that will happen, but i'm assured by the department of business and by our science minister, that we can maintain the very considerable investments we are making in science that there's going to be some efficiency savings but i think we can maintain the investors were making. some are by the foundations outside of government so some of them are partnership we are trying to advance as won't. >> can i ask you simple question. in 2004, use set a target in terms of 2.5 percent of gdp being spent on r&d in science. with nowhere near that at the moment. have to revise that target, and what is likely to be at the end of that care your big? >> is very interesting because the european union will be discussing exactly this, many unsavory the 11th. investment insights, the private and public research and development, this is the target

related to private as well as public research and development. i will be looking at how we can move this forward. it may be that we can work and cooperative projects and the european union to increase the level of spending. i think you have to wait until the budget to hear that. >> just a couple of windup questions. i want to have you on rabelais mister for me. you plan to increase defense expansion. you are cutting it from 38.9 billy to 36.7 billion. can you explain to me what's going on? >> defense expenditure is right. >> that's news. >> is rising and the next financial year. >> that's not what the pbr says that it's going down. >> i tell you what is happening. if you would allow me to finish. expense is rising this year and next year. defense expenditure for future years as a subject of our spending. there will be a paper published

i think tomorrow on defense strategic defense that we're having. defends its strategic if you will be our review and will make the system futuristic i think what was being emphasized is that we can was the importance of the additional spending above the defense budget. you are talking about the defense budget above the defense budget. that is the money that is spent on iraq and afghanistan. three years ago we were spending 600 million pounds in afghanistan and that was a very considerable amount of money. this year it is on top of the defense budget. next it will be 4.5 billion or nearly 5 billion on top of the defense budget. so there's no question this year and next year defense spending will be rising. >> so you're saying the use of the contingency accountability increase. pbr shows defense expenditures going down next year. >> there has been no announcement about the future of defense spending. that will be decided by the --

>> wait a second. i'm not much, but i look upon the review. you're planning to do something with defense expenditure made in health expenditure, increase school expansion. your chances as you had to make deep cuts from the exposure that if you are expending and these, which departments will take the larger share? >> we announced in the budget, pre-budget report where we will would achieve substantial savings. much of this comes from every direction and counter expenditure because that catch up expect to read them in hospitals and on schools and on transport has actually been carried out. if you build a new hospital in one area, you don't need to build the same hospital again. if you built and renovated a school as we've done, you don't need to do it again.

so there will be reductions in the capital budget, but i may say that the proportion of the money in our budget spending capital will still be higher than it was when we came into power in 1986 and 1997, started equally we are making savings through public sector, we are making savings through regeneration program. we're making changes to the i.t. program. there will be further changes in i.t. i have a chance or by the way, when i was cancer, cut public spending in 1997 and 1998 that i was also the chancellor brought forth the last minute plans or we cut the budget of 70 part is. we are not afraid to make the cuts necessary so that we can secure britain's better future. our deficit reduction plan is to cut half the deficit over the next four years by the means i've set out, including by tax by growth and by the public spending changes that have been identified here. there can be no doubt about our determination to cut the deficit in half. >> your chance is that he is making cuts. which department bear the brunt

of those cut? >> every department is having is insured to run things more efficiently. but what we have been able to say is those front-line services that is policing, and health care, and schools, will be protected. the spending review will come at the appropriate moment. there so much uncertainty about the levels of resources that are difficult part of because unemployment has not gone up in the way we expected. there may be more resources available than we had expected. if we have made a decision in the last pre-budget door in the last budget we would have to change it now. because as you know, i think everybody should be happy about unemployment is not rising at the rate people expected. in fact, unemployment is following the last few months. >> we now move. we now move to invigorating democracy.

>> that you, mr. chairman. prime minister, right from the beginning you have a clue by constitutional reform a hallmark of your prime minister ship. and you have returned to that theme today, with a major speech on these issues. could i just start by asking you this, we've got other of the opposition going around saying we've got a broken society. are you going around saying we have a broken politics? >> no, but we have to repair their damage has been done. and the expenses candle shamed the house of commons. there have been scandals also in the house of lords that has shamed the house of lords. we have got to recognize the public expect us to do better. but there's a deeper set of issues i think the public expects us to address. and that's the distance between members of parliament, elected representative and the people. i have tried to take power from

the executive and give it to parliament representing the people. but i've also tried to look at how we can give more direct, say, to individuals in our society so they can feel more engaged in our democracy. and i think that some of the measures that i suggested today will go a long way. and some of the measures that your committee produced are ones that we can accept and welcome. and they will help, but we have got to do quite a lot in my view, as representatives of the people to make sure that the people feel that power is is being wheeled in both and accountable way and fully sensitive to the needs. >> where in your speech today you talk about the discredited old politics. you're not really sang the whole system is broken. you're just saying we need a series of positive reform? >> let's be honest it was in peace wanting to make decisions

themselves about their own pay and expenses or feeling they had to do that. under house rules rather than under regulation not self-regulation. the discredited old system is in fact still hereditary where principle in the house of lords that somehow law is passed in the country could be passed by people who have got no place in that chamber other than to hereditary. the old system is of course where we have not lived up as on expenses to the expectations that people have of us. >> but the rot and expenses system wasn't the product of all these kind of constitutional arrangements that it was the part of people behaving badly, wasn't? >> it was a product of self-regulation that should have been replaced long ago by. all of us left is to members of the house of commons about what we should or we shouldn't do. was never a matter of government. it was never a matter of when

had commitments on these things and we've had to face up to the fact that self-regulation in this area doesn't work that as far as the workings of the rest of our democracy are concerned, what i am saying is there are major changes we could make that could improve the working of our democracy and make parliament more accountable to people and make people have more direct a more direct relationship with the representative. and of course make the executive give up some power they should not have to the house of commons and to the elected authorities. >> you mentioned just now the proposal, and i see it again. and i welcome the very much. can i just clear up this issue that floating around there, which is as i understand it, these proposals have been put to the house in a form that anybody who wants to object to any of them will sink them there and

then. and some people think that this is a rather clever way of thinking the whole project. can i just have it from you, that if that is how that is to be done, that the government they will find time to immediately to bring these proposals back to the house force of state about? >> yes, we would bring the proposals back, but let's be realistic. we have to go through line by line, dot and, on each of these proposals the. and we will not have the parliamentary time to be able to do that. what we are really trying to say is we prefer there to be progress as quick as possible. we prefer that to be progress by consensus. if we can get an agreement of all the parties and all mirrors of the house, this is the right way to go forward. that that is something that would ensure these major proposals could be agreed as soon as possible, but if it so happens that people object, and i wish they wouldn't, because in my view we want to make progress, then we will have to so looking at this line by line.

of course there is a limited time to do that and we must be realistic about it. i want these proposals through under want us to vote for them. we are putting proposals that i think most people who have looked at this issue would be prepared to agree with and i hope, i hope there'll be no objection to can? >> just so we're clear. i have to pressure because it's the only chance i've got. is a single person shouts object to any of these proposals, the whole thing collapses. so what i want to know is if that's what happened and some, that is bound to happen -- >> i hope not to smack but i think will. is the intention then to find time, pretty much immediately to bring these proposals backed? >> our intention is to find time but i've got to say to you these are complicated proposals that have been agreed in very detailed manner both by the select committee and now by the parties. if we have to go through them line by line, it would be very difficult to make progress. so my invitation to people is to

support these proposals, because the vast opinion is behind them. >> prime minister, i'm very, very sure we have made progress. but my concern is whether not about to slip backwards. on the 27 of october, they point out it would require a standing amendment to guarantee that all the scrutiny that we have before lisbon story may. on the first of december, lisbon treaty was in fact brought home. i look at some examples, there are 20 million articles of articles which will not only be called legislative acts, and therefore under an interpretation that u.k. government appears to be taking at the moment is that they will not therefore have to be subject to scrutiny, not really have the right to a reasoned opinion, or a right to use of the orange and yellow carded. it requires a standing member to change that, family law,

catalog, very important matters. can i ask you, can you guarantee that the u.k. government will actually do ever what business are because we do not think it is a matter of conflict across the parties to bring in a standing order a minute so we have by right what was called the golden standard of scrutiny in europe and we don't end up with fourscore with half of our scrutiny process there at the government department rather than by right and established by this part of? >> it is right to have scrutiny and it is right to make sure that whatever time can be made available can be made available. i will look at the specific issue that you have raised and i will get back as quickly as possible with my own view and a few of the ministers concerned. >> prime minister, is a right you don't think we have a broken politics but just a politics that needs reef are being a bit. in your speech today, you talk

about the new politics. what are two of the new politics ideas that you look for when you first became prime minister haven't worked out quite as strong or effective as we thought they might be. can you tell us more about the right of mp's by the people? you've mentioned this on two or three occasions, and could you put more flesh on how that would work? >> if there was a situation where wrong doing was proven by its and accepted by the recommendations, and at the house they refuse to take the action that was recommended, and these particular circumstances, that is financial pride terry and there must be some way for the electorate to have some burst on the. so you need a process for that to happen. this would only be in a position weather was effectively financial corruption and with

the hous house refused to act. >> prime minister, the electrolysis is just about ended now. looking back on this rather year that we have all faced in this place, and riley being criticized for some of the actions of some of the mp's, how many aps you think would've been subject to recall, given what you know about the cases that we've gone through? >> i cannot say because a number of cases are now with the police. and we know that they're being investigated by the policing authorities. so i don't think this is by any means over, and i think would be better to make a judgment on that later. >> thanks. when you came into office, prime minister, he made the program, the statement about political reform, governments of britain program. but electoral reform wasn't in it, and i think -- >> it was actually. we are going to publish a

document on the electoral systems which then we went on to do as a result of that met i make further announcements later. >> the wizardry of the existing system. that's what you're referring to. so i think what people are entitled to ask is, what has changed in the last couple of years to bring electoral reforms to the top of the agenda? when did you have your conversion experience speakers i think if you look back to 1997, we were committed to a review of the electoral system. the review then was done by the late roy jenkins who made a number of recommendations but unfortunately, there was no consensus around the jenkins proposals. and in fact, his proposals did not recommend the agreement that we would expect a. we been set in 2005 we would have a review of the electoral systems. we publish that, i think i'm right to say in 2008. it could've been 2007, 2007-2008. on the basis of that looking at

what has happened, not least in relation to parliament and its reputation over the last year, he seemed to me we had to reach a conclusion on where we can go. there are very strong views. let's be honest, there are people who mainly because they want the constituency link between the member of parliament and the constituency that they represent. then there are people who got a very strong view that the electoral system should be proportionate. and i can understand that. and of course, we had the experience of a large number of different systems operating in the united kingdom, northern ireland, scotland, wales and some local government systems as well. when you look at it it seems to be the case for the status quo is now less strong than it ever has been. that mp's, given the public scrutiny upon them, would benefit from having the support even if they second and third preference of the majority of

the constituents. but they would benefit also from maintaining the constituency link. and i am very concerned to point out that proposals that we're putting forward maintain that constituency link. so members of parliament is representing a local area and they are seen as the local leaders and one of the local leaders in that area as well as a representative and westminster. we don't want to go back to a time when a priest was so devoid from their consistently that they didn't visit and didn't think that was an important part of the job. so i think the proposal we put forward which is essentially for a referendum to be held in 2011, and on that system it is a fair proposal and i think it's capable of commanding a lot of support across the house of commons as well as across the country's. >> we all know there is no perfect electoral system. there are advantages and disadvantages of every kind of system. and i am still not entirely clear though, what is the problem to which the alternative

vote is the solution? because many people have always described it as being replacing a system where the most popular person wins or the system with the least unpopular person wins? >> if i may put the ugly, the person who wins has got any into command a majority of the people who are voting. and therefore, you don't have a situation where in some instances, i think in 1992, the winner got 26 percent of the vote. so his of those or her votes would be redistributed from the second, third, fourth preference is. so in a sense every vote counts. if people tend to put a second, third or fourth preference, even if they're not voting for the first person in the first ballot, they have a say in how the final selection happens. there are in my view advantages in the system.

so i can comment to the cut come to the house of commons and say people are voting for me after the preferences were redistributed. i think that's a good system. a better system than what we've got. i agree with you. there's no perfect system, but i've always been concerned that we can maintain the constituency for members of parliament. i believe in the 25 years i have been in parma, that link has become more important, not less important i believe if people thought we were removing that link to some other electoral system, they would be very disappointed and angry indeed. and keeping that link is something that has prove to be important. >> the only series electoral system that we've had since 1997 was the jenkins domitian set up by your predecessor. and if you go back and look at what they said, i mean, they say 80 on its own suffers from a

start objection that it offers little towards a greater proportion and in some circumstances it is even less proportionate of the first past the post. so most people thought that the thing we did today was to make our system rather more proportional than it is. now whatever else it offers, and 80 has good things that has to. it doesn't do that. >> i don't want to get into a big debate about other systems than a.v., but in the end you lose some of the constituents. no problem about that. the issue since 1987 is not just the jenkins report. we had the expense of what's happened in wales, northern ireland, scotland, the spirits in london. i think many people draw different conclusions from the experiences that we have seen in these areas. >> prime minister, this isn't in your speech today, but it does

appear from the anti-gay the prime minister's questions a few weeks ago that you were having some votes with 16. is that right? >> i've always believed if you could do three things at the same time, if you have the best citizenship education in school, too, if at the age of 16 people assumed their british citizenship in a formal way, and three, you can then go on to the house of lords at 16. but i think there is a doubt amongst members of the public, about whether people at 16 have got the maturity to cast votes. i don't agree with that. i think most people do have. but i think will be far better combined. i think it would be better can bind, that is leading towards that at the same time some citizenship people assumed citizenship at that age. >> prime minister, i think you and i would agree that to one of the greatest things what we did and every child matters, and the

five outcomes for children. >> and you were very much involved with that as well, so thank you. >> thank you. many people who care about childhood believe that pressures on childhood our embeds, commercial pressures, the pressures of testing and assessment that all of the pressures on modern child. and many people believe that the votes at 16 would actually take some of the crucial protections of children, childhood away. because it would raise, it would pull down the age of adulthood to 16. are you worried about some voices that argue that childhood which rank if we have those votes? >> i think we're talking about two separate things. i think, i think as a parent that the pressures of most parents of young people are, as you say, in earnest after because when we were growing up, and i think i'm speaking or all

numbers of the committee, the major influences on our lives were our parents, school, perhaps our church or faith group, and friends. now the influences are a young person growing up, particularly very young people, now include the internet, television and videos, texting, all these come into play at some point during a young person's youth. and so with the influences are quite specific when we are growing up, these influences are ones that even parents don't know the full weight of as the influence of a young child's development. so i think we should think more about the pressures of parents and how we can actually respond better to these huge influences that were not there in our youth, but are now they're on children. but i don't think it makes young people less mature. i think it makes young people more knowledgeable about what's happening. and more able to find out what

is happening, more informed if they choose to be so. my only issue here is if we're going to have a big reform like this we ought to be sure that citizenship, education and the knowledge that young people can get from the school, particularly, but generally, is sufficiently good. and so that we can have some faith that the citizenship they are assuming is one that they will take circe. >> i will push once more on that, and that is we've had some ghastly cases around child protection in recent months. and child protection, there is a very real fear when we look, children in care, that raising any attempt to raise, or bring down the age of a childhood to 16 would lead some of the most vulnerable children in our society between six and 18 pray to some pretty ghastly influences in society. what do you say about that? >> i would say that i'm afraid

that these teenagers are paid to some of these influences already, and we've got to make sure that particularly young children leading care, i think very strongly about this, particularly young children leading care are given the best support that is possible. and i think as a country we've got to recognize that some of the most vulnerable people in our country, are those children who have been in care until a certain age and then leave care and often find themselves by qualifications and therefore no jobs, without proper a commendation, and without the support they need. we've got to do more for that group of people. and you are right that child protection in that area is incredibly poor. >> does a very fine country full answer, prime minister. >> there's no question there would be a wide consultation on this record we've talked young people about it. with at a young citizenship commission that indiana could make a full recommendation, but

it is is a live issue that i think we should be prepared to discuss but i would prefer to discuss in the context of better citizenship education. >> one question on behalf of the voters, prime minister. when i taught studies and government from 11 up to 18. it's all very well in the ivory tower to talk about what is good for the order. you have the same problems i had. your next-door neighbors don't know who their six mp's are forced onto could the eight amnesties are for the scottish part of it. and another voting system, let me suggest the voting system, surely the voter has to be considered and if it is good enough for one system, it may be we should have the same system for all of our electoral levels because the electoral are totally confused in scotland at the moment. why not give them another poster? let me say for my expense.

your constituents know who you are. [laughter] >> and you are very well recognize. in your own area, and that is a tribute to you. but look, we have got different voting systems at the moment. the question is which ones are the best was. we've got a different voting system from scottish farmer to northern ireland, to the mayor of london. and to the european parliament. and soak at the moment we have a number of different systems that exist side-by-side. the question is not whether we and number of systems, there are, but whether we can get a better system for the area that we're talking about at the moment, which is house of commons. and i believe we can. i believe we should at least give the voters a chance to make a decision of whether they wanted. i don't think that is asking too much of the mp's asked the voters in a referendum to decide. >> okay. and i just as a couple of questions as we into. i mean, one of them i take from president obama's state of the

union speech last week. what i'm after is the idea that although we talk about these political constitutional structure changes, what obama bangs on about is sort of how we do politics. and he says in his state of the union speech, for straight people is where everyday is election day, we cannot wage a perpetual campaign where the only goal is to see who can get the most embarrassing headlines about their opponent. he goes onto say, this is so we for the division among our decisions and for the distrust and a government. and he says i will not give up on changed the tone of our politics. . .

it is a regret to me while i would like to see less part sean ship in way we look at some of these big issues it has proved to be impossible. it is something that president obama will obviously feel as well because he has tried, he made, his outreach is to ask people to look at these issues partisan eyes on occasion and look at the broader national interest and of course he has been not able to persuade his opponents to do that either. >> okay. and my last question is, you've, taken steps to curtail the prerogative

powers that exist in this country. why don't you this stage in the electoral cycle, why not just tell us when you're going to have an election and do that, as an emblem of your commitment to fix parliaments. >> i didn't -- we have written constitution. >> which you're in favor of. >> which i would like to see happen but it will take time to get agreement amongst so many people about what should be in that constitution. because they they saying it should be like that constitution or simply been constitutional documents that don't refer to some of the big issues of social and economic and. you have to make a decision about what that is. until that day when you've got this clear, written constitution which would require, i think a date for elections. we're in this situation which we're in at the moment where it rests on my shoulders to decide when the election will be. thank you.

>> we now move on to counterterrorism policy. >> may the 6th then. >> i don't give, answers to -- this is not a question about the election you're asking me? >> obviously very high on the government's agenda. you made statements to parliament on this issue than any other from. budget is now 3.5 billion for security. increased 250% over the last 10 years. it is now accepted that there are about 2000 people in this country who pose a serious threat to this country. an increase of about 25 to 75 years. does it worry you there is such an increase despite all the government has done as far as the counterterrorism agenda is concerned? >> i don't want to get into numbers the security services are tracking and i don't think would be helpful

to do so. i think the issue about the use of our security services, how they use their time, is an important one however, and we have doubled the number of, our security services staff over these last years since september the 11th. we've also, i think this is really important, almost doubled the number of police who are directly working on counterterrorism. we've created regional units so that we are not simply dealing with problems in one city but we're dealing with problems in a lot of cities. i do believe we've enhanced every point where we've got information to do so, our security apparatus at both in terms of surveillance, in terms of our collection of information and in terms of the coordination of the service. but every day there is a new problem. every day you've got to look whether you're doing things well and every day you've got to make changes if you think it is necessary give the changes in technology, or changes in methods of

terrorists or simply changes in the landscape where terrorists are emerging which as you know is not simply pakistan and afghanistan now. it is somalia, yemen, other countries as well. >> the threat level has increased 10 days ago, the home secretary announced it had increased. this is position of ministers. this was advice given by jtac. presumably you were informed on the same day that jtac made its decision? >> yes. and the important thing to recognize, after the detroit bombing, we have looked at a whole series of things about how we can improve our security arrangements as well. the decision about raising the security assessment is assessment not about one thing but about intentions and about capabilities of people who would do damage to our country. it's made in the broad sense that you look at intentions and capabilitis. and of course, the statement that i made two days before showed that we were taking new measures to deal with the terrorist threat that

existed. >> we understand obviously that these things must remain confidential, the decision to increase the threat level is based on confidential intelligence. that you can't share with the public. but do you think that the public ought to have been given or and in the future be given more information what they should do as a result of the level going up from substantial to severe or from severe to critical? obviously they see the home secretary making the announcement. they understand the words. they don't know should they leave their briefcase at home? should they do something different than what they were doing yesterday? that kind of information would be most helpful. >> obviously to all the people who are concerned with the security of our country, and so, our aviation security has been intensefied as you know. we're introducing the e-border system which will give us far moreable to stop people coming into the country in the first place and that is developing over the course of this year.

it is an alert all those people concerned with managing our borders, looking at our security, organizing flights, there will be aware of. as far as the general public are concerned i too am, wanting to make sure that we are clear about what's happening with radicalization with our universities. what is happening with radicalization in our prisons. we've got to therefore be pretty clear that we're taking all the efforts that are making efforts necessary there as well. so you know the alert is a call for the public to be vigilant. but it is also, a statement that we are taking what action we can, to make sure that our country is as safe as possible. >> so when it goes up, if the underlying message, you must be more vigilant because something may be happening? >> i think people will be more vigilant. i think you have to put this in proper perspective, until a year of course, we had the higher alert. it was severe.

we reduced it and of course, because of our assessment of the joint terrorism, the committees assessment of intentions and capabilities they have raised it again. >> now you mentioned airport security. of course the abdulmutallab incident. yes, the transport secretary -- rolled out in manchester and, heathrow airports. if we had body scanners and if abdulmutallab had traveled through london rather than lagos, would we be able to discover what he was up to as a result of having this equipment? >> i think body scanners will be a major improvement. and, that there are new technologies being used by the terrorist organizations al qaeda, and we've got to keep up with them. that's one of the reasons why wee commissioned a lot of, given a lot of incentives to companies to develop new technologies that could spot some of the things that are now being done. we are using the newest

technology to the best of our ability by bringing in these body scanners but obviously over time our technology impositive and enable us to do even more. >> one of the issues is not just having the scanners here but being able to work with countries abroad. and it's the international standards. does it concern you there are no international standards at the moment which people can adhere to so that what we do in europe which is obviously of the highest possible level, matches a country like nigeria or yemen? we may have 20 body scanners but yes, ma'am meant doesn't have a -- yemen doesn't have a single body scanner. >> we suspended flights from yemen. we're working with the yemen authorities. we're trying to work with them on improving aviation security and that will happen. but you're absolutely right. we are giving advice and training help to a number of countries who want to introduce more sophisticated systems for spotting and detecting people as they come to airports and take

off in planes that come to countries like ours. we must also enhance the cooperation across your pop both in terms of data and in terms of similarities in the security systems we use. as you know, our cooperation with america is very strong indeed. >> now, you probably not had a chance to read the select committee report we published this morning into the suggestions -- >> i had a chance to see the headlines. [laughing] >> prime minister, you of all people should never judge something by a headline. we have recommended, the establishment of a national committee, a national committee to bring together the security services, national security services. it is actually building on foundation we have at the moment. you have a cabinet committee at the moment that deals with national security. that the home secretary weekly thursday morning's meeting there is cobra and jtac. a lot of people do a lot of good work. do you not think it is important to bring together

the various strands in order to insure you have the best possible advice from those who know about these issues. >> although you have criticized us today, i just remind you on july the 7th last year you said the u.k.'s counterterrorism appat tus is first class, effective as any system of government can expect. and as far as the national security committee, nsc is concerned, i want to make sure there is no misunderstanding on this that meeting has ministers concerned with every area of security. but it also has the chief of the defense staff. it has the chief of all the security agencies. it has the chief of the metropolitan police terrorism division. it has all those people there who are either the chief security advisors or head the agencies. so in fact, the there seems to be very little difference between our proposal and what we actually do. that's only way i con vin

us -- convince you invite you to a meeting yourself and all the people are sitting around at cabinet table and they have a chance to contribute to the debate. these are the decisions this is the committee where we make and recommend to the cabinet decisions on security and the people you want to be there are actually there now. >> i don't know whether that is coded way of inviting me to join your cabinet but one of the problems is, -- [laughter] one of the problems -- >> i would be pretty direct if i was talking to you. >> may be a bit late. prime minister, we accept that. we accept you have a cabinet committee. the worry is it may well be a little fragmented. for example, going back to -- we thought would have home office policy. scanners. in fact it is department of transport takes the lead. is the there any way we should look at structures to see if they can be improved? deliver the, program that you have on counterterrorism is pretty ambitious. you want to protect the

public. >> we have trebled the budget on counterterrorism and every week i am looking, as our other ministers with those important advisors, at what is happening and of the danger that we face from potential terrorists coming from somalia, yemen or pakistan and the afghan-pakistan border. every week we're looking to instances of people trying to organize, to cause damage to our country and trying to prevent this happening. and i think that the structure we've got, which is actually the structure that you want, which is all the ministers together with all the chiefs of the different agencies including the chief of defense staff, is the right way of bringing people together and coordinating things. i think it is a myth to suggest that is not happening. as far as individual responsibilities and ministers are concerned the coordination between the home office and transport department was such they made a joint statement on the day parliament resumed in january with the results

that they had agreed on what we should do following the detroit bombing. and i think it's right to say that airport security and airports are a matter for the transport secretary but the coordination between that and home office is very, very strong indeed. i think you're also finding that the coordination because we're dealing with international terrorism, the coordination between national agencies and international agencies is growing all the time. we appreciate, we can not have a fortress britain policy. you can not simply say that within britain if we do everything, then we will be best protected against terrorism. we have got to take issue with what's happening in pakistan, yemen, somalia and we have to take action to protect our borders, outside our borders as well as inside our borders so international and national coordination is incredibly important also. >> finally, we understand that the part of the system has now been suspended no north india because of

number students coming in. when you were last before this committee you of course said the committee actually agreed with this point, the system was a radical approach and we hope very much we provide a template for the future. but does it worry you, that the number of students coming in under the point system possibly could lead to abuse? is it a concern to you that we still don't have a figure as number of bogus colleges there are in the united kingdom? >> right. since, march 2009, any institution that wishes to bring foreign students into the united kingdom news undergo a two-stage process of accreditation and licensing. we've reduced number of institutions able to bring students to the u.k. from 4,000 to approximately 2,000. those with a license are regularly visited and monitored. those who do not meet the high standards will have their license suspended or revoked. we've already revoked or suspended of, licenses of more than 160 colleges.

so we will continue to bear down on those institutions that do not play by the rules set. i think you've got to understand that, students coming to our country to study is an important part of the both of our international links with other countries and our education system in britain. and we do not want to discourage bonifieds students coming to study in our students. 20,000 from india, 60,000 from china. we have one of the biggest groups of people studying in our country simply because our universities and colleges are very, very good indeed but we must take care to make sure that route is not being abused. that's why we're of course tightening up on visa system, we're tightening up on colleges entitled to bring people to this country. >> you have received no information that suggests that this system being used by those who want to support terrorists or indeed, would-be terrorists? >> we are looking all the time at any possible routes that any would-be terrorist would use. if people are declaring themselves to be students

when they are not genuinely students and using bogus route to get into the united kingdom it is our duty to stop this. therefore we continue to be vigilant what subpoena haing in this particular area. >> thank you. >> counterterrorism legal framework, prime minister. i'm sure you agree, counterterrorism law has evolved over quite a long period now. a special open-ended measures and theoretically supposed to be temporary but also risk of them becoming permanent. last year in may, jack straw gave a public lecture that the time had come for, counterterrorism legislation where we still needed it. would you agree with him about that. >> we certainly still need it. the question is whether, we can look at it afresh in the light of all the information we now have. there is always a case for consolidation and so, i don't, disagree with you but there could be a case for consolidation, but i do say

to you we do need counterterrorism legislation. we're dealing with a real threat that affects people in our country that led to number of incidents where people have lost their lives tragically. it is our duty to protect every citizen of this country. >> i certainly wouldn't disagree with you about that. the real question whether the counterterrorism legislation is too draconian. whether it actually works or whether it is aftereffect tiff. look at the question of control. which had quite a battering over the year, last few years in the courts in particular. you have 12 in force. originally all together about 45 people. there is only 12 now. 7 people have absconded. restrictions that can be imposed or is reduced. average cure few is 10 hours and two have no curfews at all out of those 12. we know the home office spent 8 million pounds, legal costs just defending the legal cases. if legal aid for the

controllees, cost the court hearings. near 20 million pounds. wouldn't that 20 million pounds being better spent actually more police officers to keep tabs on these people more effectively so they couldn't abscond? you're not interfering with human rights or right to go about business in same way. don't get the same bad publicity of these extraordinaire measures and probably more effective way of keeping tabs on what they're doing. >> can i give other side of the story? the, the problem we have is that there are people who we suspect of their terrorist activity who we can neither deport from the country, nor are we in the position to prosecute. and, there is this gray area where we have got to defend the people of this country. if we can't take these two extreme actions and you wouldn't want us to do in circumstances where we didn't have all the evidence that was necessary to do so or the powers to do so in relation to deport stations.

and i have to say, when lord carlisle, the independent ajudicator in this looked at this, he come down in favor of what we've done on control orders. we're trying to get the balance right. you have emphasized the, the safeguarding of the individual rights. and i accept that as that is an issue. we've also got to make sure we protect the public. lord carlisle in his published today, it is my view and advice abandoning the control order system entirely would have damaging effect on national security. there is to better means of dealing with the serious and continuing risk posed by some individuals. now without going into the stories of these individuals, that i do know something about that without going into the stories of these individuals i think lord carlisle has given us a fairly balanced judgment what is the better way forward, accepting there is no best way forward. >> let's put it this way. certainly the issue here is protecting the public. and balance laing rights of

individuals. >> yeah. >> now we have 12 with control orders. ten of those are cure fuse averaging out 10 hours. lord carlisle hasn't actually looked at alternative which is more effective police surveilance. if we have 20 million pounds to spend which we worked out is the case, 20 million pounds goes a long way providing police officers to keep tabs on a dozen people and probably more after effectively than the control measure provides. bear in mind, under curfew for only 10 hours a night. >> it is a matter of judgment. >> look, can we look at that again. >> it is a matter of judgment. both of us agree we have responsibility as you say to keep tabs on these people. so we're not in disagreement, but, where we find someone who is at risk of causing a terrorist act, that we can not prosecute and we can not deport we've got to keep tabs on them. the question is how we do

it? you're suggesting it can be done purely by police surveillance without a control order. i just say the judgement of lord carlisle is clearly looking at whether control orders a good thing or not it would have a damaging effect on national security to take them away. now maybe over time we can find a better way of doing this everybody agrees this is not an ideal system. nobody wanted to bring in control orders in the first place. we were forced to do so because we weren't able to deport people that we could get out of the country. >> controls were beauty up because we couldn't lock people up without trial. >> not that the you could deport people. >> or deport people out. i can repeat what lord carlisle says. i think it is a basis we form our balanced judgment as well. >> could i ask about 28 days pre-charged detention. this is one of the special measures. went up from hurt teen days, it was last used in june

2007. through years ago. 2008, i was told by the minister the detailed review of the cases, takes more than 14 days in the heathrow airline plot would happen. that is operation avert. that review hasn't taken place. and now i'm told that there is no intention to carry out that review anyway. i think that shows even on the floor of the house. the point here, what we need to do to find out how this is being used, in particular, in relation to people released at the end of the 28-day period without trial, without charge, found to be innocent, what effect of the 28 days detention has been on them and indeed on the rights of society in which they live? and what impact that has had on the, for example, radicalization? can we actually have that review of those who are detained in operation avert that was promised to me in the 2008 debate? >> i just got to say, when

we went to discussing the issue about going beyond 28 days, it was part of the proposal that a report would be done on every individual case. and that report would be done in an independent way. i shall look at what you've been talk told in the house of commons. i can't, i don't have that there at the moment but if you can give me it i shall reply to you. >> it was 2008. can i ask about sex 44 and stop and search -- section 44. european courts, held that stop and serve section 44. right to respect private lives neither sufficiently or certain or defined or subject to adequate legal safeguards against abuse. time and again i've been told, by ministers, senior police officers, that section 44 should only be used strictly in counterterrorism operations

and for those purposes but in practice it is a lazy way for police officers to stop and search people more broadly. indeed even in my constituency talking to them, about half a dozen places which are subject to section 44 areas that used section 44 powers which i find rather surprising. will you now look again at section 44 and the because it does undermine confidence in the police way it is being used as well as i think, a abused. excessively. >> as far as i understand this case went to the echr after of the applicants lost their previous challenges in the divisional court and court of appeal in the house of lords. and these judgements said stop and search did not interfere with a person's human rights. the case was related to two people as you know, who were stopped near an arms fair in london in 2003, and as far as i understand it, the home secretary is not only disappointed with the european court's of human

rights ruling in this case, because we have within all the other challenges in the u.k. courts including in house of lords but we're considering the judgment and will seek to appeal. now, pending the outcome of this appeal the police will continue to have those powers available to them. i think we must wait until we see the outcome of this appeal. >> i'm sure the home secretary is disappointed. but my committee is disappointed by the response that in relation to this, time and again, time and again, about the abuses of section 44. even normal protesters, having a cup of coffee. -- >> i can accept you feel strongly about it but you got to understand this is a case where the applicants lost their previous challenges in the divisional court and court of appeal in the house of lords and therefore they have now got a judgment from the echr we will look at that carefully. but our initial instinct is to appeal. >> i understand security was even subject to section 44.

>> i don't know anything about that. >> could i ask you, finally about the, a couple of points on torture which we explored before. >> yeah. >> you promised to make public the new guidance to the services on detention and interrogation of witnesses overseas. will you make public the guidance which was in place between 2001 and 2007 when the allegations we previously explored in this committee were made to the ministers. we had allegations complicity of torture -- >> let's be clear when we start this. we do not support torture. we do not condone torture and we do not allow torture. and we do not ask other people to torture on our behalf. i'm absolutely clear that these are the principles that guide the conduct of this administration. whether there are allegations made, they're treated seriously. i wanted to publish the guidelines so that people can be no doubt, what is the

recommendations we have given to those people charged with the security of our country. what i've done is, put the guidelines before the intelligence and security committee. they're now looking at these guidelines now. i would not want to go back in time and publish previous recommendations. i would love to public like the recommendations that will be in courts now on. that will give you the satisfaction we as a government are doing everything we can. coming, hold on, come from the intelligence security committee with their advice and then we will publish them and that is, that is something we've already said we will do. >> that would be helpful for the future but allegations relate to the past. i think if we're going to be able to put to rest these allegations we have to know what the guidelines were at the time the allegations were first came up. >> there are cases in relation to that have been dealt with at the moment through the courts. i think the most important thing i can do in the job i have, is to make sure that people are clear about the

guidelines under which the security services are operating, all our services are operating now, and i'm going to publish these very soon after i had the advice of intelligence ant security committee. >> the last question, same. -- problem. general security services to talk to press about public lectures going on with his work through terrorism and but not prepared to come before my committee. do you think that is defensible that the rt general openly to talk to press and media, give public lectures but not give the same speech before a parliamentary committee? >> he offered i understand to come before you in committee to give a confident alf briefing on counterterrorism threat. the security and intelligence services are accountable to parliament through the intelligence and security committee. they do. mr. evanson and other people, heads of our security services they provide formal evidence to the intelligence security committee under the act but they do not give public evidence to other

committees. but we will give you, if you are happy with this confidential briefing on the current terrorist threat. i think that is a way of resolving the issue. >> thank you. foreign affairs. >> thank you. prime minister, last week, you hosted the major afghan conference in london. and, at that conference, you made some and other allies pledge to do more to support the coalition effort. but are those pledges really worth anything when it is quite clear that a few countries, including our own, continue to carry a disproportionate burden. >> you're abs you shootly right there should be a fair sharing of burden. let's remember why we're in afghanistan. we're in afghanistan to prevent taliban returning to power and al qaeda having a base to operate in afghanistan it telephone. -- itself. we want to give afghans

power to run their own affairs. that's why we're training afghan security forces and their police. we want all the countries involved in this coalition to be helping in this effort. in the last few days, i think the 9,000 additional forces have been agreed in addition to the american numbers. so other countries have been prepared to help. the latest country offered more numbers is germany, over the course of the last few days and they're also offering support with police training. i think perhaps as important as having people on the ground in armed combat, we also need trainers for police and the army. we're hoping that other countries will be able to do more quite soon. >> . .

>> the afghan forces themselves. so if countries are prepared to contribute to the training and mentoring to afghan police and afghan armed forces, this is a major contribution also. because our strategy is to train up the afghan forces so they can do the job and allow our troops to come home. >> there was a very lengthy communique last week which puts a lot of operations on president karzai and his government. but in view of the widespread corruption, the flawed election, and the fact that the afghan

parliament twice rejected a majority of the minister by president karzai, have you really got any confidence that he's going to change the way he's behaved in the last few years? and we can really get this time things right in afghanistan? >> i think president karzai came to the london conference to say that tackling corruption was the priority in his second term. i think he's already set up the corruption commission, he's brought in new laws and accepted international advice on the matter and some monitoring by the international community. so the anti-corruption effort has certainly been given a drive forward that wasn't there before the election. i think on other issues, the provision of afghan forces, that is him providing the numbers for us to trade and to partner. he has made good on his promises. therefore, there are additional troops joining the afghan army every day and joining the police force.

we're going to bring the afghan army up from 90,000 to 134,000 to 175,000 by 2011. so we are doing a virtual doubling of the afghan army. it requires mr. karzai himself to be able to ensure that that happens. we cannot do this alone. he has to make the decisions that hire and deploy the troops. we can help with the training. but it's a big commitment he's made. and equally he's raising the number of police in afghanistan from about 90,000 to i think about 125,000 to 130,000. there's a big rise in the number of police as well. he has to provide the number of police forces in afghanistan. >> but ultimately we are not going to solve it militarily or by policing. it's a political issue that has to be sold here. one the proposals in the communique is for a new fishtive to reconcile the taliban or elements of the taliban.

the communique, and i'd like to quote a few words to you also says that this is should be based also on a pair of 5, on democratic accountability, equality, human rights, good governance, economic growth, and i could go on. how confidence are we have as we bring in to a political reconciliation process people who don't necessarily sign up at least internally, even if they say publicly to those principals and the afghanistan constitution that we would really be able to get the kind of society in afghanistan which is considering the aspirations of the communique. >> i think the priority is to secure a strong afghanistan so the taliban know that if they are fighting against the afghans themselves at the numbers that they are dealing with in the

army and the police are sufficiently strong for them to realize that afghanistan has become strong itself. the second thing is to weaken the taliban and divide the taliban as an important aspect. those people who are prepared to join the democratic process in afghanistan and are prepared to abide by the constitution. it can -- they divorce themselves in the ideallogs and extremist that some of the taliban have. but in the end, as, you know, we're going to have to build local civil government, we're going to build strong district and prudential governments who are free of corruption. we've then got to build the local and strength that comes from people being able to resolve issues in a peaceful way that are working. that is a huge task.

if the civilian part, i agree with you, is as important as the military part. and it's important that they are complement -- complimentary. >> that could take years? >> i think the build up is going to happen quickly. >> but with other changes could take years. >> the afghan control could happen relatively soon in some cases. but i agree that this will take -- this will happen in a period of time. there will be the transition to afghan control. the policy is to make the transition. >> very quickly, i know famously you are a workaholic, prime minister, so you read all of our p.a.c. reports. we found a helicopter shortage. on the 19th of january, the

former sector of state suggests he'd be able to spend the money in 2002 to 2004. obviously more helicopter will be able now. was he right? >> the defense budget was rising at that time. it was a matter for the defense board itself to make decisions about what their priorities were. you know, we've had the longest rise in the defense budget with for 20 years. we'll put money able to the defense department. they decided they would reambulance the program. it was their decision that they made. i do say we have raised the amount of helicopters in the afghanistan very substantially over the past year. i don't accept the first part of your allegations. >> lord walker told the inquiry yesterday we've been given a target in this period when of

course you were chancellor. i think it included the helicopter mining and aircraft carrier that is were all big ticket items. i think we drew a line somewhere and said quote if we go further we will probably have to look for a few set of chiefs. the fact is when you are chancellor putting heavy pressure on defense budget, particularly on helicopter. >> i degree entirely what you were saying. i was responsible for the 2002 spending review which saw the largest increase in the defense budget in 20 years. the secretary of state at the time described it as an excellent settlement for defense. but we'll continue to allow. >> that's not what he's saying now. allow us to invest in the continue modernization of the armed forces. the treasury, if i may -- you know this. the treasury device through the budgets to the departments. it also provides for the urgent

operational requirements for the ministry of defense. there is no sense in which we were trying to cut the ministry of defense's budget. in one year they overspent and had to adjust accordingly. >> you don't say now that we are trying to get more helicopters and refurbish them. when you were in charge of the budget, we were not making the right decisions to procure them? >> what i'm saying to you is the ministry of defense was given the biggest settlement in 20 years. it was there decisions about how they allocated the money to the specific programs. it was not for me to tell the minister of defense whether to spend their money on this or that. they made the decisions as part of the ministry of defense. >> it's not what general lord walker says. they were given line by line items. what happens now?

>> i'd like to finish this. because you have a chamber of public accounts. you know the way the treasury works. we allocate budgets on the three-year period to the different departments. i repeat that the ministry of defense's settlement was welcomed at the time as the largest increase for 20 years. it was for the ministry itself to make the decision within his budget how it would spend on the particular items. as far as helicopters, i want to assure you that we've almost doubled the helicopters numbers in afghanistan in the last three years. we've more than doubled the flying hours, we've fitted more powerful engines and improved carpeted at the cost of some 400 million while conducting an urgent program to introduce into service operations. so we have tried to make sure that in this new terrain of afghanistan helicopters -- moved

from iraq. >> nobody denies. but the program should have been ready by 2010. it's not going to be ready by late 2010 now. it's been a six-month delay. it was supposed to deliver the first link by the end of 2009. they are still having delays in meeting them. what i'm putting to you, there was the faithful delay. if anyone made the decisions back in 2004 when he was defense secretary. when he was pressing you for money specifically on helicopters, it was you who vetoed it. >> i'm sorry. what happened in the early stages of the nk3 procurement, it commenced in 1995 under the previous administration. now we have a program which has been commented which is allowing us to deliver to afghanistan. i don't get -- accept your interration of the --

interpretation of the events. >> in order to maintain the role in afghanistan, when they came to our committee recently, working with the figures ngo we put it to them that there is the black hole in the ministry of defense budget. even if you assume as you were going earlier, even if we assume a 2.67% increase, there's still the black hole of 6 billion pounds. do you accept it's there? we simply can't go around saying we can maintain the commitments and all of our spending commitments on programs. the money isn't there. we need to talk real on there. >> we are talking real. that's why urgent operational requirements for afghanistan are met and continue to be met. i don't want you to go away with any impression other than that when our fighting forces are in the afghanistan or as previously in iraq they are getting the best equipment and the best support that is possible.

and this is meant not by the defense budget itself but by the treasury and the urgent operational requirements of our forces. i don't want anybody under this committee to be any under impression that requirements for afghanistan will always be as they have always been met. and i said before the figures 600 million three years ago, 4.5 billion at least in the coming year, perhaps herely 5 billion. we are not underinvesting in afghanistan. we are putting the resources that are needed, and for the work that is being done by the significant armed forces there. we are giving them every support in equipment and protection that they need. >> i'm sorry, prime minister with respect, i wasn't asking you about our commitment now to the contingency budget and afghanistan. i was asking you about the black hole in defense spending. and i was falling on some questions put you to by peter love. the fact is we are ring fencing

help and international defense. what are you going to do about the defense budget when it was generally accepted on independent analysis by the national audit office that this is a black hole in the defense budget of 6 billion pounds within 10 years if you maintain your present commitment and you've accepted today you will do in afghanistan and the aircraft carriers. >> sir, we are clearly ring fencing afghanistan and making it absolutely clear that the resources needed for afghanistan -- >> i wasn't asking you. >> but you are comparing what we are doing with other departments. afghanistan receives the money that is necessary for the urgent operational requirements that we are seeking to meet. i don't want anybody to go awe the impression that we are doing anything other than making sure the troops are equipped and protected to the work they are doing in afghanistan. as far as the defense budget is concerned, there is a strategic defense review going to take

place. that will be here in due cause. and there will be a defense wide paper and debate about the future of that defense commitment. now that is something that everybody agrees and every party should happen. you have a defense review. previously we're going to have another defense review. that is the right way forward to judge both the commits and our resources. >> so when you are confirmed today, you are still fully committed to the aircraft dariers. >> i confirm to the aircraft carriers. i also say to you that our product in defense is as it has been over the last few years to make sure what we do in afghanistan is properly financed. >> what are you going to do? at moment we're killing very successfully the afghan taliban in afghanistan. and the pakistan government as we are are pursuing the government in pakistan. nay are leaveing alone the afghanistan taliban. what is the point of perrer

suing success of the afghan if they are left. >> i don't accept your reading of events. it is true that the pakistan taliban are under huge pressure in pakistan. it is also true, and you are right, that we've made significant moves with the work we're doing to expose them to and then to cause damage to the afghan taliban in afghanistan. but we are not leaveing the afghanistan taliban in pakistan as we agreed to do anything that we want. we had our sights on what we can do to weaken their status and their power in pakistan. >> thank you very much for that prime minister. let me ask one question. when you opened your daily papers this morning -- >> what's the good situation? >> well, it is pretty grim in afghanistan. [laughter] >> when you opened your daily paper did, did you muse with

joseph stalin in asking the question that how many divisions does the pope have and therefore views and anything else? >> i didn't see that in the paper. >> you didn't. >> i heard about it. >> taking up the points about pakistan we are giving 1/3 of all of our spending on counterterrorism to assist the pakistan government. do we have an order of where and how the money is spent? and do we think it's well spent? >> i think -- i've got to assure you that our view it is well spent the. the things that we've uncovered, the terrorism is incredibly important. we have not been supporting

pakistan however in education and development activities. i think it's important to send the message that where we are helping is also in the north of pakistan trying to educate young children and trying to help pakistan develop better governments and trying to give people access to services. it is not simply counterterrorism expenditure and pakistan is the uk second largest development program worldwide. and we want to help the pakistan people as well. >> you refer to education. there's been concerns for many years about the way the young people in pakistan, the only education they can get is through their system either because the pakistani government didn't spend enough or ghost schools operating where people were paying but there were never any schools already -- schools

but no teachers. how are we assisting the pakistani government in it's own efforts to deradicallize some of those places? >> i've talked to the president and prime minister in pakistan. i think it's important not just to think of this in terms of ma dresses but some of the schools itself and propaganda in comes through the schools. we are offering help with not only education in the sense of buildings, paying for teachers, but also in terms of books, literature that is available to young children in pakistan. and i think it's important to say that we want to discourage people from using those schools and bill up the pakistan official education system and give it support. but we also recognize there are problems in the education service that are going to be sold as well. one the things that we did after the army went into the north of pakistan to deal with the pakistan taliban, was support the development of schools in

these areas. and move some of our educational spending to the north of pakistan to get held there. we are aware that unless we can win the support of local people to help deliver services that there is always a danger that people do not think we are on their side. it's important that we do that. >> we've referred already to two countries where there have been clear links with the al qaeda, international terrorism. and overreached in weeks, we've seen the -- up the agenda for yemen. we are a meeting last week associated with the afghanistan meeting where there was anagram and communique about yemen. -- agreement and communique about yemen. who do you assess the real threat comes from yemen? is it on the same scale as pakistan or somalia or lower?

>> the epicenter of terrorism in yemen is mainly focused on pakistan. the issue that al qaeda is organizized there. but we've had some success in disbursing them and reducing their effectiveness. if you have success in pakistan and afghanistan, it's inevitable that some people will organizize elsewhere. so i mean i have no doubt that when al qaeda left and saudi saudi arabia went to yemen and there are instructions there and certainly working under the the -- at guidance of al qaeda in pakistan. but it is nots on the same scale. and the issue in yemen must be that given the conflicts that exist in that country already, that we must make sure that the government of yemen is focused on the al qaeda threat.

we can help them deal with some of the other problems that we have to deal with. some movements and difficulty that is we've got including holding the country together. we must make sure if the terrorist threat is allowed to grow basically in the fragile state on uncontrolled territory, then it will become an even greater threat in the years to come. we are focused with the government. i met the prime minister last week in london on what we can do to help them deal. >> prime minister yemen is an extremely poor country. and it's had a lot of international support pledged to it in the past. but i understand that the money that was pledged to 2006 largely was never spent. because of concerned about how if we disburse and whether it would get to the right people. how can we this time with this renewed international focus make

sure that if there are pledges they actually get through to the poor people and that they do what they are supposed to do? >> well, i think our aid to yemen has been maintained on the basis of the promise that we made. and indeed it's been extent the. we will do what we can to help the country. we must be sure the money and aid is getting to the people that need it. this is an incredibly difficult country, given the conflicts that exist within the country itself. we offer the president. i talked to the prime minister here. we offered them help. but the development and we continue to do so. but we must be sure that the action that we need taken that he wants himself taken against al qaeda is actually undertaken. >> what are the other problems that's about yemen? it's that most of the remaining people in guantanamo bay are

yemenis, they were supposed to return back to their country. but clearly in the current situation that seems extremely unlikely. does the terrorist plot which was already referred to and his remarks at christmas day plot and subsequent events mean that it's now less likely that guantanamo will be closed? and also given that two of the people who are alleged to have been master minds of this plot were former people who have been inside guantanamo who are saudis who had been through the rehabilitation and reradicallization program, doesn't that call into question also the effectiveness of that deradicallization program? >> well, first of all, we want guantanamo bay closed. we've always said that. secondedly, the decisions on that will have to be made by the president about what we does with those people there from

yemen. and it's for him to make the decisions. yet, the third thing, and failure in certain deradicallization programs should not allow us to abandon the necessity for working to try to tackle this extremism problem by persuasion and by showing that the violent extremism that people are supporting that is essentially based on what is a piece of the religious. we've got to continue to expose that. and we have to continue to use the work that is done by moderates and sensible reformer in the islamic road that can't ride the extreme views. >> now we'll move to somewhere else in the islamic world. >> prime minister, we've discussed iran in this fallen on several occasions. and i was going to start with a

very simple question about prospects with top u.n. and eu sanctions. but as we sat down whereby they were announcing that the u.s. and three european has gone to the iran central bank and confirmed to the revolutionary guard. the state is circulating an outline of possible new sanctions in london, parulis, and berlin. is this at works and what is your response? >> well, i've always said that if eastern -- iran doesn't respond, the next stage is sanctions. it's important to get all three engaged in the process. britain is prepared to to take further sanctions against iran. obviously there will be a meeting of the european union to discuss this soon. i believe we can be get

agreement within the european union. then the e3 plus 3 will make up the made about further sanks that have been announced already. >> so in any sanction regime, there's always a delicate balance to being struck between how to assist the disadvantaged part of the community, how to assist parts of the political movement that have got more rationallal approach to how they run there -- how they'd like to run their country. and on the other hand, trying to do damage to the regime. is there not a risk given some of the event that is are going on inside the country that increased sanctions will simply hurt iranian people? >> i think we've got to balance that out against the fact that

iran is not in define of five u.n. security council resolutions. they are developing a weapons program that we know how no apparent civilian use despite. and the message to iran has to be very clear that we want iran to join the international community and agree with the international community in means by which they can develop nuclear power without nuclear weapons. if they are not prepared, they have to bizelated. it's a choice they are making. once the iaea have shown they are not complying with the u.n. security resolutions. >> musab has said the green movement will not abandon their rights until the people's right have reserved peaceful protest

as they are in any country. are you confident this approach is not going to damage that revolution force? >> i think you have to make a judgment 37 and the message that we have to send is that iran is a duty to respect the human rights is the right to peaceful protest of it's citizens. i think everybody who's seen pictures coming out of iran about what has happened to people who have been demonstrating is shocked by the way the regime has dealt with these peaceful demonstrations. but i think one has to take a balance of judgment about the future. and it must be this. this iran has been in defiance of the united states. evidence has emerged continuously about how they are trying to possess a nuclear weapons program under the cover of civil nuclear program.

all of the evidences and materials that they are trying to bring together. that would not be the white materials for that civilian use of that nuclear power and it's very clear that the international community has agreed that iran has broken it's responsibility of the nuclear nonproliferation act at what we now have to do is accept if iran will not make some indication that it will take action, then we have to proceed with sanctions. i'm sorry it's come to that. the international community has to show it's strength in the matter by imposing the sanctions? >> what more can we do assist the change in iran without the regimes that western powers are conspiring against and make it clear in every way possible that

we are presenting iran with the opportunity to become a respected part of the international community. and that our fight is not with the people of iran at all. we want to make sure that iran can join the international community by complying with it's obligation to the international community and through our ability to talk to the people of iran, and assure that we want them to be a peaceful part of the community. >> i hope that part of our position we would make it clear to the iranians that it would be totally unacceptable for them to execute the nine people, probably more than they currently threaten to. >> as you know we are opposed to the death penalty under any circumstances, and we'll make these views known as clear and entirely agree with you that would be completely unacceptable for that. >> you promise to conclude the

section with going to the israel palestine issue. as you are well aware, the situation gaza is desperate. but in 2007, there was 2807 trucks and truckloads getting to gaza. this year it was 418. recently, the government has experienced the commission to the humanitarian affairs minister. and parliamentarians from many countries are not being allowed access from israel into gaza. what can we do? what concrete steps can we take to get passage of humanitarian aid into gaza both from israel or from egypt? >> >> you are right about the

set of events. palestinians and israelis need to come together to reach an agreement together further progress towards an agreement. i talked to the palestinian leader, mr. abbas only in friday in london about the serious situation that has been faced by people in gaza result of what's happened. i want you to know that we have provided 78 million pounds in support. we have helped provide public services to palestinians through the world bank trust fund. and we provided additional help in december. >> prime minister, how much of that has gone to the west bank rain getting to gaza? >> substantially, i think we are helping pay for teachers, theres, engineers, and keeping

services running. i do agree we have to find a way of getting humanitarian aid and reconstruction into gaza. we continue to prez the israeli authorities to do so. european union minister's statement on the 8th of december calling on the israelis to do more. we continue to press to do so. but you know in the end, it's going to have to be an agreement that people would move forward and try and get towards settlement of the differences. i personally believe that these are in fact problems. no matter how long we've had to deal with them. i can see a way as others do thereby the palestinians could come -- and israelis can come together. first some confidence building measures. >> let me go back to the question of the gaza access first in the area. >> well, i i in the question of access. if it's not possible for israel,

what's your reaction to the egyptian government building this wall 10 kill meters or 11 kilometers long? i understand they want to stop smuggling. isn't that going to contribute even more to the humanitarian difficulties given that most of the things that go in are currently going through egypt. >> that is a problem, isn't it? >> that's why i have to be clear with you we need progress between israelis and palestinians on other issues so we can ensure that the people are gaza are given better help. there seems to me there's a stairway that can be broken. i know george membership el is working hard to do so. it will be broken by measures where the israelis are taking some action including on gaza. in terms of the dialogue,

there's been 20 meets through the egyptians, hamas, or fatah, they failed to get the agreement. they have policy which the government has upheld since 2006 is not engaging with hamas. i understand why that the position. because they haven't accepted the quartet principals. but nevertheless isn't it clear now that policy has failed and that the effort through the egyptians have also failed? we need to try to find a few way to get to the situation. i think you are trying to talk about the things that have been tempted. the central issue is whether the israellys or palestinians will be able to negotiate together a

settlement. now of course they are divided. that is a problem. but the ability of the israelis and palestinians to come together on a common agenda which we know what it is. we know what the common agenda has to be resolved is. i think to get there, you are going to have to have some measures that assure both sides working in good faith. and whether george mitchell and the president and hillary clinton can be able to help with that in the next few weeks is the essential question. i think we need some means by which we break this deadlock and allow talks between the palestinians and israelis. we do -- that is the only way forward, we have to get back to talking about the solution to the fundamentals problems over many, many years but problems that can be solved to many other people. >> prime minister, could you characterize this as a west bank

first approach. there is not possibility of two-state solution in gaza is there? >> i wouldn't characterize there. there are many issues related to gaza that are going to become part. at some point they will have to become a united force in their case? >> okay. thank you. we now move to the final scene of being prime minister. >> when you took over, prime minister, you found it number 10 to support the prime minister about 200 people in it? did you think it was well geared to it's purpose and how would you define the purpose? >> the purpose is to lead the government and to coordinate the work of government wherefore possible.

i think big changes are going to happen in the way of the government over the next period of time. i think we've only began to see the benefits of the new technology that is available to us. and as you know a few months ago, we published a document about restructuring a government which is the beginning of our talks about how to adapt at the way government is organizized to technological age. there is a lot that i would say now that we have got to change for the future. >> tony blair apparently thought it had to be changed at a more basic level. one witness to the lord committee, tony blair the prime minister is not powerful enough to have effective control over the direction of government. and therefore he built up the central capacity of number 10. i'm snot concerned if that was -- it sounds pretty much in

character. but is it your view, and it is your frustration that in some respects the prime minister isn't powerful enough? >> well, you know, i was brought up studying history. and it was, you know, the debate has always been about whether you have cabinet government or whether you have prime minister corral government. the prime minister is far more in the headlines and people focus politics in a very personalized ways towards one individual or one set of individuals. but my reading of the work of government is -- it is collective. and the cabinet doesn't matter. i think we have more cabinets meetings than most. we have wider discussions than have taken place in the past. about the various issues before us. so i hesitate to take this sort of, you know, one dimensional view that it's all about prime minister government and it's all about building up the power of

the prime minister. it's not in my view. it's about a cabinet that works, it's about individual department that is can work. but with a clear focus. for example, when you have the recession, we reorganizized government to deal with that. certainly around me chairing the meetings on the economic policy committee. we found that was the best way to bring officials and ministers and business together. that was a committee, it was working as an effective cabinet committee. and i thought that was the best way to do deal with the new problem. >> that's very interesting. because jeff mulligan who used to direct said that when he became chancellor, the treasury became more powerful across government. he describes it as a creative tension, mutual challenge. other described it in much more unfavorable terms. once you moved from treasury to

number 10, the center of government lost that constructive or destructive tension. because you were running the whole show. >> i don't agree. what happened with the treasury, and you might expect me not to agree. [laughter] >> and you might expect me to fain paint other picture than their accounts want to betray. the problem was it had to be more than finance. it had to be economic ministry. and that was why the treasury had to change. it's not enough in the modern world simply to have finance. you have to be able to deal with the wider issues. the relationship between number 10, business department, and treasury is incredibly important. the treasury remains an economic and not just finance. i think it's important to recognize that this you simply have finance, you will not be able to do deal with the wide range that finance is certainly part of.

but it is wider than finance. including the corporation. and i think the treasury is an economic ministry. it should not be seen as finance. that is still the case. and i think alastair darling and i have done very well together. >> does that mean you are still running the treasury from across the road? >> no, not at all. i think it's important to recognize that you know dealing with the recession and dealing with the financial recession as we've done. i think this is an insight to me, it demands the corporation that i don't think people outside government know recognize. >> you could not deal with that global financial e recession about countries in europe and and america working with europe. it had to be done as both levels. heads of government and finance on the economic industry.

and the contact between me and president obama and other members of the g20 had been very intense over the last period of time. equally, because we're dealing with new financial regulations, we're dealing with liquidity and banks and everything else, the details had to be done across the international community has been very extensive indeed. i think the new world is we're part of a global economy. we're increasingly part of a global society and increasingly the leaders rather than the economic or political leaders have to spend more time talking to each other about the very, very big problems. >> while you are doing that, we have understand why you have to do it, doesn't number ten generate policy initiatives which don't have the evidence-based that they developed and number 10, then feeds these out into the system and tried to keep you in the news on domestic issues and ensure that while you are busy

that they are in some way -- >> i think you read too many newspapers. i really too. policy -- we have changed the structure of government. we have an economic policy committee that meets regularly to do the issues. every one of their ideas about what should happen. be really cooperative has it tries to deal with employment throughout the recession. we have a domestic policy that looking at all of the issues that perhaps you are committing on. and we go through all of the issues on the laws on whether it to start or whether it's the education, white paper, and the health white papers that we've seen. we have constitutional committee on the issues that i've been discussing this afternoon. and the speech that i've given today. our decision is about the alternative. it's lengthy discussions taking

place over the last few months ago the constitution and future changes in the constitution. and the national security committee which is made of which i said in attendance or all of the major security chiefs on the concerning officer. so the structure of government is certainly coordinated and coordinated through the office and number 10. but i think it is -- >> interesting you didn't mention the cabinet. >> we have coordinated through number 10 and the cabinet office. as you know, our foreign apairs work is done through the ab net office whether it used to be number 10. that is a change that i made when i took off? >> prime minister, i don't know how many newspapers you read and i don't know whether northern ireland reads any. but you may have noticed that

one of the leaders of the minority party last weaklier meanted the fact without criticizing you personally that nearly three days of the time of two heads of government were taken up with the affairs of northern ireland. now what makes northern ireland in general and the peace presence in particular so different from other policy areas that it's required the personal and quite regular on john major and now of you? >> well, first it's because we want northern ireland to escape the vie -- violence that has been his legacy from the past. and it's a deep resolution of power and cross party government has been brought to a virtual end. so it's about the security of the people and our responsibility from the security of all people in the whole of

the united kingdom. but it's secondly about completing a process which was started by john major. i think it moved forward in a brilliant way by tony blair. but it is still unfinished business. because we do not yet have the job of pleasing injustice. we therefore do not have the end to the conflicts in the wars which have been a problem in northern ireland for many, many decades. we do not have the certainty that you have which is looking at schools and hospitals and housing and everything else. and it's stable in the way that assembly with the completion of the powers to spend the time that is necessary to bring, if you like, to an end one chapter is stalemate and open the new

chapter which is complete the policy to >> actually i wish you success and hope it's rewarded. in next few days. how do you -- when you are grappling with all of the issues that you face decide when to make the prime minister initiative and not to leave it appointed secretary of state? >> i think you were in northern ireland last week. i'm sorry our meeting in hillsboro presented -- you were very gracious about being moved to another restaurant. [laughter] i wanted to make it possible. >> i never suggest.

but it seems to me at this point that there were certain issued together with the tee shot of ireland and the i could help move forward. what we did during the three daying was provide a pathway for the completion of these negotiations. the fact that these negotiations are taking time is hardly surprising because there are a number of issues which need to be resolved. but i hope on the basis of what has been done both by the ministers, the foreign minister of ireland and sean woodward, our secretary of state. we are inching forward. this agreement has to be an agreement of the parties themselves in northern ireland. we are there to help them reach that agreement. i think previous agreements may have looked different. i think this has got to be the parties looking together to short out the problems that they

have. >> well, i'll admit to that. we know very well we are content to have our dinero a different place. that is the role of the special advisor. how many special advisers do you have at number 10? what is the number compared with your civil service? and how do you decide when to consult one or when to consult the other? does not the proliferation of the advisers jeopardize to some degree the imparse quality? >> well, as you know, when i took over, i changed the rules, these orders and council that have given two political advisers. the part to drop the civil servants. i change that. because i thought it was far better to find an atmosphere in

which civil servants could work together recognizing the importance of both. and now you will find that in the constitutional reform act, i'm right in saying the advisers for the first time set out in the legislation. but in the end, you know, it's a arrangement. the civil service works under guidelines to maintain independence and that is upheld as it is. equally, it's important that for the workings of government, political advisers and civil servants can work together on the development of policies. from my experience, there are very few tensions between the political advisers and the civil servants. >> what are the respective numbers? >> i think i've got to figure about 26 political advisers. roughly where we were when i came in. i'm very happy to give the

figures. >> back up to -- >> sir? >> back up to where you came in. >> well, it's roughly the same as i understand it. i'm happy to send it to the committee. >> what do you say to those were eminent civil servants among them that the government has taken over from cabinet government? >> i can assure you i have no sofa in my office. and i was explaining earlier, one, that i think what has been proven over the last few in particular in dealing with the recession. the collective actions of ministers working together is the major means by which we deal with problems. i'm saying there's a complicated factor now which is a good thing. that's part of the global economy that people cooperate together. that does mean the heads of government, the finance ministers are more lakely to be the people that are cooperating and working at an international

level. but i've found that the work that we've done to deal with the recession as we're dealing with the other issues is best done by these collective groups working together. and i think political advisers and civil servants can help towards that. but we are dealing, as i say, with a new situation that i hope that global cooperation will be enhanced. because you don't have the institutions, it tends to be more on an ad hoc individual and personal basis. >> what did you do? >> prime minister, as well as special advisers, you are more than any of your predecessors have thought to bring in your government as minister, people with outside knowledge and experience. and yet the majority of those seem to have left the government after a relatively short period. and appear to be somewhat disaleutianed by their experience. are you disappointed with the

effort? >> >> i'm not surprised we had ministers that did a particular job and decided they had other thing that is they wanted to do. but these ministers have been successful and they have made a huge difference. we have at the moment admiral west our security minister. i think we've done an excellent job. we have davis who's the former head and he is in the government as the minister for trade. and i think anybody from the business community is most impressed by how he has brought together in the reorganizizing uk and ti work, it's the financial services minister? >> we know the list. >> but i'm just say, he wassism

-- he was implying they all left. they are all doing an excellent job. i think we should recognize that this is a benefit to government if used wisely. but you've got to get the right people. and you have to accept that some people who are doing other things, like dozi was the health minister did a brilliant job in helping us but wanted to go back to his research, and he did a great job, but wanted to get back to the practice that he was trained for as one the country's leading surgeons. >> to give two examples, lord brown left the government saying he had found it to be more chaotic in short term. it concluded the civil service runs the country. ministers completely disposable and dispensable. are you concerned of the verdict of those?

>> not really. look at the end of the day, many of the people who've come in and are helping government are personalities in their own right. [laughter] >> they want to go and do other things. they can make controversial statement. i think you have to look at this as a whole. have we benefited from having the expertise in the government and in some cases serve for limited periods of time but do particular things. like the digital work that lord canter did. i have to answer that yes we have benefited from that work. i think the country has benefited from that work as a whole. i would be surprised if the opposition wanted to make an issue of this. i think the whole country benefits when we have people of talent. we are prepared to give time. >> and appointed ministers from within the house of commons, there are being complaints they found it overwhelming, without proper knowledge or training, it's one the reasons why you are looking for the government but

you have found is difficult to find the people within all of the talent in the house of commons? >> that is certainly not a common in the labor party. we have people of immense talent. [laughter] >> i don't know why you should think has is possibly. you must be thinking of some other party. [laughter] >> prime minister, can i conclude and you, your predecessor made it clear in the election he would not serve a fourth term. how long would you like to go on being prime minister? >> my prime ministership depends on the people of this country. and that is their decision to make over the next few months. i don't want to answer that. >> we quite understand what the people will decide. how long would you like to go on? >> i will do the job as long as i feel that i can make a contribution to this country. and it's up in the end of the

day, and this is why, this is a very strange session, i may so talking about the job of prime minister when we have the policy issues to deal with. but i would leave the decision the in the hands of the british lek lek lek lek lek lek -- that's obviously isn't it? >> you would be surprised in the session before the election we might think it appropriate that the voters should know how the job is done and what the demands of it are. thank you for helping in that respect. >> well, i'm very grateful. >> thank you. >> i may i state that i'm old enough to remember the political convenience for gri and may i

say it's the end of our 15th sitting. it's probably the last one we will have in this parliament. it's something we can never have happened, and the only previous prime minister to attend committee did so at the beginning of the last industry. they did so not as prime minister but as leader of the house. so thank you and your predecessor for both of your roles in pioneering and establishing a new form of parliamentary ability for the prime minister. thank you very much p >> thank you y'all very much. i'm very grateful to you. thank you, chairman. >> with the federal government closed after the weekend snowstorm here, the u.s. senate is delaying plans to vote

tomorrow on the nominations of joseph greeneaway to be the judge on the u.s. circuit course of appeals and craig becker to the national relations board. the senate is convening to move it on to tuesday. live coverage here on c-span 2. might, and we thank you for your sustaining power. because of you, we live and move and breathe and have our being. forgive us when we fail to hear you whys er in nature's declarations, as the heavens speak of your glory and the skies show forth your handiwork. lord, continue to order the

steps of our lawmakers, so that their thoughts, words, and actions will be acceptable to you. give them such wisdom that your will may be done on earth, even as it is done in heaven. infuse us all with a positive spirit as we face the challenges of this day and the week ahead. we pray in your loving name. amen. the presiding officer: please join me in reciting the pledge of allegiance to the flag. i pledge allegiance to the flag of the united states of america and to the republic for which it stands, one nation under god,

indivisible, with liberty and justice for all. the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c, february 8, 2010. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable mark r. warner, a senator from the commonwealth of virginia, to perform the duties of the chair. signed: robert c. byrd, president pro tempore. mr. reid: mr. president? the presiding officer: the majority leader. reileader. mr. reid: mr. president, we have had a -- this has been an historic storm. i was in nevada, left friday morning early, and had a beautiful weekend there. highs in the low 60's. but getting back here was another story.

it was very, very difficult. but i'm here. a lot of senators simply have not been able to get here. the staff is under great duress to get here. the subway -- the metro, as we call it, that is so important to people who live and work here, is basically only an underground transit vehicle now. anything above the ground is not working. so if you live right in d.c., you can come to work, but if you're in either maryland or virginia, you can't get here, if you depend on the subway. so, as a result of that, we've had to change things. even those that get here have extreme difficulty driving. people are still recommended by police authorities not to go on the roads. they're dangerous and difficult, and some -- especially if you get off the main drag -- are impassable. so, mr. president, as a result of that we're going to have to change things around here, and, as you know, all the reports are

that there's a 90% chance we're going to have another big storm tomorrow. but having said that, mr. president, as if in executive session, i ask unanimous consent that the orders with respect to calendar numbers 468 and 688 be modified to be delayed until 2:00 p.m. tuesday, february 9, under the same conditions and limitations provided under the original order of february 4, 2010. the presiding officer: without objection. mr. reid: mr. president, i ask consent that the senate stand in recess until 2:00 p.m. tuesday, february 9, that an tuesday, that after any leader remarks, the senate proceed to executive session, as provided under the modified order of february 4. the presiding officer: without objection. the senate stands in recess until tuesday, february 9, at 2:00 p.m. journal@c-span.org and

twitter. c-span.org and we will talk to lease up from the politico who wrote friday >> bertoia started off talking about jobs weeklies of rarer who wrote about a possible job spill in the senate.

lisa lair, senator breed said wednesday or thursday of last week that there would be votes in the senate about a jobs bill. what's the status are not? >> guest: that's exactly right. he said originally last thursday that there'd be a vote on monday. clearly that's not going to happen in senate aides are blaming the snow, which of course pushback many votes to tuesday. it's unclear whether they would've had a bipartisan bill to proceed even without the snow. you know, reaching bipartisan consensus in the senate has been really hard, even on a limited jobs bill like the one they're talking about. >> host: the white house said there pivoting towards job the president has called on jobs legislation. what are you carrying that's in the mix this legislation? >> guest: at a farmer limited november type of legislation they were considering before massachusetts. there's a lot of corporate tax breaks, and types of things they get extended every year like a

corporate r&d tax. it might include money for the highway trust fund. it's going to include payroll tax holiday that sponsored by senator schumer and senator hatch. this is going to be a real mix of things that largely focused on taxes to >> host: you wrote in your articlen politico there is intense leadership to move a jobs focus bill before the senate leaves for the february recess. where is that pressure coming from and what are we expected to see them in the february recess kaifu not exactly right. the senate leadership wants to move a bill before the recess as well that moderate democrats want to see that happen. obviously, to win democrats have often massachusetts and scotch browns win has really should he go up the capital. it is particularly shook up for reelection. people like bleach link to an out of and that they're supposed

to go out i believe from friday with the salad will see what happens. >> host: record to spend 45 minutes or so talking about trade agreements that the president has called for a number of folks are calling for to stimulate job growth in what can you tell us about any interest in the senate side of things at least for that kind of legislation. >> guest: i know the administration has been reaching out to democrats to win support for trade policies of that property in the senate. as well in the house. they're moving on these things. >> guest: lisa sidelined with politico. >> guest: thank you for having me.

look under the right note for educators who spent offers a decent custard.org peewee redesign the website to make it even more useful for teachers with the most current and timely. you can find the most watched video clips organized by subjects and topics. the latest education news, plus the chance to connect with other c-span classroom teachers geared and it's all free. sign-up at the new c-span

classroom.org. >> and match a house hearing on the president's fiscal year 2011 budget request for a $38 trillion or the white house budget director peter orszag, the proposal includes a three-year freeze on several programs including military and homeland security, expiration of 2001 in 2003 tax cuts for families making over $250,000. in $100 billion job measure and the spending increase on energy and infrastructure. this is just under three hours. >> once again, dr. orszag, director orszag, welcome to the hearing. today we take a president obama's budget for fiscal 2011 and eyewitnesses this author direct or orszag, welcome to the series. if i can borrow a line from your budget narrative in order to understand where were headed it helps remember where we started.

our economy began backsliding into recession in december of 2007. one full year before president obama was sworn in. within weeks of taking office in administration and congress launched a massive supplemental to get this economy moving again. the recovery act added to the short-term deficit and an estimated $1.321.2 trillion. the debt was already swollen by the recession. but the bush administration's budgets and bailouts. according to the cbo recovery act, this made a difference. they're reckoning the recovery act race real gdp by 1.3200 increased employment by as many as 1.6 million jobs. it's reasonably as january a year ago the economy was not growing, it was shrinking, contracting 4.5% and i'm not

alone. a 741,000 workers lost their jobs in january of 2009. by contrast, in the last quarter 2000 the economy grew by 5.7%, job losses averaged 69,000. from the start the obama administration has realized under your guidance that it would be almost impossible for us to bring the deficit down by moving the economy up. and that's whether president bush, president budget for 2011 has dual objectives. one eye is on the economy, the other i am deficit. we brought the economy back from the brink and feeding the recession. and no one, no one can be satisfied when unemployment averages 10% in the main places, my district included, is far worse. so the biggest issue in this budget is for a job though, at least her vision for it. the president's budget stays focused on the bottom line.

the deficit is cut by half, from 1,556,000,000,000 in 2010 come of that 10.6% of gdp to 727 billion, that's 4.2% of gdp in 2013. in four years, it's been cut in half and the budget keeps drinking the deficit down in 2014 it reaches 39% of gdp. now $727 billion in overhead is nothing to cry about. but i'm in the deficit in four years as they were to go if we were going to achieve it. funding were plans to spur job creation the president shifts the emphasis from big business to small business. from wall street to main street. this budget freezes on security spending overall, but it singles out priorities like education and increases well above a freeze. a three-year freeze on non-security spending and a bipartisan commission, which you propose in the budget is not

enough to finish the job. and frankly i would like to see a lot more deficit reduction. but these are concrete commitment from the president's part of bringing the deficit down. we are an unsustainable path of that as long as we avoid the hard choices, the harder they become. we proved in the 1990's that it possible to use deficits responsibility, but it cannot happen without concerted effort appears that for the president for formal commission is a step in the right direction. later this week the house will take another step in that direction. we will vote to reinstate the statutory pay-as-you-go rule, model all the rules that have record deficits and surplus in the 1990's. on both the budget and the economy, they're hard choices ahead of us, but the budget set up today marks one more step toward moving the economy up or bring the deficit down. director orszag, we look forward to your testimony.

he for return to you, let me turn to the ranking member. >> thank you, mr. chairman. welcome back dr. orszag. good to have you. that last year americans became increasingly focused and troubled by the alarming growth of spending end up pouring out of washington and they had a right to be. no doubt the president inherited a difficult situation. what is happening now is obviously our concerns. by year's end, the house passed legislation to boost spending by $3 trillion over the next decade, raise taxes by 1.3 trillion increase deficits by 1.3 trillion. but just last week in his state of union address and a discussion which we appreciated the republicans retreat the president was employing what i considered a far more open inclusive tone, acknowledging the serious of our budget and entitlement problems contacted about the need for real fiscal discipline. i personally was very heartened by his remix. the president sounded as though

he received the message and he sounded ready to moderate his agenda. but yesterday we got the actual budget, which however you cut it is remarkably similar to the plan we got just last year. more government spending, more taxes, more deficit and more debt. here's how "the new york times" summed it up vote, by president obama's own optimistic projections american deficits will not return to what are widely considered sustainable levels over the next ten years. in fact in 2019 and 2020, years after mr. obama had left the political seas even if he serves two terms they start rising again sharply. his budget draws a picture of a nation that like many american homeowners simply cannot get above water. let's look at a few key points. this year's deficit is 1.6 trillion. of the record here at under this budget the deficit never falls between $700 billion in the end of the decade trillion dollars

4.2% of gdp. taxes increase by $2 trillion using the estimates. then held by the public more than doubled over five years and receive 60% of gdp this year and consumes 77.2% gdp by the end of the budget window. we've heard a lot of hype surrounding a handful of proposals in this budget, supposedly aimed at tempering the government's explosive growth. so let's take a look at this quote unquote spending freeze that applies only to nondefense, non-homeland, nonveterans, not international affairs, none telegrams, nonemergencies contract emergencies discretionary spending. it would violate increase in nondefense discretionary spending that the president has signed since taking office. and it won't even start until next year. they go, i'll note that the congress party has a paygo bulan place right now.

and since the democrats implemented it upon taking the majority in 2007, the deficit has soared from $161 billion to 1.6 jillion dollars this year, a tenfold increase. so i'm not sure how much do we want to place and paygo to smaller funding and turn spending problem for us. we rarely follow the rule is often waived and when we do is just used to chase higher spending with tax increases. and finally adjusted to want they want to bring attention to this chart and talk about the fiscal commission. you can see this chart very well, but on page 146 of the budget, we've got the administration's actual clearly unsustainable budget numbers of top and an advertisement for this commission at the bottom. that's in the box bottom. the box tells people basically, don't worry, we'll punt our problems to this nonbinding commission will extensively fix the economic bonds contained mass this will make worse. i don't think anyone can claim

that the governing this either. i know those are tough words, but we are in a very, very dire fiscal situation. other president has contended that many of our nation's problems, fiscal and otherwise, lying in heavy bickering and partisan washington that'll be the first to agree we need to avoid the politics of personal destruction. we need to start talking about the substance of the budget and the decisions ahead of us. dr. orszag, you do that, but we cannot get lulled into avoiding a rigorous debate on policy we truly believe are bad for a nation. i don't see anything in this years budget that doesn't point to the exact same outcome of last years budget. and that's the reason our nations march on a disastrous economic and fiscal course and make an already unsustainable budget outlook even worse. dr. orszag, i appreciate your candor in the past and i look forward to your testimony. >> first, a housekeeping detail. i would ask unanimous consent that all members be allowed to

submit an opening statement for the record at this point. abjection so ordered good mr. orszag come you've been here before, you know the rules. you'll make your statement part of the record that it was submitted or do can summarize it any way you see fit. you can take all the time you need to explain the budget, using charts as you see fit. we're glad to have your look forward to hearing your testimony. select thank you, mr. chairman, mr. ryan. fiscal year 2011 budget for the administration focuses on spurring job creation, securing the middle class and putting the nation back on a job to fiscal sustainability. first, let's examine where we have come from. over the past year, we have averted a second great depression. at the end of 2008, the economy was declining by more than 5% on an annualized basis. at the end of 2009, it was expanding by more than 5% on an

annualized basis. a very substantial share of that shift has to do with the policy actions that were undertaken to avert a secondary depression. now while the economy is expanding, the employment market remains unacceptably weak. the unemployment rate is 10%. there've been 7 million jobs lost since december 2007 and that is why the president is stepping forward with proposals like the new jobs and wages tax credit that's intended to help spur hiring today, especially among our small businesses here it is all why we must invest in clean energy to bring that i deficits over time because eventually those deficits will impede ongoing job creation. and what about the preexisting condition with regard to our fiscal front? the president in visiting with our republican friends pointed

out that on january 7, 2009, the congressional budget office issued an economic and budget outlived that showed very clearly an increase in spending in fiscal year 2008 at 20.9% of the economy of fiscal year 2924.9% of the economy a four percentage point of gdp and crease before the obama administration even took office. and what happened in reality. in reality spending in 2000 the section is slightly lower than cbo initially projected coming in at 24.7% of the economy. there's a different mix mandatory spending is lower, discretionary spending somewhat higher because of the recovery act. the total spending was basically in line with what was initially project did in early 2009. what about the medium-term deficits? in early 2009, medium-term deficits over the next decade of a trillion dollars were already

apparent, assuming continuation of the 2001 and 2003 tax cuts and a medicare prescription benefit, neither of which were paid for and which i've more than $5 trillion to our projected deficit in because of the economic downturn, which reduces revenue and increasing spending on certain programs that unemployment insurance and food stamps. the combined effect of the so-called automatic stabilizers adding more than $2 trillion to the projected deficit. now that's all an explanation of the situation in which we found and find ourselves. but the key question i think both mr. ryan and mr. spratt identified. what do we do about it? i think the first is to embody or embrace the basic principle that we shouldn't make the situation worse. the administration is glad that the senate has joined with the house in passing statutory pay-as-you-go legislation, which embodies that basic principle.

they shouldn't pay for new proposals or new tax cut. if we lived by this principle in the past, are out of your deficits would be roughly 2% of gdp and that as a share of the economy would be declining. we didn't live by them, but but we should now. second, economic recovery will help to reduce the deficit. and under our projections are made from a deficit of about 10% of the economy this year to roughly 5% of the economy by 2015 as the economy recovers. unfortunately, that 5% of the economy is still higher than our fiscal target, which is roughly 3% of the economy. at that level, that's gdp or is assured the economy the economy would stabilize. sadly get from five to three. the first thing we do is put toward specific proposals to reduce the ten year deficit by $.2 trillion. let me repeat that. the budget embodies not counting the winding down of the wars in iraq and afghanistan,

$1.2 trillion in deficit reduction. more deficit reductions in embodies in any administration budget in over a decade. how do we do that? a variety of steps. a new financial services fee, raising $90 billion imposed on financial services firms with more than $50 billion in assets, which will not only discouraged leverage, but also meet the statutory requirement of repaying taxpayers in full for the cost of the tough legislation. second, we allow the 2001 and 2003 tax cuts for those families with more than $250,000 in income to expire as scheduled in 2011. i reduces the deficit by about $700 billion over the next decade. third, in order to help spur the clean energy economy of the future, a direction in which we must move, we eliminate fossil fuel subsidies.

reducing the deficit by $40 billion over the next decade. and finally, we have a freeze on nonsecurity discretionary spending, which reduces the deficit by $250 billion over the next decade. i know that freeze is not across the board. we are investing more in education and r&d and in clean energy while reducing spending in other areas in order to achieve that overall freeze. and it also perhaps turn the question and answer period like to address the claim about more than 80% increase before the freeze was imposed. even with those steps, the deficits are higher than we'd like, which is why we are calling for a bipartisan fiscal commission to get us the rest of the way. it is very clear that in order to address the medium-term deficits we will need to act together. and that is the purpose of the bipartisan fiscal commission to take the additional steps necessary to reduce their

medium-term deficits to a sustainable level and thereby allow ongoing economic activity and avoid the harm associated with deficits that are too high. finally, let me just briefly point out that all of that has to do with our fiscal trajectory over the next decade. as you go out in decades beyond that, the key driver of our long-term deficit is at the rate of which ask your gross. i hope we can come together to pass legislation that will help to not only improve quality and expand coverage, but ask cost growth and reduce deficits over time and health care because unless we do that, nothing knows we do from a fiscal perspective will ultimately matter. thank you agreement, mr. chairman. >> mr. orszag, as i understand her presentation the economy is assumed to grow at a rate of 4% on average within the first five

years. some commentators have noted this and told me that it is optimistic and blue sky ash. how do you respond to that? how did you arrive at the four percentage point growth factor in the developing? >> the first thing as i is for those who are interested in the economic assumptions they are contained in table s. 13 of the budget. basically they were developed in the end of 2009 under the leadership of the council of economic advisers at the time they were fully in line with the blue chip that is the private sector forecasters consensus on the path for the economy. so there is a much more sophisticated process involved. but one of the benchmarks we were using was to make sure we were lining up with the blue chip consensus at the time. >> you describe it as conservative or liberal or? >> i think it straight down the middle of the plane.

>> as he looked up the projection of deficits over the next ten years, the deficit is indeed cut in half from a trillion 56 in 211-2727 in 2013, 2014. after that period of time, there was the range of 720 to $780 billion until about 2019 when it decided to update. so rather than seeing a continual damage trajectory in the buyout tears, there's an uptick in the budget. what causes that and is that something you're satisfied with? >> first, one of the reasons were calling for a fiscal commission is we are not satisfied with the deficit numbers in 2018 or 2019 and thereafter. second, the underlying driver they are is basically two things. one is ongoing increase has in medicare, medicaid and social security costs because of the gauging of the population and

rising health care costs. and also, rising debt as a share of the economy imposing additional interest payments which feeds into the deficit and causes that flight that take towards the end of the decade. the reason that we believe there is additional steps necessary in a fiscal commission is imperative that we need to get the deficit down before that, stabilize data and share the economy and avoid that uptick towards the end of the decade and thereafter. >> one final question. my good friend, the ranking member, has written something recently called the roadmap to our future. >> road map 2.0. it is his contribution which i respect. a solid piece of work if you happen to agree with the premise. if not, it's not exactly something i'd endorse, but nonetheless it's an earnest use of work.

>> in his contribution -- no i wouldn't put it down having finished it. but i did see if represented in the "washington journal" and other places. if you had an opportunity to look at this and this is a viable alternative to the situation we're in today? >> well, i've had an opportunity to have a review it. it is a serious proposal and does address our long-term fiscal problem. it does so in a way that i think many policymakers might find objectionable. it does so by coming to key drivers when it does in particular to medicare. and therefore those who are currently 55 or younger, they will take medicare program and instead of providing the existing benefit structure, instead provide a voucher, which whatever its other effects will shift for us onto beneficiaries. and then the voucher increases at a much slower rate than health care cost, which means are also shifting expected costs onto beneficiaries. and that results of which is by

the end of the cbo analysis. come in medicare and medicaid have been reduced by more than 75% compared to their current trajectory at the cost of shifting a lot of risk and expected costs onto individuals and their families. their other changes, too. it changes the employer and eliminate the tax benefit for employer-sponsored insurance and introduce individual accounts into social security. it has been significant changes in the tax code, which will shift the tax burden down the income distribution and so on and so forth. but since the author of the plan is sitting right next to, perhaps i should defer to him to describe it. >> thank you. >> that's a lot. i guess i'm answering questions outside of asking them. first of all, i thought it was important that we get off pointing fingers at each other and start putting plans out there to talk about how to solve

this problem. we pretty much all agree the problem is here. i think we could probably get agreement as to the size and magnitude of the problem, given that we used to cbo, gao, and other nonpartisan fiscal authorities. what we're proposing, what i'm proposing in some of my colleagues are proposing is look, let's tell current seniors, were not going to message her benefit. you've earned your good mr. lester brown and so that's why what people 55 and above, no changes. that's quite different from the health care bill moving through congress right now. that takes roughly $400 billion out of today's medicare for today's seniors to into the creation of a new entitlement your were saying, let's not knock 86% of the people off medicare advantage. we are saved, let's telescript seniors and social security and medicare, your benefits are going to stay the same, but we know the future is totally unsustainable. dr. orszag, a quick answer to good to.

you would agree would agree to spending medicare is on an unsustainable path, but do not? >> yes, i would agree. we have different solutions. >> absolutely, absolutely. the point where making his let's give people the chance to have the ability to plan for their future and let's use our values as we had consensus in society and how we approach it. full support for low income people. as people get sicker, they get more support and don't subsidize wealthy people as much as we subsidize everybody else. for social security, the same thing. don't increase benefits as fast as you do for wealthier people who can afford it on their own and give younger people the opportunity if they so choose to have it of having a system like that which we here in congress have. this system looks a lot like the system we have for own health care for families and our own savings for retirement. on the tax exclusion, i would simply say most economists and

there's other talk about economic consensus. i would disagree with the consensus on stimulus, but i think most people would agree on the tax exclusion is not very good policy. it was written in world war ii at a time when people have the same job throughout all their lives. it's not the way the world works today. people change jobs of the time. they get out of work and go work for themselves heard so why do we in the discrimination of tax policies against people who don't get health care for their jobs. let's give them the same benefit everybody else gets fiercer d-link that tax benefit from the job, which is changing all the time and reattach it to the person swiftly lose their jobs to keep attacks benefit. if they change their jobs they keep their tax benefit. if they work for themselves, to keep the tax benefit. but the end of the day what fraternity to do is attack the root cause of inflation, bring that down and really at the end of the day the philosophical differences we have will probably be evidenced in the different approaches we take care of we simply believe that

the nuclear of our economy as an individual, not the government and we believe we had to have a safety net to help those people who cannot help themselves, to help people who are temporarily down their luck. so we don't want to turn that safety net into ama. that will is able-bodied and placing complacency on the government. we want people to have access to equal opportunity so they can make the most of their lives and reach their potential. that's in a nutshell is the thinking behind the plan i've been offering. with all that, and i appreciate the indulgence, is it okay for you my question time or are you done? i'll give you a couple brief questions. i took a lot of time. you agree that medicare is going too fast. it grows at 5% annually, which is 1.5% faster than the economy is projected to grow. that can be sustained. you agree with that? >> i agree with that. >> cvo silliness of this new

health care bill that is soon to congress and i don't know if it's going to happen, but the most recent report from cbo says this new entitlement growth of 8%, but the provisions being used to pay for it only got 5%. the medicare savings in the tax changes grow 5% versus 8%. so aren't we already blocking and new entitlements on top of these other funded liabilities we have that already is on a dangerous trajectory with respect to the resources being used to pay for it. >> i'm not sure what cbo analysis are referring to. the ones i've seen suggest that health legislation both in house and senate would not only reduce the deficit over the next decade but just as importantly reduce the deficit in the decades thereafter. and that's because you have the deficit reducing parts growing relative to the other components of the legislation. i would also note just with regard to the underlying issue that the legislation not only does that, but it puts in place an infrastructure for better information would be available,

which presumably even under door proceeds want individuals to have because in many cases now individuals don't have the information that would allow them to make better choices. ms is one example. there are a whole series of other structural changes that are crucial regardless of how you want to move forward on overall health care. >> assuming that i'm quoting cbo accurately, growing expanding entitlement program at 8% and only paying for it would pay for sick or 5% creates a problem. >> it would show up as a gap in the second decade and we have been clear that we want deficit reduction and the first decade and improving thereafter. so that would violate that principle. >> i'm going to send you a letter about the allowance for health care. i won't get technical with you now. last november he stated in the medium-term out in 2015, 2016, 2017, we need to get something around 3% of the economy so that

that is around 3% and no longer watching as the share of the economy. the budget was at stake. am i missing something? the present budget doesn't be the standard. why the president submits a budget that does not meet what you laid out for credible budget. megadeth meet the recommendations of the fiscal commission. we put together proposals to get to 4% of that was headed by person is necessary. you put forth some ideas. those can be set to the commission. i'm hopeful there'll be other ideas. >> in a skirmish and it does not meet the standards. >> correct. >> we will disagree on the levels of spending. let's not get into that. what about the statutory caps? why not call for creating statutory discretionary taps to lock in whatever level it is that you want to achieve? >> we believe the regular congressional process 3028 and three it to be something were

opening two. it's short notice so i don't expect much of a financial. have you given thought to giving the scalpel you need for enhanced persistent procedure. we are in favor of any constitutionally valid approach to eliminating unnecessary spending. so i'll take that as he has >> i'm going to repeat my answer. >> thank you, peter. >> mrs. schwartz. >> thank you and thank you for your testimony and for the fact that the administration is taken very seriously what is actually difficult, i would say balance that has to be struck this year. in responding to and continuing to respond to the importance of economic growth in doing what we can to stimulate the other two jobs and revitalize its economy. and of course, respect to what

we inherited, you know, the administration inherited a year ago was pretty dismal, 741,000 jobs lost last january in contrast to 64,000. were not talking about job loss, that certainly is in much better can as the president has talked about. and appreciate the fact that you've really put forward the importance of making some investments for the future, as we also are stimulating particularly small business job growth. really appreciate some of the proposals from the administration. i did want to follow parts of the discussions about health care and i want to see whether we can talk about this in the way that might be more comprehensible to everyone listening, if anyone is. because i think while we can and we should get into some of the budget terminology, the fact is that there is a very significant contrast between what has been proposed by the administration, by the democratic congress and

tackle in health care costs into the future. and the republican alternatives. i realize all the republicans may not be in the same page, but mr. brian, his presentation here gives us an opportunity to really say gosh to really talk about the contras that were seen in terms of the health care reform legislation that we been working on for a number of months and continue to work on. be important not only to improve access to health coverage for all americans in containing costs for businesses, helping them to be able to be more economically competitive and add new employees because their health costs will go down over time. but also making it very clear moving in the direction of deficit production for the federal budget. both of the proposals come in the senate and the house of both received scoring from reduction in the deficit go when ford of over $100 billion. and potentially more as we look at the proposal for the budget.

and deficit reduction commission, which we believe the president will do through executive order. but what mr. ryan is suggesting house proposed and i assume many of his colleagues have endorsed is actually in the medicare as we know it. for future sweeteners. >> will do generally be guilt? >> i think you've been able to give a really good feature. it really is offering a voucher to seniors, basically saying here is a voucher, going user individual clout with the insurance industry to be able to buy insurance for yourself. doesn't matter how sick you are. and it also does and employer based health insurance. which many americans, in fact most americans get health insurance through their employer. >> that's just not true. would you yield? >> tax advantages for employers providing health insurance.

it's for the individuals and of employers being able to do it. if there's all this to individuals. now i think that if this will for goal difference and ideological difference to believe individuals whether they are seniors or whether they're actually employed workers across the country. you're really putting a couple hundred million americans on their own to negotiate for the best price and best coverage they possibly can. now, that is a very different philosophy. we have heard many of us in hall meetings et cetera that seniors were to keep their medicare and that those who employ of two of coverage would like more consumer protections in their coverage. but impact to want to see their coverage go away. so could you elaborate a little bit more on how important it is for us to move ahead in a way that does really address the major issues facing both american businesses and american families and are seniors and our

budget to move ahead on comprehensive health care reform that would impact address real concerns, which is containing the rate of road and cost for all of us, again individuals, families, businesses at the federal government. >> sure and maybe would actually just clarify things and i think mr. ryan wouldn't object if i just read from the cbo letter about his plan because i think it just crystallizes the sjostrom about the pros and cons when cbo wrote that both the letter of expected federal spending on medicare and the uncertainty surrounding that spending would decline, but generally spending for health care and uncertainties surrounding that spending would increase. so what would be involved, i think mr. wright would agree, is a shift to both risk and expected cost of individuals and it would be a cbo said good >> silkwood said the federal government money but it would usher to the individual. thank you very much.

>> just one thing. the cbo letter also says her health care reform gets more additional support to the wind income people than we currently do. it does not remove the tax reduction for employers to offer other insurance to their employees. employers can still deduct off of their taxes provision of health insurance for their employees. if the employee tax benefit that goes for the job to the employee. it's a very confusing issue. i just want to make sure we debate this were using fax. thank you. >> thank you, mr. chairman. welcome, dr. orszag. this is not personal to you since i have a great amount of respect for your budget and your integrity. but this is a breathtaking document. its historic levels of debt. its historic levels of deficit, historic levels of taxation that is simply breathtaking.

and i fear that the actions of this administration have undertaken by this congress will simply bankrupt this nation. i fear this budget document. now dr. orszag had my second opportunity to speak to the president on friday. and if you would please relate to the president at that he spoke exceedingly well of him, to his leadership and his character than he would come and speak to house republicans. in my exchange with the president, i laid out some facts i guess to put it politely. he pushed back on them. and i asked him a question that he declined to answer. for the record, i said the last republican budget did not grow government beyond 20% of gdp immediately frozen on defense discretionary spending and spend 5 trillion less. for the record, the administration can go to the budget committee website pages

49 and 39 and verify that in your own table s-1 for your last budget to get the 5 trillion differential. he also asserted that what were once old annual deficits under republicans have now become monthly deficit under democrats. can you pull up chart seven, please? i don't want to spend a lot of time looking backwards, but i continue to hear from my friends on the other side of the aisle that republicans spent to much. republicans greeted these deficits. yes what's, we share the guilt coming yes. we ran up deficits and i embarrassed and we regret it. but as an order of magnitude, what we see in the field go to chart a please, that the average deficit when republicans control the purse strings, was $104 billion. the average deficit when democrats have controlled the purse strings, $1.1 trillion. so i would submit dr. orszag to

submit to inherited a a bad budget deficit. you inherited it from a democratic congress and i believe you are making it far, far worse. [inaudible] >> okay. >> mr. chairman? [inaudible] [laughter] >> and i'm not sure there was a question that i'd be delighted to answer it anyway. [inaudible] >> would you like me to respond? >> mr. chairman, is the clock not working? will work now? here we go. i'm okay with two and a half. >> would you like me to respond to that?

>> okay, thank you, mr. chaiman. [inaudible] >> i'm not sure there was a question. i would like to respond to it, but i'll let you finish your question. >> i'm happy for you to put this in context. the question i asked the president was told that new budget, like your old budget, tripled the national debt and continuous down the path of almost 25% of the economy again table s-1 of this budget you've got presented so that debt held by the public is set to rise from 5.8 trillion asked why a way to 18.5 trillion in fy 2020, which is three times larger. so perhaps the president misunderstood what i said. if not, i believe he was mistaken so i'll certainly provide you with the citations. but dr. orszag, since the president decided to push back on my assertions, i have some

other assertions i would like to share with you that you can talk about. now this is today quote, the deficit for this year would be 10.6% of the total economy, a figure unmatched since the country was emerging from world war ii. this is from "the new york times" yesterday. the budget projects a deficit will begin nearly 1.6 trillion in the current fiscal year, a post-world war ii record. cnn, they're not caught in a stimulus to, but the obama administration wants to extend the life of several recovery provisions by building them into the federal budget. cnn yesterday. even if all goes according to plan, the white house still forecasts u.s. public uprising above 71% of gdp by 2013, up from 53% in 09, levels that could spook investors. today's wall street journal

quote, all of this spending must be financed and the deficits and taxes are both scheduled to rise to record levels. also in the journal quotes, as a share of the economy outlays will reach a postwar world war ii record of 25.4% this year. this is a new moderate and a landmark. so if the administration pushes back on my assertions, do was to put that the assertions of "the new york times," cnbc, wall street journal, and warriors. >> i think actually doing so is the same thing. can i put up your chart of the deficits again because i think is important. >> mr. chair, and excuse me, could i ask to prepare those charts because i can't read on the bottom and i always like to know where the numbers are coming from. minority staff, so they are republican documents. thank you. [inaudible]

>> let's just accept them. >> the chart is using cbo numbers. here's the key points. that increase in the deficits you see there is a result of the economic downturn in the policies that were already in place while you were in control of the congress. and in particular, if you check the projected deficits of a trillion dollars. again, i'm going to repeat. they reflect nothing for the 2001 in 2003 tax legislation opting for the medicare prescription drug benefits and economic downturn. so saying this is the responsibility of the administration of the democratic congress is like a guy who ran up a credit card bill, left before the credit card bill arrived in the mailbox, and of the new homeowners they are saved -- >> i'm happy to your context and explanation of what i do not hear is that you deny the facts. that is correct that it is now higher than it was in 2007, yes.

>> i am out of time. thank you, mr. orszag. >> mr. chairman, i'm going to give my first 15 seconds to yield to mr. doggett. >> and what a church out of their easter hensarling, that showed the democratic control. yes, sir, that one. i don't fault you for wanting to give us eight years of bush when you're claiming for years of clinton. but that's all that chart shows. >> would the gentleman yield? >> if i've got -- [inaudible] i'm under the impression of congress that controls the purse strings. >> i understand you want to burden us with eight years of bush, which the country has been burdened with and the most irresponsible policies imaginable and you want to claim the only balance budget we've had in 50 years which came under president clinton's policies. that chart says more about what we face in trying to put together a budget than it does anything about the history of democratic and republican control. >> reclaiming my time. thank you settlement for

clarifying that. dr. orszag, could you tell me, did president bush ever submit a balanced budget to congress in his eight years in office? >> i do believe so. but what i know for a fact is he never proposed a budget that reduced the deficit like this budget does. >> yes, i do believe he ever produced a balanced budget into terms in office. do you have numbers available, the total amount of accumulated data at the end of his term? >> yes, if you look at the historical table -- >> would you read that into the record please? >> it will take me a second. >> while you're looking, a few of the total bore cost study placed on the long-term debt, i would appreciate that. >> i can give you that. total bore cost are now in the range of a trillion dollars. and again, involves cost of roughly $160 billion a year at this point. to answer your question on debt

held by the public at the end of fiscal year 2009, that was $6.8 trillion. >> $6.8 trillion. >> there is a question -- let me give you the end of fiscal year 2008 was $5.3 trillion. >> and i know one thing, until people go back to work, nobody's budget is balanced including the family budget. the local school budget, the mayor's budget, the city budgets, the state budgets around this country. so let me ask you at the end of the bush presidency how many jobs were being lost per month? >> roughly 700,000. >> over 700,000 jobs a month. and i come from one of those areas that was hit in the solar plexus. hominy jobs are being lost today after only one year of the obama administration? >> will have new information on friday, but well under 100,000

hopefully we're getting closer to zero. most private sector forecasters believe that by sometimes this spring will be experiencing positive employment growth. >> yes, that's an enormous turnaround of the shift of state. i can tell you in my district, what's happened is that people are buying lottery tickets in ohio because the situation still remains bleak. but for two positions that were open in our corner of the state, 4000 people applied. people want to work. the work ethic is still out there. and i have a hunch that this year is going to get better. but the public is still hurting a lot. let me ask you in terms of the job proposals you are proposing to us, which do you view as being that most affect this and helping people move back to work as you look at the range of jobs proposals. we never had any jobs proposals

from the bush administration. they just move forward jobs offshore. more people got thrown out of work. which proposals are you making that have the greatest hope for our people? >> well, maybe just identify a few that the congressional budget office has identified as being the highest bang for the buck in terms of employment effects. they include extending unemployment insurance benefits, which the administration proposes. and they include things like a tax break for firms that increase the payroll, in line with our new wages and jobs tax credit, which is intended to spur hiring among small businesses. >> and you have some infrastructure proposals i believe in your -- >> we do. >> and we know that those actually get the most bang for the buck in terms of what they return to the public. those individuals working as well as to the taxpayer.

because those are long-term wealth creation jobs. and so i would just encourage you to do what you can bear so that we can move more people back into the workforce and get something of lasting value for the american people. and i thank you so much for clarifying those figures. ..

>> what you need to do up there is quit spending money. it's really that simple. quit spending money. they are saying return the unspent funds from the stimulus package from the treasury and pay down the debt. quit taking the money that came back in t.a.r.p., do what it was originally intended to do, that was pay back the treasury for the money that's spent on t.a.r.p.. it doesn't peep like the administration has this message. i know you are in a difficult position. this is a tough time for all of us. there are sparts of this budget that i agree with. parts that i disagree with obviously. we've heard a lot about statutory paygo. it only means something if you follow it. after the great rhetoric that we put out, we've enacted statutory paygo. the first year you exempted 212

from paygo rules. so if you put in statutory paygo, you better will willing to stay with it. so far nobody's been willing to do that. do you know how many money you're spending budget in addressing global warming? because one of my concerns has been, i'm a ranking member on the interior subcommittee. almost every agency in this has money for global warming, i know a lot of the other agencies we have the same thing. how much are we spending and how coordinated? i'm not trying to be the global warming. i don't see the coordination within the administration. it's like if we spend a lot of money we'll say we're doing good. >> we'll get you the exact

figures, but roughly speaking, there's $2.5 million. and then about a bill and a half dollars in international affairs budget too. so that would be about $4 billion. but we'll get you the exact figures. >> the national park has $10 million on global warming, epa spends money on global warming. we need to look at across all of the agencies and what the coordination is within the agency if we are going to spend all of the money on global warming. i compliment the administration, for the first time an administration has matched some of the rhetoric in support of nuclear power with the funds in their budget. they've put together a pretty good budget in terms of nuclear energy and research in nuclear energy. i do have some concerns with some of the policy obviously. the yucca mountain decision, we

are going to completely refund that. we are going to withdraw our application. what have we put in this budget to settle the lawsuits that are inevitably going to come and that we are going to lose when we withdraw our application? how much money? how did we come with that amount? what did we assume the final amount is going to be? >> first answer as the president has appointed a blue ribbon to study longer range waste management options for -- as we expand what to do with the waste. that's -- i think crucially important. i'll get back to you on the exact figures on -- as you know there's a set of payments already involved in the local storage that as you know the waste tends to be stored in secure facilities. but around reactors themselves, and i'll get back to but the details on payment involved in

that. >> thank you, i appreciate that very much. mr. chairman, let's focus on problems and see what we can solve going forward. >> thank you, mr. chairman. and dr. orszag as my earlier comments indicate, i understand you have been given an incredible economic mess and budgetary mess and you cannot believe it all up over night. i do have some concerns about certain aspects of your budget and the approach we take. i think your proposed limitation on spending is important. it's at the lowest 60 years, the exclusions and credits, tax

expenditures have blossomed. many of these tax expenditures just lack the direct expenditures. they are worthy. they serve atz sound public policy and deserve our support. but some of them respect as much waste add any direct spending program. i'm not going to give you any tough questions. i want to raise the same one that i raised with you last march when you quote agreed wholeheartedly with me about my concern that we needed a greater focus on the budget with tax expenditures. but as i look as the section of your budget this year on evaluating tax expenditures, it simply copies the same language that bush administration budgets use without crossing a t or dotting an i. there's no tax expenditures. there's no plan for evaluation. how are we going to get our budget in balance if wasteful tax expenditures grow without

restraint? >> as i said before and as i'll say again now, i fully concur that tax expenditures are worthy of scrutiny and are an important part of the fiscal problem that we face. where i guess i part company with with you is i'm just doing a quick calculation in my head. we have almost half a trillion in reduced tax expenditures contained in the budget. limits on itemized, a evaluation on possible fuel subsidies, elimination of special tax preferences for cooperations involving international activities. it gets you to almost half a trillion right there. and i think the list could continue. i look forward to continue to work with you on the important issue. >> thank you, i appreciate that. i'm referring specifically to appendix a where you outline when the challenge is but you don't do anything to provide the kind of evaluation and substantive review of those tax expenditures that we need. as far as what you propose in

international tax avoidance, as i read your proposals, after the administration made a very compelling case for action last year after president obama even as recently as the state of the union and the presidential ray owe address said he was in favor of closing and tax loopholes that reward from sheltering their income or shipping jobs over shore. all that this budget does is reduce the amount of revenue that we expect to get from international tax avoidance proposals by 40% from what you had last year. last year once the budget was announced and the speech was given, i didn't see any action by the administration to try to secure any of those proposals and turn them into law. let me ask specifically in the remaining minutes about your job tax credit. because if we're going to borrow money to try to stimulate jobs, i know we want to be sure that we actually stimulate jobs that

wouldn't have been created anymore. i think this job's tax credit talks a little better than it walks. you're well aware that congress rejected this proposal last year in the stimulus. that while the congressal budget office has had some good things, it noted that the credit would not be very effected in the industry or region that are hardest hit. because it does not provide an incentives for firms that have been contracting. you are aware that a wide range say that this proposals only encourages firmed to do what they would have been done anyway. that's especially true of this one since you awe ply not to the date. other economist have questioned whether or not it doesn't have the effect of starting the market and rewarding some firms at the expense of your competitors. can't we do better than this job's tax proposals. isn't it -- if we're to have oning the proposal that's less costly and better way to do it?

>> senator, we are open to other suggestions that we have put forward similar ideas. we think i approach we set forward was attractive. i guess what i would say is it is targeted to small businesses because small businesses play a crucial role in economic activity. you are right that some of the assistance provided will go to small businesses that would have theired workers or increased wages anyway. but i'm not sure that is all together necessarily a negative thing. we would be injecting even in those cases. again the purpose is to induce more hiring and induce additional wage increases. even when it doesn't, it is injecting additional cash into small businesses. that will help to evaluate that many small businesses face. you say it's targeted. but it's all businesses that get this. >> yes, but as you know there's a cap. that means it will go

disproportionately to small businesses. >> thank you. >> mr. mchenry. >> thank you, mr. chairman. thank you mr. orszag for being here, dr. orszag for being here. is this budget sustainable? >> i would say the fiscal course that -- i get consistent with the earlier thought let's try to avoid pointing fingers. both the fiscal course we were on and the fiscal course that we remain on over the long term are not fully sustainable. that's one reason why frankly we need to work together, including through a fiscal commission to address the problem. >> absolutely. so if you are sitting, if you are testifying in six years, let's just say we're having the hearing -- >> let's hope not. [laughter] >> well, let's just say. all right. hypothetical. because i don't want to sitting here in minority in six years looking at you as the budget

director unfortunately. [laughter] >> maybe secretary of the treasury. but anyway, if we were sitting here six years from now and we've acted according to the budget you propose, what would interest rates look like? would we with in a fiscally sound position? or would we have just major trimmers in the economy in terms of high interest rates and things of that sort? >> look, what i say right now is the immediate problem that we face is the week job market. >>by the way, the very weakness means that boring will collapse, one way to even mr. ryan will admit traditional mainstream economist believe help to mitigate that despite that, long-term interest rates are low. the 10-year bond is yielding less than 4% today.

because private boring has collapsed. and the treasury is relatively attractive. as you go out over time, that situation will gradually reverse itself and we need to get ahead of that problem. which is why we with need outyear to avoid the risk that interest rates spike sometime in the future. >> let's just be honest. i'm in support of a commission that would look at entitlement reform and spending reform in a real way. i've got a bill to that end. the only difference between my bill and what the administration is proposing is i say we have to take tax increases off of the table and new taxation off of the table and look at the spending side of this equation. are you willing to do that? >> well, we have put forward what we believe is the right approach on spending and revenue. the fact of the matter is we need to let the commission do it's work. i think we will start taking things off the table at this point. >> are you concerned they are going to take hold and realize

that this administration isn't serious. that this commission isn't very serious. there's no binding nature to us having a vote on these reforms. >> can i comment on that? there's been much more made between the commission and statutory and executive order. there is a difference. we would prefer statutory. >> so would i -- >> i think the difference has been exaggerated. the structure of all of these commissions involve a super majority vote within the commission itself to report out a recommendation. that is the key challenge. if that actually were accomplished, the difference between a statutory guarantee of a vote and senator reid and speakerrer pelosi making a commitment that there will be a vote which they have done seems to me much less important. the real question about working together and finding solutions is would you succeed? will you succeed in getting the commission on a bipartisan basis to report out a representation.

if you do, i think that means we have recognized the severity of the problem together and we're able to move forward and the strength of the voting is much less important despite all of the attention. >> okay. to address the real issue, do you have concerns about high interest rate in the outyears under a budget such as the one being proposed? >> one of the reasons that we are calling 23409 only for the $1.2 trillion but also a fiscal commission l which will have to take difficult steps? >> so the answer is yes. >> it's a motivation to try to act before the problem arises? >> well, i certainly appreciate. you've always been very forthcoming with the committee both in the service to the congress and now to the service in the president and the county -- country and i appreciate that. my concern is chief lending and high spending for the answer, the last decade would equal

unraveled prosperity. it didn't. we have a tech bubble with low interest rates led. we were now paying for the subprime bubble. as a result, we're going to create a new bubble with federal spending. this will be the obama bubble that generations are going to have to pay for. with that i yield back. >> thank you, mr. chairman. thank you, dr. orszag. i know you have the easiest job in government. and -- but we do appreciate you. we appreciate the way you do it. >> thank you. >> i'm most disturbed. i found myself a few minutes ago listening to my good friend and colleague from idaho and -- agreeing with him. i probably won't sleep good for weeks. [laughter] >> i've got a friend in arkansas

that likes to say he hasn't heard that much trash since he went to western auto and brought a $3 radio. some of the comments. we all agree we don't need to be pointing fingers and go back and do it again. i just want to say this. if we don't come together and deal responsibly with these problems, and to talk about solving the problems and leave reform of the health care system off of the table, i don't think it's possibly to do that. everything has to be on the table if we're going to do it. we're going to all, at least a majority of us are going to have to come together and put forth

the best ideas. i think that's what y'all are trying to do. goodness knows we've needed to do it for a long time. we do know we can do it. because we did it in the clinton administration. having said that, i will yield to someone that has something more intelligent and has a lot more technical questions that you will enjoy answering a lot more. thank you. >> that seems pretty wise to me. thank you. >> mr. campbell. >> thank you, mr. chairman. thank you, dr. orszag. so because the budget every year has deficits in access, it's not sustainable in your view; correct? >> deficits above 3% means that debt continues to rise as a share of the economy. it's why we need addition to the steps a fiscal commission. >> okay. what does unsustainable mean? what is it -- >> one way is debt is rising as

a share of gdp. we were still in the situation where treasury securities are the safest and we have time to act. the risk is that ultimately when you are unsustainable course, interest rates will spike. and that will impede economic activity and harm the job creation we're trying to spur. >> okay. that's what you thought. if you look at the budget as it goes out, despite the fact that, you know, the deficit is around 4% of gdp as they go out. ddp growth is healthy. you protected by a percent. inflation, you have 2%. and interest rates under control. you have the tenure treasury at 5.2%. which means real interest are 3%. i mean that's all really good, you know, -- really good economic metrics generally. if you are going to have this high deficit shouldn't those

interest rates be shown as higher? >> well, what we do, based on economic modeling, show an increase in interest rates that reflect not only the recovery of private boring but also some effect of higher debt as a share of gdp. i would note that cbos projections are not all together dissimilar in terms of economic activity, interest rates, and what have you. the issue is not the central projection. because that is inline with what our protection suggest. the issue is either after 2020 or even then, is there some risk that the situation can deteriorate and do you want to get ahead of that? the answer is yes. >> clearly, the deficit would be worse if the gdp was -- >> vice versa, yes. >> right. i guess the question i have dr. orszag is that even with those, i think, fairly optimistic

projections that this budget doesn't work. i mean when you say it's unsustainable. when you say it's just -- it's not just you. and to your credit you have been intellectually. you said that -- you are saying it today. the current one says it. brookings institute says it, cato says it, left, right, center, everybody agrees. why would the president submit a budget that doesn't work? >> well, look, now i do have to go back to the context for a second. which is this budget reduces the deficit by more than $1 trillion. we have said that despite that significant reduction, we don't get to where we need to be. so the comments about unsustainability is if the fiscal commission doesn't work -- we're hoping it will. we just need help to do so. >> all right. you're saying they will get it

to work. many of you may disagree with the policies. this we your admission fixes it. it works. it's credible. and think of it. one guy. one minority congressman did that. the president can't make a similar proposals. i clearly would different ideas. he needs a commission to tell him what to do. the president can't come up with his own idea or make a suggestion on how to make a sustainable budget. he has to hunt it to a commission when one single congressman has one that everyone agrees what does work even if you don't like the policy that is are in it. >> look, the policies are a shift. eliminating the medicare would solve the problem. >> granted, they will give you all of that. you may hate his proposals. but they work. propose you don't hate that work. why doesn't the president do

that, instead of saying i don't know what to do. we'll give it to commission. they'll figure it out of the. >> i think it is -- hav l put forward $1.2 trillion. to get the rest of the way is going to require bipartisan support. i don't think mr. ryan proposal will get anywhere near bipartisan, i'm not sure the majority of your caucus will support it. to just put ideas, that's easy. to move towards the situation to come up with something that can be enacted. >> okay. well you can't do something together unless somebody gives the place to start. it'd be nice if the president did that too. >> okay. thank you. i apologize, i have laryngitis. i want to thank you for being here. i want to admire your job by with having to clean up the mess that you inherited. i think this budget reflects in the right direction. let me ask you three questions.

first of all, the republicans have decided the freeze on the spending propose to your budget follows an 84% increase in spending in that category. do you agree with that assessment? >> no, let me be clear about this. in 2008, spending was $408 billion. it increased in fiscal year 2009 because of the recovery act. then in 2010, it was 447 billion. so that bump up was gone. and that is the level, as you can see in our cables. that is the level at which we freeze nonsecurity spending. so it's lower than that in 2011. to argue that we're freezing all of this grossly inflated base is just factually inaccurate. >> thank you for clearing that up. my next question involves more spending. with the captor earlier that ask you about the cost of the war.

i guess i want to go one step further. that is the cost of these wars and the impact on the deficit. the fact is that i want to give the administration credit for putting numbers in the budget that i think reflect the reality of what war spending is. i happen to disagree with the administration's policy on afghanistan. and i disagree with the previous administration policy on iraq. but there's one indisputable fact whether you are pro or con. that is they cost an awful lot of money. and they are not being paid for. i'll be curious to hear your assessment of the impact on our deficits as well as whether or not the administration l would consider the proposal to pay for the wars. which is something is that some of us have been suggesting for quite some time. >> well, again, the spending on the war in iraq and afghanistan is contained within an overall budget that achieved this $1.2

trillion. so from that perspective -- >> we paid for them. they are proposed a war tax. which was shot down in a bipartisan way. if there was such a revenue source, i mean it would clearly reduce -- >> it would reduce the deficit further if you have some additional revenue source, yes. i think i may have already mentioned earlier, the administration budget for fiscal year 11 included $160 billion to fulfill the security needs that the president has associated with wars in iraq and afghanistan. >> i appreciate that. when we propose $1 increase in education funding or $1 increase in health care, we have a offset it. you know, when it comes to the war, it seems that, you know, you know, even during the beginning of vietnam.

it also is costing us a great deal in terms of the treasurer. i think that one of the ways is to address the war cost. let me go to another issue. that is the, you know, we talk a lot about numbers here. people show charts up. budgets are about people. the richest country in the world, we have a hunger problem. we have tens of millions of the citizens who are hungry. many of them children. the president for today's credit set a goal to end child and hunger by 2015. that's a tough goal to be able to achieve, i'm sad to say. how does this budget seem to accomplish that goal and what is in the budget to improve access for those struggling to put foods on the tables. >> congressman, i couldn't agree with you more.

if you look -- look, the fact of the matter is almost 20% i think it would raise figure of 17% of our children are obese. which is one dimension of our food and nutrition problem. on the other hand, it included full access to food. we are committed to getting the number tootle zero by the decade. reauthorization of the school lunch and so on. we have almost roughly $8 billion, for example, and those are the two mainstays of our battle to fight child hunger and nutrition. i point out even today, the first lady was doing an announcement or event leading the effort to try to address the

issue. she is very focused. >> and i appreciate that. i which there was a better understandings in government that by not addressing the issue of food and security and hunger, especially amongst children, you end up paying for it in the long run. kids who will end up having chronic health care issues. i praise the president and first lady. i make one final suggestion. that is, i think it would be a good idea to have white house conference to get everybody together and come up with one comprehensive plan to be able to deal once and for all. thank you. >> thank you, mr. chairman. let me thank you director for joining us today. i have one broad question, general question, and one more specific. let me start with this. i'm convinced the american people get it. i don't know if it was congressman ryan or who with said earlier. they don't care who's to blame for the situation we're in. once i said it, it's george bush. you understand some of that.

we said some of the charge that representative put up that the amount of spending that's happened here in the last three years and last year has been unbelievable. but the american people get it. they know instinctively that we can't continue doing what we're doing. several news sources talking about this budget, increase taxes, increase spending, increase borrowings. americans understand you can't do that. they understand that you can't have deficits running at 10% of gdp, deficits averaging close to $1 trillion. they get that. so the general question is i think they want to know, you know, what can you say the american people that when they see this, they see the broad picture? what are you seeing? what's the administration saying that we can reassure them on this path as mr. campbell i think very appreciately pointed out that's unsustainable? >> well, as a start we are freezing nonsecurity spending, saving $250 billion over the next decade, and that includes a

lot of choices that are -- i know some people don't agree with. there are additional investments in education. but you can go down the tables in this budget. there are a whole series of departments from the commerce to interior and so on and so forth that are declining, even before you take into account inflation. so that is a start. now some people say that's not enough. and we agree. it's not enough. that's why we put forward more than that in deficit reduction. some people say even that's not enough. we agree. which is why to get the rest of the way there, we think we need to work with you to some up with bipartisan solution to get us to where we need to be? >> let me ask more specific then? how much of the increase in spending we've seen over the last year in the stimulus package, and i guess to some degree even the bailout, with t.a.r.p. program, how much of that money is built into? i don't know some of that was one time.

how much is built into the baseline. >> that's another point i could have made. in addition to the argument about 80% increase not being with accurate. it's also not accurate it's a significant accomplishment. i think one the fears when the recovery act was enacted that all of the spending would be built into the base and perpetuated over time. >> my question is how much? >> nonsecurity freeze means that's not happening. by the end of the freeze, by the end of the freeze, spending in nonsecurity agencies will be below the baseline from 2008 projected forward. so that's perhaps the cleanest comparison. forget about the recovery act, everything that happened since 2008. take spending then, look at baseline. but the end of the freeze, we're below that. >> let me be clear. none of the stimulus package passed is built into any baseline going forward. is that accurate? >> in aggregate, let me be clear. there's no budget authority

provided by the recovery act in 2010 in the discretionary budget. our freeze is off the 2010 discretionary levels in terms of budget authority. therefore my statement holds. >> okay. thank you, mr. chairman, i yield back. >> he yields back the song. >> thank you, mr. chairman, thank you, dr. orszag. i think we agree that president obama inherited a very challenging situation. and doug had the cbo last week testify that without the recovery of the extraordinary impact of the recovery package. we could be in quite a different place without that very bold effort to stop the job loss. but we also know that unemployment or employment is lagging indicator. and i happen to represent some communities that have been very, very hard hit. one community in particular has 18% unemployment. others hover around 12%.

kind of goes up and down a little bit. but basically remained unchanged. so i applaud the effort that the president has proposed in the state of union address and that we see in the budget here today. but i'm wondering, do you have benchmarks in place. are you going to be able to assess whether or not the initiatives are working? >> i've had a proposal out there that we need to do some direct job creation and need to get engaged around direct job creation particularly targeted to communities have been particularly hard hit. we don't see a lot of that discussion today. i'm wondering if that was ever on the table. if there's ever the point that you say we are not having the impact that you need. especially in those parts of the country that are dealing with extraordinary circumstances. >> will the gentlelady yield? >> yes. >> i wish to appreciate myself with her remarks 100%.

>> while we were trying to attack the problem of weak labor we evaluated the whole series of proposals. i'm not going to go into full and eternal. but rest assured that there were a wide array of options that were scrutinized, evaluated before coming to the solution that we should focus where we did. i would come back again and say do not forget that the recovery act -- because of the recovery act that there are 1.5 -- 2 million people who have jobs. it's a huge accomplishment. there's more that needs to be done. unemployment rate is too high. the job deficit reflecting the job losses that have occurred is a whole that needs to be filled. >> are you going to look at a

specific number of jobs created on a month-to-month bases. we need to come up with something that is more targeted to communities that have been particularly hard hit. >> i think we would welcome the additional kind of transparency and evaluation that's been built into the recovery act into additional jobs efforts if the congress also agrees that that would be worthwhile. >> as i talk to my colleagues on the floor who comes from similar kinds of district where we see the effort. i applaud the administration for the recovery act. because i've seen in my district, job after job that has been saved as a result of it. money spending out into the private sector to begin to jump start, for example, clean energy jobs, i think these tax credits for new hires are important. but they are still just one element of our society that's been particularly hard hit of and where we may need to do something more direct and the job directly engaged in it.

thank you, i yield back. >> i yield back. mrs. lamas. >> thank you. it has to do with the program. i just want to open by saying that an agreement was reached in 2006 on that program. and so if you are going to open that agreement again, freeze everybody. freeze the unite mine workers benefits, freeze the states from getting their money, freeze the states that are not certified. freeze everybody. but don't punish one person because quite frankly senator obama did vote for that agreement and now president obama wants to change the agreement. i'll leave you the opening statement on that subject and switch again to something that president obama said. this was last friday.

this was in a conversation with republicans. and i'm quoting. the source here, the washington post online transcript, this is verbatim. i've read it. i can tell you what's in it. there are some ideas in that i would agree with. then he went on to say there's some ideas i also don't agree with. he did say this, the major driver everybody hr kno ismedicr health care spending, nothing comes close. medicare and medicaid, massive problem down the road. that's where it's going to be what our children have to worry about. the reason i would contend that i'm here in the minority is that republicans ignored the american said we're really concerned about overspending.

and i would content that if we don't get a handle on spending that the democrats who are now in the majority are going to earn the minority just the say the republicans earned the minority. i don't want to be here fighting over this in six years with you as budget director going back and forth about the same old things we've been talking about today. i really want to solve these problems. i don't want to be old. and be a former member of congress who sat and fought over things that we knew we could solve and we refused because we were too dug in being partisan. so i want to tell you i really do want to work with the administration or anybody who is willing to have a serious conversation about entitlement. this is the president's acknowledged it. the only way to really get a

handle on our budget problems. and get to budgets that are sustainable. and to do something responsible for our children and grandchildren. so with that caveat, i would say is there anyone who has a proposal that is an alternative to mr. ryan's proposals? that we could all sit down and work on? while we are are here. do you know of a proposal out there, mr. orszag? >> i am not aware of a proposal. represent ryan's plan work because of the significant shift of the cost of individuals, i'm not aware of the plan that achieved the reduction of cost or substantial shifting of risk

to individuals. and it would be a very dramatic shift from the system that we have today in which individuals will face much larger risk than they do in the current environment? >> is it fair to say mr. ryan's proposals shift that risk only for people under 55 years of age so they would have a chance to prepare. >> yes, but i don't think that's something you can actually fully prepare for? >> does any democrat in the house have a counterproposal to mr. ryans? >> gentlelady yield? >> i will. >> on november 7th, the house voted for a bill which all of you voted against that had, i believe, $480 billion in medicare and medicaid reductions that were done through eliminating things like medicare advantage, phasing them out, making changes to payment to

hospitals and other health care providers. you may quarrel for how the money was spent? was that free standing would you vote for them? >> mr. chairman, i can tell you honestly, i don't know. and the reason is because they weren't free standing. we didn't get to discuss it. >> but if they were. >> and mr. chairman, i would assert again, i don't know. >> o.k.. the problem that i saw with what you were proposing there on health care is that it would affect people who are currently retired. and mr. ryan's bill with doesn't effect anyone's who's currently retired. >> would you yield? the republicans did at the point when we were voting on health care reform also present an alternative to mr. ryan's proposals which was spending $60

billion, ensuring very few americans and raising the number of uninsured americans to about $52 million. i think you did vote for that alternative. you already did vote for that alternative yourself. >> i don't know for sure. but i would just like to point out that you did actually have an alternative to the proposal that did increase the number of uninsured americans. >> the proposal before is the president's budget. >> indeed. >> bear in mind the president eastern's budget takes a deficit of $1 billion and takes it in half. the biggest entitlement is not medicare, medicaid, it's interest on the national interest. it cannot be manipulated. has to be paid. and by bringing the debt down by that much in that period of time, they have contributed to the the release of the debt

service burden that's going to burden our future for years to come. so that a complete proposal? no. but the proposal is that we will go until we have alternate recommendations from the bipartisan commission. so -- in the mean time we're doing what we can given the recovery to reduce the deficit and to avoid any great accumulation of debt service. now we have to move on with our questions. i believe -- who's next? s mr. edwards. >> thank you. thank you for being here. just for the record, i was not here when congress took the first big vote in 1990s, i did vote in '87 -- '97 my first year

here. there were a lot of members that did not vote. i was one who did. i think we did move toward. that's really what we're about today. let me ask you a question on something else for my friend from texas. i'm probably going to differ on credits for hiring. because i was in manufacturing years ago. and we with used it in the '70s when it came out. and i introduced a number of weeks ago hr4437, the hiring act for 2010 that really does a lot of what the president has talked about in his state of the union that is now before us. now last month, last quarter we saw economic growth of 5.7%, i think is pretty close where the number was. and it looks like the economy maybe turning around. but for businesses, and the economy in my state of north

carolina, we just got numbers of 11.2% statewide and counties in my congressional districts are roughly 15%. they aren't recovering yet. so my question to is as we look at these incentives for hiring that's in the budget roughly $33 billion. job tax credits that are proposed to be created that are designed to help job creation, how many jobs does the administration assume that this will create? i recognize that we -- in the bill i introduced to 50,000. i'm not sure what the proposal is by the white house? how many are we looking at? >> i think we answered yesterday we have not taken a formal analysis of proposals as the jobs bill altogether, all in

takes better shape, perhaps it it -- some estimates would be forthcoming. >> the biggest bang for the buck, this type of approach seems to rank pretty well. >> well, right. i know in the budget we did my bill does it in two stages. it's a little more generous. you think we were looking at $3 million the first year and two something the second. as an economist, do you believe that this is an effective use of a way to put americans back to work? let me add one more piece. how do we balance with kind of thing with what we were talking about. how do we get togethers getting the budget balanced? >> let me answer the first

question first. economic activity has gone from big negative to more than 5% growth. and so gdp growth has turned around. the issue is what typically happens as gdp recovers, first you have growth. that is what we have seen over the past couple of quarters. then firms start relying more on temporary help and extended hours. only finally do you get increase in deployment itself. we're somewhere into the second and third stage. we're trying to collapse them so we can have gdp and job growth more closely linked. something like a job credit can help jump start employment among firms that are seeing their prospects begin to turn around that might be reluctant to hire with the jobs credit, they go ahead and do it. >> right. let me move to one other thing

very quickly. i'll say one i have to ask on education when the secretary comes. this one deals with with -- i represent fort bragg and hope, for a lot of these women coming back with a multitude of problems that's going to be long term for years to come. is that factored in at budgets that we're dealing with? >> absolutely. >> because the year before, it was not >> there were a variety of steps taken and even before you shifted over to the v.a. under secretary gates leadership. as you know the v.a. budget has a historic increase. 20%. we succeeded in moving to advantage appropriate the which will help security funding. he is absolutely focused on providing high quality care. and the budget supports him.

>> thank you, thank you, mr. chairman. i yield back. >> thank you, mr. chairman. thanks for being with us today. i'd like to follow up on my friend and colleague from north carolina that was talking about. i know some of my colleagues have you heard me talk about this. i represent the largest -- i think the largest manufacturing district in ohio. it's in the new numbers. i also represent the largest ag district. as you look through the past year with stimulus at $787 billion and extra $75 billion that will be add on that. we've told that people back home better have an 8% unemployment rate. the latest numbers of u.s. were 10%, ohio was 10.9%. i represent 16 counties, over 14%, one over 15%. a lot of the folks out there -- i met with my constituents yet

yesterday in two different counties for over eight hours for seven minutes for eight hours. and, you know, they are looking at what we're doing here in washington. you don't see the effects. i like to look at your testimony in page two. i want to make sure i understand what i'm talking about here. you say more than a million small businesses will receive a tax cut from the latter proposal. we will extent to small business for every new job. new job. again, i think that you've kind of pointed it out. a lot of places have cut back. but in our areas, not only have we had massive unemployment cuts right now or employment cuts, i should say, but we've also had the same situation with plants working 32 hours. i have a lot -- i tell these people constantly across my district, and the first thing they want to do is get them up from 32 to full time.

and those anded plants that are still holding on my their fingernails, they will say we will hold where we were and see how long we can goo with the same employees. what will this job, this $5,000 tax do for those businesses? >> in particular, businesses that are not hiring but will expand their hires? >> right. >> that's one of the reasons why it's not jobs but job credit. you expand your payroll which you would if you worked for hours. you would also be eligible for tax credit. we can walk with you through the details. the logic is precisely to get at the types of firms you are discussing. not only that, workers are already working 40 hour an work to get an increase in wages paid and provide a tax incentive for small businesses to do that too. >> as long as they have an

increase in the social security tax for the employee that's already -- >> they are aggregates of security payroll, correct. that would happen if workers at the same wages worked more or earned more. >> let me ask this question. because of the -- you know, the number of employees that have been added recently on the federal side. does this budget look at reducing the federal payroll of it all? because again when we looked? across our district we've had -- i'm sure everyone has had their employers say what has the federal government done to reduce as we've made massive cuts to try to save ourself right now? >> well, there has been an increase in the federal work force over the past several years. moseley in the department of defense, the department of homeland security, the department of veteranning affairs, and so on and so forth. as you know also there is an historically low wage increase for federal workers built into

this budget along with a freeze for the top level president the issue appointees. and in terms of the federal work force there's a chart in analytical perspectives in page 99 and there's a table somewhere there. a table on page 107 that just provides the total. and you can see the total executives branch civilian employment does decline from 2010 to 2011 under this budget. >> okay. how many how much of an increase have we seen for total federal employment going up in the last let's say last two years for the last year that you just sited? >> there were increases in 2007. i don't have them in front of me, but i can get them. >> all right. thank you, mr. chairman. i yield back. >> thank you, mr. chairman.

i believe everything should be on the table tax cuts, spending, we do need to get things under control. but i am alarmed that the tax cuts can't be -- especially the spending and recovery act. now i don't think it was a bad idea when our school districts all across our states were cutting education dollars that the federal government stepped in and helped our -- children that are eager to read that want the extra help. i truly believe we don't want to do that. or with idea, students who through no fault of their own, struggled to learn to income more self-efficient and to be

productive member services of society as they grow up. >> i don't think it's wasteful when states are cutting back to make sure there's police on the streets and first responder are able to respond to fire calls. just last friday, i was in white bear lake. the bear is looking a little skinny. i went to food shelf where people who used to volunteer are recipients. i went to meals on wheels, and more seniors need he. we are still struggle at times between food and medicine. i heard from early preschool educators as well as other school officials that they are very concerned about the food and security that students face on the weekends and we'll face again this summer. then most whether or notedly, i

met with jay. i probably have permission to use his full name, but i'm going to use jay. a man that helped build the 35 bridge after it collapsed. a man who has now been laid off. he has been looking for a job. without the expense and unemployment, his children would not have health insurance provided by their father. they would not have a proof over their head. right now he's very fearful of unemployment running out until we finds a job and see his house go into foreclosure. this is not foolish spending. this is not you are on your own. this is us coming together collectively to help one another in a great time of need. now i know that when we were facing this crisis and putting together responses that maybe we've learned we can do a better job in providing the responses

that still need to be out there until the economy fully recovers. so i would like to ask you, doctor, as the administration proposes to move forward with some of the provisions from the recovery act, what l.es are you proposed to extent? which one withs are you looking at reframing? why would we do this? and what is their cost and what is the cost to our society and the economy if we don't reinvest particulars in the recovery act? >> let me answer that in two ways. one is we are proposing and embracing a job package as a supplement to the recovery act. the recovery act has succeeded in helping restore economic growth. but -- and as i mentioned earlier, one and a half to two with million people would be unemployed today who weren't because of the recovery act. but more needs to be done. that's why we are stepping forward. with regard to the recovery act

itself, there are a variety of cases in which the agency, but special projects that are not working, shouldn't be funded and shifted to more promotions alternatives, we can gunmen get awe list of those projects. there's an ongoing effort to try to make sure we are getting the most from each dollar that's spent. >> mr. harper. >> thank you, mr. chairman. dr. orszag good to see you again. i think what we've noticed here since the very beginning is there's no end to the spending that's going on. you look at this and come in, it looks like every agency, every committee even the mra for members of congress go up. and it would seem to me if we were serious about getting a grip on the budget that one of the first places we would do was on spending.

we have state governments that are having to cut back and scale back. we have businesses and households that are doing that. but to be quite honest. we're not doing that in washington, d.c. we continue to have a level of spending that we've had. at some point we have to live within our means. while we could argue for or against the stimulus, it's hard to justify to the taxpayers to let you know that tax dollars was spent on this particular project. things that were not necessary. if you look at our budget and congress over the last couple of decades, i think you have to go back to when john from ohio was the budget chit tee chairman and you have the balanced budget act of 1997 and you saw where the numbers looked better.

that we can do this with -- if we with choose to do that. how would you define the middle class? >> we have defined the middle class as income belows $250,000. if you look at and i won't comment on the congressional request because that is a separation of powers. i'm not going to touch it. if you look at executive branch agent agencies, you can see we with are proposing a reduction for the department of agriculture, a reduction for the department of commerce, human services, housing and urban development, department of interior, department of justice, department of labor, environmental protection agency and so on and so forth. so i'm hoping you will work with

us. that is what's required in order to freeze nonsecurity spending. those kinds of steps. >> but for as many as you've listed thus far, we haven't made those cuts. you're saying in the future budget that we were talking about. >> in the appropriation cycle that you will soon be turning to, that is what we are proposing. >> if we look at, you know, and honestly, with we're tired of hearing the mess that we've inherited or blamed it on former president bush. which i could understand the first three or four months. but if you look at deficit spending of the eight years that -- under the bush administration if we look surely at the table that you have on the historical tables on page 22. if you are are looking at those numbers. two years of this administration, we're going to approach the deficit spending level of almost the eight years prior. >> but again i use the analogy

before. it is like someone ran up a huge credit card bill, left town, and the new guy in the house is blamed for running up the credit card bill. it comes from two main sources, economic downturn, which was apparent at end of 2008 and the steps we've taken have helped to mitigate it and massive tax cuts and medicare prescription which were deficit finance. those two factors alone add up to $8 trillion over the next decade. >> back to the middle class. tell me how you define the middle class? >> we are $250 or below. >> minimum would be? >> we haven't defined down. >> to anyone under $250,000.

and the president won't raise taxes on people under $250,000. are we now raising -- >> no, sir. no. no. >> are you not having an increase on taxes under that amount? >> no, it applies those with with income above $250,000. :

lack of job security. it's my understanding this budget proposal does include proposals that would cut taxes for middle class families. >> yes, sir. >> would cut taxes particularly those who create new jobs and would continue investment in building roads and bridges and clean water systems, things of that nature, is that right? >> along with investment and -- >> how much of is that of the $3.4 trillion, $3.8 trillion budget we're talking about here how much is that. >> i could get back exact figure, the bulk of that figure comes from, medicare, medicaid, social security and programs like that.

>> okay. the other thing that think we already do sincerely here, people say why can't we spend less? put aside the revenue stuff for a minute. why can't the government here operate on less money? i think that is a very legitimate question that we have to try to answer and do something about. but i do think it is very important to understand exactly what that means. i looked at the 2010 budget projections for the year we're in right now, and roughly speaking, 20% of everything we spend is social security. now there may be people here who disagree, i think most people in the congress say, don't touch that. another 20% is the defense budget. and i think although there are many who would say that should be reduced, i'm frankly not one of them, i think a majority of those would disagree with reducing that. now we've taken 40 cents away. 6 cents of the budget is interest. we have to do that. by the way that is going to

grow as interest rates rise, which i think they inevitably will because of economic conditions. that is going to grow. that is not negotiatable. that is only true entitlement is the. you have to pay creditors. now we take 46 cents a way. another roughly 6 cents is pensions for people who retired from the military, v. apension or who worked for federal government and retired. i don't think anyone would say, take a pension from someone receiving it. this is not future pension policy. now we've taken 52 cents away. of the 48 cents that are left, 70% of that is medicare or medicaid. there's a little bit, you know, there is 15 cents left. let's talk about that is. fbi age entsd, va hospital, highway construction. cancer research at nih there is some waste in there. and look i'm all for whatever effort we can to

work together to find it but you are deluding yourself you think there is enough waste in the 15 cents so attack problem we have, which brings us to medicare and medicaid. and i would, ask you, dr. orszag, just to talk about, the medicare, medicaid savings the administration has already supported, in the house and senate, health care bills, that have passed. tell us a little bit about how much that saves and where the savings come from. >> as you already noted it saves roughly a half trillion dollars over next decade. i would note it comes from, efficiencies gained by, taking away excess payments to providers, a much different approach than reducing -- >> so, for example, if a hospital has a really bad track record, in readmitting people to the same hospital a few days after they have been discharged there is disincentive to do that, right? >> correct. there isn't currently. under the proposal there would be. >> if motorized scooter company has record of

selling a lot of motorized scooters to people who don't need them, that is taken away, yes. >> it is mitigated. >> the medicare advantage plan pays private insurance companies $114 for every $100 we pay for regular medicare that is phased at in varies ways in the bills. >> so you get down to 100 cents. >> these proposals are easy to demagogue. frankly, mr. ryan, i heard a lot of demagoguery last couple months, proposals are hurting seniors obliterating medicare of this. we've been guilty of that in the past. >> may i say something nice to you? >> i would be shocked but go ahead. >> you know, the durable medical equipment stuff, spot on. >> right. >> the hospital readmission, spot on. medicare advantage, i think if you go to bid-based pricing system, can get 60 billion without you ruining the program. i think it goes too faw . the put money back into medicare to make is more

solvent. don't use to it create a new entitlement. >> there is room for discussion. i would simply make this point, it is official role of minority party to demagogue the medicare issue versus majority party. we've done it. i think it is a huge disservice to the people in the country. mr. ryan made a constructive proposal which i completely disagree. i think it is constructive proposal and i think we should go forward and talk seriously about what the administration has already tried to do. >> thank you very much, mr. chairman. there are some things we do agree on i think. the debt and deficit sun sustainable. and that we have to address it. and we keep hearing about hard choices. president talks about hard choices. you talked about choices. we all talk about hard choices. you know, the american people, families, small business, even large businesses are, you know they're having to make hard

choices every day. real hard choices. not theoretical hard choices. they're really making serious hard choices. they don't, they don't blame, they can't, nor do they, that is just not what most americans do. they don't blame others for tough decisions they're having to make. they don't pound their chest when they make the tough decisions. they make them. and they make those hard choices on a daily basis. they don't, frankly, make partial hard choices. i'm talking about people in leadership, whether it is head of a family, over a small business or a large business. they don't make partial hard choices, and then say, that don't solve the problem, and then say, but i'm going to wait for an independent commission to make the hard choice that we'll solve will solve the problem for me. that's not what families and small business haves to do. by the way, that's not, i'm not criticizing just this

administration. i'm talking about congress, and i'm talking about what the american people don't do. the american people don't do what congress does. >> thank goodness. >> they don't. they make tough choices. they don't blame others. they don't make half, say a different word, half-hard choices and expect some other commission to make them for them. they show leadership every single day and they make hard choices. so here's, can we put up chart 9, if that's possible. we hear a lot about the president himself talking about the hard choices that this budget makes on this three-year partial freeze. there it is. those are their hard, difficult choices, that, that are being proposed in this budget. i happen to agree with mr. andrews. there are hard choices that have to be made. that doesn't do it. dr. orszag, you're a straight-shooter.

we may disagree but you're a straight-shooter. do you really believe that the three-year freeze, when you have said that doesn't solve the problem, but that you then, you're waiting for this commission, you're going to create this commission or to then, come up with proposals to solve it, do you really believe that those, that with a straight phrase, that face, i can look at american people who are making real tough choices with their families and businesses and say we're doing the same thing? because we're doing a temporary freeze. and doing some other things and then we'll have a commission to come back and tell us how to make the real choices to solve the problem? with a straight face, do you really think, that american people are, that we're making the same sacrifice in government that the american people are in their businesses and in their lives and in their families? are we making same tough choices that they are? >> two comments. first, one of the reasons we are so focused on, promoting

job creation now is to help those struggling families today because unemployment remains too high. second with regard to these deficits, budgeting includes more than one trillion dollars in deficit reduction over the next decade, more than any administration put forward in its budget in more than a decade. i would say, if every family had to get its proposals through the congress the hard choices it would make would be much more difficult to enact also. we're trying to get this done in a way that is feasible. only way we're going to get to where we need to be ultimately, given legacy we inherited if we work together. that's exactly what we're trying to do through this commission. >> but, dr. sores sag you said before, that, this budget will not get us to where we need to go and we need -- >> because we recognize that we need to work with you to get all the way there because frankly, you know, we can't do this by ourselves. even if we put forward a bunch proposals to get deficit down to 2%, 1%, or zero, unless we have congress of the united states working with us we

are not, then it is a meaningless document. >> i understand that you have, obviously have to get the congress to do it, but with all due respect, you blame the past and past administration as if that was a dictatorship. no you control the house, senate and administration and you're saying, am i hearing you correctly that the president is now saying that he can not get it done even though he controls the white house and same party controls it and needs commission to get it done? >> congressman, as you know -- >> hold on, sir a decision that every single american family makes every single day they make those hard choices are you saying that the president that controls house and senate, is either unwilling or unable to get it done? i want to make sure i understand what you're saying? >> congressman, as you know, one of the things that's developed over the past period of time is that in the united states senate, at this point basically every single thing requires 60 votes. and as you know, in a matter of weeks, or days, and i don't have exact update,

democrats will not have 60 votes in the united states senate. so the comment that, democrats control the senate, is simply not accurate, relative to the way voting actually works. >> but then you can not criticize the previous administration who had less votes for everything, it goes both ways, sir. works both ways. >> mr. dillard row. >> thank you, mr. chairman, and mr. orders sag, i move to questions about jobs and infrastructure. i would say, my colleagues have said, mr. ryan's plan is constructive. i would concur but as i see it, very simply and very quickly it partially privatizes skoth security, dismanned else medicare, block grants medicaid, -- riches 1% of people for this country and increases taxes for middle class. as far as i can tell we've gone down that road before. it is rejected by public i believe it will be rejected again.

let me move to infrastructure. initially you know i'm particularly fond of dr. orszag. it would appear the budget eliminates the idea of a national infrastructure bank as it was proposed last year with the capitalization of $5 billion a year over five years. and instead we have a national infrastructure and innovation fund within the department of transportation. i'm just going to read down several questions, so that you can, then, at one time answer them. how much private capital do you anticipate the fund will leverage and how many jobs you think can be created with the fund? is the $4 billion request, for 2011 a one-time request or does the administration propose this is ongoing annual funding level? if the fund's located in department of transportation, would a board composed senior dot officials and agency representatives reporting to the transportation secretary how can we expect it to be objective independent entity?

further, questions with regard to, the, it looks as if we are just codifying the tiger grant team. how is the fund not simply codifying the tiger grant team? and, it also appears if the budget continues the tfia program for surface transportation. the question why didn't the administration consider folding tfia program into the fund and does it make sense for dot to have two federal credit programs, the fund and tfia that make loans and provide other forms of credit to assist with surface transportation? finally, it would appear that this, new fund is, singularly about transportation. the bank, as you, know, would have gone beyond transportation infrastructure to the environment and energy,

telecommunications. is it a sense we'll start out with transportation, expand it to other sectors or does, or do you believe we should just do it, transportation infrastructure, if you, how is it within., it does become problematic if other sectors are to be added in the future. let me ask you all at once. sorry for all of that. i never get three questions. >> i think, there are more than three but that's fine. why don't i actually propose, let me, i know this is an issue that we have discussed at length in the past and something that you feel passionately about. >> right. >> the basic goal here is to get a concept operational, building on the success that we have had with the tiger grant program that has been successful. get a concept operational and after proof of concept it could be expanded both into other areas and spun if necessary. you asked a series of detailed questions. i think most auspicious approach might be for me to get back to you in writing.

>> why don't i lay those questions out for you, dr. orszag. thank you, i yield back. >> [inaudible]. >> thank you, mr. chairman. there we go. thank you, mr. chairman. dr. orszag, i know it's been a long afternoon. thank you for being in front of this committee again and your many it today. we all agree we're going through a weak job market. our focus here should be the economy, creating jobs. and i think the american people, expect congress to be making some real policy changes here. to be moving forward, with what we're, with real policy reform. i think, you know, it's been talked about earlier and i think all of us when we go back to our districts we face our constituents. there are americans out there, the american people that are struggling right now. families are struggling to make it from paycheck to paycheck. small businesses making,

struggling to make it from payroll to payroll. and you made a comment earlier, that it was in your previous job, or your previous career, that, you just put out ideas. i think, now is the time that we have to be, moving forward some real policy reforms. and we've had this discussion. but i want to go back to this. that is, it seems as though this budget all real work again is being left to this fiscal commission. and, the question is, how much, you know, how much, is, you just recognized, earlier that, unless this congress, i think in a bipartisan manner stands behind this commission, you know, how successful can this commission be? you have a administration proposing this fiscal commission but you recognize the fact that it will take congress to support this commission in order for this recommendations to be successful. and i guess in my opinion, isn't the job of the elected officials, all of us here in the administration to make policy decisions that need

to be made? >> let me try to clarify also because i think there have been various attributions of unsustainable and what have you. the hole we face is so deep, that despite more than unwin trillion dollars in deficit reduction contained in this budget we're still in a position where, further steps are necessary, and we think the only plausible way to take those further steps is if we do it together. so, yes, we have a fiscal commission to get us the rest of the way there, but simply i think inaccurate to say there aren't lots of hard choices. you don't get $1.2 trillion more deficit reduction than any previous administration proposed in more than a decade without making lots of hard choices. now is it enough? no. we've admitted that. we need to work together to get rest of the way there, and i hope we can. >> and, i appreciate your response but, i think it was mentioned earlier there has been one proposal before this committee, congressman ryan, has a proposal. i would have liked to have

seen a firm proposal today before this committee we could have a true debate on. not wait for a commission to report back. let me also, talk about, the debt because i've got three teenage sons at home and i didn't come to congress to just continue to run up more debt, by, public in this budget. more than doubles over next five years. it triples, by fiscal year 2019 from the current levels. the budget, would push the debt, $9. trillion this year or 63% of the gdp. and i believe that's largest, in recent history. maybe in history. and that concerns me. we're talking about, the future down the road, at what point do we get a control of the amount of debt, which i believe is, hurting our economy right now, within this budget proposal? >> well, again, right now, we find ourselves in an exceptional circumstance because private borrowing has collapsed.

interest rate on 10-year bonds remains below 4%. we have taken exceptional action to rescue the economy. and frankly that was necessary. if we had not done that, as i've already said, more than, 1 1/2 to two million more people would be unemployed today. the economy would not be growing at 5.7% at end of 2009 as it was. and we would still face, i mean it is worth, we sort of glide right past it. if you rewind the tape for a year, and look at the prospects and discussion then, about the possibility of another depression, about financial market meltdown, as tough as the situation we face ourselves today is, it is much better than many predictions suggest. >> i'm running out of time. we're continuing to spend. and, let me just ask you, in this bill, how many new entitlement programs are created in this budget? and what is the total amount of spending increased that is involved in those new entitlements? >> again, net deficit

reduction of $1.2 trillion. discretionary savings in non-security budget of $250 billion. get you precise answer to your question afterwards. >> again. we talk about president's talked about need for fiscal restraint. how is the administration going to enforce the spending freeze that we've talked about? for non-defense discretionary programs. how do you enforce that with that type of budget proposal? >> the way you enforce it through regular congressional process. 302-a and '02-b process. but as mr. ryan and others asked, if you and your colleagues are interested in statutory discretionary cap to better enforce that, that is a discussion we can have. >> dr. orszag, thank you for, -- >> be glad to. >> [inaudible]. for 2 1/2 hours. do you want to take a 7th inning stretch? >> up to the committee. i'm just loving this.

>> how many cans of diet coke do you have. >> my pitcher is out. >> chairman, this is good time we don't want to interrupt you, let's go forward. >> all right. >> mr. edwards. >> that is the first answer, dr. orszag brings into question your credibleability. >> can we get him some more coke? >> let me begin by saluting you and the administration for taking four major steps towards trying to get this car out of a itch did. three-year freeze on non-defenses discretionary spending. little disappointed some of our republican colleagues say that is not significant. reduction of $250 billion in the deficit is not significant. that might reflect how we got in the ditch in the first place. secondly, commend the administration for supporting pay as you go statute. if we had that in place and, speaker hastert and, republicans in, in this budget committee in, this room, not allowed that rule

of the house to go out, out into left field in 2001 or 2002, we wouldn't be in this ditch and facing kind of economy and deficits that we're facing. number three, salute you for proposing genuine effort to try to reduce the deficit by $1.2 trillion over the period of time. i challenge anyone to suggest that is not a significant amount. fourth, i commend the administration for supporting a bipartisan commission to try to deal with entitlement spending. i know there has been partisan criticism of that. and, yet, as i recall, i've sat on this committee for a long time. as i recall, dr. orszag, during the 12 years that republicans each and every year passed a partisan budget through this committee, i don't remember any long-term entitlement spending reductions passed during those 12 years through the house. in fact just the opposite

occurred. on a partisan basis they passed largest increase in medicare spending since medicare was created in 1965. i do want to go on record saying i am one democrat who believes our short to medium term deficit reduction goals ought to be even more aggressive than the administration proposed. i intend to speak out on that. having said that i almost also must say that it is disappointing that some of the captains of the economic titanic, those who wrote budgets that put us into the worst recession since the great depression and gave us the largest deficits in american history after they inherited the largest surpluses in american history, now do nothing but take potshots at each of these four very substantive proposals the administration has made. i welcome bipartisan support and dialogue but, those who, were in charge when we went from the largest surpluses in american history to the largest deficits in american history, ought to, if

they're genuine about that, be a little more open-minded, rather than immediately criticizing each of these four very substantive proposals. i do want to commend mr. ryan. i think his proposal is substantive. it is dramatic it. if not revolutionary. it is compared to programs as we know them in the federal government. and i think this is an opportunity for the american people to see a dramatic difference, envisioned for the future of our country, one the administration proposed. again as we try to start reducing deficits. the other one, proposed by mr. ryan, not just any back bencher republican, leading republican, well-respected republican on budget committee. genuine about reducing deficit and national debt but one that nevertheless, proposal that would eliminate medicare as we know it, for people under 55. partially privatize social security and i've seen the cost of that in

years past is up to 2 trillion dollars in lost revenue to the social security trust fund. it also, as we talk about new spending i think republicans are right to ask about level of new spending when we have the deficits we face. i think it is also to fair to look at level of new tax cuts proposed by mr. ryan in republican alternative vision for our country. let me just ask you this question, do you have any kind of cost on what it would add to the deficit, some of the proposals in that ryan road map, the republican road map, costs eliminating estate tax over 10 years, reducing individual, highest tax rate from 35 to 25%. eliminating capital-gains tax, interest income, and, dividend income, and, extending the 2001 and 2003 tax cuts? do you have any ballpark numbers how much those individual actions would increase national debt over 10-year period. >> we will get you exact

figures but we're talking about trillions of dollars shifted, and, offset through other changes including, to in particular medicare and medicaid, to offset those huge shifts in access. >> if i could pleasantly interject. >> sure. >> the status quo is unsustainable. >> that's correct. >> many programs medicare with as we know it will not exist in the future. has minimum, $38 trillion unfunded liability. we're all kidding ourselves think medicare for under 55-year-olds will look tomorrow exactly like it looks today. no matter who is in charge around here it will not look the same because it is totally unsustainable. peter orszag, first guy will tell you that. >> that's why they proposed a by partisan commission so we sit down together because frankly, mr. ryan -- >> sounds like you're going to -- >> you never been able to get the vast majority of republicans in your own caucus to support your very bold and honest proposals to reduce the deficit. >> -- that's what i'm doing.

>> maybe we do this on bipartisan basis. i salute you for offering very tough choices and alternative vision. it is honest proposal and have debate and relative to the president's budget. thank you. . .

now either. >> that is not to deny that we need to get the deficit down over time. >> in terms of dealing credibly with jobs one of the challenges is we have is we create jobs on the federal level.

the recovery act provided $140 billion for states, and yet they still cut their budgets an the recovery act provided total of 400, almost $450 billion. that just went to offset what the states were doing. is it accurate that -- is that accurate? we have essentially offset the damage of what the states returning to the economy? >> we have, through direct state fiscal relief and through federal action of said, i'll get to be exact calculations, but offset the drag that state and local governments typically exerts on the recession because they are doing counterproductive steps. >> one of the challenges we have is just to keep up to zero to give up to the point where we are of setting where the states are laying off. we created jobs and the state

lays off the job we have not made any progress. >> i cannot comment on the exact figures. one of the reason why state fiscal relief was provided to the recovery act and a variety of ways was to offset the actions of states to lay off workers and teachers and nurses and cons and so on and so forth which would exacerbate the downturn. >> next please. >> this is when we had a good fiscal responsibility during the clinton administration we created an average of 237,000 jobs a month. during the bush administration we were overspending the budget by $8 trillion we did worse. the long term this the challenges we have. next chart. this chart shows the change in percentage of gdp, social security, medicaid, medicare, net interest, and all other public spending. if you look closely the only thing that is really growing is

medicare. if he wanted to solve the problems, things like getting rid of medicare would be one way to do it. it would be a tough choice that he would make. can we talk about the effect of how much -- pakistan he said you have to cut medicare 705%. can you explain what impact that would have on a person who is trying ticket health care with a medicare voucher that is only 25 percent of the cost of health care and what it would do to employees if you eliminated the tax preference for health care, if you eliminated that and had people easily going out on the market as individuals rather than the market, what the tough choices would amount to in health care choices that the republican alternative would envision? >> with regard to the 75% you are referring to the reaction that would occur in medicare and medicaid spending under m r. ryan's republican alternative. the fact of the matter is that

think there, again, i'm going to give him credit, too, for stepping forward. there is a significant question about whether that is even a feasible approach because he would be providing individuals with a voucher that would not pay for the cost of health care over time. an increasingly small share. it would not have the type of benefits that would be provided through medicare where there is less uncertainty about the cost that they face. they face not only more money out of their pocket, but a lot more uncertainty about how much they have to pay an struggling with many of the same problems that individuals in the current market struggle with which our unfortunate. so in that situation i wonder whether future congresses would actually stick to a voucher level that was inadequate for the nation's elderly to purchase their own health insurance. if a future congress didn't not

only would you have dramatically changed medicare programs, you would not even get the budget savings that mr. ryan is aiming for. the point of which is, i think what we need to do with regard to medicare and medicaid is it at the underlying drivers. provide much better information about what works and what doesn't. change incentives about providers. improve incentives for prevention and wellness and so on and so forth. you can go down the list. that is a different structure and a perch. frankly without all of those components present anyway and not sure mr. ryan's approach would even work. >> thank you, mr. chairman. one of the freshman of this committee gets to ask a question. pam going to try to ask three

questions, mr. orszag. one is local, but very important. in the budgets will in the states that the environmental infrastructure projects is not important to the main areas in deciding to divest the core of those kinds of projects. obviously that has implications for the chesapeake bay. many of us are concerned you don't have the core capacity at epa to be able to do the same things the corps of engineers test. >> again, what we are trying to do with our army corps of engineer proposal is to focus on of the three traditional areas that the army corps of engineers has worked, you know, has focused on. commercial navigation, aquatic echoes systems, restoration. there has been an additional area added by the congress. we think it is better addressed through, as you correctly note, and other funding streams.

we have $3 billion for the state, for the various revolving funds involving clean water. we think that is a better person that particular problem than funding those problems to the army corps of engineer. >> well hopefully this is the beginning of a dialogue. >> absolutely. >> second. help me understand. at least in my district the recovery act is working. has funded transportation project and topped with our school systems. it is funding some very important technology, r and d related projects. i guess if the stimulus is working, and i think it is, why do we need another jobs bill or in other jobs initiative contained in this budget? aren't we concerned that given the surprising strength of economic growth, should it be sustained anywhere near that level? we are going to start to see jobs created in the house. the lag time between this money being invested an actual jobs

created is going to be log, as we just saw with ith the recovey act. >> look, the recovery act has succeeded, not only in commencing in climate, but basically primarily in restoring economic activity, in moving from a collapsing economy to a growing one. where we still lag behind is the employment market. so the jobs package is focused specifically on steps that we could take just to, again, more tightly linked gdp growth to employment growth. something like the jobs and wages tax credit. so the recovery act is working. it has averted a second great depression along with other measures that were taken. the employment market remains too weak. the question is whether we can shorten the lags involved in when the economy starts recovering and when the jobs market does. i agree with you that private-sector forecasters are projecting that by this spring there will be positive job

growth, but even when that happens it is likely to be smaller than would be necessary even to work the unemployment rate down. don't forget we had that 7 million job gap in terms of the jobs lost since december 2007 that need to be worked off. so i don't think that the biggest risk we face is that job growth is going to be too rapid without further action. i think further action is beneficial. >> thank you. i know that was the beginning of a dialogue, as well. my third and final question has to do with the ranking members, a proposal. i certainly join in the chorus of praise that he, at least, has put something on the table. at part ways with some of my colleagues in praising that proposal because quite frankly i see it as a radical departure from a decade of hard work in the united states to protect senior citizens but rest respect to their pensions to the social

security program and their health care through medicare. we made a conscious decision in this country to provide that kind of protection. under the guise of deficit reduction to now threaten all of that certainly presents us with a stark choice. for me it is an easy one. i believe for my constituents, when they understand it, it will also be easy. he may want to comment. >> i'm not going to dissuade you from the depiction that there is a very germanic change. there is no question about it. it not only means higher costs per beneficiary but more uncertainty around those costs for medicare beneficiary. we have not even done to the tax changes were there would be tax reductions at the very top and tax increases and the middle. the total of the change, the burden has shifted away from higher earners and toward middle ironers. >> i think the gentleman. my time is up.

>> thank you, mr. chairman. there has been a lot of talk about the proposal. i guess i would like to know if mr. ryan's proposal is a proposal that the republican is seriously entertaining? we can find out if this is a proposal that the party is moving off of and actually going to go with a legitimate proposal. i think that would be -- i think it is either one or the other. there is not a whole lot of other proposals out there. we will it be against everything are we can embrace the proposal. i'd like to see if we can get that information, mr. chairman. >> a few questions, if i might. the three-year freeze in discretionary spending has a value beyond the $250 billion which is a lot of money in my

neck of the woods. that is showing the investors, the american people, that we are beginning to give serious about controlling our debt. when you agree with that? >> it is part of a broader set of measures to reduce deficits. >> isn't it true that a week, we can daffodil we had an opportunity, well, the senate had an opportunity to go with td commission that would be praised to talk about. six or seven republican co-sponsors of the very on bill swift to ed to know on that and ended up defeating our opportunity to go with statutory? >> that is correct. >> a think it is a pretty good, and that the president is despite that setback still willing to step out and offer the olive branch and say, i will do it on my on in a bipartisan way. let's get serious about the debt. we will put everything on the table. i would think that should indicate to the american people

that this president, at least, is still serious about bipartisanship. >> at think that is exactly right. >> a couple of quick comments. a couple of things that have not been brought up for three hours. one is that i made them concerned about just the focus on non-defense discretionary spending. in my area, education, health care, and public safety. i have heard it said that our greatest threat to this nation is the economy, not necessarily a land war in afghanistan. while i think we should support the veterans 100% and exclude them from many short of projections and, indeed, make sure they are well cared for, the inefficiencies is a long way to go in terms of becoming a functioning body based on what we have seen here in recent years. again, i do have some concerns about the buildup in afghanistan. i hope that the demonstration might consider ight consider sos

in those areas. >> absolutely. let me emphasize the defense budget has patronized. there are some important, especially canceling an alternative engine, cancelling the cgx naval ship, a whole variety of other terminations and reductions. secretary gates was remarkably effective working with the president and congress in terminating and necessary weapon n systems last year. we want to build on that and continue that success and reform, especially the part him apart. >> last time. i applaud your efforts in trying to stimulate small business. i am one that happens to believe private enterprise is the best stimulator of the economy. have some degree of skepticism

over the tax credit proposal. what about the administration's stepping in of little bit stronger even than they have already with our banking and regulatory community? there seems to be is tension going on between overregulation, making the bankers consent. at the same time don't want to end up in the mess we are in. are there any new initiatives this administration will use to pursue areas of increasing lending from the private sector which i think is probably the long-term best bet? >> with regard to the regulatory system, to comment. the first is that clearly the administration is very strongly in favor of financial reform legislation. the second is my belief. i believe it is correct that secretary geithner will be appearing before your committee in the near future. with respect to more specifics on regulatory policy i am going to defer to have given the

sensitivity surrounding the appropriate boundaries in regulatory policy. >> thank you very much. >> dr. orszag, thank you very much for your patience in being here today and for the hard work he put into putting the budget to get. we will take quite a bit of time in scrutinizing it and working with the administration to try to get this right. we obviously deeply concerned about a rate the economy is at this point. we have obviously, a long way from where we were. one year ago we were losing 700,000 jobs per month. we have seen a slow turnaround. last month we saw a job losses at one-tenth the rage from a year ago and economic growth and 57. and obviously this is remarkable

progress. right now, quite frankly, my constituents can't find jobs. we have the third highest unemployment rate in the country at 12.9%. can you, once again offer my own knowledge and for my constituents back home be more specific in outlining the proposals toward it job creation and how these programs are projected to decrease unemployment and over what amount of time? and if you could after that part of it, talk about specifically defines that would be going to the job creation portion of it coming to this date, more specifically to local cities and towns. one of the criticisms we had from the stimulus money is that it went to states and did not filter down to where we had hoped to particular local communities. if you could talk to money that might be which is something that our local administrators have been clamoring for.

if we could talk about the first part. >> sure. with regard to the first part we have put forward $100 billion jobs package. some of the details are still to be worked out working with the house and senate. we have identified, for example, a $33 billion jobs and wages tax credit which would provide up to a $5,000 tax credit for hiring more people or expanding wages and affirmed. that will help to promote job growth because some small businesses are right on the edge of either hiring someone on providing a wage increase. in return for this tax credit they go ahead and do that. so that is one of the keep things. now, with regard to state and local fiscal relief. as you know, the recovery act included at the state level and put into relief. this budget proposes continuing

that for an additional six months beyond the current level. then you asked about cdbg. i believe we are funding at $4 billion, $4.4 billion in 2011. we also have, if i remember correctly, 100-$150 million catalytic grant program to try to create more innovation within that part of the budget. >> that is helpful. thanks. the money that would go toward tax credits and other incentives is small businesses. that is included within that 100? >> correct. within the 100 billion. >> okay. so if i could, turning to the other part of our challenge, not only creating jobs but also that we have talked about, deficit reduction, can we talk about

your projection and how much these job creation and small business investments translate into overall deficit reduction as a percentage of gdp once jobs are created? is this economic growth enough to reduce our deficit to a sustainable level? >> one way of answering that question is that when you generate an additional dollar of economic activity he typically reduce the deficit by somewhere between 25 and $0.33 on the dollar. so if a dollar of additional jobs creation activity from the federal government creates a dollar of additional economic activity something like a quarter to a third of it would be offset to the additional revenue. the key thing though -- let me just again emphasize. unless this economic recovery continues and unless we sprayed

on be will never get our deficit down. we had 10 percent now. need to get to a much lower number. the big reduction comes as a move from 10% of the economy to 5% of the economy by 2015 because of economic recovery and economic activity picking up. abnormally low revenue is a share of gdp which is currently the case will increase as economic activity picks up. certain cyclical spending categories naturally decline. both of which, the fact that is happening, that is beneficial to help mitigate the negative downturn now. as the recovery takes hold automatic stabilizers naturally fade and the deficit declines. that is crucially important to getting this deficit down over time. >> my time has expired. i just want to say that i

applaud the president and look forward to working with you to focus on creating jobs, jobs, jobs, like a laser beam. we have to have that focus. too many people are out of work. we did here in the congress. i know the president gets it. this is going to be a strong partnership. >> thank you, mr. chairman. thank you for your presentation and answers. last week i was on "fox business news." i was asked whether or not i thought that raising the tax cut rate on upper-income earners would be an impediment to growth and would stop job creation. i responded to him that as someone who started a business and ran its as two brothers and a sister all who run businesses, they ran a large company when the income tax rate to 70%. i had not seen that in my experience. whether it was when president

clinton raised the highest rate tour when president bush is lowered its. i didn't see any reason to believe that. he disagreed with me. add the dead his background. i could not find any evidence that he had ever run a business or been involved in the private sector. and did notice that he, like you, went to the london school of economics. my question is whether you learned anything that would give you superior insight to how business people behave in situations? >> i am like him. but i guess like you i started and ran a small business. i would join you in saying the key thing for a small business is not the marginal tax rate, especially if all you're doing is returning it to the bubbles that existed during uring the 1. it is demand for your product, access for capital, and good workers, all of which this budget is trying to focus on. get the economy back on its feet. a variety of steps to promote

access to capital including through the small business administration and the new proposal the president was speaking about today to spur small-business lending. finally in terms of workers and the workforce investing in education because those are the workers of the future. >> thank you for clearing that up for me. i have to turn now to a more appropriate subjects which definitely that affects my state. this is the question of the elimination of the accounting method. in my state that would dramatically affect the urban industry which is an incredibly important economic factor in my state. i know it affects business and many other businesses where aging is a factor. the president, and i applaud these goals, has suggested that we want to expand our exports. we want to increase our

manufacturing base. we obviously want to add jobs. but eliminating this and doing it not just prospectively, but retroactively and requiring that the businesses that have been using it legally for many years would have to make up these incredibly large reserves, which it easily would be an enormous tax cuts and would put some of these companies out of business, have you thought about the impact in regard to those three goals the administration has said that something like this industry and others wary it would seem to be something that would run counter to the goals the other economic goals that we all have. >> as you know, the purpose of that proposal is some firms use last and first out accounting for tax purposes. sometimes they use different accounting in different settings. there is a tax policy justification for moving away from that. now, there may well be consequences for