George Shultz, Fmr. Sec of State, Addresses Policymakers on Capitol Hill for the First Time in 20 Years


On March 8th, 2013, For the first time in 20 years, Ronald Reagan's Secretary of State George P. Shultz (1982-1989) visited Capitol Hill to publicly address congressional policymakers.

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On this rare visit, Secretary Shultz, a member of PSA's Advisory Board, spoke to a standing-room-only crowd on Capitol Hill. The topic of the discussion was national security, energy, and climate change. Joining PSA Executive Director, Andrew Semmel, Secretary Shultz discussed arguments for the importance of the topic and ideas to address the issue urging serious bipartisan dialogue.

Although most policymakers and pundits are not talking about climate change in terms of national security, those at the forefront of this field are. As climate change has become increasingly well-recognized as a ďthreat multiplierĒ in the security community, Secretary Shultz joins other prominent national security experts who are speaking up about the issue.

ďIt is quite clear that our national security establishment, especially over the past couple of years, has been keenly aware of the threat of climate change Ė but now itís time to act.Ē

- Lee Hamilton, Congressman (D-IN) 1965-99, Former Chairman of the House Committee on Foreign Affairs, Former Chairman of the House Permanent Select Committee on Intelligence

ďThe U.S. national security community, including leaders from the military, homeland security, and intelligence, understand that climate change is a national security threat. They're not talking about whether or not it is occurring Ė it is. They're talking about addressing the problem and protecting the American people. It's time Washington does the same.Ē

- Tom Ridge, Secretary of Homeland Security 2003-05, Governor (R-PA) 1995-2001

ďThe combination of Ö [carbon] feedback loops together with growth in world population and use of energy is going to put us into a situation in which we have a number of national security issues that are going to come cascading down on us.Ē

- R. James Woolsey, Director of Central Intelligence 1993-95

Secretary Shultzís visit follows the recent launch of an open letter organized by PSA identifying climate change as a national security priority signed by 38 former high-ranking Republicans, Democrats, and Independents Ė including seventeen former Senators and Congress members, nine retired generals and admirals, both the Chair and Vice Chair of the 9/11 Commission, and Cabinet and Cabinet-level officials from the Nixon, Ford, Carter, Reagan, Bush (41), Clinton, and Bush (43) administrations.

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EVENT TRANSCRIPT

Secretary George Shultz Ė

PSA Event on Capitol Hill March 8, 2013

SHULTZ: Thank you. I really feel privileged to come and talk with Hill staffers particularly on the subject of energy and national security. Iíve been here for a couple of days with colleagues from MIT and Stanford talking about energy game changes. And Susan Hockfield is here who was president of MIT, led the MIT Energy Initiative. Sally Benson is here who has run the Stanford energy effort. Tom Stephenson is here whoís my partner in the Shultz-Stephenson Task Force and Jeremy Carl, just so we have our team and weíve been here in Washington talking about game changers in the field of energy.

I believe, and I think thereís a very good case to be made, that we here in the United States are on the cusp of a true revolution in the field of energy, and if we can capitalize on these opportunities weíll have a much better energy future from the standpoint of our national defense, from the standpoint of our economy, and from the standpoint of our environment (inaudible 00:01:26) so let me get at that a little bit by giving you two stories.

Story one way back in 1969. Iím secretary of labor. And for some reason the president makes me chairman of a cabinet task force on the oil import program. President Eisenhower thought that if we imported more than 20% of the oil we used, we were asking for trouble in national security terms and you could see if you analyzed the situation that that was going to be a very hard thing to hope. So we made a report, and we said the problem -- national security problem is not so much a military attack as it is turmoil in the Israeli-Arab situation that will cause (inaudible 00:02:24) we ought to get prepared. We ought to have a repository for oil that we could use in an emergency. We should limit our supplies from that part of the world and so on. President patted me on the head, said nice report, it was published, there were hearings in several congressional committees. People were interested but nothing was done. So a few years later Iím secretary of the treasury. Thereís no energy department. And on comes the Arab oil boycott. I said to myself, you know, President Eisenhower had a point, because it was directly cutting off supply from the national security standpoint. At that time (inaudible 00:03:10) generated a lot of electricity by oil. So Christmas lights were doused. President requested, and it happened, that gas stations closed on Saturday afternoon and Sunday, that would restrict driving. And so it messed up our national security. It messed up our (inaudible 00:03:33). And I remember it specifically. I also remember that people came in and said look here are alternative ways of producing something in the energy field that might work. They looked interesting, but I could see they were a long way from any possible realization. So I learned from this. I learned that itís very hard to get a decision on a strategic issue on the basis of analytics alone. Something has to happen for people to do something. I learned that when the price of oil went back down, all interest in alternatives disappeared. So that can happen.

Then another story. Back in the mid í80s Iím secretary of state. And scientists are pointing out that the ozone layer is decreasing. And thereís controversy. Thereís some who doubt. I did. They all agreed that it happens, itís a catastrophe. So I always had twice a week private meetings with President Reagan and we talked about this and he decided we should take out an insurance policy. And so we negotiated what was called the Montreal Protocol. And itís interesting how when thereís something definite that seems to get decided the creative juices of the American entrepreneurial university scientific community kick in and this time the DuPont Company invented something that we could say do this and it basically would. It turned out that the scientists who were worried were right. And the Montreal Protocol (inaudible 00:05:37) What I learned from that is if you wait till youíre boiling you may have missed your moment. You have to look and see whatís happening and act on the basis of that.

So now onto revolutions. The first one comes out of the development of fracking technology that has had the effect of dramatically increasing the supplies of natural gas in this country and more and more crude oil as well. And it is kind of amazing because the energy field of thought is so vast that to make any difference it took centuries practically. But this is happening just like that. Suddenly thereís a wholly different picture and itís having a very positive effect. Including rejuvenation of American manufacturing, a lot of other good attributes. It is known that there are problems. It is known how to deal with the problems. So one of the things that we can do to take full advantage is do we have the right kind of regulatory process like it probably has to go, to a certain degree, state by state because formations differ. But not in place so we donít have somebody who cuts corners and creates a big problem, sets everything back. But so far so good. And this is a revolution. So have to play our cards right.

The other revolution is in a way more profound and with more long term meaning. And that is the emergence of alternative ways of creating energy and using energy. Much more insight into how to use energy more effectively. And in all of these processes, we improve our national security. For example we can see that security depends to a very considerable extent on creating energy where you use it. And you look at the convoys into Afghanistan getting blown up, and its not only you use, but people are getting killed in the process. Let alone, in more civilian terms our vulnerability to cyber attack (inaudible 00:08:19) and we need to have more energy created where you use it. A lot of issues very clear directly on that (inaudible 00:08:23) obviously the more diverse our supplies of energy are, the safer our economic side is.

But I think where much of this research will bear its greatest fruit is in improving the quality of our environment. Because after all if you save the use of energy, thatís clean energy. If you learn how to have an electric car go further and be more a part of the fleet, thatís very clean energy. I see a young man here from Stanford who has recently figured out how to fix a lithium ion battery so itíll go four times as far as it now does. So that suddenly gave much more range for an electric car than it did before. So all these things. Better solar. All these things make a gigantic contribution. And I think itís essential that we apply the insurance policy, Ronald Reaganís insurance policy concept, to our present circumstances. Because a lot of us think -- and the statement that you referred to reflects that -- that the globe is warming. And we should be taking steps to do something about that. These are the steps, that we talked about. Now first of all, let me disaggregate this problem a little bit. Because I know I read particularly on Capitol Hill there are a lot of people who think that science is not sufficient and so on. But thereís a man named Gary Roughead who retired a year or so ago as chief of naval operations so he knows something about oceans. And heís now out at Hoover at Stanford. And he has a little film. He showed it to us yesterday at our meeting and he showed, among other places, of the Arctic, an ocean is being created that wasnít there before. How could that be? It can only be because itís getting warmer, there is no other explanation.

And one of the things about this film that catches your eye, it covers about a 25-year period, and the film is of sea ice. As the years go along, you see the sea ice running around and edging down a little bit. Then about the turn of the century thereís a discontinuity, and it suddenly starts shrinking. So I think itís the discontinuities we have to be thinking about, as you can imagine all sorts of ways. Permafrost really starts to melt in a big way, a huge release of methane gas connected with that. So there are potential discontinuities here that tell you that you better apply Ronald Reaganís insurance policy.

So what does that insurance policy look like? I donít think itís even that difficult. One part of it is sustained support for energy R&D. And one of the things that has emerged from the partnership between MIT and Stanford on this, we look at what the Stanford people are doing, we look at what the MIT people are doing, Susan has led, we see that people are accomplishing things. Itís happening. And there are a lot of things that are close. There are a lot of things that are a little further back that are revolutionary. An example of that is large-scale storage of electricity. And the people are very gifted people working on that hard, and they have this conceptually figured out. Maybe itíll be four or five years. I donít know. But theyíre getting somewhere. And this is a revolutionary kind of development.

Another one is significant and sustained support for energy R&D. Itís interesting in the case of MIT and Stanford, and there are lots of other places. Iím not just trying (inaudible 00:13:11) they just happen to be the ones I know about. In both these cases, a significant amount of the support comes from industry. Both institutions are comfortable with that. After all Stanford, Silicon Valley is just a big Stanford spin-off (inaudible 00:13:33) MITís whole ethic and tradition. I served -- I have a PhD from MIT and I served on the faculty for about ten years. So I absorbed the ethic of MIT. Itís very much the same way. So weíre comfortable with industry partners. And they give us this attribute. If somebody develops something thatís doable and scalable, there are people around who know how to do it and can take something and turn it into a widespread and used product. And I think thatís a great advantage because thatís obviously the name of the game in the end.

So sustained support for energy R&D. And I think when the government has a good level of support it tends to encourage industry to come in too. And if suddenly the government stops thatís a big signal. And itís a very undesirable signal. So this is really important. And the amount of money involved is not -- by anybodyís standards but the federal government, would be a lot, but by federal government standards $6 billion, $7 billion, $8 billion, $10 billion, $15 billion; I think when I was director of OMB we rounded to those numbers. (laughter) (inaudible 00:15:05). And then I think to myself that it would be good. And I remember Dick Lugar I think this month or -- he said oh just put flex-fuel motors in our cars. Doesnít cost very much and it means that you are saying to the automobile engine is open to different kinds of fuels more easily than now, and so you could do something like that. Then I think, and I know people on Capitol Hill are worried about things like this, somebody has to propose these things, so why not me? I think that we want all forms of energy to compete on a level playing field. Right? Weíre going to have a game, we want a level playing field. Wouldnít be right for Cal to have six downs in a football game and Stanford only two. Wouldnít play that game. You want them both having the same number of downs. So we want all forms of energy to bear their full cost so they can compete in the marketplace properly.

Part of the cost of energy is the carbon thatís produced. And itís particularly something to worry about because it has a lot to do with the climate problem that weíve been talking about. So how can you possibly create a playing field by taking a step that makes all forms of energy bear not only their immediate costs of production but bear the cost of the pollution that they emit? Some produce nothing, like nuclear power. Others produce a lot. So my proposal is to have a revenue-neutral carbon tax. As an economist I prefer a tax to a cap and trade system because itís an old-fashioned straightforward way, there it is, and itís obvious that what you tax you get less of. Thatís well known. And so thatís the way I would go about it. I would start small and have a legislated scheduled increase. And why revenue-neutral? Because I want this to be justified and thought of solely and only as a way of leveling the playing field. I donít want it to be seen as a way to raise money for federal operations because then people would say, gee we got to do more of this and that and so on. Justify it purely on the basis of leveling the playing field. No other reason. Thatís a big enough reason. There are various ways of making it revenue-neutral. I favor one thatís very visible. That is you take an existing organization that has already the job of taking in money and paying money out and giving that existing bureaucracy the job. Making everything very transparent. Money comes into a fund. Itís there, you can see every day how much is in it. Itís not included in the unified budget so it doesnít get spent. Social Security Trust Fund. And periodically pay it out to people, some clear broad spectrum. And weíd pay that in the form of a check labeled carbon dividend. So every once in a while I get my carbon dividend. (laughter) But at any rate there are various ways of making it revenue-neutral. But thatís the way I would favor.

So I think that if we do these things, we will wind up seeing the creation of a lot of new ideas that come to market profitably. Different forms of energy. After all, all energy comes from the Sun. And we donít have to wait a thousand years for it to get blown around; canít we just take it directly? And people are figuring out how to do that better and better.

Iíll wind up with a little personal experiment. Iíve had a home on the Stanford campus now for about 40 years. Itís a really great place to live. And about five years ago, a little over five years now, I put solar panels on the roof of my house. If I were doing it today, the panels that I could put on would be substantially better than the ones I put on. But anyway I put on what was that when we had them. And I have a little chart showing my electricity bill before I had them on and after I had them on (inaudible 00:20:27) by this time the amount I saved on my electricity bill pays for the cost of installing my solar panels plus the opportunity cost of the money invested. Iím driving an electric car. So I say, Iím driving, and itís free. Take that, Ahmadinejad. (laughter)

M: Thank you very for that. (applause) I wonder if Ahmadinejad was listening, but I hope he was. You had touched on so many different issues here that Iím going to throw this out to all of you out there for some questions and answers. I just take the advantage of being here to ask you one or two very questions very quickly. And the one question -- you touched upon this. I was just wondering here in this body, the Congress, thereís a big issue about what the role of government should be in terms of its funding, spending, policy development and so forth, as opposed to leaving this stuff primarily to the private sector. And you touched upon this a little bit. Could you elaborate a little bit on what the role of the government should be in terms of dealing with the energy of climate change and the problems?

SHULTZ: Well, I think it mightÖ has a regulatory role obviously. And it has jobs to do. The field Iím talking about in the fracking arena I think needs to be studied carefully, and find that regulatory process that will work. I might say experience with regulation shows that the over-the-shoulder type regulation really doesnít usually work very well. Got to find the kind of regulation that incentivizes the person being regulated to do what you want to have done. And you can work that out. But at any rate thatís one kind of a role. In the field that Iíve just been talking about, obviously, I think thereís a role for government funding of R&D. I would personally limit the D part to bringing something to the point where itís clearly doable and scalable. And then leave it to the marketplace. I know around MIT Kendall Square a lot of people looking for new ideas, they have money. And around Stanford as I said earlier. After all we created big spin-off, Silicon Valley. So there are always people looking around for things. But at any rate, sponsoring that research. A sustained basis, but it doesnít have to be so much that itís totally dominant there needs, to do it in such a way that private money also comes in so there is an interactive process. And I think obviously we want to have a chance for these things to come onto the market. And that can be done. I havenít mentioned nuclear. Nuclear power obviously is a very clean form of power. So itís desirable. And one of the things that people are working on, and Burt Richter, who isnít here, has been talking about this in our meeting; heís a Nobel laureate in physics at Stanford. The small modular reactor has a lot of promise to it. Itís safer. And you donít have to have as big a capital bite. And this is something thatís now really sort of developed by industry; thereís an interactive process because for very good reasons nuclear power is heavily regulated. And the process of getting permits to do things is really complex in this field. Thatís to be expected. Thatís going on now. So thatís a positive. So I think thereís an interactive process here. I -- personally -- maybe itís my University of Chicago background, but I think the marketplace is terrific. And to do a lot of good for you. And if you interfere with it too much you will distort where things might go. So rely on the marketplace.

M: Iíll ask one more question. Then weíll open it up. In the letter that we talked about before thatís I think distributed among all your chairs, you signed along with 37 other distinguished Americans, the letter stated -- Iíll quote from it -- ďThe potential consequences of climate change are undeniable. And the cost of inaction paid for in lives and valuable US resources will be staggering.Ē End quote. Could you maybe just take that line and just elaborate a little bit more? What are the risks involved (inaudible 00:25:58) what do you see (inaudible 00:26:02) the global community doesnít address this climate change issue?

SHULTZ: Well, there are huge changes that are in the works if we donít moderate whatís going on. Changes in heat levels. Some places are going to get very very hot. And weíve already experienced some of that. Even Vladimir Putin got out of Moscow a couple summers ago (inaudible 00:26:40) so youíve got that problem. Youíve got when the sea ice melts as I was describing, that doesnít change sea level because the ice is in the sea anyway. But the icecap on Greenland is also melting. That does affect sea level as ice goes from land into the sea. So you get rises in sea level. So you have a rises in sea level and then you have big storm that you get periodically. The consequences of a storm are much more severe because thereís much more vulnerability. So you have things like that. There are big areas of the world where the consequences to a country are severe. Take Bangladesh. Itís a very low-lying country. And it can be basically inundated. Or all the islands in the Pac ó Iím a marine. And during World War II I fought in the Pacific. We fought among those islands. And theyíre just little islands out there in the ocean. And so things happen with them. So you can create conditions that leave people who want to fight about things. If I suddenly find that Iím losing all my land, I want to get somebody elseís. Youíre going to have a lot of tensions emerge. So I think itís a problem in our defense side (inaudible 00:28:24)Itís a big deal.

M: I just might add that the State Department, the Defense Department and the National Intelligence Council all elevated this issue of climate change to a high priority national security issue. Weíll take some questions. And if I call on you, please state your name and your affiliation.

SHULTZ: Let me just add. I think climate change is part of it, and itís also worthwhile to say letís put all forms of energy on a level playing field. And that will help with climate change. I think itís only fair that all forms of energy compete on an equal basis.

M: So letís start over there.

COLLINA: Tom Collina. Arms Control Association. I want to apologize for asking a slightly off topic question. But I wanted to thank you for your Wall Street Journal op-eds youíve written over the years. And ask a specific question about them. Previous ones had called for movement forward on the Test Ban Treaty. The latest one did not. Iím wondering if you could give us your personal view on whether the United States should ratify the Test Ban Treaty as a way to enhance US security. Thank you.

SHULTZ: Yes. I think clearly we should ratify that treaty. We didnít have it in the present one because it just wasnít part of it. In one we did the other day, we were saying this issue has lost its attention. And we need to get back on the offense. And hereís a way to get back on the offense (inaudible 00:30:11) I think that in some ways, and Senator Nunn puts it this way. If you can say that a senator might have been right to vote against it when it was first put forward and right to vote for it now. Why? Because things have changed. Itís now not just an idea that we can detect tests. There is a network that has been built out now and has been demonstrated that we can detect even small tests. So I find it hard to see how we would justify going and producing any new nuclear weapon. We have quite an arsenal right now.

M: I think maybe our micís up here faded out. (inaudible 00:31:04). For those of you who want to see and read the latest article that the four statesmen have written, itís in Wednesdayís Wall Street Journal. For your reference. Next.

M: (inaudible 00:31:22) center for national policy and former energy person during the energy crisis (inaudible 00:31:30) staff in the í70s. And my question is international. And the question we looked at (inaudible 00:31:39) marketplace here in the United States (inaudible 00:31:42) can in fact develop and push good alternative energy. On the global issue Iíd like to know how you think that we as America in terms of our initiative can in fact create a structure, since weíre not the only polluter of CO2. How we can add, at this moment, with this kind of (inaudible 00:32:04) to this process on an international basis, and what, if you were sitting as secretary of state with Obama, you would tell him that he should do.

SHULTZ: Well, thatís a very good question. And itís a matter of the degree to which the United States can give leadership effectively. Let me give a little background on this. At the end of World War II some gifted statesmen looked back. And what did they see? They saw two world wars. They saw the first war was settled on rather vindictive terms and helped lead to the second one. They saw 70 million people were killed in the Second World War at least. They saw the Holocaust. They saw the Great Depression. They saw the protectionism and the currency manipulation, part of it whether we like it or not -- (break in audio 00:33:21) -- and how the human body works. And the emergence of pharmaceuticals and medical procedures and so on. You can examine your insides without cutting you up and so on. Mostly this has come out of the United States. The United States has been in the lead. That doesnít mean that people do whatever we want. When the US is leading, people say well, US is in the game (inaudible 00:33:50) and things happen. I saw that a lot during my time in office on all kinds of issues. So I think that in the climate issue we have to be a leader; we have to be. And when the US takes the lead, take the Montreal Protocol experience. The US led the science. US led the diplomacy. We located it out of this country, Montreal, so we didnít say look at us. We just wanted to get it done. And we had great consultation I might say between executive and congressional branch, because as we were going along we said to our friends in Congress look, hereís this problem. What do you think? Hereís what weíre doing about it. What do you think? So when it came to be ratified it was really not a problem. So I think we should go about it that way. We should find out well, what can we do about this. A lot of the clean energy things that weíre talking about in our MIT-Stanford business are directly relevant. And results of this research can be made known everywhere. And people are avid for this. Then at least as I would be going about it, I think these gigantic meetings as in Copenhagen and so forth, they are bound to fail. Theyíre just too big and unwieldy at that point. You need to get the key countries together and figure out what we are going to do. And then expand that circle to make it more widespread. Thatís what we did in the Montreal Protocol. And I remember way back when I was secretary of the treasury we had the problem of creating a new monetary system. And on one occasion I was about to announce the US plan at a Bank/Fund meeting. And I did something I really didnít think about this way. But I asked the finance ministers of France, Germany, Japan, Britain, those were the main trading countries at the time, to come in and look at my speech before I gave it. And none of them tried to change the structure of the speech but they had little nuanced suggestions that I could take and that would make it a little easier. So one time weíre having another one of those meetings, and I wanted to have our group together. And I told the president about it. He said, ďWell, Iím not going to be in the White House this weekend. Why donít you use the White House and give your meeting a little class?Ē We met in the library of the White House, as you know, the best room on the ground floor. It was a very pretty room with a nice fireplace. We met there and I had a great meeting. And we knew -- this is the key -- we knew that everybody wanted us to meet and nobody wanted to know that we met. One of those things. In other words they want guys to get together and then tell them, but they want you to do it because they know itís got to work that way. So we decided to call our group the library group so we could refer to it without anything that triggered what it is. Actually that led to the G-7 meetings of heads of government because the guys I was meeting with like Giscard and Schmidt later became head of government, and with Jerry Ford they established the process now. But anyway something like that. Because itís obvious that if we do something and get ourselves, our emissions under control and China doesnít and India doesnít, itís not going to do much. So we have to have a process of getting there. And I think the process is work on the science part, work on what you can do, share that information. And work together with these other countries. I donít know how many people have been to Beijing lately. I was there not quite a year ago. And man, you donít dare go out of your hotel and take a deep breath. Itís awful. And they know it. And so theyíre looking for things. They arenít resisting. And I think if we keep at this R&D that weíve been talking about here -- and I keep referring to Stanford and MIT, but thatís just where I happen to know something. But lots of other people. I know Sam Nunn is part of our group, and heís sitting there. He says, ďYou know, we guys down in Georgia, we know something too.Ē So there are lots of people working on this. And thatís what we want to encourage. And our experience is that a little collaboration helps, because you say oh, is that the way you think about it, how about this and so on. And itís also fun. So thatís the way I would approach it. And I think it can be done. But just to say OK, letís get it 190 countries together and sitting around, that doesnít work. Weíve got to go about it in a much more intelligent way.

M: Using privilege of the chair. Just let me just follow up on that. So you think itís really possible then for some kind of a global treaty that sets limits and has some enforcement mechanics built into it, through sanctions and others that just do not comply that has some legal binding rules and so forth.

SHULTZ: Weíve done it before. Why canít we do it again? George H. W. Bush did that. So good work on conservation and the environment is in the Republican genes; weíve been the guys who did it. So we just got to get back to that. And I might say at least as I took part in them, these things were done by Republican administrations. But not in a partisan spirit. There was deep consultation and support for them was general. It wasnít like it was a divided kind of thing. So somehow or other. Get back to it. I think on the global warming issue the reason I mentioned the Arctic is that I respect science, and Iím not -- but people are saying they donít like the science and so on. So Iím saying well, never mind the science. Just use your eyes. A new ocean is being created. Thatís not science, thatís just plain observation. And if you look at the chart on the way in which the sea ice has been disappearing, the most stunning thing in it is how in recent years suddenly there has been a shift. And the discontinuities are the thing you have to watch out for. Because something may come and hit you faster than you believe because of the operation of the discontinuity. And people can see that and look at it. And what we were trying to do, the reason why we brought our MIT-Stanford act here to Washington yesterday, was to make a point around here that the R&D on energy is producing results. There are things that we know how to do today that we didnít know how to do yesterday. As I said before there are other things that you can see are going to happen. Thereís a little more work to be done. But you can see itís being done. And itíll get done. There are other things that are further way, but you can feel reasonably confident about. As I mentioned earlier, large-scale storage of electricity. Think of what that means. It is a game changer. It provides distributed power. It takes the intermittency problem out of solar and wind among other things. It was interesting to listen to these guys talk about it two or three years ago, Susan, when we were at Stanford. An MIT guy was really very interesting on this. And he said, ďWell, the first thing we learned was scaling up batteries is not the way to think about it. Thatís just conceptually wrong. Thatís not going to work. You have to (inaudible 00:43:16) a different thing.Ē Why? Well, a battery has to be light. Youíre going to put it in a car. But if itís stationary youíre not worried about how heavy it is. You can have a totally different way of thinking about it and warming it and so on. So we brought our act here in order to try to get across to people that the support theyíre giving for energy R&D is important to sustain, and not in a dominant way, because if you do it right, industry pitches in, and thereís a partnership. And itís partnerships that work.

M: Are there any congressional staff that want to ask a question? Yeah.

ROKEACH: Thank you very much for coming today. Iím David Rokeach with Congressman Randy Neugebauer. You mentioned getting energy sources back to market competition and sources competing with each other. So if you were able to account for the externality of carbon emissions and enact a carbon tax, how would you then treat energy subsidies both for traditional fuels and for clean and renewable energy?

SHULTZ: I would wipe them out. Let everybody compete on a level playing field. Now I donít want to be too drastic about that. For example the small nuclear reactor. You talk about nuclear things, youíve got to be real careful. Right? So there needs to be a careful process of examination and licensing and so on. And in effect thatís like a subsidy. Because the government is going to have to spend a lot of money on that as are industry people. But the putting up of that kind of thing is necessary. But we hope itíll be worth it. So I donít mean to be like a person that says hereís the rule and thatís that. But by and large I think if we eliminate the subsidies and let the things compete on their merits, and where something canít compete keep working on it until it can. And this electric car I drive is a terrific car. I love it. And I just drive it around Palo Alto, around campus and so on. But if my friend over there gets his way on the battery, instead of going 80 to 100 miles in my car, I can go 320 to 400 miles on a charge. Iím really in business. His research is getting there. And he tells me that some battery companies are getting interested. And they want to see how theyíre going to make it work and so on. Thatís the way it should go.

M: OK. We have time for a few more questions. Yes.

FELZENBERG: Iíll be very brief, Mr. Secretary. This speaks directly --

M: Can you identify yourself?

FELZENBERG: What?

M: Identify yourself.

FELZENBERG: Oh Iím sorry. Al Felzenberg, Joint Economic Committee. Excuse me. This speaks right to your point on R&D. You mentioned President Eisenhower a few moments ago. And one of the things he did late in his administration in response to Sputnik. The National Defense Education Act where if you went in the fields that the nation needed we forgave all or a good part of your tuition cost. Now I think itís great that weíre trying to keep foreign-trained PhDs in the United States through some STEM legislation for technology and math. And is this not a better alternative than the way (inaudible 00:47:11).

SHULTZ: Nothing heavy, no big discussions. Just getting to know you. I think one of the most important functions, ideas that we ought to get in our minds is what I call gardening. If you plant a garden and you go away for six months and you come back, what have you got? Weeds. You canít find the flowers or the vegetables or whatever you planted. Any gardener knows youíve got to tend it. And I think the same is true in human relationships. I tried to develop this concept as I was secretary of state in dealing with people in other countries. But I think itís very much the case in our relationships, I should think around here, that youíve got to do gardening. You got to listen to people and talk to people in settings that arenít always in a sense business settings. Just used to be in the old days everybody would relax and root for the Redskins around here; I donít know whether thatís true or not(inaudible 00:48:27) at least they could agree on that. But I remember. I donít know if this is a good note to end on but. I worked hard on Middle East issues when I was in office. One time I was over there peddling my peace ideas. As I (inaudible 00:48:45) there was a cartoon in the Jerusalem Post which showed me bending over, being hit by (inaudible 00:48:53) on the ground there was a piece of paper labeled Shultz peace proposals. An Israeli with a club beating on me. Thereís a Palestinian with a club beating on me. Thereís a Jordanian with a club beating on me. And the caption says, ďWell, at least they agree on something."

END