Gadgetory

hello everyone I'm ensure an executive editor at cnet news and joining me on stage is Republican congressman darrell Issa he's one of the most outspoken members on tech issues on the hill he was an adviser to president elect Trump on tech issues thank you for coming thanks for having me here and thanks for making CES show the largest show of its kind anywhere in the world by two times there you go yeah it is it is a crazy large show every time I go to other shows and I think oh my gosh CS is that much bigger every time so there's only one show that has similar square footage it's over a million square feet and it's a place where they show off earth moving equipment yes okay also here in Vegas yeah it's big but it's not big in the same way yeah and it's not every year and it's not every year yeah so um we're going to start a little bit talking about President like Trump because it's just kind of one of the things in the room we've heard lovely little from him on tech issues and I was hoping maybe you could give us a little bit of insight as someone who was involved about how he thinks about tech it's such an important industry obviously it's what's in the pulse here what are his thoughts around some of these issues I think one of the things you have to know about Donald Trump is that he can take anything and digest it quickly but you have to deliver it quickly this is somebody who wants to know in 30 seconds what do I need to know or in five minutes and he will take an hour briefing but only if it really takes an hour and so when you look at tech issues what does he need to do he had about an hour meeting with some of the foremost authorities and technology including Elon Musk including tim cook and others and they had an hour to make their case on what did they need and they did they made their case that we need the best and the brightest so we can grow an economy in America we need to be able to bring back stranded capital because it doesn't make any sense that we get to leave it over there and invested or we can pay a third of it out if we want to bring it back he got it he didn't need a third item but the fact is the technology here with a little as a few items we need bandwidth we need some things like that but that's in the weeds when you look at Donald Trump we need two things from him we need him to move Congress to reform the tax laws so that it encourages american dollars made overseas to come back and we need to have the best and the brightest be able to get here so that whether it's h-1b or other programs it means that that you can create a job here because you can get the person you need if they're not available here that's it there is this that's why that's why the beauty of Trump is he doesn't want to run technology he wants rhinology to run and he's prepared to help in those ways got it so I'm actually curious about you brought up a couple of issues that are really fascinating to me one of them is the repatriation right Apple has been hugely talkative about how important it is to repatriate taxes and ours I type the the money and have a tax holiday it's something that I mean it's one of their signature issues on Capitol Hill it is and if we look historically one of the concerns experts always bring up is that the last time we did a tax holiday that money was largely given to shareholders it didn't create new jobs it didn't really have that much impact and it was it didn't really do what Congress had hoped it would do when they pass that you know Congress has a bad habit of thinking that you have to be able to take the money and put it in a certain account or it doesn't get there okay we've got a live studio audience here just a show of hands how many of you if you received money as stockholders would put it to good use okay the reality is is that money that comes back here and goes to stockholders will buy more stock make investments maybe buy an extra iphone and by the way when you dividend it out there's a tax paid so the government gets an extra benefit of its if it's distributed out so even back in the bush administration when they did that yes some of it got paid out in dividends some of it got invested and then some of it went to the American people the stockholder who guess what in did it as a matter of fact one of the interesting things is if you think about Apple's stock holders largest stockholders of Apple's stock of course are large funds and large funds going to bring up is right how are they going to help well no American well the thing is large funds if they get a distribution they normally don't distribute it back to their actual stockholders they in reinvested so it didn't really dividend out in the true sense to the public it really went into a fund who then either bought more apple stock or quite frankly I might have bought other startups so the first thing you have to do is not assume that money has to be earmarked for some use because if you do that what happens is and i'll just take apple as an example apple says yeah we're going to put 10 billion dollars is going to bring you back and spend it here which we know in the quarters afterwards they can take another 10 billion they would have spent there and not spend it so thinking you can ear market is a problem so here's the other part of it the last one was a bad program because it basically said it's five percent take it now it was a tax holiday what it did was it encouraged people to do the same thing again and build it up overseas what Donald Trump knows the legislature it Congress knows is we have to come up with a permanent change that tells people don't strand the money over there bring it back if you bring it back we're not going to penalize you but oh by the way the deal we said today is the deal that you're going to have in the weeks and months on a permanent basis and that's why real change rather than tax holiday is president-elect Trump's goal it's Congress's goal and that that makes some sense I guess what the concern that when when I hear from the experts on this is that if we're going to talk about meaningful impact from that money coming back bringing it back and having it kind of going to circle of Wall Street is questionably impacting real Americans but I mean will be but you said Apple you know I'll give you a little piece doesn't have to just the Apple there are a lot of company I know but but you know since you're a great company when I pick on them and they're very large their large but they also pulled a trick Apple already brought much of their money back they brought it back and they dividend it out a couple years ago just before taxes went out and what they did was they borrowed against the money that stranded overseas then took the borrowed money and dividend it out so in a sense Apple has to unwind a situation in which they already did a transaction you know it's that kind of distortion where government always calls it a loophole but the reality is government has created a bad idea corporations really don't pay taxes we do if you take thirty five percent off of a corporation and it pays a dividend all it really does is reduce your dividend by thirty five percent if you don't take it from them and you pay it out what happens is I pay more taxes but at the end of the day if they reinvest it and pay less taxes and reinvest it actually that's where the real magic is so if you look at a company that is looking for money and they've got let's just say many of the Nasdaq don't pay any tax in some rephrasing don't dividend at all and what they do is reinvest every penny they have but if they're growing fast enough they're actually net borrowers every year because even though they're reinvesting every penny it's after-tax pennies one of the questions in the tax code is if a company is reinvesting in expansions in the United States why not give them a deferral on their taxes so that we're not taxing them on exactly the investment that's going to make them more profitable than later quarters in which they're going to pay us more and again that's an investment act so there's a lot of that moving around Washington what we know now is we have a partner that is willing to work with us on how to do that and is not automatically causing their to have to be a tax increase to offset a tax cut because yes we need to deal with the corporate tax but I think everyone here at the show doesn't want to pay some large tax increase just to do that so and just not to believe it I just want to make sure I fully understand for you that the concern is that it's a regular program it's not a holiday and that you know if it ends up going into the investment you know kind of cycle of Wall Street it's not as much a concern versus helping create jobs by new factories whatever but as long as these companies got to just choose what they want to do with it corporations will invest at the highest and best use we we are giving an opportunity for them to make that investment one of the important things is that the repatriation has to be a repatriation you can't say what we're going to let you pay the tax and then have it recapitalised overseas so there have to be some protection from that okay um let's move on to encryption I think it's one of probably the hottest topics of the tech industry in the last year no that would keep us on the apples yeah Apple will be a regular conversation I think here so it's almost been a year since that happened right Apple versus the FBI I believe you said that the FBI should have hacked the phone before they tried to go through the legal means to try and force Apple to help them what I said was that pretty much a freshman at MIT could have hacked it anybody that ever worked for me as an engineer could have hacked it I mean we're not talking difficult just a few minutes ago you had a taken apart product here and what do you really do well you open it up you look at the sub components and you ask a question did we have a non-volatile memory that could have been replicated and then repeated as many times as necessary to circumvent the automatic destruction and the answer was of course you did you only had to be high school electronics kid not even a college to do it and afterwards a number of people showed they could do it for less than two hundred dollars of odd parts and it's on the internet you don't have to believe me so one of the questions was we who want encryption to protect us where at we saw the FBI go to a court and ask not ask but order a company to create a backdoor that was easy automated and repeatable remotely now if I've got this phone and I can hack it because I have possession of the phone and it might take me an hour two hours but I can do it you know what that's good enough for the FBI's need let's face it the guy was dead but they asked for something that we should worry you when somebody asks for some thing that they can do on every phone here in this at this show remotely you say what is it you're asking for a tool that has nothing to do with your current need and that's what I told the FBI director in live audience is I know how I could open that phone so I want to know why you're asking for a company to do something to to its disadvantage and to the people that it represents those buyers if if if all of you wanted to buy 10,000 phones and said I want a back door on the phone i buy I would support that but not on the phone i buy so do you think that the that let's take the encryption part of the first i can write ignore the the hacking and then kind of all the mechanics there do you think the government should have any sort of access to these phones as a regular course that there should be a rule that you know encryptions fine but not when it comes to national security well that's you know that's that's interesting that's sort of like saying you you can have a boat with no holes in it except for the one that's there of course that's the argument in cook makes it look Tim makes a good argument and and the argument is simple encryption is how i have my right to privacy a backdoor on encryption is how you take away my right to privacy and to believe that that set of keys will not get misused simply runs counter to actual past experiences with law enforcement including the FBI now having said that I'm an approach you know I appropriate money that's what Congress does we have appropriated both in monies that you can see and in monies you'll never see that are in dark programs we've appropriated money to allow our clandestine industries to our CIA and NSA and so on to do things that are really amazing that in fact can circumvent protections I'm willing to spend that so that our national security so that our enemies cannot safely do things I'm not willing to order a company to do it work to their disadvantage into their consumers disadvantage I don't use the off-the-shelf product here i use what's out of i do that for a reason which is I'm not available phone let me see I can't talk right now the but if you touch the phone it rings that's that's because they're listening ah but you know I want to protect it yeah you know the fact is we all know that for example the State Department's email system was completely circumvented and all the emails were pulled and for 30 days they were they were at a almost shut down as far as operating we now know that the Russians hacked the Democratic National Committee a bit rather mundane simple fishing expedition my emails are encrypted there if they're not going to get my key they can bet they can go to my services I have multiple accounts and they can do a great job of getting some encrypted files they're not going to get my emails and that's my right to privacy and I I think that's the greatest part about being an American is I have a constitutional right I've had for 240 years and the clandestine stuff you were talking about when they find those hacking holes it doesn't worry you that they're doing that and not alerting apple and closing those holes or whatever ah well you know those those entities are required to operate outside the United States and so you know making America safe has required spies since George Washington hired a bunch of them so I don't have a problem with that and I think the important difference is national defense and investing money in figuring things out in World War two we figured out how the rush or how the Germans were encrypting in their cipher and it helped win the war that's not new but we're Americans and we have a right an expectation of privacy not just American citizens but anyone here in the United States and to me that's more important than a moment of catching a bad guy and it doesn't worry you that they might come back that those holes might come back and if does in the United States that's an interesting question but do you really hear what you're saying does it bother me that we're investing money and trying to figure out for example how we can find out what the Russians are doing so that we maybe can figure out that they're hacking us before they hack us no I'm okay with that okay I'm just thinking clear like you said earlier the keys that you don't want those keys to be out there because they could be used in the wrong way right and what I point is is that even if its clandestine overseas they could still end up being used right i mean a key is a key it doesn't matter whether its overseas or not no no you don't understand okay the arithmetic of of encryption is just that it's it's arithmetic and so you can have a very very long key that is not a public key that cannot be found now having said that we have clandestine organizations and I've been briefed on them over the years who find ways to get information and i'll just give you one that's legacy if you will when you have a telephone conversation over a cellular phone if you don't encrypt your signal what happens is with cdma you can't just grab the signal out and listen to it however if you go to where the phone goes to the ground line if it's not end-to-end encrypted you can listen to everything now that happens to be piece of legacy information anyone that knows cellular knows that that at the switch most of our signals were unencrypted historically so do i want my clandestine agencies to know that and to try to get the information sure you know anyone that's watched a 30 year old james bond movie has seen a long-range microphone that can pick up what you're saying from miles away there's a lot of techniques and i'm not going to sit here and talk about the techniques sure but we fund our government making America safe we also have a set of constitutional protections that I think are not fungible and one of them the apple case made clear I will never never support telling our companies or our citizens that in fact they have to have a back door so they can be a little bit safe so the last question I'll ask on this president elect Trump said that he was going to boycott Apple's products over the Apple versus FBI things he saw him starting using Android wheats he doesn't really use phones for much else I understand but when he says things it does have an impact right i mean he is the president like the united states so actually when he said it he wasn't the president-elect okay but you get my point right and I guess I look I get your point that lots of people said a lot of things Marco Rubio who I supported initially for president in the very beginning was strident in the same way well Ted Cruz who I didn't support was on my side um you know politics often gets people making a statement that when you really sit down I you change your mind president elect Trump in just a few days on january twentieth at noon will raise his right hand and he will swear allegiance to uphold and defend the Constitution as long as the Constitution is unchanged he will have to defend the Fourth Amendment my right to privacy my right not to have on regional search and seizure and I think he will do it and I know many of the people that are going to be in the administration and by the way if they don't I can be his best friend I can be his nemesis because I took that same oath and I take it seriously all right well um congressman thank you for taking the time I appreciate it that's a wrap for us actually that's the end of our CES 2017 coverage from the stage thank you all for joining us both here and over the internet and check out all of our coverage on cnet com and we'll see you next year excellent you