things about the Agora, the interesting characteristics of it are it was multidirectional, it wasn't someone standing on a stage like I am with you and just dictating. So there was a conversation, a real dialogue, right, the prefix in dialogue means "across." It was unfiltered, it was not interpreted. The news wasn't interpreted and then written down and handed to people. It was unfiltered. And it was real time. You were hearing what people were talking about right there with each other. The conversation was happening right now, it wasn't recorded or showed later to people.
But there are all sorts of limitations with the Agora. First of all, the distance in which that news would travel was very, very short. It was filled with noise and rumor, "Did Umenity's goat really die or does this guy just walk around all the time saying everybody's goat died?" We don't -- I don't -- maybe we don't know it. I've got to go ask this other person. It was super incomplete, et cetera, et cetera, et cetera. There was no formal record of it, so it wasn't preserved, on and on and on. But it had these amazing qualities of unfiltered and multidirectional, which were fascinating. So hundreds of years later everyone starts wearing tights and we invent the printing press. [Laughter] And the fascinating thing about the printing press now is now we start to have a broadcast -- really a broadcast version of news and even political discussion, political discourse, and information distribution. And we lose some of the benefits of the Agora. We lose multi-direction, and we lose unfiltered, because as we're now starting to print things out and write things down, the communication is necessarily filtered, it's being filtered by the person who's doing the writing, and we lose that multidirectional capability that the Agora had. But all these other benefits accrue to us, we now have a written record, we can do things like compile the written record and put it into libraries for future reference. Everyone is starting to hear at least the similar version of events, right? It's written down in two sheets of paper and handed to these two people and they go back to their community and we both read the same thing. In the Agora just through the natural progression of playing telephone with people by the time this person tells that person and they tell the next person and they tell the next person, the story's changed completely. Umenity's entire goat fleet was -- herd was wiped out. [Laughter]
So these benefits that we get with broadcaster contrasted or juxtaposed against these things about the Agora that we value that we lose. So interesting things start to happen as technology improves and broadcast media becomes more prevalent. One, as we start to create the ability to create these print broad sheets that can be distributed to more and more and more people, it also increases the cost and capital requirements with being a publisher, right? This kind of equipment here wasn't something that everyone had in their basement. It was something that fewer and fewer people or companies or organizations had access to. So not only is it now not truly multi-perspective, it's the perspective that's coming from fewer and fewer and fewer sources ever more filtered. And with that filtering and the fewer sources we start to get really this outside-in view of the news. What I mean by that is in the Agora we had an inside-out view of the news. It was the participants themselves who would come there and talk about what was going on with them or what they had just witnessed or what they had just saw, and now we're starting to get this very, very filtered third-party view of what's happening. And of course this just becomes more and more and more reinforced as technology gets better and better and better. We start to value the speed and distance and elimination of the time and distance barriers to distributing information, but in exchange have fewer sources of that information and less perspective on that information. It becomes more outside-in, more filtered, fewer sources. All right. So we see that with radio.
And in each of these cases the fascinating thing about these new technologies is they all start out with the idea that they're going to be multidirectional. And in fact we even get the illusion of multidirectional, multi-perspective in things like talk radio, right; people have talk radio and they'll call in and they'll say, "We want to hear what everyone hears about that." But of course it's really an illusion because there's an editor of who gets to call in, which calls we're going to take. We're only listening to the kinds of conversations increasingly, as you all know, the kinds of political discourse, for example, that are coming from people that agree with us, right? Rush Limbaugh doesn't have the ratings he has because liberals everywhere are tuning in every time Rush Limbaugh comes on the air. But his talk radio show is listened to by people that want to hear what he's got to say, and then they call in. So it's still really filtered, it's still mono-directional, and it's still outside-in, not inside-out.
Okay. Again, with TV; envision originally as two-way, but ever fewer sources in fact it's incredibly few, networks for many years. And all these problems of broadcast become compounded as the benefits of broadcast, ever wider distribution, ever faster distribution, also weigh in. So along comes Twitter, and it has this really, really interesting effect on all this stuff. The history of technology traditionally has been disruptive or disintermediating to existing media companies. Every time you talk to a news publisher, for example, about things like Google News, they, you know, will shake their heads and say, "Well, they're really like trying to take us out of the equation and draw all the eyeballs over there to Google News, and aggregate the news, but we spent all this money reporting on it and then they get all the oddballs. And you can go on and on and on through this eras of technology companies that are merged that turn out to be disintermediating or disruptive to broadcast communications. But along comes Twitter, and Twitter reinvents the Agora. We once start to see multiple perspectives on a particular news story or event that's happening. We once again start to have a shared experience across the globe about what's happening and what we're viewing right now. We once get an unfiltered perspective on what's happening.
But at the same time, it complements all these traditional forms of broadcast media, and all sorts of fascinating in ways that we would have never predicted when Twitter was getting starting. And in fact it continues to happen in ways that we can't predict and we haven't predicted. So, for example, on television when there's an event on television like a major sporting event like the Olympics, or the debates, or of course the reporting of the presidential election, it is increasingly the case that Twitter is the shared experience, the addition of the multiple perspectives and the inside-out view and the dialogue and the conversation about the broadcasting that's happening on television right now. And we see that more and more and more and more with every broadcast event on television. Just to give you a couple examples, during the World Cup a couple years ago in the summer of 2010 when there was a major match between Brazil or Japan, two of our biggest countries, we used to fret that if Brazil or Japan scored it would take down the Twitter service because everybody in Brazil or everybody in Japan would be tweeting, "Goal," gee 138 O's and AL [phonetic], or 137.
And in fact I remember vividly in the summer of 2010 sitting in the commons at our then world headquarters and watching Brazil game -- Brazil's first match on a big screen with all of our operations engineers praying for Brazil not to score; [laughter] and sweating every time Brazil would start to penetrate deep into the opponent's territory. And we set records at that time for tweets per second of about 3,000 tweets per second when Brazil scored and then when Japan scored; so at the time, again, about two years and a few months ago, of 3,000 tweets per second. Cut to the first presidential debate, and during the first presidential debate, we were well over 8,000 tweets per second for extended periods of time, like hours; 8,000 tweets per second for over an hour. Cut to the night of the election, well over 12,000, 15,000 tweets per second for extended periods of time. So it's increasingly the case that people realize that this is where the shared experience happens while the broadcasters are talking about or showing us something else that's happening. It's even the case, interestingly enough, that Twitter complements television in ways that are [inaudible] in the world would think it would disrupt television. So let me give you a specific example there.
During the Olympics -- I don't know why I'm talking with my hands in my pocket. I normally don't do that. I think I'm just trying to prevent myself from gesticulating wildly because I've had like four cups of coffee. [Laughter] Anyway, it's like three hours earlier in San Francisco, and I had to wake up early here so I drank a lot of coffee. All right. What was I talking about? Oh, yes, the Olympics. So when NBC was broadcasting the Olympics here, they were tape delaying a bunch of the events. And on Twitter the first day that the Olympic events were being broadcast, a bunch of people were tweeting with hash tag "NBC Fail" because they would say things like, "Well, we already know Ryan Lochte won because he tweeted that he won and everyone in London who's there is tweeting that he won, so why are you guys saying like, 'Tune in tonight to see who wins the --'" you know; [laughter] but what happened was NBC had the highest rated Olympics in 36 years of television broadcasting the Olympics in the US; in the last 36 years the highest-rated Olympics that they've had -- that have been had. So why was that? If it was the case that we already knew what happened so we don't have to watch tonight, what's going on? What was going on was -- and NBC would I'm sure stand up here and tell you the say thing, as people were talking about it on Twitter during the day, that inside-out view of the content from the athletes and participants themselves, instead of from a guy in a broadcast booth saying, "Tune in tonight," people got increasingly excited about watching it because of the excitement they were seeing from the participants and the people who were in the stands tweeting things like, "That was the most amazing, you know, 100-meter relay I've ever seen," right?
In fact, we noticed it happening to ourselves in the office. When we would read things during the day, we'd see a tweet from a woman on the US 4 by 100 meter relay team in track and field tweeting, "World record," you know, that they'd just broken the world record. I never watched track and field events, I went home that night and watched with my family the women's 4 by 100 meter relay teams watched them break the world record. So it provides this amazing complement to broadcast media in all sorts of fascinating ways, and I'll show you some examples of that. And then what I want you guys to be thinking about as you think about your careers in the future of what you're going to be focused on and thinking about our -- all the interesting implications for, "How does that change television? What are the interesting things that having a shared conversation about this thing that's on TV right now, how can that change television?" Remember when television first started, they just had a single camera sitting there pointed at these people and telling them to do something, or broadcast something live, and then they started to realize, "Oh, there are all these other interesting things we can do with this medium." I think what you'll see over the course of the next few years is that television producers will start to realize, "Wait a minute, if we've got a shared experience and we've got a second screen out there on Twitter, there are all sorts of other things we can do." We're seeing that with radio, we're seeing that with television, and we're seeing it with print journalism, and I'll show you some examples of that as well.
Okay. So this is an example of companies or rather production companies in television starting to think about super early days what to do with this kind of thing. So "The X Factor" is the show in the UK, and now here in the US because we import all of our realities from the UK. I don't know why I just made that sort of political statement about US reality shows. [Laughter] I don't have any particular opinion on it one way or the other. So this is a video clip I'm going to show you from the show "The X Factor" in the UK where "The X Factor" producers know that while "The X Factor" is on everyone in the UK is talking about it on Twitter. So what they decide to do is start to say during the show -- during the program when someone was on who they know people are going to be talking about a lot, we're going to put the hash tag we want to correlate or -- sorry, aggregate this conversation around on screen and see what happens. So let me show you what happens. What you're going to see is a blue line that corresponds to tweets with this hash tag that they're going to put on air at a certain point. What's in the upper right-hand -- left-hand corner is not on air at the time, so that's not on the screen at the time. The blue line are tweets with a particular hash tag you're going to see appear on the TV screen. And the white are all tweets about the show with the hash tag "X Factor," okay? All right. So here's the show.
So they put this hash tag on air and then there were 27,000 tweets within the next like 90 seconds about -- with that hash tag. So media is starting to think about ways in which they can bring the audience back into the program, and this is going to be, I'm telling you, 2 to 3 years from now we'll look back on this and say, "Remember when they just put like the hash tag on the screen and that's all we did," and it will be viewed as super-primitive. But right now they're already starting to figure out ways in which they can pull that shared experience back into the program itself. We're seeing that in -- we saw that during the political debates. Four years ago, eight years ago, during the debates when they would go back to the news studio after the debate, they would have Frank Longs [phonetic] there as the guy who was like, "Frank, tell us what we just saw there tonight." And Frank would go back into a room with like, I'm here with 8 Americans -" and they're like, you know, they're apparently supposed to represent all of us, "And what did -- tell us what we thought when" you know, when Bob Dole said this," and that was supposed to represent all of our perspectives, right?
Today that doesn't happen anymore. What Fox did during their presidential debates was they just went to -- they did things like, "Tweet with hash tag, you know, 'answered' or hash tag, 'dodged,' if you think one of the candidates answered or dodged the question." And then during the breaks or after the debate they would go back and say Americans thought that, you know, Romney didn't answer this question and they thought he did answer this question. So we're not getting the pundant [phonetic] and the few people interpreting what they think we all saw, but we're really getting the Agora, "Here's what all of us really saw as it happens in real time." So it's all of the benefits of the Agora with the additional benefits of broadcast. It's global, it's real time. So, again, what we're going to see is there are fascinating implications to that on policy and more. So here's another little chart I'd just like to show. We talk about Twitter as the pulse of the planet. When someone asks us how we think about Twitter, we like to say, "Twitter is the pulse of the planet." And what you just saw there is a great example of why we think that. I mean, that's an -- those are tweets about a show during the season of the show. And what you could see is when the show is on, you get a big uptake in what people are saying about the show, and when it's not on there's background noise. The same thing you would see is true about major events, the same thing you would see is true about politics, on and on and on and on. They just happened to be showing TV examples here. So it's this incredible pulse of the planet.
I want to talk now about the implications for this and then have some discussion around the policy pieces of this. So the implications for this when you can hear the entire pulse of the planet, when you can hear what the world is thinking, are really, really cool. For example, if you had told me years ago that I wanted to go and study literature somewhere and I can go to a school where I can sit in the audience and the world's great authors are going to talk to me about character development and writing style and differences in writing style, and they're not just going to talk to me about that in a way that I can engage with and ask them questions about that they will answer, but they're going to engage with other great authors of the world who write in similar genres, fiction, biography, et cetera. Salman Rushdie, those of you don't follow him, who are interested in literature, is an amazing user of Twitter. And he will have conversations about character development with other great well-known writers like Margaret Atwood and others. And they'll go back and forth on Twitter and then other people will jump into the conversation and engage with them.
And the same thing is true about every sort of possible interest you could have. If you're interested in cooking, the great chefs of the world are all on Twitter engaging with their audience and each other about their topics particular to their interest. Mario Batali will answer questions about whether you should use truffle oil in a particular kind of fish dish or not. In fact, he was like tweeting up a stream this morning. He must have sent out like 80 or 90 replies to recipe questions this morning. But they're all on there, right? The chef at El Boulie [assumed spelling] in Spain and Tyler Florence in California and Grant Atkins in Chicago. So there's a huge [inaudible] Twitter. We have 1400 people working at the company right now, and people will frequently ask me like, "What do all those people do?" We have 700 engineers, and one of the things that I've challenged the engineers to do is as more and more signal pours into Twitter, it's going to be increasingly hard for us -- for our users rather to discover the content that's most interesting to them. Again, if you think about going back to the Agora, what if everyone in the world is at the Agora? The benefits to that are we can see each other as people and not as cardboard cutouts. Right; we don't see these two-dimensional media filtered perspectives of people, we see the real person. The down side of that is man, it's noisy when everybody is there. It took three years, two months and one day for the first billion tweets to be sent. From the time the company started in 2006 to mid-2009 three years, two months and one day for the first billion tweets to be sent. It has a nice rhythm that it was three, two, one. It probably wasn't exactly one day, but we like to say that; so it's three, two, one. [Laughter]
We now send a billion tweets every two and a half days. So the volume, the noise level has increased dramatically. So there's all this interesting engineering and social communication work to do inside the company to make sure that if I come to Twitter and I'm interested in literature, or I'm interested in cooking, we're surfacing the best signal and the best conversations, because sometimes, you know, Salman Rushdie might get into a conversation about something else that has nothing to do with literature, and we don't necessarily want to surface that to people who are interested in literature. So there's a bunch of fascinating work for us to do inside the company on making sure we're surfacing the right signal.
Oh. This is one of my favorite conversations. I'll tell you in a minute -- I don't have the slide on and I'll tell you in a minute my absolutely favorite conversation on Twitter, but this is certainly one of them. So I just mentioned that everybody in the world is around the Agora now. And there were all these interesting artificial barriers to communication that happened when we were dominated or only informed by broadcast media. And those artificial barriers included barriers of socioeconomic status. There was no way that I was going to walk up to the same information distribution Agora five years ago as T. Boone Pickens, the Texas oil billionaire, or Drake, the Canadian hip-hop artist, and just those are the circles I run in. There were barriers to -- [laughter] they're not -- [laughs] I don't go home at night and hang out with T. Boone Pickens, I assure you. All right. There were these interesting artificial barriers of status that the only way I ever saw Ronaldo, the football player was being interviewed on TV by some sportscaster who was asking about a football game or a World Cup match or something. So you had only this high-status, impenetrable barrier to communication that created this two-dimensional cardboard cutout image of people. And what happens when you bring all these people around the same agora as all these artificial barriers to communication are destroyed, and you start to see these fascinating conversations that never would've happened before, like this one between the Canadian hip-hop artist, Drake, who tweets, "The first million is the hardest," and T. Boone Pickens who smacks him down with, "The first billion is a hell of a lot harder." [Laughter] And what you're not seeing here is Drake's response, which was basically, "Oh, man, I just got like smacked." [Laughter]
And we all get to see that. Like so first of all this conversation never happened before, because T. Boone Pickens didn't hear Drake onstage or wherever he was saying, "The first million is the hardest." And B, we all get to see that now. So all these cool things happen when this is what's going on, when this is the way information is being distributed. Rupert Murdoch uses Twitter. And the interesting thing when you talk to people about their perception of Rupert Murdoch's use of Twitter is they almost uniformly tell you, "You know, I had this image of that guy as X, and it's interesting to see that he's got this like broad global perspective on the European crisis in Greece and Spain. What's going on with Iran and nuclear weapons and the whole Middle East sociopolitical situation there?" And we get this 360-degree view of the person that we never got through broadcast media when it was filtered from few perspectives to us. I think that's what's probably causing more and more of these VIT's -- it's what we call "very --" "VIT" is "very important tweeters," to come onto Twitter because they can see that they can now go direct to the world and not get their perspective filtered through these third parties.
Okay. My favorite one of these conversations was when the comedian, Sarah Silverman, tweeted, "When life -- when your family is really bugging you, just pretend you're in a Woody Allen movie." And Mia Farrow responded, "I tried that, it didn't work." [Laughter] Okay. So now, again, think about like -- thinks about this notion of events and the way events are traditionally presented to us. So the Daytona 500 race is this broadcast event on television. And what normally happens, interestingly enough, when a race is broadcast on television, after a crash, is that everyone turns off that station and goes and watches something else because the cars are on their yellow flag and they're cleaning up the track and they're going really slow. And people who were watching the race and interested in it turn it off. During the Daytona 500, which was broadcast on TV again this most recent time, the ratings for the program, for the race, after a major crash ticked up a little bit. Why did they tick up a little bit; because one of the participants in the race, this driver -- we won't ask why he had his iPhone in a car with him while he's driving 195 miles an hour, [laughter] but he did, and during the yellow flag he tweeted from the car his view of the fire up ahead of him on the track. That got picked up by ESPN, they broadcast it, people were like, "What's going on? I gotta watch the Daytona 500. There was a big crash in the Daytona 500." So it actually had a complete opposite effect on the viewership of this program than it normally had. But again, these amazing implications for the relationship between this global digital agora and other broadcast mediums.
So -- oh yes, I'm starting to forget what slides are coming next so I'm going to look over my shoulder. It has these remarkable implications for companies and the way they communicate. So think about the way companies traditionally communicate with us. They traditionally communicate with us through advertising. That's how they get their message out to us. And for years companies have talked about -- whenever you would go to a company's marketing department they would talk about, "Well, we need to get more involved in one-to-one communication with our customers," but it was really joke because there was no way to do one-to-one communication. Worse, they would just have these, you know, television commercials in the can that they show over and over and over and over again, and there was no -- but no sense of what people really thought about their product or how they could react to what people were thinking about their product. And now on Twitter we're seeing companies actually lead the way in thinking about new ways of talking to a group of users or a group of customers.
I'll give you one example and then I'll talk about this one. The CEO of O2, which is a mobile operator in the UK, likes to talk about Twitter as being able to walk the floor with your customers 24 hours a day. And they had an example recently where one of their -- so they provide cable boxes and mobile phones and things like that, much like AT&T would here. One of their users on Twitter tweeted to them -- to O2 in very, very British slang like, Ali G British street slang, tweeted to them this his cable box was out. But again, and it's really, really funny, you know, British street slang, and if you look at the history of his tweets he didn't speak like that usually. So he was clearly like doing it in this Ali G kind of accent intentionally. O2 tweeted back to him in the same Ali G street slang that he should turn off his cable box and turn it on again and see if that fixes it. [Laughter] If you had gone to any major company in the world, consumer brand company in the world, two years ago and said, "You should do an ad where you write to one of your users in Ali G street slang," they would have said like, "You're absolutely out of your mind." But that tweet got picked up all around the UK, it was in the papers the next day, et cetera, et cetera, et cetera. So companies are finding new and amazing ways to use this platform to talk to their users and react to them and listen to them in real time.
Here's another cool example. During that same race I just showed you from Daytona, this photo was taken. Tide [phonetic] tweeted out this photo, "Let's hear your captions from this -- for this picture," and they got a ton of like great super funny responses on Twitter to captions for this photo that industrial strength Tide was used to put out this fire. Then they made a 30-second spot based on those user responses to captioning the photo and ran that as a television spot later. So the conversation has totally flipped from people on Twitter talking about ads they're seeing, to people on Twitter talking to the brand and then the brand creating an ad based on that conversation; so remarkably changing the way companies are thinking about marketing.
So now I want to talk a little bit about unplanned events. So I've talked to you about broadcast events, and races, and basketball games, and the Olympics, and political debates and so forth. What about how Twitter's used -- what about this global digital agora during unplanned events? So a couple interesting events have sort of happened in the world in the last couple years in which Twitter's played an interesting role. And those include Hurricane Sandy, just recently, and then the earthquake and ensuing tsunami in Fukushima, Japan. And the interesting role it's played there is it starts to migrate from being a way to follow your interest to more of a emergency real-time news and communication platform. I think when we look at our users around the world, most of our big users, most of our net promoters in most countries think about Twitter primarily as a way to follow your interest or to keep up with the news, and secondarily as a way to communicate. During these unplanned events like these hurricanes, people start to think of it more primarily as a way to communicate. And, again, perspectives only help in that regard. So you see rumors dispelled. One of the fascinating things about the hurricane was you saw rumors emerge on Twitter, they were actually created on Twitter. People would tweet images of sharks in, you know, a flooded basement and then people would immediately tweet later on that those were just -- those were Photoshopped. So the rumors emerge, but the more people that are on Twitter the more quickly those rumors are dispelled. So you get this perspective of people who were on the scene and can say, "Here's what the subway looks like," but then you also get this -- talk about multiple perspectives, this is from about as far away as you can be, from one of the astronauts taking a picture of the hurricane from outer space in the aftermath of it.
And now I talked earlier about the fact that it's also -- it has a complement -- Twitter has this complimentary relationship to broadcast and journalism. Here's New York Times columnist, David Carr, asking how helpful diverting important dumb or hateful was Twitter last night for a piece I'm doing? So people started to respond. In fact, we just heard during the introduction that people are thinking Twitter more and more as a town's square as this agora. And here's a user who says, "Twitter was a pop-up town square for the Northeast US." And more and more and more and more people will start to respond to David Carr about how they use Twitter to communicate with each other, find out what was really going on, and dispel rumors about where power was on, where it was off, things that were on fire, things that weren't on fire. During the hurricane David Carr assembled all this feedback and wrote his piece based on it. So from broadcast medium, to broadcast medium, to broadcast medium we're seeing this fascinating, not only complementary relationship, but reinforcing relationship where the two things for a virtuous circle.
So this is a visualization our engineers did inside Twitter of the moments after -- the minutes after the earthquake and ensuing tsunami in Fukushima, Japan. And what you saw there was instant -- keep in mind it's like 1 a.m., 2 a.m., 3 a.m., 4 a.m., 5 a.m., right, in lots of parts of the world, minutes, if not sooner, in the aftermath of the earthquake and tsunami the entire world knew about it, and was communicating back to people in Japan. Not only were the people in Japan communicating to each other, but the communication was global within seconds and minutes of the disaster. That's incredibly powerful and makes Twitter a super-important communication lifeline after emergencies like this. So one of the things we're doing is working directly with the government of Japan to create this -- we call it this "lifeline project," to enable Twitter to be a communications lifeline in cases of emergency like this, because it's the fastest and most efficient way to distribute your news of your personal situation as quickly as possible.
And we're doing things like making sure there are lists of government agencies that are already on the platform that people can follow in cases of emergency, and making sure that the government agencies know which hash tags they're going to use to communicate things like where power is on and where it's out, when the railways are running and when they aren't, on and on and on. Right; so instantaneously in the event of a disaster the government of Japan is a mechanism they can bring up on Twitter to communicate with people and allow those people to communicate with each other. Once we feel like we've got a good sense of how this is going to work in Japan, we'll of course take that capability around the world. We've already got governments in the UK and Spain and elsewhere wanting to leverage that. So I think that's fascinating, and one of the great things that does for us internally is it provides this amazing motivation about why we have to be successful as a company and why it's so important to do all the work we're doing and scaling our infrastructure.
Okay. So now kind of finally here, a couple last things, I want to talk about -- I have no idea how much time I have left. I've over? I'm just -- okay. There's nodding at me. That generally means like, "You went over a long time ago." So there are laws in a bunch of countries about the media and about media communications, right? One example that I'm going to talk to you about -- and I'll just give you one example, is this thing called "super injunction." So a super injunction is this capability -- it's kind of a injunction in the UK in which the following happens. If someone believes that there's something being said about them that might be said about them in the press, they can go to court and try to get one of these super injunctions. And a super injunction is essentially an injunction in which the court goes to the media and says, "You cannot talk about this particular rumor or news about this person." There was one in the UK a while ago about Ryan Giggs, the soccer player, and whether he had had an affair or not. I believe it was the news and then there was a super injunction in which the court went to the media and said, "You cannot talk about whether Ryan Giggs had an affair or not." But more interestingly, not only can you not talk about whether Ryan Giggs had an affair or not, you cannot talk about the fact that there is an injunction preventing you from talking about whether Ryan Giggs had an affair or not.
So it's particularly [inaudible] in the sense that you can't talk about the fact that there's an injunction preventing you from talking about that. There are things like this in the US too, right? There are lots of things like this. You'll get a court order that says, "Here's a court order. You have to comply with you can't talk about the fact that you got this court order." So the problem is this policy worked when broadcast news and information was distributed by a few media companies, "The Guardian," "The Times of London," "The BBC," and a couple others. What happened on Twitter, a user found out about the fact that there was a super injunction -- this particular super injunction, and they tweeted the rumor with has tag "Super Injunction." That's how quickly like this news spread across the UK on Twitter. The only people who weren't talking about it were the media companies who were prevented from talking about it. [Laughter] It turns out when you tell an entire country you can't talk about something, it doesn't work nearly so well as when you tell a few media companies you can't talk about something. Because the penalties for the media companies are obviously severe. You can't penalize the entire company -- country for talking about something.
And we see this over and over and over again. So there are all sorts of fascinating policy implications for law and local law. Nazi speech is forbidden in Germany. So we have to do things at Twitter like -- you know, it's obviously we're going to comply with the rule of law in the countries in which we operate. So when there's a take-down notice for a Tweet that originates in Germany that's got Nazi hate speech in it, what we have to do is when someone in Germany goes to click the "view that content," we'll say, "This content is not viewable in this particular geography because of an appropriate legal request," but it is viewable if you're in the US and you click on that tweet and you see it. So what we're trying to do at Twitter to balance these combination of local laws and we want to respect the rule of law in countries in which we operate, and these policies that are perhaps not as up to speed with the technology in other cases, is when we get requests from government for tweets that have to be -- that the government feels need to be taken down or information about users that the government feels that they should have access to, we do a couple things. One, we always try to protect our users' rights to not have forced distribution of their private information, so we always ask that we be allowed to alert the user and that they can protest that if they want. And then two, every request like this that we get we hand over to an organization called "Chilling Effects" that they then publish on their website so people can at least see transparently what's being requested of us. Okay. So this is just, you know, going to be an amazing thing for policy folks and legislatures and so forth to think about.
So I want to close with just this general perspective on Twitter that was provided by this artist, this Chinese artist, Ai Weiwei. So Ai Weiwei is the Chinese artist who designed the Bird's Nest building the beautiful Bird's Nest Stadium that was used in the Beijing Olympics. And he was actually imprisoned in China for using Twitter. We're blocked in China, but hundreds of thousands of Chinese citizens access Twitter through virtual private networks that they use to hop over the great firewall. And Ai Weiwei is one of them. [Laughter] It's good, right, the great firewall? It's not mine. I heard Eric Schmidt say it from Google and I use it all the time now. So Ai Weiwei says, "I think Twitter is my art and language version." And he did this amazing exhibit at the Tate Modern in London. And the exhibit you're actually looking at here. And from far away it just looks like a bunch of white pebbles that he threw in a room and like leveled out. And that's like -- I'll hear that about Twitter sometimes, like, "Ah, just seems like a lot of noise," because from far away if you're not in it, participating in it, following your interest and people you care about, it can look like a lot of noise. A half a billion tweets a day is really, really noisy. But a bunch of things happen as you get closer to this exhibit. You start to realize it's hundreds of millions of sunflower seeds. And they're ceramic sunflower seeds. And as you get even closer, you start to realize that they're ceramic sunflower seeds and that they're hand-painted. Each one of these is hand-painted. And they're all completely unique and different from each other.
Erin Stratis: Hi. I'm Eric Stratis. I'm a student at the School of Information. And our first question is from Twitter. We were hoping you could talk a little bit more about activism, and specifically the idea of selectivism or how the convenience of the platform might undermine its impact.
Dick Costolo: Selectivism?
Eric Stratis: Yes.
Dick Costolo: That's a great one. I've never heard -- so like basically people who are like sitting around in their underwear at home like tweeting, you know, activist statements, or not. So here's how I think about that. There's an interesting, you know, two sides of the coin to activism on Twitter. On the one hand we had a while ago some very directed and specific conversations about anonymous user id's. So as you know, on Facebook or Google+ you have to sign up with your real name and use your real name, and everyone knows who you are. And on Twitter you can come into Twitter with an anonymous user ID. And we felt that was super important, because one of the things we saw in Tunisia at the beginning of the Arab Spring was that, I mean, look it's simply the case that there are some places where political speech is not only not tolerated, it's punished, and in some cases severely, right? And in Tunisia we saw that people who were organizing protests on Twitter -- and that's what Twitter and other social platforms were great for during Arab Spring was actually organizing protests. They were sending those tweets out with id's like #Slim404, right, because they don't want, you know, the police knocking on their door an hour later and saying, "Come with us." And in fact that's a real # handle. #Slim404, if you go look at his profile right now he's an interior minister in the new Tunisian government.
So the flip -- so that's great, and that's wonderful and we encourage that and we like the fact that if Twitter emboldens political speech. Of course the flip side to that and the flip side to the level playing field that everyone has a voice is it's very easy for people to sit at home behind an anonymous ID and lob, you know, trolling hateful comments out to people. You see that in places like -- we see it a lot in the UK around soccer games, soccer matches. A player misses a shot that would have like been an equalizer or sent the game into extra time, or they miss a penalty kick, those players get the most, you know, horrifying hateful speech directed at them from these anonymous users on Twitter. And then because it's a level playing field and you see all your app mentions and you see the entirety of the conversation, that stuff is right there in front of, you know, these players. And so one of the things we're trying to do internally is figure out how to deal with that, right, how do we keep the serendipity of discovering the new voice and the connection that would have never otherwise been made while not forcing people to have to sit there and just read 4,000 like you're a moron, all caps with ten, you know, vulgarities after that.
It turns out the beauty of the follow graph, and the follow graph was Twitter's I follow, you know, #XE. I follow #San Francisco Giants, et cetera; the beauty of the follow graph is it's fairly easy to start to figure out whether an account is new and doesn't have followers yet, or whether it's just simply a spamee [phonetic] unauthoritative, you know, account that's curling abuse at everybody else. So we're algorithmically working on ways of filtering out that hateful speech while making sure that descent and, you know, reasonable descent and discourse isn't filtered out. It's a hard problem. Yes.
Kelvin Yung: My name is Kelvin Yung and I'm a first-year master of public policy student. This question is from the audience. "Why 140 characters still?"
Dick Costolo: Still; so 140 characters is sacrosanct for sure. It started out because of the limitations of cross-network text messaging, particularly between the US and Canada where there was 160 character limitation on cross network text messaging, so we wanted 140 characters message, 15 characters for the # user ID that the tweet was coming from, and then 5 characters for something else we thought we would think of later to use it for that we've never come up with any interesting ideas around. [Laughter] We could obviously expand the length of it now too. It turns out that the 140 characters -- the beauty of 140 characters is the tremendous constraint it places on publishes, and the brevity and focus and economy of words you have to have in order to tweet 140 characters. And it does two interesting things. One, it makes it easier for everybody to tweet without having to feel like, "Oh, I don't have time to write a paragraph about this thing I'm seeing right now." It's just 140 characters so there's super low friction to publishing. But the secondary part of it is there is this poetry and the constraint of 140 characters that's really remarkable and magical, and we don't know why it is so we're not going to change it. But every time you talk to a comedian on the platform, again, Sarah Silverman, or Conan O'Brien or someone like that, they'll tell you, "I use Twitter to test out my jokes." And every time I write a joke that's too long my original reaction is, "God darned it, I wish I could try to --" you know, "I wish I could write a longer tweet, because I've got this great job, but the more I edit it to get it down 140 characters, it's always a better joke when I edit it down; always." So there's just something magical about it, and we'll never change it. We'll never change it.
Female: So our next question from Twitter is about VIT's and how often VIT's are actually the ones writing their tweets versus staff and what you think the consequences of having staff write for those people is.
Dick Costolo: Yes; great question. So the great thing about Twitter is it's almost always the people themselves. And I'll tell you a couple stories. So as I'm talking to someone who works with an athlete and they said, "He doesn't know what his password is to site X or site Y, but we don't know what his password is to Twitter." [Laughter] I won't talk about what site X or site Y were. But you can guess perhaps. So I think on Twitter specifically you've got these VIT's who feel like, "No way. This is my unfiltered direct voice to people, and it's going to be me not anybody else." And you see that from Kanye West, you see it from actors like Stephen Fry, on and on and on and on; Mike Tyson. You know, I could go -- you go through any genre and I could tell you it's almost always the people themselves. There are absolutely cases where staff does it, or helps out, perhaps in politics -- in the political sphere all the time. The best practice we've tried to foster around that is, "Look, when you're tweeting yourself at least tag your initials onto it, and then when it's not from you yourself, you know, people can start to get a sense for, 'Oh, this is from the team, and this one's from you yourself.'" So that allows you to -- you can still have someone who's helping you out, but every once in a while you can hop in yourself and tweet and make sure people really know that one's from you." You actually see that from Obama, right, he'll tag tweets with dash BO, and you know that one was from him himself, from not the staff.
I don't think it hurts anything to have it be the case that in some cases it's case who was tweeting that out. The great thing about this, again, I'll use the, "Twitter brings you closer" vision. When you've got this close-up perspective on everything, you can tell what -- people know when it's the staff, and that's fine. As long as, you know, the staff isn't really pretending to be, "Here, you know, on the brink of the mountain," and it's really, you know, you find out the guy was down in the jeep and it's the staff that's up there on the brink of the mountain. So people can detect that. It's when you make that inauthentic that people will go, "Okay. Like that's, you know, I don't buy that anymore. I'm out." In fact, we had a consumer electronics company in the US -- this is a couple years ago now, who had started using Twitter to do customer relationship management, basically answer questions people had about whether there was some problem with -- I know you're filtering these questions to me and I'm directing my answers only to you. I'll turn around here. [Laughter] Someone over there is going, "Wait a minute, that was my question." [Laughter] And so the customer relationship management department was using the platform to respond to these user requests. And then they got a bunch of followers. People were excited they could talk to this consumer electronics company now. And the marketing department jumped in and said, "Hey, we want to like start talking to these 50,000 people or 100,000 people now." And like the next message was this marketing message. They lost a ton of followers because people could immediately detect, "Wait a minute, this is not the tone of voice that this account was speaking with before, and it's someone pretending to be the people behind this account, and it's someone else now in it completely." People detect that inauthenticity super quickly, and because everyone is in the room together now it's much faster and easier to detect, and companies can't be -- you know, you can't be trying to snow or spin your audience anymore. That goes for politicians and everyone else.
Male: You talked earlier about the massive volume of tweets that are being sent now. Are we at that point where there's so much information that we're losing the quality of those interactions and thoughtfulness right now; and how does Twitter can sort of counter those effects?
Dick Costolo: Well, I think the volume of the information helps us, because it helps us do things like dispel rumors more quickly. The Guardian in the UK did a study around the London Riots where they determined that Twitter was particularly good at dispelling rumors that were being spread about the riots, even though it was also, to be perfectly frank, the source of some of the rumors. So people would say, "You know, there's the King's Cross Tube Station is on fire," and the more and more and more people that were on Twitter talking about the London Riots, the faster someone would take a photo of the King's Cross Tube Station and say, "I'm actually there right not and no, it's not." So I think that that volume only helps us. What we have to do, though, as more and more volume pours in, is a much better work algorithmically with our engineers of surfacing the very best signal. What we've tried to do around that is have particular instances on things like the Olympics when people are searching for hash tag Olympics. "Let's just show the very best tweets. We'll just show the tweets that the most people replied to and re-tweeted and favorited and then that will be the best of the best and we won't have all the noise. The problem when you do that is you lose the roar of the crowd, right; it's like the Brazil soccer game where Brazil scores a goal in the World Cup and everyone in Brazil tweets, "Goal." And if you went to Twitter and we only showed you the very, very, very best of the best tweets, you would just see, you know, "Brazil scored a goal, 1-0," and then, you know, nothing else, no other conversation, no other volume. So we need to find a way to keep the roar of the crowd while surfacing the best signal. So that's the big engineering and design challenge for us.
Female: Can you talk about why users aren't allowed to download their own tweet history?
Dick Costolo: Yes; I can talk about that. So the question is, "Why are users not allowed to download their tweet history?" It's funny, the question makes it sound like I won't let them. [Laughter] So here's the deal, so during the night of the presidential election, there was a point at which we were serving 1.3 million timelines. A timeline is my home timeline of all the tweets of the people I'm following; 1.3 million timelines per second. So keep in mind that's every second 1.3 million timelines going out that are threading together every single tweet that's coming in from around the world at 15,000 tweets per second, and organizing them in chronological order. So that architecture is really, really, really, really well-suited to real-time search and real-time distribution. It's really horribly suited to archive search and archive distribution. So if you wanted to do a search against our user database, our user db for that entire history, it would be so slow that it would slow down the rest of the real-time distribution of things. So what we're doing to enable users to download the entire archive history of their tweets is, as you can imagine, creating a different kind of archival system for these tweets. We're in the process of doing that now. And by the end of the year I've already promised this, so the engineers -- when I promised it publicly they're already mad at me so they can keep being mad at me. By the end of the year you'll be able to download the archive history of your entire tweets; you know, your entire tweet archive. [Applause] Yes. It's commonly requested feature. Now, again, once again, I caveat this with the engineers who are actually doing the work don't necessarily agree that they'll be done by the end of the year, but we'll just keep having that argument and we'll see where we end up year end.
Male: This is a combination of questions from the audience. We received a lot of questions about countries that censor information, in particular China. How well does Twitter work in countries where the government plays a significant role in censuring the information? And what steps, if any, has Twitter taken to address this restricted freedom?
Dick Costolo: Yes. So we're blocked in China and Iran. As I said, hundreds of thousands of users in China still access us through VPN's. In Iran we're not doing anything specifically. We do things when countries threaten to shut us down, or shut us down for a day or two because of some set of tweets that they found offensive. So in those cases we engage with those countries and try to have a dialogue with them about bringing the service back up. We always do that in a way that doesn't compromise our thoughts about the sanctity of users' private information for the fact they were going to show tweets that are legal to show in countries for those users. We will, as I said, respect the rule of law in a specific country that we operate about not showing those tweets that are against the law in that country to those users. So, again, the Germany case comes to mind. So focusing specifically on China and Iran, nothing we're doing in Iran right now. I don't think that we will do anything particularly to try to get on block there. In China, you know, I would like it to be the case that once the new government gets settled there, and once Xi Jinping gets settled in we could go to that government and talk to them. But we won't compromise the way Twitter works in order to operate within a country. You know, we won't start saying, "Okay," for example, "you can have government employees at the Twitter China office who see all the tweets and censor them when they go out if they don't like something, right, we won't do that. So hopefully we can get to a point where everyone realizes that hey, all this information being broadcast in public and available and being able to see what your citizens are saying, is actually a good thing and a helpful thing.
Female: How do you think the recent developments in the ability to work with and analyze big data have impacted Twitter and its operations?
Dick Costolo: Hmm; significantly. So, you know, we have a bunch of Hadoop engineers. Hadoop is the software we use to store -- do all our big data and big data analytics. I think there are all sorts of fascinating work that researchers, institutions and academics can do on our data to understand interesting things, like how effective is Twitter at dispelling rumors was an interesting one that I mentioned that the Guardian did. We have all sorts of researchers from universities across this country analyzing the corpus of -- massive corpus of tweets we have to try to understand patterns that emerge about how people communicate with each other and how conversations and means get started, how to distinguish means that are spamee from means that are organic and things like that. So I think it will be, you know, interesting and fascinating to see the kinds of things that people do with the data. One of the really cool jobs really that's emerging from big data are visualization, data visualization or interaction design around big data. So you saw the Japan earthquake visualization we did. We have a couple designers in house who work with a couple of our big data analytics engineers on, "What's the best way to visualize this amazing thing we saw in the numbers last night?" That's kind of a cool thing that never existed before, right? And that teams has -- that very, very small team has built a ton of fascinating visualizations for us internally that we've started showing more and more externally. I think that will become a really cool kind of job to have, and a new job.
Male: This is the last question that we have time for today, and maybe this will bring us back to before you started your talk about the digital agora and giving us some advice. What's the most important advice that you've ever received?
Dick Costolo: Oh, questions like that are so hard. [Laughter] The most important advice I ever received was the advice I gave to you guys at the beginning of my discussion. And it was in Steve Jobs' commencement address at Stanford University that I was not privy to seeing but red. And he talked about the fact that he dropped out of school -- I'm giving all these like -- he talked about the fact that he dropped out of school [laughter] and went to study typography and fonts, and you know, that really ended up becoming -- that foundation of his understanding of typography and fonts became the basis of the competitive advantage of Apple Computer and the Macintosh over, you know, IBM and Microsoft, and really the beachhead from which Apple Computer expanded. And he made that point to highlight to the students that, you know, he didn't plan to get where he was based on, "Well, I'll go study some typography and that will be how I create my beachhead against IBM," right? That's not how he got there. His point was, "You can only connect the dots looking backward. You can't connect the dots looking forward." So it makes no sense to live your life according to some -- either somebody else's ideas for what you should go do, or your own preconceived notions about in order to get to this, I need to go do this and this first. It only makes sense to do what you want to do and be -- and what you're passionate about because that will be how you end up in a place where looking back you can connect the dots and see that you landed where you wanted to land. And I mean, let me tell you, you are not going to hear from anyone who that's more true of than me. So that would be my advice to everybody in the room. All right; thanks very much. Thanks for coming. I really appreciate everybody's time.
Susan Collins: Well, unfortunately we are out of time. I would like to thank the School of Information for co-hosting this event with the Ford School. They have been terrific partners. I would like to thank all of you for joining us here this afternoon. I hope that you will come and join us for other policy talks that the Ford School hosts. And most importantly, I am so pleased, once again, to thank our speaker, Mr. Dick Costolo, for choosing the University of Michigan to present that fascinating and really inspiring presentation about where Twitter came from and so many thoughts about how it's used and where it might be going. And so just a final round of thanks if you'd like to join me.
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Oops. So I'll move that to the side for now. You can see you vote A for the affirmative, and B for the negative, and I'll keep it open for another five seconds or so [laughter].
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All right. See our results there [laughter]? Largely balanced, it appears [laughter].
Change your mind.
Nate Smith: And of course, the interesting part; we'll see at the end if any minds have been changed. But hopefully, regardless of whether minds have been changed, a degree of nuance has been achieved. So, thank you, everybody. Get your last-second votes in here, and -- all right. Good. Go. So I'm going to turn it over to the debaters' opening statements in a moment, but before I do that, I'd like to emphasize that you can submit questions not only via the old-school technology of pencil and note card but also via the new-school technology of Twitter. You should use the following hash tag, which should be on the screen, but it's -- the hash tag is...
Ford Policy Union.
Nate Smith: Ford Policy Union, all right, so that means the little pound sign, and then Ford Policy Union. So thank you very much, and enjoy the debate.
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Edward Luck: I feel rather dismayed to see those numbers because they can only go in one direction [laughter], so I'll try to dissuade all of you who were so affirmative to begin with, but I must say I am very much pleased to be here. I spent much of the last five, six years debating with member states, so I hope this will be no rougher than that, although I think the numbers in affirmative are rather different when you're dealing with the Cubas and the Irans of this world. Their views are maybe a little bit different, and maybe the differences will be a little less nuanced and maybe a little sharper than we have here tonight. But I thought I'd begin by posing a very simple question. Where did "responsibility to protect" come from? There have been those that have suggested it somehow appeared in the middle of the night from some people in the north who somehow wanted to impose their will on the people of the south as an invention of the strong to overcome the sovereignty of the weak, and that's not the way that we see it. We think that the "responsibility to protect" came from the history, the legacy, of the twentieth century. We remember the Holocaust. We remember the killing tales of Cambodia. How we remember the woods outside Strabinetze [assumed spelling]. We remember the carnage of Rwanda. There was a huge, huge public policy problem. There simply is nothing in the sovereignty of states that give them the right to murder their citizens in huge numbers. We have had a genocide convention since 1948. What we didn't have was any policy, any apparatus, any doctrine, any strategy to do something about preventing these kinds of crimes, or responding when they happened. And there were those who traced "responsibility to protect" to humanitarian intervention, through the efforts of Bernard Cushnair and others to talk about the right to intervene in such situations. We should remember that the "responsibility to protect" is not a nicer version, a neater version, of humanitarian intervention; it's an alternative. It's saying, "How do you do this, first and foremost in a preventive way, not simply trying to respond? How do you do it using the whole tools of the UN Charter, the Pacific Measures under Chapter six, the coercive ones under Chapter Seven, and the regional and subregional under Chapter eight, using the whole capacity of the international community?" It insists that any intervention be multilateral, not unilateral, that it be conducted under the international law and international organizations. There are those who charge that we are trying to create a whole new chapter in international law, that this is a radical departure, and it's nothing of the sort. And as I've said, and as the Secretary-General has said from the beginning, this is a political concept. It is based on existing international law. It is based on what we think is a proper understanding of sovereignty. States were not created in order to threaten their populations; states were created to protect populations. It's the most fundamental obligation of sovereignty. Citizenship has purposes, but it also has responsibilities. So, too, for leaders. Yes, they have certain purposes, but they have fundamental responsibilities, first and foremost for the populations on their territory. The "responsibility to protect" came from Africa. It came from the experience in Rwanda and elsewhere, where the African Union in 2000 agreed that under grave circumstances -- and they had three of the four crimes covered under RtoP, genocide, war crimes, and crimes against humanity -- that there was a collective responsibility to respond and intervene, if necessary, in internal affairs. They recognized that when you're killing thousands and thousands of people, refugees are spilling across borders; when ethnic groups -- other sectarians' groups are in different sides of borders, that that kind of massive killing represents a threat to international peace and security. It is not a national issue; it is fundamentally an international issue and requires an international response. So the UN wasn't in the forefront in inventing RtoP. In fact, it was responding to efforts happening in various regions, and the growth of international norms and standards in these areas. At the World Summit in 2005, all the heads of state and government agreed on a formula for the "responsibility to protect". It was then our job in Ban Ki-moon's administration to turn that into strategy and doctrine, to try to get 193 member states on board. A few are still a little reluctant, but by and large they're coming to be very supportive, and they understand what we're trying to do, and then to operationalize it, and apply it in individual situations. In Kenya, in Acope Deboir [assumed spelling], in Kyrgyzstan, in Guinea Conakry, in Libya, we have applied "responsibility to protect" by and large with positive results. You don't tend to read about it in newspapers because it has not required military intervention. It's required quiet diplomacy. It's required having the International Criminal Court or regional courts so there no longer is impunity, that there is accountability to leaders who would commit mass crimes. It has been a quiet effort in most ways, and it's been an effort, step by step, to bring the member states aboard, and get them to understand that this is not a threat to sovereignty; it is the essence of sovereignty. Who is the enemy of sovereignty? Those who would try to restore international law and order; those who would wantonly kill tens of thousands, in some cases more than a million, of their own citizens. Are they the ones who are upholding sovereignty, or are they the ones who are giving sovereignty a bad name? So we think what we are doing is -- first and foremost is trying to assist states to meet their fundamental responsibility. We believe the sovereignty comes from the people; it is not imposed upon them. And we believe in sovereign member states. There wouldn't be a UN without them. But we do recognize that there are obligations; there are responsibilities, that come with sovereignty. And we recognize that the general course of international law, of international standards, has been toward building stronger institutions. These are not institutions that make it harder to govern; they're institutions that make it possible for states to govern because there's an enormous sovereignty gap. It's hard to think of any issue on which the state by itself can deliver to its populations. It needs to join with others. That's why international law has grown in one area after another. That is why international institutions have taken on new roles, not as the enemy of the state, but to allow the nation state era to proceed longer, to be more sustainable, and to be more survivable, because it's limited things like clashes between states; it's limited weapons of mass destructions; and it's beginning to limit mass atrocities against one's own people. So we think that this is a fundamental direction of international law and governance. We think it's something that's very consonant with the times. And we recognize that, as more and more states come aboard, and as the practice becomes more established, there is not more opposition; there's more support because they recognize that, in fact, historically, most of the interventions have been south to south, they've not been north to south. Big, powerful countries are not looking for excuses to intervene. This is why John Bolton, when he was the US permanent representative, opposed the "responsibility to protect", because he thought it imposed obligations and restrictions on US sovereignty because it implied that we should do something about this kind of carnage. So we recognize this is not a plot of the big against the small; it is -- in fact, we found from member state after member state, they said, "When we had problems, when we had instability, when we had sectarian violence, no one was there to help. No one would respond." So it's not trying to force something on these states; it's something that they want, but it needs to be done on international law; it needs to be done in a logical way, a proportionate way, with a large stress on prevention, not on response. We recognize that if we're always trying to respond to all this kind of violence, it's helpless. The UN cannot substitute for the sovereignty of the state, but it can, and we think it is, helping to reinforce that sovereignty. Thank you.
Nate Smith: Thank you, Dean Luck. Professor Roth.
Brad Roth: Well, it's -- I should be wearing a black hat, I guess, and as representative of the 24%, I don't know. The difficulty with this debate is that I'm really in the position here of saying not so much "No" to Dean Luck but "Yes, but," and explaining the basis of the "Yes, but" is going to require a kind of journey through some issues about the nature of the International Legal Order and about the role that RtoP plays within that basic structure. And the difficulty here is that RtoP has become rhetorically a kind of device that has gone far beyond the kinds of modest propositions that Dean Luck has put forward here, and so in some sense I'm going to be arguing not as much against Dean Luck but against some of the kinds of extrapolations that perhaps Dean Luck himself would resist, but that are inherent in the kind of discourse that we have about RtoP. Dean Luck talks about RtoP having three pillars. The first two pillars really I don't want to talk about because the First Pillar, about the responsibility to each state to prevent mass atrocities within their borders, is not by any means an innovation. It's not an innovation in the sense that the states have long had international legal obligations, specifically with respect to these matters. It's also not an innovation because sovereignty itself as conceptualized in the fundamental documents of the present International Legal Order actually is conceptualized as a manifestation of the self-determination of the whole population of the territory without distinction, and that itself implies an understanding that sovereignty is to be respected for the purpose of protecting the fundamental interests of whole territorial populations. So the First Pillar of RtoP is not legally significant. The Second Pillar of RtoP is not really a matter of legal obligation; it's a political development, and one that I think all of us could get behind as a positive move in the international community to take responsibility for what goes on within the borders of other countries, to try and assist in thwarting efforts by certain kinds of rogue elements to engage in mass atrocities. But the Third Pillar is the crucial one, and I am going to have to disagree with the claim that RtoP is fundamentally not just humanitarian intervention dressed up in a neater way because what is really distinctive about RtoP, actually, is the revisitation of a very old argument in international law, which is essentially about the license of states to invoke uses of force that are presumptively unlawful in the International Legal Order in the name of humanitarian purposes. That is a live question. It has long been a live question, both within and without international law. It's important to recognize that when we're talking about a "responsibility to protect" in this third and crucial sense, we are talking not simply about responsibilities and obligations; we're talking about licenses. We're talking, if you like, about a license to kill. But I don't mean to be demagogic about this. A license to kill may be exactly what you need in certain circumstances, to head off mass atrocities or to stop mass atrocities in progress. But we're talking about something that is extraordinarily potent here, extraordinarily consequential from the standpoint of territorial populations, and that, applied in particular cases, is going to be a matter not of ending civil wars but participating in civil wars on one side or other.
And you have to look at the kinds of situations where interventions have taken place, whether expressly for humanitarian reasons or with humanitarian reasons invoked after the fact as a kind of rationalization for big power interests. Sometimes it's difficult to make the distinction between those two things. Sometimes people with different things in mind support the same kinds of interventions. But we've seen what's happened in many interventions around the world in places where powers who were seeking to affect matters on the ground, and perhaps indeed in a beneficent way, have made a terrible mess of things at great expense to human life in the territory. So it's important not to oversell the idea of humanitarian intervention, to create the situation where you have in mind on the one hand the terrible, ugly world of sovereignty, and on the other hand a kind of idealized vision of civilization to the rescue. In fact, the issues are much more complicated than that, and Dean Luck understands that those issues are much more complicated. That's not where we actually disagree. But the problem is that the rhetoric of RtoP has a tendency to take on a life of its own, and to undermine the fundamental structure of the International Order, I'm afraid, with respect to a kind of caricature of the non-intervention norm. The non-intervention norm is not a norm about non-responsibility. As I've said, sovereignty in the International Legal Order has long been predicated on the idea of responsibility for the territorial population. On the other hand, sovereignty is not reducible to responsibility, and much of the rhetoric that you hear is about sovereignty as responsibility as opposed to merely sovereignty and responsibility. When you start to reduce sovereignty to responsibility, you create all sorts of opportunities for various actors with various agendas to say that states have forfeited their right to sovereign inviolability in the International Order. That right to sovereign inviolability in the International Order is based upon, basically, matters of principle, matters of policy, and matters of politics; matters of principle having to do with the importance of the self-determination of territorial populations, people who have an unshared stake within their territorial boundaries in the future of public order and the basis for the creation of lives for themselves within the particular context in which they live; secondly, the question -- and, crucially, the question of policy, the problem of untrustworthy implementers of universal values. The big problem in the International Order is that interests and values are very much in flux. We have a horizontal system of international enforcement that creates the license potentially on the part of particular states in the name of the international community to intervene, rather than actually lead a centralized force carrying out that intervention. Now, of course, and the third part is the untrusted nature of the implementers, the fact that the international system requires an accommodation broadly among states with different interests and values. In order to have a basis for international peace and cooperation, we need to have a set of ground rules that are clear. Now, of course, what -- "responsibility to protect" has been accepted by the United Nations establishes that the Security Council is indeed the source of authority for making the determination about the use of force. On the other hand, there's a problem of a kind of disconnect between the substantive norms of "responsibility to protect" on the one hand and the procedural norms on the other, that the substantive norms speak about the state manifestly failing to protect their populations from genocide, war crimes, ethnic cleansing, and crimes against humanity. But if you include war crimes in that, unadulterated, that could describe any civil war, and it becomes very unclear what RtoP then has by way of its limits. On the other hand, if we are going to rely heavily on the procedural aspect to work this out, and to see to it that we respect the decision of the Security Council, then we have to be concerned about the vetoes in the Security Council, and the efforts to do end-runs around vetoes where the notion is somehow that the process of the International Order is incapable of fulfilling the promises that had been made substantively. And what I'm most concerned about is that the promise of RtoP substantively brings us to a kind of fork in the road, potentially, where we find ourselves in a situation where there's a demand for a kind of action that our institutions, by their very nature, are incapable of fulfilling. And the result of that is potentially one of two things, one, a collapse into cynicism, and the other, the embrace of a kind of unilateralism that we have seen invoked frequently in the International Order, often with very negative consequences. And so those are the concerns that I want to put before you at the outset. Thank you.
Nate Smith: Thank you, Professor Roth. Now, Dean Luck, you'll have a chance to pose a question to Professor Roth, and he'll give you an answer, and you'll have a chance to respond to that.
Edward Luck: Well, I don't run an academic institution, and I respect the academic rigor of your arguments, and I'm not myself a legal scholar, but I've heard similar arguments made by member states maybe for less elevated reasons. And you hear a lot of talk about the misuse of the "responsibility to protect", and you've talked about the potential misuse of the "responsibility to protect". My problem, and this is a question, is what specific cases do you have where member states invoke the "responsibility to protect" to do things they should not have done in other places? Yes, theoretically it can be misused. My problem is I don't know what those cases are. And likewise you speak of the Security Council as being an imperfect vessel for holding RtoP. Most political institutions are. What is the alternative? Because if you're going to talk about the hypothetical possibility of creating international institutions that don't have vetoes, that don't have blockages, that don't have political considerations, are we dealing with a public policy problem here, or are we dealing with a theoretical issue? So I'd be interested, both in terms of misuse and in terms of other vessels to make these decisions, are you talking about any specific instances, or are you talking about hypotheticals?
Brad Roth: Well, I think with respect to misuse, there haven't really been a great many uses of the Third Pillar of RtoP in practice, and so one -- in an official sense, and so then the question arises of whether states have been prone to invoke humanitarian considerations in service of other agendas, often at great cost. And we've seen, of course, that happen. The problem is that, in order to get people -- in order to get states interested in actually applying the power that they have and investing the blood and treasure they have in the more extreme versions of RtoP, you need to have some sort of confluence of interests between the states that are being sort of contracted out to do this task and the interests of the international community as a whole. And the problem there is that it's hardly clear whether that confluence of interest will hold throughout the duration of a project, and you can see a number of efforts of states to engage in intervention that have had sort of quasi-humanitarian justifications. Clearly, the issues of the war in Iraq and in Afghanistan, the justifications of the Ethiopian incursion into Somali in 2007, all of these were, of course, quite flawed episodes. None of them, of course, were under the banner of "responsibility to protect". And I'm not concerned that the Security Council is an untrustworthy instrument by and large for doing these operations. Where the Security Council actually invokes "responsibility to protect" and authorizes states, I think that's the best thing we have potentially. But the problem I'm concerned with is that the Security Council will end up becoming deligitimated by the vary fact of its inability to agree to the circumstances of what counts as a justification for the invocation of the Third Pillar. And, under those conditions, we're likely to find ourselves back in all of the other cases, going farther back, going back to various kinds of policies being asserted during the Cold War by various states, that all of us could probably agree had a kind of predatory quality under humanitarian guise. And it would be very difficult to contain that dynamic because of the way in which there would be a sort of legitimation of an end-run. But in terms of what the alternative is to all of this, I think that the alternative is to go for consensus in the Security Council, and then failing consensus in the Security Council, we are frequently going to have to bite the bullet and not go forward even if we think the Security Council's wrong in not affirming the invocation of "responsibility to protect" in those circumstances.
Nate Smith: Dean Luck, would you like a chance to respond to that or...
Edward Luck: I would. I think that in some ways your arguments against "responsibility to protect" actually in the end are rationales for the "responsibility to protect" because of the historic misuse of humanitarian intervention. I agree there has been some. The pre-RtoP history, in fact, is why we need to "responsibility to protect" as we have it, as agreed by all the heads of state in government as 2005, as embedded in the charter framework, as using the multilateral vehicle of the Security Council. We don't have any examples since 2005 that I know of where there has been this sort of humanitarian intervention, regardless of international opinion, regardless of international law. I think what we are doing with RtoP is taking that danger and that risk, which I agree is out there, and putting it in a legal, institutional, political framework to tame it, in essence. The problem was that before there was much more temptation, I think, for unilateral use of force. Now I think the standard is not a norm in UN terms because it doesn't have a binding legal quality. It is in political science terms, but not in UN terms, a norm. But the normative nature of it, the fact that this has become an accepted international standard, the fact that there is very wide public support and engagement, as this evening is one more example of that, shows that there is a public involvement in this issue which I think is enormously helpful because it will help to keep governments accountable. And I think what we have done, in essence, is taken a dangerous beast, in some ways, of humanitarian intervention, put it in a framework that tames it and puts it in a positive direction. So I think what we have done is to listen to all those arguments. As I say, I spent most of the last five or six years arguing, struggling, discoursing with member states, many of whom are highly, highly skeptical. So every year, we've gone back to the general assembly with a new report. The first report I wrote in 2009, the big report in the strategy, and then looking at rapid response, then looking at regional, and then this most recent one looking at this Third Pillar, the responsibility. So I think we need to look at this and say, "Okay, what's a comparator?" You know, we can't compare it with an ideal situation. What other norms have we seen develop over the years? We think of human rights, you know. Where were human rights seven years after the Universal Convention? Where were human rights in 1955? Did people think they had any traction? More states then were disputing saying it was an intervention in terms of sovereignty. But over time, the political power, and the moral assuasion, has been enormous; yet there's no real enforcement norm. And it seems to me that if you look at that kind of trajectory, you know, we might, 10 years, 15, 20 years from now, be saying "responsibility to protect" has become a vary ordinary part of our lexicon, and of the standards and expectations we have of states, and that's where I hope we're going to be. So we're at an early stage, but I think the trajectory is quite encouraging. And, as I say, we've applied it in seven, eight different situations with by and large pretty good results.
Nate Smith: Thank you. If you'd like to pose a question...
Brad Roth: Yes, well, I'm concerned again about this question of the fork in the road, so I want to ask you about the inclusion of this unadulterated term, war crimes, as distinct from genocide, ethnic cleansing, and crimes against humanity, in the charge for the use of force. And I'm concerned, too, about the relationship between that and the idea of anti-impunity because we've seen associated these two different ideas. In fact, RtoP was originally about just humanitarian catastrophe more broadly, and became narrowed to deal with specific crimes. But the more that it's associated with crimes, the more it's associated with this idea of anti-impunity. And I'm wondering whether you share my concern that insofar as anti-impunity comes to replace in some sense the core value of non-use of force across borders, as the core of the International Legal Order, that you end up in a situation where you potentially license a ruthlessness to end all ruthlessness, that if the quest is to end impunity at all costs, then don't we lose sight of the fact that peace is essentially peace among people who regard one another as criminals much of the time?
Edward Luck: Interesting questions. One, on war crimes. The four crimes that are covered, genocide, war crimes, ethnic cleansing, crimes against humanity, it's an odd group; I admit to that. Ethnic cleansing is not well-established in international law, though it could well be a precursor to other kinds of crimes. When we look at individual cases, almost always they'd end up being crimes against humanity. It's such a broad category, and if it's systematic and widespread, such as mass rape and other things, they clearly fall there. genocide is very clear, but you rarely know what it is until after the fact, given the proofs that are required in terms of intent and eliminating all or part of a particular group.YOu just don't know that when it's unfolding. War crimes hasn't been applied very much in this area because, one, we're trying to do prevention before a war takes place. And in most cases, this is not in what one would call a war unless you'd call a government, or in this case we've also included rebel groups or others, that they should be bound the same way. Non-state armed groups should have the same restrictions as governments in this sense. It's not usually a contest. Now in the case of Syria, actually, I think I was the first person in the UN system back in June, 2011, that said that evidence suggests that there's a real likelihood that crimes against humanity are being committed. Now more recently, since the ICRC has sort of said, "This is -- no, this is a civil war situation," people have started to call this war crimes. Now I agree; there's difficulties with war crimes because they can be individual acts. They may not be mass acts. They don't always fit very well. But these are the four sets of crimes that the member states agreed to, and so we accept that; we don't try a variance on that. But we have not seen that it is a hindrance to include war crimes. There could be the mass kinds of violence that we associate with atrocity crimes as a war crime. As I say, it's not been typical. Now on impunity, we think that accountability is at the essence of this. Government leaders should be accountable to their people, and they should be accountable to their neighbors and to international law. They don't just have willy-nilly to do what they want to do whenever they want to do it. And we don't have, quite frankly, very many tools. It's going to be rare that the Security Council is going to vote to take coercive action, and even rarer that that action is going to be military. We looked at Kenya. This is the first case that came up. We didn't even have the strategy laid out. It was the year before the Secretary-General's report. I was just beginning my work. But it looked to me, at least, that this was something that could unfold into something very, very nasty. It looked like ethnic cleansing was happening. We saw large groups of people, by tribal identity, being burned in churches. It reminded us of Rwanda. We saw the ethnic differences in Kenya. We saw where this could go. We saw the very dangerous combination of dissatisfaction about a political result tied to ethnicity, to tribal affiliation, and it looked very, very dangerous. So I said, "Look, we need to focus on prevention. We need to stop things. When you're responding, it's not going to be very effective, and this is a chance to make a difference." Fortunately, the Secretary-General agreed. Many other people didn't. And Kough Yunan [assumed spelling] in his mediation in Kenya used an RtoP lens, and when the Secretary-General, Ban Ki-moon, went there, he did the same thing. And he went to the leaders of the opposition, and he went to the president, and he said, "Your people are inciting further violence." And people forget that in the Summit from 2005, the agreement wasn't simply to prevent four crimes. It was to prevent the four crimes and their incitement. And that is very, very important because that's the first thing you can see or hear, and try to do something about. When Gaddafi says that his opponents are cockroaches, well, we heard that before in Rwanda. The Tutsis were cockroaches. When President Bagbo's [assumed spelling] supporters in Coatabar [assumed spelling] started marking houses by tribal affiliation, we said, "We've seen this before. You know, this has to stop." And it stopped. So, you know, what do you say to these people? You say, "These things are not acceptable, and there now are international criminal mechanisms, the ICC, the International Criminal Court, regional tribunals. You cannot take it for granted that impunity will protect you."
And that is a deterrent, and that will dissuade this kind of action. As long as you can deter it, as long as you can dissuade it, that's a lot better than having to send the marines after the fact. And so that's what we're trying to do. So if we take away impunity and say it's sacrosanct, you know, if we say we can't raise the accountability issues, that for us loses a big, big tool and a peaceful tool.
Nate Smith: Thank you, Dean Luck. Would you'd like to respond?
Brad Roth: Well, the concern that I have, of course, this is with the emphasis on anti-impunity in the context you're talking about, war crimes, you are always going to have in civil conflicts war crimes. And, indeed, the less technologically sophisticated the armed forces are, the less likely they are to be engaged in a kind of conflict that will look like the rules of the Geneva Conventions directly apply. And so the difficulty is that by stressing the notion of anti-impunity as crucial to all of this, you make it that much harder for people who have committed themselves already to then engage in any kind of peaceful process. The difficulty of low-hanging fruit here is substantial, where typically there is culpability going all the way down in these movements, where war crimes have been committed substantially by both sides, or even when they are only committed by one side, the difficulty is that you have people who are already sort of in for a penny, in for a pound. They can't simply throw their top leaders overboard because they're sufficiently implicated in the very first act that they've committed in all of this, and that creates a great deal of difficulty in trying to bring about negotiated settlements of these questions.
Edward Luck: Just a small response. I think your point is a good one, but I don't think peace is sustainable without justice. And I think we need to move forward on both the peace and justice fronts, and in the end, that combination, I think, is the strongest. So it's not to me an either, or situation.
Nate Smith: Thank you very much. We're going to have just five minutes each for some closing statements, and then we're going to move into the question portion of the evening. So, Dean Luck, if you'd like to give your closing statement...
Edward Luck: Well, I've enjoyed the debate so far, and hope the rest will be -- I don't know how much the numbers have gone down [laughter], but I appreciate the exchange. But I think it's important to remember that this is a school of public policy, and we have a fundamental challenge to public policy here. We have to find responses that work, that are legal, and that there will be sufficient political will to support them. And I understand there are lots of theoretical problems with "responsibility to protect", but I know from personal experience there are a lot of operational challenges as well. And I think we have to recognize that we're at the beginning of a journey here. This is a very new concept. What is really unusual is that people are trying to do something about these things, and I remember the International Court of Justice's decision on Syria and Swebinetza [assumed spelling], and, you know, not being a lawyer, I can say as a layman, as a political scientist, it looked to me what they were saying is, "There's a responsibility to try. You know, you knew something was happening here. You had every reason to believe the possibility of a huge atrocity unfolding was around the corner, and you did nothing. You may have encouraged it, may not have encouraged it, but you did nothing." And I think what we're seeing with RtoP, it's saying one of the worst features of the twentieth century, one of the worst features of human history, have been these mass spasms of violence against completely innocent people, In Cambodia because they wore glasses, they were educated, or visited another country, they should be eliminated; the Holocaust, because you're a gypsy, because you're a homosexual, because you're Jewish, you should be eliminated; Rwanda, because you're Tutsi, Anata [assumed spelling], Hutu, you should be eliminated. You know, you have to do something about that, and, yes, there are theoretical problems, but if you are frozen, and if you refuse to ask the tough questions, if you refuse to try because there are theoretical possibilities of abuse, you will do nothing and you will feed that spasm of hatred and that killing that goes on from time to time. And we have to recognize, every country, if you look back at your history, there are incidents of this sort. And I may be a little bit naive, but I believe in the idea of human progress, and part of that is finding ways to cope with the very worst parts of our nature, the very worst abuses of our government, and we have a collective responsibility to try. And that's what I think RtoP is. We have to be very aware of the criticisms. We have to be very aware of the possible abuse. But I think what often people see is only that little part of the Third Pillar on the use of force. It's been done once with Libya. We think that tens of thousands of lives were saved in Libya. Was a Garden of Eden created overnight? No, there are still problems in Libya. But we took very serious when Gaddafi had his forces literally at the gates of Benghazi, and he said, "Blood is going to flow on the streets." We took him by his word. We had no reason to doubt him. And I think it's a good thing that the international community responded. I think it's a shame that the international community has not responded effectively in Syria. But that has not stopped the Secretary-General from repeating again and again that there is a "responsibility to protect" there. But we recognize that the politics and the Security Council won't always make those things easy. We also know there are no simple answers, but to look the other way, as they did with Homma [assumed spelling] Rules 30 years ago when President Assad's father killed tens of thousands of people in a fortnight and no one said anything, there was no international reaction. That's the danger. You find with the history of genocide, the history of mass atrocities, it's when people are silent, when they look the other way, when they find fancy reasons for not acting, that's the biggest danger. It's not that people want to rush in, militarily or other ways, in these kinds of situations. The history is they don't want to do it, and the "responsibility to protect" is saying, "Ask the tough questions. Remember that you're all part of humanity, and try to act as best you can." And that is our obligation. It's not an obligation to succeed all the time. It's not an obligation to use this tool or that tool. It's to use whatever tools reasonably you can at this point in time because we realize that kind of carnage is simply not acceptable. That's not the kind of humanity we want, and that's not the kind of world we want. Thank you.
Nate Smith: Thank you. Professor Roth?
Brad Roth: Well, of course, my answer to all of this is "Yes, but." And so I really do embrace virtually everything that Dean Luck has said. I'm a little bit concerned about the proof of non-abuse being an N of one, and so we are too early in the process to know about abuse, and even with respect to Libya, we have this very serious question of whether the mandate was exceeded. It was one thing to use force to try to prevent what seemed to be an impending mass atrocity in Benghazi, which, by the way, is something that I supported. But then came the question of, "Well, what then? Do we go all the way to regime change, and is regime change really within the scope of the authorization?" There's debate about this. I think not, and I think that by transgressing the scope of the limited authorization, that we've created great problems, including bolstering the recalcitrants of the Russians amd the Chinese in future cases. "Fool me once, shame on me, shame on you. Fool me twice, shame on me." So the difficulties there are considerable, but I think that this is all a very constructive project, and all of what I have to say is as an internal critic of RtoP. And my concern has to do with the way in which this rhetoric can be abused, and particularly the way in which the setup for this is likely to create abuse, not because the Security Council will abuse the authority, but because what will happen is that the demand for intervention cannot be satisfied by the kind of diverse International Legal Order that we have, which is dominated by competing conceptions to this day of what counts as legitimate and just public order within states. We have the problem, not all so far unlike the circumstances of the Cold War as people like to imagine, that you have very different conceptions of legitimacy out there, and very different notions of what is an appropriate moment to intervene in these sorts of circumstances, and where you have deadlock, which is just predictable, then people are going to run with the idea of sovereignty merely as responsibility to create other kinds of realities on the ground. And one must always remember the potential for massive human costs to all of that. Furthermore, I want to guard against a kind of caricature of the nature of civil war violence. Yes, it's true that there are these cases involving ethnic cleansing and genocide and so forth, and I am four-square in favor of doing whatever is necessary to prevent those kinds of atrocities, but it's also important to recognize that civil wars are fought all over the world over the fundamental terms of public order by contesting parties that have deep constituencies where it's become a cliche to say that "yesterday's terrorist is tomorrow's statesman," but we've seen it happen over and over again.
We've seen people who are considered to be criminals in one era, like the current presidents of Brazil and Eribwi [assumed spelling], for example, become now highly respected and broadly respected presidents of their country. We have situations like el Salvador, Nicaragua, where we have not had a settling of accounts, and none the less where we've had things moving forward in all sorts of improbable ways where basically people needed to agree to disagree about who were the heroes and who were the villains in order for any kind of life in the society to go forward. We have to remember that we have both within states and within the international community fundamental disagreements about questions of legitimacy and justice. And where there can be no consensus, where there aren't clear cases of genocide and ethnic cleansing, and crimes against humanity, we're going to be stuck with partisan conceptions about what counts as criminality that people are going to take as license to invoke the notion of sovereignty being merely responsibility as a way to ignore the fundamental territorial inviolabilities ascribed by the international order to the sovereign states, and, of course, particularly in favor of weak states to guard them against potential predations by strong states that have potentially ulterior motives in seeking to impose their will to choose sides within internal conflicts.
Nate Smith: Thank you -- thank you both. This has been great so far, and we're going to open it up for audience questions at this time. Our first question concerns Libya. Obviously, this is pertinent and on many people's minds as it's relatively recent and appears to be a clearcut example. This is from the audience. "Isn't Libya an example of the dangers of RtoP? The big powers went beyond the mandate from the Security Council and imposed their political solution via a regime change. This is the Russian concern. Don't they have a point?" Dean Luck, if you'd respond first?
Edward Luck: Well, I think the question of regime change is an important one, and, needless to say, we've had a lot of discussions with the member states about that. And I'm going back to New York later this week for a retreat with the Security Council. I'm sure we'll have some more discussions there. And my response has been pretty clear. Yes, we believe in regime change in the sense that we want regimes to change their behavior. It's not about changing personnel. And personally, as I'm no longer the UN assistant, I can say we were not happy when the heads of state of the US, the UK, and France published that [inaudible], or whatever it was, saying that the object was to get rid of Gaddafi. We don't think that's the fundamental point. We think what you have to do is get a different kind of sets of institutions in Libya. If Gaddafi were to stay, it would have to be that he convinced people that he actually had a different kind of intent. But we don't want to reduce it to one person. I don't think the fundamental question in Syria is whether Assad comes or goes. The fundamental question is mass killing, and we worry very much about the future in Syria, where there is no international intervention in terms of that small 12% of the population that's Alawite, other minorities there if there's a change in regime, and there's no stability there. So the goal of RtoP is not to change the name on the door; that's not it. The question is to change the behavior. That said, my guess is that Libya is better off today than it would have been if Gaddafi had completed his work in terms of eliminating his opponents. You take a country like that, where you don't have well-developed civil society, you don't have well-developed political traditions, there are going to be complications. Nation-building doesn't happen overnight. It's a place where the UN has been deeply, deeply engaged, where we think there are a lot of positive trends, but there's still a lot of instability. We saw this in Benghazi, unfortunately, with the killing of the US ambassador there. But things happen, and you can't attribute everything that's bad happened because of RtoP. So it seems to me that, on balance, it was the right thing to do, but were there some excesses in terms of regime change? I think there probably were. But there have been studies of the number of civilian casualties and other things, and they actually were remarkably low given the amount of violence that there was there. And we have to remember the course that Libya was on. They might still be involved in a horrific civil war if there hadn't been that kind of intervention.
Nate Smith: Professor Roth, would you like a chance to respond?
Brad Roth: Well, I think had the foreign powers remained within the terms of the mandate, you would have had essentially a stalemate in civil war, which might have been worse than what you have now. But the difficulty is trying to evaluate the move beyond that because, on the one hand, "responsibility to protect" is supposed to be about preventing the atrocities, but then the logical next step, once you've prevented the onslaught, is, well, now what? Do you simply then try to let the two sides fight it out in a fairer manner or something, in which that sounds like it makes no sense whatsoever, or do you try to determine the outcome of the armed conflict, in which case you're into something which hadn't been agreed to in advance? And the difficulty with that sort of situation is breaking down the kind of system that makes possible accommodation over these matters in the first place, and we're seeing an outgrowth of that in Syria. I'm not necessarily convinced that the Russians and the Chinese would have gotten on board with Syria, even if they hadn't been betrayed in the Libyan context, but I think they do have a good talking point. And the Syrian context presents another kind of problem where you can have, with a breakdown of consensus, a situation where you have, as in the Cold War, intervention drawing counter-intervention. The assumption of so much discussion about humanitarian intervention is that the international forces can simply intervene to stop the war. That frequently is not the case, and in many instances, if you're going to have an intervention that is going to be seen as illegitimate by other powers who are going to take that as license to feed the fire by arming the opposite side, you can have simply an intensification of the conflict, so it's just unclear what the consequences of these things might be. At the same time, I was with you; I mean, I supported the initial effort in Libya, and hardly had the solution as to what one gets into after that.
Nate Smith: Thank you. I have a question now for Professor Roth to address first. "Looking at the recent examples of Libya and Syria, it might appear that the 'responsibility to protect' is, to a significant extent, subject to the feasibility of the military mission. To what extent should practical limitations be taken into account in the face of grave human rights violations?"
Brad Roth: I think, actually, that everyone is pretty much in agreement on this, that the issue that I'm speaking to is the question of the license for intervention, but the legality of the intervention doesn't actually over-determine the moral question of whether or not to intervene in one direction or the other. It may be circumstances in which it's lawful to intervene, and there is a mandate to intervene, and it's a really bad idea because what we can project as the consequence is going to be one that will increase rather than decrease the human cost. At the same time, of course, there may be circumstances where there is no legal authority, and there is a clear violation of international law at stake, and then we have to take on a different question, which is whether or not, if we believe strongly enough, that a massive atrocity can be feasibly prevented at a much lower human cost, whether indeed we have to sort of somehow weigh that consideration against the damage we're going to do to the international order and the international scheme of accommodation by breaching the international norms. Those are very hard questions, and I think they're on some kind of a sliding scale that we have to consider. And I'm simply wanting to say that the importance of maintaining the integrity of the international order is a critical element of that decision, not necessarily that it over-determines one's moral position ultimately.
Nate Smith: Would you like a chance to address that?
Edward Luck: Yes, I would. I think Syria is a quandary from any viewpoint. It was a tough one. As Professor Roth said, I don't think the Chinese or Russian position would have been different if Libya had not happened. I sometimes wondered if Syria happened first and Libya happened second, would things be different? I don't really think so. I think the calculations made in Mascore, Beijing, don't have much to do with "responsibility to protect", don't have much to do with Libya. It's just geopolitically something that matters to them for particular reasons.
But what I think we see in Syria is this responsibility to try to do something. If there is no international outrage, if there is no international response whatsoever, as the case 30 years ago in Syria, that really is saying, "It's okay to do whatever you want to your people. We're going to look the other way;" as in the Holocaust, people didn't want to acknowledge it existed. They wanted to look the other way. That simply isn't acceptable, but that doesn't mean we automatically have good, effective policy tools in every case. But I think a political cost is being paid by the regime in Syria for the way it's acting, and no the opposition is paying a political cost because of the excesses on its side of the ledger. And these both sides need to be held to a higher standard than they've been able to perform, and its' interesting. The proposition tonight talks about intervention, including possibly military intervention. But if you hear these complaints, the squealing from various regimes when their human rights behavior gets criticized, the very verbal condemnation is to them intervention in sovereignty, intervention in their internal affairs, so I think we have to recognize that the term we use at the UN is not intervention, of course. We talk about engagement, degrees of engagement over time, and early active engagement is extremely important. The problem with Syria, of course, is we haven't had any way in. It's the kind of regime that doesn't give you any room. We've been trying to find ways of working with individual communities within Syria to try to build up some barriers if mass violence goes, because we've seen in most of these cases some communities are not affected as much as others if they have certain things in place beforehand, and we just haven't been able to do a very effective job of that in Syria because of the nature of the regime. I can think of a few other places it would be like that today, but I think the good news is that borders are more porous than they used to be. Movements about human rights and atrocity prevention are much broader than they used to be. Communications is different than it used to be, and so the public engagement, the moral engagement in these kinds of issues, and potentially most cases, diplomatic engagement is much more possible than it used to be before. But Syria happens to be just a very, very tough case. But I think it's a lot better that people are trying to do things than sitting back like 30 years ago and saying, "Well, do whatever you want to your people. It's not our concern."
Nate Smith: You mentioned the Holocaust, and we actually have a thought experiment here from an audience member regarding World War Two, if I might pose it to both of you. World War Two involved both international aggression, i.e., invasion into Western Europe -- or Eastern Europe, and the genocidal policies of the Nazis. Under RtoP, would these genocidal policies alone have warranted full scale intervention, and the use of force on the order of World War Two?
Edward Luck: It certainly would have justified intervention. You don't first go to military force, but clearly you would have had to go to that eventually. And I think if you look back, the Founding Conference of the UN in San Francisco in 1945, the Holocaust really was barely mentioned at all, and that was by an NGO or two. The governments, including our own, didn't want to face that fact one way or the other. And, you know, people say, "Well, the UN was the response to the Holocaust." Unfortunately, it wasn't because people wanted to look the other way and pretend it didn't happen. And that's the kind of shadow that I think is going to be with us over these kinds of policies, and that's why I argue better to have early engagement, better to try to do something, even if you're unsuccessful, than not. That's fundamentally what RtoP is, finding ways of responding, and get as many people as possible behind that. You know, if you look -- if you had a UN, which you didn't have at the time of the Holocaust, and if you had been able to have the same kind of international will that you have now, there would have been all sorts of things that one could have done. Would that have changed the German program? I don't know. It might have; it might not have. But we know what happens when you don't try to engage those things. And I've gotten very interested in the individual "responsibility to protect", and my wife is a psychologist, and I help out in San Diego to help develop that further, because in the end it's not just governments and international institutions that have responsibilities, but individuals. And it seems to me, the governments are not black boxes; they're made up of individuals. They make choices, and these kinds of crimes are mass crimes; they require mass mobilization. So many, many, many, many people get involved in this, and they each make their individual decisions for whatever. Are they going to stand up to hate speech, and the singling out of particular minorities within a country as targets? Are they going to stand up to incitement? Are they going to hold their own officials accountable? Are they going to pay attention to these things? Are they going to find it convenient to join the masses in crushing some minority? You know, those are fundamental issues, and we can't pretend that our societies are immune from them. So when I have been touring around the world in these things, you know, so many regions, they say, "Well, the RtoP is fine because it doesn't apply to us." And you remind them, "This happened next door. You know, it could happen next where you are." And it's not a coincidence that when everyone said, "This is all about the global south," the Secretary-General's first speech in RtoP was in Berlin to remind people.
Nate Smith: Professor Roth?
Brad Roth: Yes, well, there's a line, typically you'll hear it in law schools, among conservative law professors particularly, that hard cases make bad law. And I've always opposed that view. I don't think that hard cases make bad law. I do think that extreme cases generate bad dicta, as we say, that there's a tendency for fixation on extreme cases to give rise, not to narrow exceptions that take into account the full range of possibility, but rather, to use individual cases as a way of entirely seeking to discredit particular sets of norms. And so a situation like the Holocaust, a situation like Nazi Germany generally, gets pulled out very frequently in many kinds of discussions, both in the context of intervention and in the context of international criminal justice as this sort of example that seeks to problematize everything about sovereignty, everything about non-intervention, everything about immunity, when, in fact, Germany was an extraordinary case of a commission of pan-continental aggression, the commitment of multiple genocide, the Legal Order that not only breached the international system but actually sought to, and effectively did, destroy the International Legal Order. And so it -- one has to be concerned about examples of that as, you know, applying to circumstances where we have a functioning International Legal Order that has particular kinds of mechanisms of response, and fundamentally the question we have in dealing with issues is how we address institutional failures at the international level, and that's a very different kind of question, I think. The Rwanda genocide is another example that is typically pulled forward in this respect, and the important thing to note about the Rwanda genocide is that what was the failure there was entirely the failure of political will. It was not the failure of the license to intervene. It wasn't as though people were chomping at the bit to intervene, but restrained somehow by an international norm of non-intervention. The authority was open for any state that wished to intervene under the circumstances. The fact is that no one wanted to because no one had sufficient interest until such time as the French decided that they wanted to intervene in Operation Turquoise, and they did so in ways that potentially were infected by their own history of relationship to the perpetrator regime, and, therefore, perhaps then people disagree about the facts on the ground in this respect, but perhaps made things worse rather than better as a result. And so we always have to be careful in looking to the big, bad example as a way of reconceptualizing the fundamental structure of constraint on the exercise of power in the international system.
Nate Smith: You mentioned Rwanda, and that brings us to another question that I'd like to pose to both of you, and I'd like to give you the first crack at it. Do supporters and skeptics of the RtoP draw different lessons from the genocide in Rwanda? And, by contrast, would they draw different lessons from the UN intervention in East Timor?
Brad Roth: Well, with respect to East Timor, the important thing to note is that the sovereignty of Indonesia that was claimed was never internationally recognized with respect to East Timor, and so East Timor was always a kind of sui generis situation. It was always within the scope of special UN consideration of concerns about self-determination and decolonization.
The decolonization of East Timor from Portugal was thwarted when Indonesia invaded in 1975, did so terribly, bloodily, and imposed itself on that territory, and the international response to all of that has to be seen in that context, and it's very much within the basic framework of the self-determination and non-intervention regime that actually existed in the international system. With respect to Rwanda, I think, yes, people do draw different conclusions, and I would draw different conclusions to some extent, and to other extents not. I think that, on the one hand, the failure in Rwanda was politically very significant in drawing attention to the need of the international community to respond much more vigorously to these circumstances. It was a horrific embarrassment to the International Order to have sat idly by and let 800,000 people be murdered in the course of three months. No question about that. But, again, the greater licensing of the use of force in such circumstances doesn't actually provide any kind of guarantee that you're going to get more of the intervention that you want in the places that you want it. The problem there wasn't a failure of license; the problem there was a failure of political will. And, as I mentioned, where there was the political will, that perhaps is the exception that proves the rule because the intervention of the French was at least certainly questionable with respect to its positive efficacy. And one could go quite farther in speaking about how the French intervention actually gave the possibility of who to extremists to escape across the border, and lead to further problems in the Congo that ultimately culminated in a civil war and set up mass atrocities that dwarfed that of Rwanda. Of the 800,000 people killed in Rwanda, horrible as that is, it pales by comparison to some 3,000,000 people killed in the chain reaction events that took place across the border in the Congo after all that had taken place. And people can disagree about whether or not Operation Turquoise actually had some effect in helping to bring that about, but the Rwandan case, I think, is much more complicated in terms of its lessons for these issues than is ordinarily acknowledged.
Nate Smith: Dean Luck, would you agree with this assessment?
Edward Luck: I think there are areas here that we agree. I think I'd probably say it a little bit differently. And I remember Rwanda rather vividly. I actually remember being on the 38th floor, Secretary-General's floor, the day when there was so much pressure to pull the troops, the UN troops, out. And one of the things we forget is how much this was related to Moga Deshu and Black Hawk Down, and the attitudes in Congress in Washington about US involvement in these kinds of situations. And I remember the enormous, enormous pressure to find a thousand reasons not to intervene, to find a thousand reasons not to respond in these kinds of situations. That was the onus in those days, and, I think, we find the danger and the risk not only of acting, but the danger and risk of not acting and coming up with excuses not to act, and I think it's partly a question that RtoP, in my view, makes you ask sometimes the right questions in these kinds of situations. And if you don't ask the right questions, you won't get the right answers. I remember very vividly the focus in those days was on the Arusha Peace Process, and Rwanda was a member of the Security Council at the time, feeding false information -- this is the genocidal government -- about what was and wasn't happening. The UN didn't have the early warning mechanisms in those days. It didn't have the assumption that you should look very hard at the possibilities of this kind of sectarian violence. Instead, it was, "Don't disrupt the peace process. Let it go forward." And I remember the enormous pressures, first from Belgium to withdraw its forces, because, remember, it was 12 Belgium peacekeepers who were murdered trying to protect the Hutu moderate prime minister, and they killed her and they killed the peacekeepers at the beginning to show that they meant business, and assuming correctly that after Moga Deshu, the international community didn't have the will to take any casualties in these kinds of situations. So, yes, I think that if there had been the "responsibility to protect" in those days, and you had the early warning and other mechanisms, if you had a presumption like this Secretary-General does that you have to look very carefully at the possibility of this kind of violence, you would have had a very different result. I was with Romeo Delair [assumed spelling] a couple weeks ago, who is a Canadian colonel then, now a general, who refused to leave. Three times, the Secretary-General Boutros-Ghali called him, told him it was time to go; the mission was over. Three times, he told the Secretary-General, "NO, I'm staying." The western forces by and large left. The Canadian forces, other African forces, stayed. I know the general very well, the Canadian who stayed, and he said, "We have to stay to protect our African brothers." We don't know the numbers, but tens of thousands of lives were saved because those two individuals said they would stay, even though they were told they were supposed to leave. So that's where I get back to the individual "responsibility to protect". If you don't think saving those lives is terribly important, if you have a lot of theories about why that's too complicated, you say, "Yes, well, this is a tough one. Let's go somewhere else and do something else." But they said, "No, this matters," and they stayed, and a lot of people are alive today because of that.
Nate Smith: Could you address Professor Roth's point that the eventual French intervention down the line ended up costing many more lives than it saved?
Edward Luck: Well, since I'm no longer at the UN, I can comment. I'm a permanent member of the Security Council, I suppose [laughter]? I agree with his point about their involvement with the Hutu side throughout. Some questions of perhaps behind some of the arming of the government, etcetera, perhaps being a little more willing to look the other way. And yes, Operation Turquoise, of course, was not under RtoP. There was no RtoP. It tended to protect the retreat of many of those who had been most responsible for the genocide. That then did destabilize the Eastern DRC. And I think all of this shows that if you had "responsibility to protect" in place, if you had a doctrine, a strategy, to carry it out, if you had wide international acceptance of that, if you had a Secretary-General very attuned to that, we would not have the kinds of problems we have in Eastern DRC today. It's in the absence of all of that that we ended up with this mess, so you can't tie that to RtoP. I would think very much it's the lack of RtoP, it's the lack of an effort to really take these kinds of issues seriously as a high priority in national and international policy, that allowed this to happen. You know, because we find with all these crises, in our little office that we have in "Genocide Prevention and Responsibility to Protect", we were asking questions that no one else was asking. We were concerned about things that other people were not concerned about. You had a lot of big departments with a lot of big responsibilities, whatever, but if you don't have people saying, "Our job is to prevent atrocity crimes, and that is job one, and we're going to do that," it's not going to be done. And if you didn't have RtoP, it would not be done because no one would have that job, no one would be looking at the early warning, no one would be saying incitement is bad, no one would be looking at the histories and ethnic differences and things within the society, and no one would look at that course of events down the road. I mean, you know, in Syria, we're very, very worried about eventual genocide, and probably the genocide against the Alawites because President Assad has used them in this way. That's an enormous danger. If you're just talking about peace processes and, you know, who should rule Syria, whatever, you're not going to ask those questions, and by and large those questions are not being asked, and I really worry what's going to happen in the next couple of years there.
Nate Smith: Professor Roth, we're just about out of time, but if you'd like 30 seconds, 45 seconds, to respond to that...
Brad Roth: Well, yes, I'm kudos on all of these matters. I think that it's excellent what the United Nations has attempted to do in many of these circumstances. But the fundamental problem, particularly from the standpoint of international law, is what you can actually expect by way of exercises of such political will as you have or are going to have. And if there were the wholesome political will on the part of empowered actors to do what's necessary to prevent atrocities for purposes only of seeing to humanitarian ends in these places, yes, that would be a wonderful thing. The question is, "Do we have any evidence, actually, that that is the sort of political will engaged in these sorts of questions?" And if we don't have assurance of that, then what we have basically are legal protections that deal with conditions of mistrust, as legal protections so frequently do.
And so we have a continued significance of the non-intervention norm, subject, of course, to the kind of consensus that is required for Security Council Chapter Seven resolution. And in the absence of that, the important thing is to not use RtoP as a way of deligitimating traditional constraints on the exercise of power across borders that we know from history have not tended toward humanitarian outcomes.
Nate Smith: Thank you very much to both of you. I'd like to give you a round of applause.
[ Applause ]
I'm going to turn it over briefly to our professional debate judge here to make some comments for the edification of the wider University of Michigan community while I get our electronic polling set up again. Thank you.
Maria Lou: I feel a little weird with that title, but I think that you guys are both fantastic debaters. If you -- it was great. I think that the way that you framed the arguments, whether it was through the historical progress of the benefits of RtoP or the potential problems and the use of examples, demonstrates that the resolution that we've come up with here is a bit too simplistic to really what the RtoP is about. So I think that there's agreement that we all probably -- we have the responsibility to try, and there's, I think, a consensus here that we need to add. I think that what this debate does is raises important questions about potential legal or political difficulties, or operational difficulties, of what the RtoP kind and cannot accomplish. So I think that we have turned -- we were turned in the right direction. I think that this is a demonstration of why debate and discussion is good, because it might help us figure out how to come closer to an optimal solution instead of trying to polarize the discussion. So I thoroughly enjoyed the debate, and I want to see what the new results are [laughter].
Edward Luck: It sounds like you could be a diplomat [laughter].
Maria Lou: Maybe, I don't know. I'm in law school so we'll see [laughter].
Nate Smith: Okay, so the resolution is on the screen. Feel free to vote here, and make it known if the discussions night has changed your mind. And also, please let us know in person, and by email, and contact, if you learned something else. Maybe your mind wasn't changed, but maybe your understanding gained nuance or texture. All right, I see a few changed minds up there. It's great to see. So, once again, I'm going to stop it in -- oh, you know, we see a dissenting vote on E over there [laughter].
So, while that's up there, I'd like to thank the speakers. This has been a very thoughtful and engaging discussion. I think that we tackled a lot of the nitty-gritty details with respect to the theoretical foundations and "responsibility to protect", as well as to the implementation and operation of these interventions or non-interventions. To those of you with iClickers, I'd remind you to return them outside in the foyer, and get your M-cards back. And we hope to see you again at our next policy -- Ford Policy Union debate. It's going to take place on January 16th, and it will feature our own Alan Geardorf [assumed spelling] and Thea Lee [assumed spelling] of the American Federation of Labor, Congress of Industrial Organizations, debating the pros and the cons of free trade. Thank you very much, and thank you very much to our participants.
[ Applause ]