quorum call:

quorum call:

quorum call:

the presiding officer: the senator from west virginia. mr. rockefeller: i ask unanimous consent that the order of the quorum call be rescinded. the presiding officer: without objection. mr. rockefeller: i ask unanimous consent that the blunt amendment number 5 be modified with the changes at the desk. further, that the amendment as modified and the reid amendment as modified, number 55, be considered and agreed tone block and the motions to reconsider be laid upon the table with no intervening action or debate. the presiding officer: without objection. mr. rockefeller: i ask unanimous consent that the senate proceed to a period of morning business with each senator permitted to speak for up to ten minutes each. the presiding officer: without objection. mr. rockefeller: mr. president, i ask unanimous consent that

when the senate completes its business today, that it adjourn until 10:00 a.m. on wednesday, february 16. that following the prayer and the pledge, the journal of proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day, following any leader remarks, the senate proceed to a period of morning business until 11:00 a.m. with senators permitted to speak therein for up to ten minutes each, with the time equally divided and controlled between the two leaders or their designees. and, finally, at 11:00 a.m., the senate resume consideration of s. 223, the federal aviation administration authorization bill. the presiding officer: without objection. mr. rockefeller: mr. president, roll call votes in relation to f.a.a. amendments are expected to occur throughout the day. if there is no further business to come before the senate, i ask that it adjourn under the previous order. the presiding officer: the senate will stand adjourned until wednesday, february 16, at until wednesday, february 16, at

>> coming up tonight on c-span2, president obama at today's white house briefing. at this white house news

conference prison obama said the country's long-term deficit problem and have to be addressed on a bipartisan basis in the coming months. he also defended various cuts in his 2012 budget proposal and called for a peaceful response to widespread protests in the middle east. this is an hour. >> good morning everybody. please have a seat. figured that i'd give jay one more taste of freedom. [laughter] before we lock them in a room with all of you so i'm here to do a little downfield locking for him. before i take a few questions let me say a few words about the budget we put out yesterday. just like every family in america, the federal government

has to do two things at once. it has to live within its means while still investing in the future. if you are a family trying to cut back, you might skip going out to dinner, you might put off a vacation. but you would want to sacrifice saving for your kid's college education or making key repairs to your house. so you cut back on what you can afford and focus on what you can't do without. and that is what we have done with this year's budget. when i took office, i pledge to cut the deficit in half by the end of my first term. our budget needs that pledge and puts us on a path to pay for what we spend by the middle of the decade. as they started freezes domestic discretionary spending over the next five years, which would cut the deficit by more than $400 billion over the next decade and bring annual domestic spending to its lowest share of

the economy cents dwight eisenhower. now, some of the savings will come through less waste and poor efficiency. to take just one example, we will give -- we will save billions of dollars by getting rid of 14,000 office buildings, lots, government owned properties that we no longer need. and make sure special interests are not larding up legislation with special projects, i have pledged to veto any bills that contain earmarks. still come even as they cut waste and inefficiency, this budget freeze will also require us to make some tough choices. it it will mean freezing the salaries of hard-working federal employees for the next two years. it will mean cutting things like like -- i care about deeply like community action programs for low income communities. and we have some conservation programs that are going to be scaled back.

these are all programs that i wouldn't be cutting if we were in a better fiscal situation. but were not. we also know that cutting annual domestic spending alone won't be enough to meet our long-term fiscal challenges. that is what the bipartisan fiscal commission concluded and that's what i have concluded. that is why i am eager to tackle excessive spending wherever we find it, in domestic spending but also in defense spending, health care spending and spending that is embedded in the tax code. sum of the spending we have begun to tackle in this budget, like the $78 billion that secretary gates -- gates identified in defense cuts. but to get where we need to go were going to have to do more. we have to bring down health care costs further including programs like medicare and medicaid which are the single biggest contributor to our long-term deficits. i believe we should strengthen social security for future generations and i think we can do that without slashing benefits are putting current retirees at risk.

and i'm willing to work with anybody on capitol hill to simplify the individual tax code for all americans. all of the steps are going to be difficult. that is why all of them will require democrats, independents and republicans to work together. i recognize that there are going to be plenty of arguments in the months to calm and everybody is going to have to give a little bit. but when it comes to difficult choices about our budget and our priorities, we have to fund -- we have found common ground before. ronald reagan and tip o'neill came together to save social security. bill clinton and the republican congress eventually found a way to settle their differences and balance the budget. many democrats and republicans in congress today came together in december to pass a tax cut that is made americans paychecks a little bigger this year and will spur on additional economic growth this year. so i believe we can find is common ground that we are going to have to work.

we owe the american people a government that lives within its means, while still investing in our future in areas like education, innovation and infrastructure that will help us attract new jobs and businesses to our shores. that is the principle that should drive the debate in the coming months. i believe that is how america will win the future in the coming years. so without that may take a few questions and i'm going to start off with ben feller of ap. >> thank you very much mr. president. you have been talking a lot about the need for tough choices in your budget but your plan does not address the long-term crushing costs of social security, medicare, medicaid, the real drivers of long-term debt. can you explain that? where's your leadership on that issue and when are we going to see your plan? and if i may serve on the floor in front apprise in egypt has helped prompt protests and by rain and in yemen and iran. i'm wondering how you balance your push for freedoms in most

places against the instability that could endanger u.s. interest? >> on the budget, what my budget does is to put forward some tough choices, some significant spending cuts, so that by the middle of this decade, our annual spending will match our annual revenues. we will not be adding more to the national debt. so, to use sort of an analogy that families are familiar with, we are not going to be running up the credit card any more. that is important, and that is hard to do. that it is necessary to do and i think that the american people understand that. at the same time we are going to be making key investments in places like education and science and technology research and development that the american people understand is required to win the future. so what we have done is we have

taken a scalpel to the discretionary budget rather than a machete. now, i said in the state of the beginning in and i will repeat, that side of the ledger only accounts for about 12% of our budget. so we have got a whole bunch of other stuff that we are going to have to do including dealing with entitlements. now you talked about social security, medicare and medicaid. the truth of social security is not the huge contributor to the deficit that the other two entitlements are. i'm confident we can get social security done in the same way that ronald reagan and tip o'neill was able to get it done by parties coming together making some honest adjustments. i think we can avoid slashing benefits and i think we can make it stable and stronger for not only this generation but for the next generation. medicare and medicaid are huge problems because health care costs are rising even as the population is getting older. so what i have said is that i'm

prepared to work with democrats and republicans to start dealing with that in a serious way. we made a down payment on that with health care reform last year. that is part of what health care reform was about. the projected deficits are going to be about $250 billion lower over the next 10 years than they otherwise would have been because of health care reform and they will be a trillion dollars lower than they otherwise would have been if we hadn't done health care reform for the following decade but we are still going to have to do more. so what i have said is that if you look at history of how these deals get done, typically it is not because there is an obama plan out there. is because democrats and republicans are both committed to tackling this issue in a serious way. and so what we have done is we have been very specific in terms of how to stabilize the discretionary budget, how to make sure we are not adding additional debt by 2015.

and then let's together, democrats and republicans, tackle these long-term problems in a way that i think will ensure our fiscal health and at the same time, and sure that we are making investments in the future. >> but when is that happening? >> we are going to be in discussions over the next several months. this is going to be in negotiation process. and the key thing that i think the american people want to see is that all sides are serious about it and all sides are willing to give a little bit and that there is a genuine spirit of compromise as opposed to people being interested in scoring political points. now we did that in december during the lame-duck on the tax cut issue. oocytes had the gift. and there were folks in my party who were not happy and there were folks in the republican party who were not happy. and my suspicion is that were

going to be able to do the same thing if we have that same attitude with respect to entitlements. but the thing i want to emphasize is nobody is more mindful than me that entitlements are going to be a key part of this issue, as his tax reform. i want to simplify rates. and i want to, at the same time, make sure that we have the same amount of money coming in as going out. those are big tough negotiations and i suspect there's going to be a lot of ups and downs in the months to calm before we finally get to that solution. but just as a lot of people were skeptical about us being able to do with the tax cuts that we did in december but we ended up getting it done, i am confident that we can get this done as well. with respect to the situation in the middle east, obviously there still a lot of work to be done in egypt itself to, but what we have seen so far is positive.

the military council council that is in charge has reaffirmed its treaties with countries like israel and international treaties. it is met with the opposition and the opposition has felt that it is serious about moving towards free and fair elections. egypt is going to require help in building democratic institutions and also in strengthening an economy that has taken a hit as a consequence of what happened. but so far at least, we are seeing the right signals coming out of egypt. there are ramifications though throughout the region. and i think my administration's approach is we approach it approach that jibes with how americans eat about this region which is that each country is different, each country has its own traditions, america can't dictate how they run their societies but there are certain universal principles that we

adhere to. one of them is we don't believe in violence as a way of -- and koreshan as a way of maintaining control. so we think it is very important that in and all the protest that we are seeing and throughout the region, that governments respond to peaceful protesters peacefully. the second principle we believe in strongly is the right to express your opinions, the freedom of speech and freedom of assembly that allows people to share their grievances with the government and to express themselves in ways that hopefully will over time meet their needs. and so we have sent a strong message to our allies in the region, saying let's look at egypt's example as opposed to iran's example. i find it ironic that you have got the iranian regime pretending to celebrate what

happened in egypt land, in fact, they have acted in direct contrast to what happened in egypt by gunning down and beating people who were trying to express themselves peacefully in iran. and i also think that an important lesson, and i mentioned this last week, that we can draw from this is real change in these societies is not going to happen because of terrorism. it's not going to happen because you go around killing innocent. it is going to happen because people come together and applied moral force to the situation. that is what garners international support. that's what garner's internal support and that is how you bring about lasting change. patricia zengerle he. >> thank you mr. president. getting back to the unrest in the middle east and north

africa, what concerns do you have about instability, especially in saudi arabia as the demonstrations spread? do you foresee any effects on oil prices? and talking about iran, can you comment about the unrest there more? what is your message to the iranian people. in light of there was some criticism that your administration didn't speak out strongly enough after the demonstrations in iran after their elections. >> first of all on iran, we were clear then and we are clear now that what has been true in egypt should be true in iran, which is that people should be able to express their opinions and their grievances and seek a more responsive government. what has been different is the iranian government's response, which is to shoot people and the

people and arrest people. and my hope and expectation is that we are going to continue to see the people of iran have the courage to be able to express their yearning for greater freedoms and a more representative government, understanding that america cannot ultimately dictate what happens inside of iran any more than a code inside of egypt. ultimately, these are sovereign countries that are going to have to make their own decisions. what we can do is lend moral support to those who are seeking a better life for themselves. obviously we are concerned about the stability throughout the region. each country is different. the message that we have sent even before the demonstrations

in egypt has been, to friend and foe alike, that the world is changing, that you have a young, vibrant generation within the middle east that is looking for greater opportunity, and that if you are governing these countries, you have got to get out ahead of change. you can't be behind the curve. and so i think that the thing that will actually achieve stability in that region is if young people, if ordinary folks end up feeling that they are our pathways for them to feed their families, get a decent job, get an education, aspire to a better life. and the more steps these governments are taking to provide these avenues for mobility and opportunity, the more stable these countries are.

you can't maintain power through koreshan. at some level, in any society there has to be consent. and that is particularly true in this new era, where people can communicate not just through some centralized government or state run tv but they can get on a smartphone or a twitter account and mobilize hundreds of thousands of people. my belief is that, as a consequence of what is happening in tunisia and egypt, governments in the region are starting to understand this. and my hope is, is that they can operate in a way that is responsive to this hunger for change but always do it in a way that doesn't lead to violence.

chip reid. >> thank you mr. president. actually i'm going to have to get my glasses out to read these. >> that is a bad sign there, chip. [laughter] >> a little fine print. you said that this budget is not going to add to the credit card as of about the middle of the decade. and as robert gibbs might say i am not a budget expert and i'm not an economist but if you could just explain to me how you can say that when, if you look on page 171, which i am sure you have read, it is the central page in this. the deficits go from $1.1 trillion down to $760 billion they go down again all the way to $607 billion 2015 and by 2021 it is at $774 billion. the total over this 10 years, the total debt is $7.2 billion on top of the $14 trillion we

are to have. how can you say we are living within our means? >> let me be clear on what i am saying because i'm not suggesting that we don't have to do more. we still have all this accumulated debt as a consequence of the recession and as a consequence of a series of decisions that were made over the last decade. we have piled up, we have racked up a whole bunch of dead. there is a lot of interest on that debt. so, in the same way that if you have a credit card and you got a big talents, you may not eat adding to the principle. you've still got all that interested you have got to pay. well we have got a big album in terms of cumulative interest that we are paying. and that is why we are going to have to whittle down further that that has already been accumulated. so that is problem number one. problem number two we already talked about which is rising health care costs health care

costs and programs like medicaid and medicare, once you get past this decade, are going to start zooming up again as a consequence of the population getting older and health healthe costs going up more rapidly than incomes and wages and revenues are going up. so you have got those too big albums. what we have done is to try to take this in stages. what we say in our budget is let's get control of our discretionary budget, to make sure that whatever it is that we are spending on an annual basis, we are also taking in a similar amount. data step number one. step number two is going to -- is going to be how do we make sure that we are taking on these long-term drivers and how do we start whittling down the debt. and that is going to require entitlement reform and it is going to require tax reform.

and in order to accomplish those two things we are going to have to have a spirit of cooperation between democrats and republicans. and i think that is possible. i think that is what the american people are looking for, but what i think it is -- is important to do is not discount the tough choices that are required just to stabilize the situation. doesn't solve it vetted stabilizes it and if we can get that done, that starts introducing this concept of us being able to, in a serious way, who operate to meet this fiscal challenge and that will lay the predicate for us being able to solve some of these problems over the course of the next couple of years as well. so, again i just want to repeat, the first death in this budget is to make sure that we are stabilizing the current situation. the second step is going to be to make sure that we are taking on some of these long-term drivers. but we have got to get control of the short-term deficit as

well, and people are going to be looking for a signal for that and the choices that we have made are some pretty tough choices, which is why i think you have been seeing some rumblings not just from the other party but also for my own party about some of the decisions that we have made. chuck todd. ..

you are a good friend from illinois, democrat from everything you just described in the answer just happened. why not grant it? >> the notion that it has been shelled by think is incorrect. they still provide a framework for a conversation. part of the challenge here is that this townlets face it you guys are pretty in a patient. if something doesn't have an today, then the assumption is that it's just not going to happen. i've had this conversation the last two years about every single issue that we've worked on. whether it was health care or don't ask don't tell matt come on egypt, we have this monumental change over the last three weeks. why did it take three weeks? so, i think that there is a tendency to assume that if it didn't happen today is not going to happen. well, the siskel commission put out a framework.

i agree with much of the framework and i disagree with some of the framework. it's true it got 11 votes and the was a positive sign. what is also true is for example that the chairman of the house republican budget years didn't sign on. he has got a little bit of juice when it comes to the budget says he's got concerns so i'm going to have to have a conversation with him what would he like to see happen. i'm going to have to have a conversation with those democrats who didn't vote for it. there are some issues that as a matter of principle i don't agree with, where i think they didn't go far enough or they went too far. so this is quinn to be a process in which each side, both in -- in both chambers of congress go back and forth and start trying

to whittle their differences down until we arrive at something that has an actual chance of passage, and that is my goal. my goal is to actually solve the problem. it's not to get a good headline on the first day to read my goal is is that a year from now or two years from now people look back and say you know what, we actually started making progress on this issue. >> it looks like no you first domino do first and everybody -- nobody wants to talk about it. >> this was the same criticism people had right after the midterm election. if you had pulled the press and the conventional wisdom in washington after the midterm, the assumption was there's no way we are going to end up getting a deal that of the majority of both democrats and

republicans. it was impossible, and we got it done. so this is not a matter of you go first or i do first. this is a matter of everybody having a serious conversation about where we want to go and then ultimately getting in the boat at the same time so it doesn't tip over, and i think that could happen. julie ilana goldman. there you are. >> thank you, mr. president. you're budget relies on revenue from tax increases to multinational corporations that ship jobs overseas and on increases on the oil and gas industry. you've been calling on this for years. and if you couldn't get it through a democratic congress, why do you think you will be able to get through now? and also, doesn't it blunt you're pushed for a deficit neutral corporate tax reform? >> well i continue to think i'm

right. so we are going to try again. i think what's different is everybody says now they are serious about the deficit. well if you're really serious about the deficit, not just spending but serious about the deficit overall, in part of what you have to look at is unjustifiable spending through the tax code, through tax breaks that do not make us more competitive, do not create jobs here in the united states of america and the two examples you cite most economists would look at and it might say these are not contributing our long-term economic growth, and if they are not, why are we letting some folks pay lower taxes than other folks creating jobs in the united states and are investing? why are we not investing in the energy sources of the future, just the ones in the past, particularly the energy sources of the past are highly profitable right now and don't

need the tax break. so, i think what may have changed is if we are going to get serious about deficit reduction and debt reduction, then we've got to look at all the sources of deficit and debt. we can't be just trying to pick and choose and get 100% of the week. the same is true for democrats. there are some provisions in this budget that are hard for me to face. you've got cities around the country and states around the country that are having a tremendously difficult time trying to balance their own budgets because of the fall in revenue. they've got greater demands because folks have lost their jobs, the housing market is still in a tough way and a lot of these places and get part of what this budget says is we are going to reduce community

development block grants by 10%. that's not something i'd like to do, but -- and ifill would come up a year ago or two years ago i would have said no and to these new circumstances i am saying yes. so my expectation is that everybody is going to have to make those same sorts of compromises. with respect to corporate tax reform, the whole concept of the corporate tax reform is to simplify, eliminate loopholes, treat everybody fairly. it is entirely consistent with saying for example but we shouldn't provide special treatment for the oeo industry when they've been making huge profits and can afford to further invest in their companies without special tax breaks that are different from what somebody else gets. what is absolutely true is that

it's going to be difficult to achieve serious corporate tax reform if the formula is lower our tax rates and let us keep all our special loopholes. if that's the formula then we are not going to get it done. i wouldn't sign such a bill and i don't think the american people would sign such a bill. if you're a small-business person on main street paying your taxes and to find out that you've got some big company with billions of dollars, platform businesses all across the world and they are paying a fraction of what you are paying on taxes you would be pretty irritated and rightfully so. and so the whole idea of corporate reformers corporate tax reform is yes, let's lower everybody's rate so the american businesses are competitive with businesses all around the world but in order to pay for it to make sure it doesn't add to cover a deficit was also make

sure the special-interest loopholes that a lot of lobbyists have been working for a hard on to get into the tax code -- let's get rid of those as well. all right. april ryan. caught by surprise. >> you did, sir. thank you. mr. president, i want to focus in on the least of these. you started your career of service as a community organizer, and now we are hearing from people like -- organizations like the cbc is saying rebuilding our economy on the backs of the most vulnerable americans is something that is simply not acceptable, like the cuts to the community service block grants, pell grants, heating oil assistance and freezing the salaries of federal workers. roger harrison of the joint center for political and economic studies says it's not good to make these types of cuts in a time of recession instead of doing it at a time of recovery. and also, need to ask you have you been placing calls for your friend rahm emanuel for his campaign in chicago?

thank you. >> i will take the last question first. i don't have to make calls for rahm emanuel. he seems to be doing just fine on his own. and he's been very busy shoveling snow out there. [laughter] - very impressed with that. i never saw him shuffling around here. [laughter] let me use pell grants as an example of how we are approaching these difficult budget choices in a way that is sustainable but preserves our core commitment to expanding the opportunity. when i came into office i said i wanted to once again have america have the highest graduation rates, college graduation rates, of any country -- that we had been slipping. and so i significantly increased the pell grant program by tens of billions of dollars. and so millions of young people are going to have opportunities

through pell grant programs that they didn't before, and the size of the pell grant itself went up. what we also did, partly because we were in a recessionary situation and so more people were having to go back to school as opposed to work, what we also did was, flexible, say that you can get pell grants for summer school. now we are in a budget crunch. the take up rate on the pell grant program was skyrocketed. the costs have gone up sycophant for. if we continue on this piece, sooner or later what's going to happen is we are just going to have to trough of the ability to read we'll just have to say that's it, we can't do this anymore, it's too expensive. so instead what we said was how do we trim, how we take a scalpel to the pell grant program, make sure that we keep the increase for each pell grant, make sure that the young people who are being served by the pell grant program are still

being served, but flexible, on the summer school thing, let's eliminate that. that will save us some money, but the core functions of the program or sustained. it is how we are approaching all these cuts. on the liheap program, the home heating assistance program, we doubled the home heating assistance program when it first came into office, in part because there was a huge energy spike, and so folks -- if it just kept up the same level, folks would have been in real trouble. energy prices have gone down now, the costs of the program have stayed the same. so what we've said is well, let's go back to a more sustainable level. if it turns out that once again you see a huge energy spike, then we can revisit it. but let's not just assume because it's at a

5 billion-dollar level each year we're going to sustain it at 5 billion-dollar level regardless of what's happening on the energy front. that doesn't mean that these aren't still tough cuts. because they are always more people who could use more help across the country than we have resources. and so it's still a tough decision, and we understand people's frustrations with some of these decisions. having said that, my goal was to make sure that we are looking after the vulnerable, looking after the disabled, we are looking after our seniors, we are making sure that our education system is serving our kids so that they can compete in the 21st century, we are investing in the future, and doing that in a way that is sustainable and that we are paying for as opposed to having these huge imbalances where there are some things that aren't working that we were

paying a lot of money for, there are some things that are underfunded. we are trying to make adjustments so that we've got a sustainable budget that works for us over the long term. and by the way, there are just some things that are not working and all we have eliminated a couple hundred programs in this budget. on the education front, we are consolidating from 33 programs grabriel giffords programs. there is waste and inefficiency that is long overdue, and we identify a number of these programs that just don't work. let's take that money out of those programs that don't work, and put in money -- but money in programs that do. >> is the president filling our pain, especially as you were a community organizer -- >> i definitely feel folks pain. somebody is doing a book about the ten letters that i get every day, and they came by to talk to me yesterday. and they said what's the overwhelming impression you get

when you read these ten letters a day, and what i told them is i'm so inspired by the strength and resilience of the american people, but sometimes i'm also frustrated by the number of people out there who are struggling, and you want to help every single one individually. you almost like you want to be a case worker and just start picking up the phone and advocating for each of these people who are working hard, trying to do right by their families; oftentimes, through no fault of their own, they've had a tough time, particularly over the last couple of years. so yeah, it's frustrating. but my job is to make sure we focus over the long term where we need to go, and the most

important thing i could do as president is make sure we are living within our means, getting a budget that is sustainable, investing in the future and growing the economy. if i do that, then that's probably the most help likened it to the most number of people. >> house republicans as you know want to start cutting now come start cutting this year's budget. are you willing to work with them in the next few weeks to avoid a government shutdown? there has been talk of down payment on budget cuts they would like to make for this year's budget. also i was wondering if you could talk about the attempt to get the american diplomat freed from pakistan. some have criticized the a demonstration for putting pressure publicly on what is essentially the weak government and i'm wondering if you could walk us through.

>> my goal is to work with the republicans both on the continuing resolution and for those who are watching that don't know the sea or is a continuing resolution, a way to just keep the government going when you don't have an overall budget settled and we have been selling our overall budget from last year's of this is carried over business from last year funding the vital government functions this year. so i want to work with everybody, democrats and republicans to get that resolved. i think it is important to make sure that we don't try to make a series of symbolic cuts this year that could endanger the recovery. so that's point number one. and when to be looking for some common sense that the recovery is still fragile, we passed this tax cut package precisely to make sure that people had more money in their pockets, that their paychecks were larger, we

provide these tax credits and incentives for businesses. but if the steps that we take then prompt thousands of layoffs in a state or local government, were corps vital functions of government or and performed properly, well, that could also have a dampening impact on our if recovery as well. so my measure is going to be are we doing things in a sensible way, meeting core functions, not in danger in our recovery? in some cases like defense, for simple, secretary gates testified if we are operating even under the current continuing resolution he's putting significant strains on the ability to make sure the troops have with the need to perform their missions in afghanistan. further slashes would impair the ability to meet so we've got to be careful. again, let's use a scalpel,

let's not use a machete, and if we do that, there should be no reason at all for a government shut down. and i think people should be careful about being too loose in talking about the government shut down because this has -- this is not an abstraction. people don't get their social security checks. they don't get their veterans payments. basic functions are shut down. and that also would have an adverse affect on our economic recovery of destabilizing a time when everybody is hopeful we could start growing this economy quickly so in looking forward to having a conversation, but the key is for people to be practical and not score political points. that's true for all of us and if we take that approach we can navigate the situation short term and then deal with the problem long term. with respect to mr. davis, our

diplomats in pakistan, in the future and that is if our diplomats are in another country than they are not subject to that country's prosecution. we have respect to diplomats who are here. we expect pakistan as a signatory and recognize mr. davis as a diplomat to abide by the same convention. the reason this is an important principle is if it starts being fair game on our ambassadors of the world, including in dangerous places where we may have differences with those governments and our ambassadors are various embassy personnel

are having to deliver a tough messages to countries where we disagree with them on xyz and the start been vulnerable to prosecution locally, that's untenable. it means they can't do their job, and that's why we respect these conventions in every country should as well. so, we are going to be continuing to work with the pakistani government to get this person released. and obviously part of -- for those who aren't familiar with the crown bonus, a couple of pakistanis were killed in an incident between mr. davis within -- in pakistan. so obviously we are concerned about the loss of life. we're not callis about that. but there's a broad principal at

stake that i think we have to uphold. >> how seeley is have your friends and to the pakistani government if they don't hand him over? >> i'm not going to discuss the specific exchanges that we've had but we have been very firm about this being an important priority. it henry. >> thank you, mr. president. i want to go back to egypt because there was perception around the world that maybe you were too cautious during the crisis and a step behind the protesters pity i know as he said there was a dramatic change in three weeks and some of us wanted to go faster than that. but having said that i realize it is a complicated situation in the evolving rapidly that have now as the protests go through the northeast and africa you said your message to the government was a sure you're not a violent with peaceful protesters but what is your message to the protesters? do you want them to taste freedom or only if it will also bring stability to the interest in the region? >> first of all, without

revisiting the events over the last three weeks, i think history will end up recording that at every juncture in the situation in egypt but we were on the right side of history. what we didn't do was pretend that we could dictate the outcome in egypt, because we can't. so we were very mindful that it was important for this to remain an egyptian he meant -- event. the united states did not become the issue, but that we send out a very clear message that we believe in an orderly transition , a meaningful transition and a transition that needed to happen not later but

sooner, and we were consistent on that message throughout. so, particularly if you look at my statements, i started talking about reform two weeks or two and a half weeks before mr. mubarak stepped down and at each juncture recalibrating did just about right. and i would suggest that part of the test is what we ended up seeing was a peaceful transition , relatively little violence, and relatively little if any anti-american sentiment or anti-israel or western sentiment, and i think that testify as to the fact in a complicated situation we got it about right.

my message to the demonstrators going forward is your aspirations for greater opportunity for the ability to speak your mind for a free press, those aren't absolutely aspirations we support. as was true in egypt, ultimately what happens in each of these countries will be determined by the citizens of those countries, and even as we pulled these universal values we do want to make sure that transition still not degenerate into chaos and violence. that's not just good for us, that's good for those countries. the history of successful transitions to democracy as has

generally been ones in which peaceful protests led to dialogue, led to discussion, lead to reform, and ultimately lead to democracy, and that's true in countries like eastern europe and also in countries like indonesia transitions but didn't in debt to bigot in such a chaotic fashion that it ended up dividing of the society is fundamentally. >> has improved the chances of something like middle east peace or has it made it more complicated? >> i think it offers an opportunity as well as a challenge. i think the opportunity is that when you have the kinds of people who were in tahrir

square, feeling that they have hope and opportunity, then they are less likely to channel of their frustrations and to anti-israel sentiment or anti-western sentiment, because they see the prospect of building their own country. that is a positive. the challenges that democracy is messy. so there -- and if you're trying to negotiate with a democracy, you don't just have one person to negotiate with; you have to negotiate with a wider range of views. but i like the odds of actually getting a better outcome in the former circumstance than in the latter. all right. mikey manuel. >> thank you, mr. president. the number-one concern for many americans right now is jobs.

taking a look in your budget, there are tax hikes proposed for energy, for higher-income people, and also for replenishing the state unemployment funds. do you worry about the impact on jobs, sir? >> well, actually, if you look at the budget, there's a whole bunch of stuff in there for job creation. i think some folks noted for example our infrastructure proposals -- which would create millions of jobs around the country. our investments in research and to filament and clean energy have the potential for creating job growth and industries of the future. my belief that the high end tax cuts the bush tax cuts for the high end of the population my

belief is that that doesn't in any way impede job growth and most economists agree we had this debate in december. we compromised in order to achieve the overall package that reduced taxes for all americans, and so on the believe -- i continue to believe that there was a smart compromise. but when it comes to over the long term maintaining tax breaks for millionaires and billionaires, when that will mean additional deficits of a trillion dollars, if you're serious about deficit reduction coming to don't do that. and as i said, i think most economists -- even ones that tend to lean to the right or are more conservative -- would agree that that's not -- that's not the best way for us to approach

deficit reduction and debt reduction. so why do think it's important, and as we dig about corporate tax reform, as we think about individual tax reform, to try to keep taxes as simple as possible and as low as possible. but we also have to acknowledge that, in the same way that families have to pay for what they buy, government has to pay for what it buys. and if we believe that it's important for us to have a strong military, that doesn't come for free. we've got to pay for it. if we think we have to take care of our veterans when they come home -- and not just salute on memorial day, but we actually have to work with folks who have post-traumatic stress disorder or come and brain injury, well, that requires surfaces that are very labor-intensive and expensive. if we think it's important that

our senior citizens continue to enjoy health care in their golden years, that costs money. if we think that after a flood we help our neighbors and fellow citizens so that they can recover we've got to pay for it. so, the circumstance that's changed -- earlier julian asked if i would get a deal, generally have centered about what's going to be different this time. my hope is what is different this time as we have an adult conversation where everybody says here's what's important and here's how we are going to pay for it. there are going to be some significant disagreements about what people think is important,

and then that's how democracy should work, and at the margins i think that i will end up having to compromise on some things. hopefully others will have that same spirit. >> what if they see deeper spending cuts before you consider tax hikes? >> well, i think it just depends on what exactly you're talking about. and i think that there should be a full, open debate with the american people. are we willing to cut millions of young people loss when it comes to student loans to help kids and families on their college education? are we only serious about education in the abstract, but when it comes to the concrete we are not going to put the money on it? if we're cutting infant formula to poor kids, is that who we are

as a people? i mean, we are going to have to have those debates -- particularly if it turns out making those cuts doesn't really make a big dent in the long-term debt and deficits, then i think the american people may conclude let's have a more balanced approach. but that's what we are going to be talking about over the next couple of months. as i said, i know everybody would like to see it could result today. it probably will not be. [laughter] that's a fair prediction. all right. i'm going to take one last question here. jackie calmes. -- before, mr. president. i had almost given up. >> don't give up. >> you've correctly suggested that the media can be in patient

about seeking both sides come to a deal with this is your third budget, your third year of your presidency. you said many times he would rather be a one-party one-term president if it means you've done the hard things that need to be done. now i know you're not going to stand there and invite republicans to the negotiating table today to start hashing it out. but why not? since you're not, what more are you doing to build the spirit of cooperation you mentioned earlier that needs to happen before there is bipartisanship? and finally, do you think the markets will wait? >> i should acknowledge them >> let me speak to this generally.

>> first two budgets were in the middle of the worst recession since the great depression so we had a different set of priorities. and i said at the time in each of those budgets, what i said was the deficit is coming out and we are compiling some additional debt, but the reason is because it is so important for us to avoid going into a depression or having a longer recession than is necessary because the most important thing we have to do in order to limit the amount of increased debt and bigger deficits is to grow the economy some more so that was our priority. that was our focus. the third budget reflects a change in focus. the economy is now growing again. people are more hopeful, and we've created more than a million jobs over the last year.

employe years are starting to haulier again and businesses are starting to invest again. and in that environment, now that we are out of the depth of the crisis, we have to look at these long term problems and these medium term problems and a much more urgent and serious way. now, in terms of what i'm doing with the republicans, and having conversations with them and democratic leadership. i did before this budget was released and i will do so afterwards. and i probably will not give you a play-by-play of every negotiation that takes place. i expect that all sides will have to do a little bit of posturing on television and speak to their constituencies, and rallied the troops and so forth. but ultimately, what we need is a reasonable, responsible, and initially, probably, somewhat quiet and toned down conversation about, all right, where can we compromise and get

something done. and i'm confident that we will be the spirit that congressional leaders take over the coming months, because i don't think anybody wants to see our recovery be real. and all of us agree that we have to cut spending, and all of us every that we have to get our deficit under control and our debt under control. and all of us agree that part of it has to be entitlements. so there's a free and work their -- that speaks, by we, again, to the point i made with you, chuck. so there's a free work that speaks about the point i made with you, i think they gave as a basic free market within that framework we are going to have some tough conversations. the devil is going to be in the details, but on a -- look, i was alive to see yesterday republicans say how come you didn't talk about entitlements? i think that's progress because

we had been hearing made it sound as if we just slashed deeper on education or other provisions in domestic spending that somehow that alone was going to solve the problem. so i welcome to -- i think it was significant progress there is an interest on all sides of those issues. in terms of the markets, i think with the markets want to see is progress. the markets understand that we didn't get here overnight and we are not going to get out overnight. what they want to see is that we have the capacity to work together. if they see as chipping away at this problem in a seriously, even if we haven't solved a hundred% of it in one fell swoop, then that will provide more confidence that washington can work. and more than anything, that's not just what the markets want; that's what the american people want. they just want some confirmation that this place can work. and i think it can.

all right. thank you, everybody. [inaudible conversations]

treasury secretary timothy

geithner discussed the president's proposed 2012 budget at a hearing of the house ways and means committee today. the dutch request totals $3.7 trillion in spending. and according to the white house, it would cut the deficit by $1.1 trillion over the next decade. this is two and a half hours >> the committee will come to order. before we hear from secretary geithner the committee will meet to consider the oversight letter for the 100th of congress. we must adopt a copy of the letter has been distributed ahead of time and is located in the folder in front of all members. this list is not exhausted but highlights significant areas the committee oversight. the committee intends to exercise its constitutional prerogatives to ensure the taxpayers' money is well spent

with regard to all programs within the committee's jurisdiction. i want to thank the ranking member for working with us and i now recognize mr. levin for his statement. >> thank you mr. chairman. in addition to this letter, i will be sending a letter which covers two points. one, the language in the letter regarding the fda making clear what i.t. is the appropriate approach and number two, the taa suggested very strongly and indeed more than suggesting, indicating that it's critical that we pass the extension of the full taa this week. >> thank you mr. levin. at this time are there any questions for the staff? if not, i ask unanimous consent the committee about the letter for the 112 converse and without objection so ordered. i also ask unanimous consent of

the staff be authorized to make technical and comforting changes to the letter and without objection so ordered. with no further business on the committee agenda this meeting is adjourned. i would now ask the staff to prepare the witness table so the committee can come to order for the previously scheduled hearing on the president's fiscal year 2012 budget proposal with secretary geithner. [inaudible conversations]

the committee will come to order on the fiscal 2012 budget proposal. before i begin this afternoon, i want to recognize an individual who is not with us today because his courage and conviction has landed him in invitation to the east room of the white house. it goes without saying that it's an honor to serve for the berkeley from atlanta mr. john lewis, his role in the civil rights movement is well documented and after today, when the president of the united states bestows upon him the nation's highest civilian honor, the presidential medal of freedom, it will be well recognized. on behalf of this committee and the people i represent in the fourth district of michigan, i want to extend it heartfelt congratulations to john, the success of the civil rights movement with a victory for the african-american community and for every american that may be a bit of character for this committee and i ask we break with tradition and all joined in a deserve a round of applause for the honorable john lewis. [applause]

with that, welcome, secretary geithner. it's good to see you again and have you before the committee. it's been said that the power to tax is the power to destroy. but last year's election shows the american people were increasingly concerned about the power of deficits to destroy jobs sound dollar and ultimately their children and our country's future. unfortunately, the president's budget features too much of both. it could result in record high deficits while pushing the federal tax burden to over 20% of the economy, a level never sustain the nation's history. let me be clear mr. sick to become americans are not taxed too little. what america has under this administration is too little job creation. more alarming, taxing and spending is not the is the answer to what ails the economy. in 2009 we were promised spending $1 trillion on a stimulus plan would drive

unemployment under 7% by now. instead, unemployment has remained at or above 9% for a record 21 months. stimulus advocates also promised 147 million jobs by now. we are woefully short of that market as well. today, almost 14 million americans are looking for work but can't find it and a record number have given up choosing instead to sit on the sidelines of our economy. a full 6.2 million long-term unemployed and the average duration of unemployment is a record 37 weeks. that's almost double the level of record level before this recession. vice president joe biden recently said the unemployed should just hang in there and wait for jobs to return, but at the current pace it could be 2020 or beyond before the u.s. returns to the unemployment and that is a long time to hang in there. the fact is americans shouldn't have to wait any longer for some real solutions and frankly this budget is a missed opportunity.

in the words of the chairman of the president's own deficit commission, this budget goes nowhere near where you have to go to resolve the fiscal nightmare. as i look through the budget proposal i am left wondering if there wasn't a printing error because it looks almost identical to the last year's budget. again we have massive tax increases now totaling $1.9 trillion the will hit small businesses middle class families, american employers with a worldwide operation and investment income. the very investments we need to jump-start the economy, even the same things missing from this budget there are platitudes about tax reform, but tax policy proposals that move in the opposite direction. and there's nothing on entitlement reform and there is little more than lip service about getting the deficit under control. during the simpson commission which three members of this committee were members of, we heard testimony that once the nation's debt reached 90% of its economy, that country was the economic growth declined by

about 1%. in the u.s. the would cost about a million jobs. we are at 90 present our growth rate is now 100% of every economy and we cannot afford to lose out on the needed job creation simply because washington can't get its spending under control. despite that and other warnings been presented fail to deliver change. i hope for so much more and i am left wondering how many more experts me to ring the alarm bell before this administration begins to hear it and act accordingly. i ask unanimous consent to insert a "washington post" editorial from today's paper in title president obama's budget kicks the choices further down the road. now i'm sure many of my friends in the minority kent wheat to china in and set the record straight. let me allow -- please allow me to admit something. we all share part of the blame for where we are today. however, that is not the issue.

the issue is whether or not we will be part of the solution. and mr. secretary, you and i have had many good discussions about where the country needs to go to read today i'm not interested in the boiler plate but interested in finding real solutions that reduce the cost and complexity of the tax code that deals with the unsustainable cost of our entitlement programs and that brings our debt back under control. all of these will help unleashed a private-sector to create good paying jobs. so mr. secretary i look forward to hearing from you today and also a leader in the week we will hear from your colleagues at the dickerman of health and human services as well as the office of management and budget on these topics and with that, i yield to the ranking member mr. levin for the purpose of an opening statement. >> thank you, mr. chairman. the president's budget is in sharp contrast to the house republican. it embodies a necessary

combination of investing and economic growth and reducing or deficit. the republican 2011 blueprint, which the house will debate this week, reflected starkly different priorities. eight disinvests. it would take the economy backwards through extreme cuts. the president's budget charts the responsible path to a sustainable fiscal situation. it has its point of departure in an economy that has been through a wrenching recession and recovery that is still gathering strength. since the recovery began, more than 1.3 million private sector jobs have been created. more than all eight years of the bush administration together. our efforts were designed to ensure a sustainable economic recovery, and we must be sensible to that. as we take needed steps to reduce our deficits. that is why as the president's

budget lays out, 1.1 trillion in deficit reduction over the next decade it invests in the proven public-private partnerships that support jobs, innovation and growth. it makes permanent and enhances the credit and extends the bill the american bond program which republicans oppose and which is financed over $180 billion in a vital infrastructure improvement. it also provides an additional 5 billion for the highly successful 48 tax credits. this tax credit provides a direct incentive to manufacture advanced energy products like solar panel and wind turbines here in the u.s.. and one example that i know you, mr. chairman, is familiar with. the semiconductor received $142 million in tax credits to

help maintain its global leadership and producing the polycrystalline silicon used in the solar panels. this is one of the vivid examples of a successful public private partnership. the house republican plan this invests in jobs and growth in our community. it cuts more than $1 billion from the clean water revolving fund. it chokes funding for the energy of finance research project agency, which is conducting cutting edge research to foster the products and jobs of tomorrow. it completely he eliminates the program that puts police officers on the street every day. it takes a hatchet to the community development block grant program that is so important to local economic development and the municipalities that are under severe economic strain right now. at the same time, the

republicans rules allow for unlimited additional tax cuts that are not paid for at a time when tax revenue as a percentage of the economy are near an all-time low. according to the administration's estimates, permanently extending tax cuts for the upper income households alone would increase the deficit by nearly $1 trillion over ten years. the president's budget focuses on preserving the tax relief for working families making this $250,000. it would permanently protect the middle class from a emt and extend its vital assistance to the working families that we had to fight republicans to include in the december tax compromise. more broadly, the chairman, you, mr. chairman, has criticized the president's budget as lacking a plan for tax reform. if we are going to have tax reform, we are going to need to

work together, not against each other, to make it difficult choices necessary for responsible reform. nowhere is it more true than on the debt limit as the secretary, as you, mr. secretary, made clear, the need for the fiscal responsibility and the need to support economic recovery must complement each other, not undermine one another, and vitally we cannot jeopardize the economic recovery by putting at risk the full faith and credit of the united states. the majority must not irresponsibly put our economy in severe jeopardy by using the debt limit as leverage or as a bargaining chip. we took mrs. steps to prevent a recession caused by a financial crisis from becoming a depression. we cannot risk a new financial

crisis the would reverse the new momentum of economic growth. thank you, mr. chair. >> thank you, mr. levin. welcome, secretary geithner. you have five minutes. you're full statement will be part of the record. you may begin your testimony. welcome to the committee on ways and means. >> thank you, ranking member geithner and members of the committee is a pleasure to be before you talk about the president's budget. the president's budget presents a comprehensive strategy to strengthen economic growth and expand exports with investments in education, innovation and the nation's infrastructure. alongside these investments the budget presents a detailed multi-year plan to cut spending and reduce deficits. our deficits are too high and unsustainable and left unaddressed in the economic growth would make us weaker as a nation we have to restore fiscal responsibility and go back to living within our means.

the president's budget cuts the deficit he inherited in half in the share of the economy by the end of his first term. these cuts are phased in over time so that we protect the recovery. in order to make it possible for us to invest in future growth and restore fiscal stability, the president proposes to reduce mullen security description are spending to its lowest level as the share of the economy since dwight eisenhower was president. to achieve this, the budget proposes a five-year freeze of the annual monsoon to be discretionary spending at its 2010 level. and this will reduce the deficit by more than $400 billion over the next ten years. the president also proposes to reduce the request for the distance to the defense spending to freeze the salary to improve efficiency and government services through a range of programming elimination's and reductions. the savings create the necessary room to make targeted investment

in support of reforms that will help strengthen the future economic growth. most important thing that we can do to promote our long-term growth is to improve the quality of education to invest in innovation and to rebuild america's infrastructure. without these investments, america will be weaker and less competitive. as part of the strategy for growth the president proposes reforms to the tax system designed to encourage investment. we propose to put in place a permanent and expanded tax credit for the research and development in the united states to eliminate, to eliminate capital gains on investment in small businesses, to encourage advanced manufacturing and clean energy technologies, to keep taxes on investment income, dividends and capital gains low, to reform and extend the build america bond program, and to make college more affordable for middle class americans. these tax incentives are accompanied by reforms that would reduce incentives to shift the income and investment outside of the united states and

to close loopholes and tax preferences we cannot afford. now in addition, we propose to pursue a comprehensive tax reform bill would lower the corporate tax rate. the tax system for businesses combines a very high rate with a broad range of expensive tax preferences for specific industries and activities. we need a more competitive system that allows the market, not tax planners and lobbyists to allocate investment, a system in which businesses across the industry pay a roughly similar share of earnings. a system that provides more stability and certainty that is more simple to comply with. we need to do all this without adding to the future deficits. we have begun the process of building support for the comprehensive corporate tax reform. mr. chairman, i would welcome your support for the comprehensive support. i believe we have the opportunity to do this now. the president's budget also outline some responsible reforms of the individual site.

we propose, as we have in the past, to allow the 2001 and the 2003 tax cuts for the wealthiest americans to expire, to limit certain deductions, tax expenditures for the same high-income americans to restore the state tax to the 2009 levels and to close the carried interest loopholes. these proposals, and i want to emphasize this committee's proposals would help ensure the savings we achieve together through spending restraints are devoted to the deficit reduction, not sustaining the lower tax rates for the most fortunate to%. this would achieve the next decade there necessary to stop the national debt from growing as a share of the economy and to stabilize our debt burden at a level that will threaten the future growth. this is only a first step. a down payment on a long-term reform necessary to address the long run deficits. we face the next century not just the next decade we have to

build on progress and the very substantial progress that has been achieved in the affordable care act to reduce the rate of growth in the health care cost. although in addition to that, although it is not attributed to the short term or medium term deficits, we should work together across party lines to strengthen social security for the future generations. now, we cannot grow our way out of the deficits. they will not go away on their own and they will not be solved by cutting deeply into programs into investments that are critical for the future growth and competitiveness .. ..

>> helps sustain recovery and restore confidence. we want to bring that same commitment to the challenge of restoring fiscal responsibility. thank you, and i'm happy to take questions. >> thank you very much, mr. secretary. i think we can agree, the economy, i think that is particularly wide and disappointment. disappointment, the present budget brings up some of that takes and tax hikes and american small business that congress, even when both chambers were controlled by democrats already rejected. 75 percent of small businesses are structured as pastors or partnerships or escorts and sole

proprietorships. they are responsible for about two-thirds of all new jobs created. these are the companies that the president would subject to massive tax hikes by raising the top marginal rates. given that unemployment is stuck at 9 percent for 21 consecutive months, do you really believe we should be raising taxes on small businesses? will you commit that any tax reform we might move forward on would address the concerns of these employers? >> mr. chairman, very important question. you are right to emphasize that our overwhelming priority now for the country should be to make sure we are reinforcing the expansion to get more people back to work. we are still living with the stars of the damage caused by the crisis. high unemployment rates and millions of people still at risk of losing their homes, the pressure on small banks and businesses to that objective should still be our overwhelming

focus and priority. we propose in the budget this series of very well designed targeted tax incentives for small businesses because, as he said, there are so important for job growth and innovation. as i said in my opening statement, we are hoping to eliminate capital gains tax on a busman's small-business system make permanent investment. jeff, you are right that we are proposing again to a louth aspire to the schedule agreed to by the congress these taxes that have affected the top 2 percent of individuals and small offices. the only effective% of businesses. the best focus is structured as partnerships. we are talking about our law firms investment firms, businesses to choose to structure themselves as partnerships, not as corporations. the vast amount of small businesses you're referring to

earn substantial amounts of revenue each year. again, even in that case we are trying to restore those tax breaks. job growth. we think that is a responsible recommendation. recognize it is not possible on your side of the aisle, but our challenge is to figure out a way to restore sustainability and strengthen economic growth. after about those two objectives. we will be growing in the future unless we make tough challenges to be those of the types of tax changes and reforms that we think are consistent with our obligations. >> i am encouraged by some of the comments that the president has made and you have made and also in your testimony today. given those comments haboob, to see a budget that cuts in the opposite direction, instead of proposing reforms that broaden

the base and lower rates which is the direction most people are saying on the business side, trying to level the playing field, reduce complexity. this budget is proposing changes in continuing to pick winners and losers. i guess my question is, how do you suggest we achieve tax reform particularly on the business side and the administration continues to push proposals that will raise taxes on some companies are some activities and order to offset spending unrelated to those activities? going in the opposite direction of the very encouraging comments that have come out of the administration and you as well. >> you're right. in the budget we did not propose a detailed plan for a comprehensive tax reform, but we do propose a set of changes to the existing structure that would help as we see it improved investments in the estate's. i think the way to look at those changes is, they help make the

case for why we need comprehensive reform. aspects of those proposals that make you uncomfortable, you should view it as an incentive to do comprehensive reform. we are very serious, as you know, and we talked about this a lot to my trying to build consensus now on the set of fundamental changes to the corporate tax system. do so in a way that is fiscally responsible. we have to lower rates substantially and eliminate the substantial reduced broad range of tax centers that create a lot of unfairness and distortions and tax code. what we did in the budget, we would like to work with congress and comprehensive reform, but forced to work within the current system. here are changes. again, see those as an incentive as a way to make a broader case for comprehensive reform. >> thank you. >> thank you.

mr. chairman, i'm glad you asked the secretary about the position of the administration not to extend the high income tax cuts. i think, mr. secretary, you have helped to shatter the myth that this is basically an increase in taxes on small business. you have explained that. as i remember the analysis, about 75% of the high income that would be affected would be income over $1 million a year. is that correct? >> that is roughly correct. >> that is the estimate. >> that's one estimate. >> and you indicated what percentage of businesses would be affected? >> on the 2-3% of all business in the country. the vast bulk of businesses make

well over a million dollars and earnings. of course many, many of those to make that much money are fundamentally what we would call law firms for investment firms or other types of companies the structure that way to help lower tax burden. >> let me now ask you about investment because there is such a sharp contrast between the president's budget. i think you have described it for the president. it is invest and cut the deficit. for the cr that is essentially non invest toward disinvestment. cut the deficit except increase it by how much the high income tax cut over ten years? >> to extend the high income tax would cost substantially over

$700 billion, may be close to a judge in. >> night. now, mr. chairman, it is interesting. at think we need to have this discussion to be used the term winners and losers. that is often talked about in terms of investment. i don't mean to pick on you. i've picked on him because i was there. it is a vivid example of public-private partnership. i was told right there that if it hadn't been for 48c, the expansion would not have occurred. mr. secretary, just quickly some of why this budget cut in the deficit combines it with investment. >> we live in a very competitive world. we have to make sure we are focused every day on how to make the country stronger and more competitive. if we're going to be able to

meet a substantial share of the growing demand for services around the world we want more of that to be met by investment in the united states. with the president's budget does is propose a range of reforms and incentives to make it more likely that that next great american business builds our next factory in the united states and that the great foreign competitor builds his our next factory in the united states. want to make sure the tax code is working to encourage those kind of investments and not to discourage this kind of investments. very important when we think about fiscal responsibility to assist to lead get them through the prism of what will be a better strategy for growth and investment and not simply an exercise of reducing future deficits. that's very important. how you do it is critically important. you have to set priorities and make sure you are preserving the capacity to invest in things that are important to every business in the country.

for example, any business engaged in manufacturing will tell you they need better access to high-quality engineers. they want schools to do a better job of producing people with the skills they need to compete. they need to make sure they have better design incentives in the tax code to encourage investments in the united states. the proposal we made to make permanent is a good example of those kind of incentives. want to make sure that we look at the fiscal sources through the prism of what will be good for growth and investment in the united states. >> thank you. the cnr is a disinvestment proposal at the time. we need more not less. >> again, i think the challenge is we all recognize we will have to reduce spending. we all recognize we're going to have to reduce our long term deficit. the question is how to do that in a way that preserves the incentives for investment here and allows us to improve education and strengthen public

infrastructure. >> thank you. >> i thank the chairman. i join in greeting the secretary to r. hearing. secretary, on page two of your written testimony you state that we must restore fiscal responsibility over the long term by reducing the rate of growth and health care expenditures ." i could not agree with you more. in fact, that is one of the main reasons why i voted against the democrats' health care overhaul twice in the last congress. the obama administration's own medicare actuaries have predicted that the national health care expenditures of for the next decade would be $311 billion higher because of the democrats' health care overhaul. in other words, the health care law bans the cost curve up, not

down. yet on page seven of your testimony you assert that independent analysts have estimated the democrats' health care law will significantly slow the growth rate of medical costs. mr. secretary, could you tell us who are the analysts you are relying on for this claim? is there reason you are choosing to ignore the findings of your own administration? >> excellent question. thanks for giving me a chance to respond. as many of you have said, our long-term deficits that we face over the next century are primarily driven by graphic rates of the health care costs and to a lesser extent by some security obligations. the most important thing we can do is reduce the rate of growth in health care costs. now, in our system and our country we rely on the

independent nonpartisan congressional budget office to analyze for the congress and the administration the impact of reforms on cost. it is the judgment of the cbo that bind all of us, the congress, and ultimately the administration. in the judgment of the nonpartisan independence cbo that those reforms if enacted and held to overtime will substantially reduce the rate of growth in health care costs to the public sector and it may, in fact, make the largest contribution to entitlement reform that this country has considered in generations. it is, of course, in recognition of the fact that the only path to long term fiscal responsibility is to health care savings that these reforms made it through the congress. of course we recognize that we will have to build on that. we have not solved the problem definitively. we welcome the chance to join with you in figuring out ways that we can help make a further

contribution, even greater contribution. i would rely on the estimate. one more clarification. if i'm not mistaken i think with the actuaries said was if congress does not enact reforms and cost will grow more rapidly. he was making a prediction about what congress might ultimately do, not with the reforms would produce in terms of savings. >> last summer in an interview he said that the administration wanted to present the rates on capital gains and dividends from rising beyond 20%. can you please clarify whether this 20% rate is inclusive of the new tax increase? >> no, it is not. we do propose in the budget to make sure that the top rates on dividends capital gains don't rise beyond 20 because we want

to have a budget that is encouraging investment in the united states. >> it is not inclusive, so it does rise beyond 20%. >> well, maybe this is a simple fine convention. and we think about the rate on dividends and capital gains plead with the statutory rate. we think there is a good case for trying to make sure we keep the overall tax burden on investment income and a modest level. we think that is good for future growth. >> again, our concerns traumatic time in the economy is what it is and we hold to this american public, certainly those who are creating new jobs, the job creators cannot afford to have more money taken out. that money that could be used for investment. i yield back. >> mr. johnson is recognized. >> thank you, mr. chairman. mr. secretary, the congressional budget office says permanent deficits and the social security program in the social security

payroll tax cannot fully cover the benefits. in other words, the cost of paying benefits is now more than the revenues coming in to pay that. you would agree. we are on a very tight time schedule, so i will ask a few simple questions and ask you to be brief in responding. how are we paying benefits if we don't have sufficient payroll taxes? is the treasury paying social security interest it is hurting from the ious treasury gave the system when it borrowed payroll taxes from social security to pay for other government spending? >> we have the ability to meet our commitments and will continue to meet that obligation , but we recognize, as do many of your colleagues that over the longer term we have some time to get this right. we need to make sure we strengthen social security for

future generations which will require some changes. as the president said, we are willing to work with all of you to figure out the best way to do that. >> how much are those interest payments going to be in 2012? >> i don't know right now, but i'd be happy to respond. >> $127 billion according to the trustee's report. according to the president's budget in 2012 the budget deficit is expected to hit almost 1 trillion, the fourth year in a row. meanwhile the debt held by the public will be near 12 trillion next year, double what it was in just 2008. mr. secretary, where will the money come from to pay the interest of? >> congressman, again, i think you're making your point. it is important we find a way to reduce our long-term deficit. with the president's budget does is propose a detailed mix of policies, both spending

restraints as well as tax reforms that will bring those deficits down dramatically, dramatically. >> i understand that, but where were you get the money to pay social security? >> we have the resources to meet those commitments for a substantial time to come. we don't want to put off those questions forever. it would be good for the country to come together in ways to strengthen social security, and we are willing to begin that conversation with the congress sent. >> clearly we are borrowing at record levels. that is a crisis that this nation faces. a few the rest of the world scene will want to lend to us. what percentage of borrowing comes from foreign sources? >> congress, as a whole we are borrowing much less than we were just a few years ago. right now our current account deficit is now about half the level it was at the peak in 2007. what that means is americans as saving more. but a substantial share of our outstanding debt, like mr. for

every major economy, is held by foreigners. again, we agree and what this reflects is a recognition that if we are going to grow in the future we have to make sure we agree on reforms that bring down long-term deficits. >> your president budget issues a 47 percent comes from foreign sources. >> thank you, sir. i yield back the balance of my time. >> thank you, mr. chairman and you, mr. secretary, for sharing your views. as we discussed, the budget for 2012 will have to look at the continuing resolution for this year. having said that, at one point in time the president of the united states indicated that he was only advocating an extension of the tax relief for those people making less than $250,000. but in this agreement the president was not -- didn't ask

for it, but did agree that it would be for everybody. having said that as understand the cost of the relief given is over a hundred billion dollars. now, the majority has a substantial number of cuts in spending, but that doesn't necessarily mean that it is not going to be ultimately a cost that we are going to have to pay. my question to you, has there been any comparisons between the cost of extending this relief to the economists. we should not expect economic growth. a negative impact of cutting programs which could cost an additional spending. has your office reviewed this? >> well, congressman, you are

raising exactly the right point which is, as we think about race to reduce the deficit you have to make sure we are doing things that will be supportive of future growth, have a high return, as you say. a large bank for the buck. you want to make sure you are cutting into things that will hurt future growth, raise unemployment, and long term deficit. with the president's budget does this reflect our view of where those choices should be made. you want to make sure we are increasing investments in education and infrastructure, research and development, not cutting them to be if we do a smart job of making investment and reforms in those areas future growth will be stronger, more competitive. deficits will be lower. if we cut deeply into those investments we will be weaker as a country. it will be harder to solve our fiscal problems, but those are exactly the kind of trade-offs that this committee and her colleagues.

>> really. the point i am trying to make is that the insistence on the overall tax increase for the upper income did increase the deficit, and that money was borrowed in order to do it. to come back now and talk about savings seems to be a dramatic inconsistency in supporting both of those things. >> this temporary tax cuts were expensive. we cannot afford to make them permanent, and i agree that if we're going to make cuts in spending as we have to do we want to make sure that the savings go to support investments and cutting future deficits, not sustaining tax cuts for the top 2 percent of americans that we can't afford. >> thank you, mr. secretary. i yelled back. >> thank you. >> thank you. this budget doesn't add up for job creation or tackling these dangerous deficits. the two are tied together, as you say. consumers are confident.

tackling the fiscal deficit. businesses don't believe congress is serious. at think you are making -- repeating to mistakes. using the economic forecast. as you did last year and the year before, the white house -- excuse me, mr. secretary. not you to read these forecasts higher than cbo. it does not sound like much. just that difference wipes out three-fourths of the purported savings in this budget of the next decade. then secondly, on job creation i don't understand why the administration comes back with higher taxes on u.s. companies trying to compete and win overseas because all we are doing is encouraging companies to manufacture. $87 billion more in energy, taxes on u.s. companies encouraging them to send their workers overseas. finally, this budget takes a whack at real-estate

partnerships, traditional partnerships to build our shopping centers, departments to movie theaters, office buildings none of which can stand almost tripling of their taxes. so how in heaven's name is the white house believe it will jenn up the economy which is very sluggish by taxing the manufacturers and job creators most likely to get us out of these tough times? >> excellent question. let me respond quickly. i actually think if you look carefully at the economic presumptions and the budget, they are quite realistic and conservative. at some part of the horizon some of the estimate was a little higher. that other cases there are lower and more conservative. i give you one example. the average growth rate estimated over this time is significantly lower than the average time to past recoveries. we are trying to be conservative we have one great strength of our system.

in the end, cbo. you will be able to rely on them to make sure. they're reasonably conservative. now, very important that as we think about tax policy that we are doing things to encourage investment. we are proposing to reduce tax benefit that goes to some part of the business community, but we are proposing very substantial and broad based incentives for investments to be if you look at the overall that impact in terms of the tax revenues it is a modest change. it shifts the incentives of the tax code to encourage the next company to build the plant that we are proposing to eliminate some loophole and things that we think are expensive and don't have much impact on growth. people will disagree with those things, but it's a reflection of the fact that we don't have unlimited resources. tough situations. we can't do everything we want

to do. every time we look at tax provision we should ask ourselves to questions. improving standards? does it have a substantial return in terms of growth? if it is too expensive in our view is we should phase it out. >> close out. again, this is not your budget, but the white house. please carry back to the white house this message. because they kill jobs, tax increases are dead on arrival. we have to find a better way to work together with you to get this economy going. thank you. >> thank you. thank you for being here. i guess it's just you and me for the time being. >> us solve some problems. >> i was pleased to hear the president talk about lowering corporate tax rates as a way to expand jobs. within the budget that i am worried that the administration

is not paying as much attention to small businesses in terms of creating jobs. obviously you know. don't have to tell you the way that small businesses are set up most pay as pastor entities, and in taxes and therefore there are a number of things within the president's budget that impact those small business honors to be so if i could just read you a list of things that i am interested to hear your yes or no answers if you think that any of these are tax increase on small business owners. the president's budget, as you know, proposes to phase out personal exemptions. in addition to proposing to limit otherwise allowable itemized deductions, known as the limitation treaty you consider these two tax increases on small businesses bob pastor entities that are oftentimes partnerships, as carbs, many of those often itemize their

deductions. >> to make it easier, i agree on the following which is that those tax changes only impact 2-3% of small businesses. the small businesses affected of form and they are businesses that and substantially more than $9. you are right that many of them are structured as pastor entities, but in that context most of the ones that are affected by this are typically like a law firm. >> the budget proposes to reclassify many groups of independent contractors as employees. you have testified to this before. tax purposes. many of those contract with outside individuals. do you consider the new payroll tax on small businesses a tax increase? >> i would not describe it that way. as you know, this is a very complicated provision of the tax code to be very hard for people to comply.

we are proposing is a very simple thing, congress authorized the irs to issue guidance for comment on how to make sure that we simplify these of complying and major businesses, right now the current system apart from being too complicated to comply with creates unfairness across businesses and give some the opportunity to, frankly, lower tax burden. we want a level playing field and a more simple code to comply with. what we are proposing is that congress give the irs the authority to issue guidance for comment. of course once the draft comes out anybody affected would have the chance to comment and suggest how it could be improved. >> with small businesses be paying more? >> it depends on circumstances. what we think is fair is we have a tax to agribusinesses pay roughly the same amount of income tax balloted turning.

in our current system, which is deeply unfair some companies pay a lot more and some pay less. we think we want to move to a system where, again, a more level playing field and fair and simple system to comply with. >> another way in the president's budget that is changed is the top rate for the estate tax. obviously many small-business owners are concerned about what happened two years to the estate tax. the rate that goes up to 45%, is that an increase in taxes for small business? >> it is absolutely the change in the estate tax. we are proposing to it restore the rates to levels and no nine. again, with those rates and exemptions a tiny small fraction of the states are affected. again, we think that is the best way to balance our obligations for fiscal responsibility with

all of the other objectives and how to make sure we are strengthening the economy as a whole. >> in my state of ohio there are roughly 50,000 people that are employed by the independent oil and gas industries, producers. a pretty big industry. most of these are employed, most of these individuals are employed by small business hours. as you know, the president's budget proposes to repeal the tax credit to repeal for a cost. the percentage depletion. the you consider this a tax increase? >> i would. what it does is reduce a very, very substantial subsidy that now goes to the oil and gas industry. we are proposing to eliminate that because it is very expensive and it works against a national priority, which is to encourage the economy as a whole

to shift to less carbon intensive forms of energy and to reduce our ultimate dependence on the types of energy that contribute to climate change and could threaten future growth. that is the rationale. >> a small-business owner, a family operation. if this proposal becomes it will evaporate the industry. last year joint tax suggested that this will not only hurt the domestic production of oil and natural gas, but it will ironically increase our dependency on foreign fossil fuel. do you agree? >> no, i don't. here's a different way to look at this. when we allow parts of the american economy to pay much lower taxes than the average, that means taxes are higher on all of the businesses in your state. at think we have to ask yourself if that is fair and if it makes

sense. that's to inefficiencies. probably hurts growth overall. people who sit in this room are allocating investment. again, we want the market to decide which businesses grow, not the community. again, when we allow certain parts of the economy to pay much less than their fair share of taxes it means every other business in the country is paying higher tax as a result. >> do you consider the individual mandate within than health care bill a penalty levied upon people who refuse to except to take on individual insurance, the penalty that they have to pay to the irs, a tax? >> i think you know my answer to this question. we do not. that is not the judgment i ultimately make, but one to be made in different rooms and bodies than this. i can tell you that i fully support the health care reforms that were passed to read a think

they are very important to helping make sure that the cost businesses bear a reduced overtime and that we can restore fiscal responsibility and sustainability to be. >> to you think it is kind of ironic that the treasury secretary thinks it is not a tax, but the justice department argues that it is? >> i cannot begin to explain when lawyers and financial people disagree. i can give you lots of other examples. >> thank you for your patience. we will take a 10-15 minute break. refill your water glass, take a restroom break. folks should be down in about ten minutes, and we will resume our hearing. the hearing will be recessed for about 15 minutes. [silence] [inaudible conversations]

>> mr. stock is recognized. >> thank you mr. chairman. thank you, mr. secretary for taking the time to explain much of this task. we have recently received a letter from over 270 prominent economists. i presume you were one of them. it stated that the affordable care act contained in essentially every cost-containment provision that

policy analysts have considered effective in reducing the rate of medical spending. could you comment on how you feel the affordable care act will relate to constrain health care cost? >> congressman, a very important question. thank you for asking it. with these reforms to overtime is change the incentives for how americans use health care and set in motion what we believe by the most powerful sense of ideas out there for reducing the rate of growth and health care costs over time. of course their is a lot of uncertainty surrounding these estimates, but as i said earlier we rely on the steep the zero to make these estimates. in their judgment these reforms over time will substantially reduce long-term deficits by reducing the rate of growth and

cost. now, as the president made clear we want to build on those reforms. ultimately we will have to do more, and we would welcome the chance to work with people on both sides of the aisle to strengthen those reforms so they could deliver even more savings in the future. i agree with your characterization that the bill includes -- we think the -- many if not most if not all of the best that he is out there are for reducing the rate of growth and cost. >> mr. secretary, you every once in awhile blocked. i am given a "from something you did a while ago talking about the absence of health care reform. i wonder if you could think back on your face book someplace and send us a copy of that for the record. >> have would be happy to. i've never really use that term, but i would be happy to give you

analysis and reports about what they would do for our competitiveness. at think it is important to recognize. this is what they care about most. they care a lot about the burden of rising health care cost puts on them. competitiveness and growth and jobs, you have to make sure that these reforms take hold and are allowed to work overtime. >> thank you very much. >> thank you. mr. davis is recognized. >> thank you, mr. chairman. thank you for joining us. i would like to switch subjects to a different area that is current from the standpoint of job creation and sustainment. that is to talk about unemployment insurance. could you tell us who pays unemployment insurance taxes? >> well, as you know, and i'm sure you know this based on your question, businesses pay. now, if you are an economist you could give a more complex answer because ultimately the economy

as a whole pace those taxes. >> ultimately it comes out of someone's pocket. >> did correct incident is on businesses. some people would say -- of won't give you a more complicated answer. >> i guess that leads me to my next question. have you ever been an employer and pay these taxes? i have. i have written the text. >> i unfortunately have been in the public sector all of my life. i have helped manage a substantial organization. >> no-fault than that. does give a difference in context. the reason i wanted to clarify that, the administration's budget describes your unemployment insurance proposal as offering $9 billion in relief to employers through 2013 and then subsequently tax hikes totaling $67 billion over the next decade. if you were an employer, as i was or many of us on the committee were paying those checks, and we are looking at long-term capitol investment trying to decide where the tire

are not higher, what to do. if you were an employer would you think that getting $9,000 in relief now in exchange for a $67,000 tax data in the future through increased unemployment insurance taxes is really a good deal? >> i do. our job is to figure out what makes sense for the country. limited resources. as many people said, we have to recognize that we face unsustainable long-term deficits. we'll have to do things that will be painful. the choice, we don't want to make those choices in an insensitive way. with this proposal, remember, this is just a proposal. congress has to reflect and consider. we are completely open to suggestions of how to better designed it. mary's short-term relief for states and employers with reforms that make the base of this assessment warfare across companies as a whole.

again, there may be different ways to do this. open to suggestions. >> i appreciate the perspective. 2014 may be the ultimate year. the concern that i have is that we have so many issues that are hitting if not reform said the reform and health care dealing with things like this. i mean, i hear it constantly from employers back in my district that there is a lot of fear frankly at the small business to midsize level about hiring now that we added another issue with the proposed tax increase. i guess my final question would be this, if you were an employer trying to make decisions of cash , longer-term, but you think that with this limit tax hike that he personally would be eager to take on new liabilities to hire people? >> well, i would try and like

added the following way. businesses across the country, if you look at what has happened to the recovery of for the last 18 months businesses are expanding investment at an accelerating rate, much more rapidly than gdp overall. we have created more than a million private sector jobs in the last three quarters. much more and much more quickly than the last two recessions. much milder. so we have a long way to go. i would look at the overall makes of proposals in the president's budget. it is my view that if you look at the overall impact on business and competitiveness they are very strong and powerful. help improvement centers renovation. we think as a good for growth long term. we have to look at the overall package. >> i appreciate your sentiment.

if i were facing an increase in personal and capital gains tax rate it might create a bit of a disincentive. we will land on a different place. with that i yelled back. >> thank you. you're recognized. >> thank you, mr. chairman. mr. secretary, welcome. i remember two years ago your first visit to this committee. my question was on trade. you may recall. i was a little concerned. only one sentence attached. no cost stimulus as it has been referred to. so i am happy to say that i am really encouraged with the president's position and latest action on his export initiative which i am a member of. also his recent developments in negotiating the korean trade agreement. an excited about job

possibilities, doubling of exports, and the engine that will provide to our economy. congratulations on that. but it shows you how much can change in a couple of years. one of the things i am concerned about hoping that something might result in a change in a position that you have taken. i remind you of a letter. 118 members of congress signed this along with myself. we voiced opposition to the tax simplification program dubbed single -- or simple return that you considered last congress. proposal that would basically have the irs preparing your taxes for you to read mail you a bill. this is, in my opinion, hardly tax simplification. more like the fox guarding the henhouse. a lot of people might agree with that. i want to assure you that we are still aware of that proposal. i wanted you to be aware of our

opposition in hopes that there might be some change in your thoughts as become a year or two later. the other thing, want to move on. i really want to get back to the small business day. not concerned that the administration building targets. some of the figures have been already tossed about. you have, as you said, and that the most of the people recognize, much of the burden really is going to fall on these pastor businesses, the as corporations, so proprietorships his income as reported on their honors individual tax return. as he has said, that is 3% of small-business is. however, the committee at -- the joint committee on taxation, last year that roughly 50% of all small business income would be subject to this tax hike. i am particularly concerned about its impact on the millions of small businesses that are

located all of the state of washington across this country. you believe that 50 percent of our income, to you believe higher taxes on hundreds of thousands of small businesses, mom-and-pop stores, is that really a way to create jobs? >> the missed shot with restarted. i want to say, a very encouraging what we are seeing now. export growth is strong, leading the recovery. growing quite rapidly and it is across the board from agriculture to high-tech. it shows how fundamentally strong and resilience this country is to be your right to emphasize the a question for the future is how to make sure that continues. for that to happen you want to make sure that you see more investment in the united states by u.s. companies, foreign companies which would help contribute to stronger export growth. the need to do that alongside trade agreements, and i urge you on your second concern. >> thank you. >> the way i would think about it is this.

i think this is the fairest way to do it to be those proposals, very small fraction of all businesses kamala 2-3%. the incidents falls mostly overwhelmingly on businesses in that category that makes substantially more than a million dollars a year. >> how do you address the fact that it is 50 percent of our income? >> that income you are referring to is concentrated in businesses that are actually not small. quite large, and overwhelmingly those businesses are structured like law firms. firms similarly. you can say communities and individuals that earn a lot of money because they are productive. they are allowed under our tax system to structure themselves that way. >> is this the way to encourage economic growth? >> i think it is. again, future economic growth depends on two important things. one is better incentives for

investment in this country and confidence that we will restore long-term deficits. we have to do both to be if american people and foreign investors are not confident they will invest less year and future growth will be weaker. we need to balance objectives. those are the rates that prevailed during the 90's which was the best record for small business creation, best record for investment, best record for productivity growth, income growth, employment growth that we have seen in more than 30 years. we think that is a prudent response to the time when we don't have unlimited resources. >> we will disagree on that one. mr. mcdermott is recognized. >> thank you for coming. the president's budget has cuts in it that are huge cuts to the deficit and still invest in the country. the odds had a plan by the republicans, cut spending and use the savings to protect its

tax cuts for the above diaz 4%. republicans' spending plan is a dark view and one that throws the middle class and of the bus. the road publican plan if you read it carefully sends one message to america's middle class, unemployed, and working poor, we don't care about you. for example, they want to cut spending to repair highways and bridges. they want to cut social security administration's the social security offices closed for a month next year. these will help put america back to work, won't help. they don't grow the economy and keep the lights out for senior citizens. for example, the public -- republicans want to cut $758 million from the women commented, and children program. now, that program provides funding to keep low-income mothers and soon to be mothers as well as their children in food and health care referrals. the program was signed into law

by none other than the great icon, president reagan to which all the republicans in the congress pray every day as their patron saint. these are just a few examples of the drastic and disastrous cuts the republicans are proposing. they don't cut defense even though the secretary is desperately calling on us to stop buying weapons. they don't seem to think that the wealthy have any responsibility to this country or for those who are less fortunate. it also seems that the republicans don't understand the idea of investing. now, these cats have been called eating the future. that comes from a native american saying that you can tell when the tribe is on its way down when they eat they're seed corn. basically the republican focus on cutting spending in these programs, they cut things that don't have an immediate benefit, but they've really taken a hit in the long term.

the republicans as the our seed corn are doing it at the expense of the middle-class and poor. the president has taken meaningful steps to balance the budget, bring manufacturing back. i would like you to talk about the question about the build america bonds and the other investments. contrast that with what is in the republican budget. we understand $2 trillion sitting in private hands, and they won't invest it. so we have no alternative but to do it from the government level. the private sector is not doing it. i would like to hear you talk about the president's investment. >> wow, i can't improve on the contrast to describe. i agree the choice we face is a pretty stark choice. what we are trying to lay out is a more confident vision of what it will take for us to grow and a world where we face competitive challenges. i want to highlight some of the

proposals and the budget which we think will be good for a best of the future growth. permanent and expanded credit for research and development, as your capital gains for small businesses, and expansion of a very valuable tax credit to help families support college for the children. low taxes on dividends and capital gains so that we are not hurting investment centers. investments in education so we improve the quality of education, improving the overall quality of infrastructure. if you are a business in the estate's you have to deal with our infrastructure. it's like a tax on competitiveness. those things that we think are critical, countries are getting very good at things and we used to be uniquely get that. we have to make sure that as we think about the budget we think about the better strategy for growth and of course we have to do that in no way that will be fair to the overwhelming majority of the american people.

coming out of a financial crisis that caused devastating damage across middle class americans. you see that in high unemployment rates, millions of americans on food stamps, millions of americans at risk of losing their home and after decades of very substantial increases in inequality. we have to find a way to make fiscal choices to restore balance and gravity to our fiscal position, but not at the expense of our ability to grow and compete in the future and not at the expense of some basic principles of fairness for a country that is still suffering deeply because of the recession. the republicans are going to have the chance not just in the debate about the sea are callable in the put together their budget resolutions that will have the chance to lay out a 10-year plan explaining how the republican and the house believes we can bring these deficits down and what makes of

spending restraint, longer-term, tax reforms will help achieve that and would give us a chance to have a good debate. we won't agree on everything, but we agree on some things. the strength of the economy depends. >> thank you. mr. nunes is recognized. >> thank you, mr. chairman. just continuing your thoughts, president obama, this is his third budget. i just find it peculiar that he would stay just now that you're waiting for us to lead. >> no. that did not mean to imply that. let me correct that. obviously the president has the responsibility for laying out to the country and world every year a budget and path to reduce deficits. >> waiting for us. >> not at all. we had to take the initiative. the book disagree about some sources. we will have to figure out what

makes sense. i know you are having this debate about current spending for this fiscal year to be as important as that can be, you will have the chance to lay out an alternative vision. my point is, just to come back to where i began, your focus understandably, we can bring some restraint it. >> in your report from your budget the state -- or i should say, that presents a budget, even with this fundamental change an aging population and continued high level of health costs will pose serious budget problems. absorb a much larger share of federal resources than in the past limiting what the government can do in other areas. the level of high debt to gdp projected at risks and sustainability without further policy changes.

you don't really -- you kind of punt on entitlement reform and other subjects in your budget. >> i listen to your colleagues said that, but i guess a with said the following in response to really have an unsustainable deficits over the next ten years. we have to bring that down to something that is sustainable. after that decade we face and sustainable long-term deficits primarily driven by health care cost. the affordable care act brings about a very substantial cost savings that will reduce those costs. we recognize we need to build on those to be the president made a few suggestions on how to go beyond the affordable care act. >> i'm glad you brought up medicare in your savings. and you look into the fine print and we get to the appendix on page 282 of the medicare trustees' report which you are using for your variance savings. you have some of the medicare crisis over time.

in the back the chief actuary says this, the chief actuary does not believe the long-term projections. for these reasons the financial projections shown in this report did not represent a reasonable expectation for actual program operation in either the short range for the long-range. i am assuming that because we did not go with s. g. r. an unfunded liabilities. now, do you agree or disagree with the chief actuary of the medic kit report? >> a very important clarification. cbo is the judge of what reforms cost. with the actuarial is doing is making a prediction about what future congresses may or may not do. that is really your job and your decision to rid of course of congress does not enact these reforms then they will save less money over time.

that is what that report refers to permit a prediction about what congress will do, not what the law will do if congress were to stick with it. >> so if we just stick with but the president's current budget without any policy changes to entitlement that we're going to be okay? >> i would say this, if you enact the president's budget, which is unlikely, but you enact that degree of deficit reduction in you will stabilize our debt and share of the economy and an acceptable level. if you leave in place the affordable care act than you will have made a very substantial contribution to long-term deficits that start to accelerate in the decades ahead. now, what the president said -- >> secretary, i think the last three years i have heard you say almost exactly the same thing worded differently. every year the budget problem gets worse over time. >> actually in some ways it is giving better