>> dr. julian. >> the government plans to ask this house to control the orders regime. i'm sure they wouldn't want to act without all the necessary information can he assure all honorable members that we will have the sight of the legislation before being asked to vote on the extension? >> my honorable friend makes an important point and obviously this is a very big change we are making from control orders to the new system and i'm sure the house will be consulted properly and proper prior site of what's being proposed will be made. but he can get involved now if he wants to as the policy is being developed. >> thank you, mr. speaker. in 2008 your review into communication needs described speech therapy services as a lottery. a national survey in primary cycles show that 57% that, unfortunately, never heard of the review and that services

remain as an equitable now as they were there. in the national year of communication and with the king speech having done so well to raise awareness of this issue, can the prime minister clarify whether the government plans to meet the recommendations of your review and how it plans to do so with local authorities facing such huge cuts? >> well, she, i think, will see shortly the green paper on special education needs where we are giving priority to this area because as i know from my own experience often getting hold of a speech and language therapist is extremely difficult. now, of course, like every other area left lane be constraints in terms of resources but i think we can do better by having a less confrontational system and making sure more resources actually get to the parents who need it and who want to do the right thing for their children. >> order, statement for the home secretary. >> here on c-span2, we'll leave the british house of commons now as they move on to other legislative business. you've been watching prime minister's question time aired live wednesdays at 7:00 am

eastern while parliament is in session. you can see this week's question time again sunday night at 9:00 eastern and pacific on c-span. and for more information go to c-span.org and click on c-span series for prime minister's questions plus, links to international news media and legislatures around the world. you can also watch recent video including programs dealing with other international issues. >> it's a three day president's day weekend on booktv on c-span2.

>> when i was sworn in as president, i pledged to cut the deficit in half by the end of my first term. the budget i'm proposing today meets that pledge. >> president obama sent congress a $3.7 trillion budget that would reduce the deficit by $1.1 trillion over the next 10 years. this week, hear the details from the administration including cabinet officials and watch reaction from house and senate members online at the c-span video library. search, watch, clip and share anytime. it's washington your way.

>> to ensure -- >> treasury secretary timothy geithner discussed the president's proposed 2012 budget at a hearing of the house ways and means committee on tuesday. the budget request totals $3.7 trillion in spending. and according to the white house would cut the deficit by 1.1 trillion over the next decade. this is 2.5 hours. >> one the language in the letter regarding fta making clear what i think is the appropriate approach. and number two, on taa, suggesting very strongly indeed more than suggesting indicating that it's critical that we pass the extension of full taa this week. thank you. >> all right, thank you, mr. speaker levin. at this time, are there any questions for staff? if not, i ask unanimous consent that the committee adopt the oversight letter for the 112th congress and without objection,

so ordered. i also ask unanimous consent that staff be authorized to make technical and conforming changes to the letter and without objection, so ordered. with no further business on the committee's agenda this meeting is adjourned. i would now ask the staff to prepare the witness table so that 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 president's fiscal year 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 an invitation to the east room of the white house. it goes without saying that it is an immense honor to serve with our colleague 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 a heart felt congratulations to john and the success of the civil rights movement was a victory for the african-american community and for every american. it may be a bit out of character for this committee but i would ask that we break with tradition and all join in a deserved 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 the power to tax is the power to destroy. but last year's election shows the american people are increasingly concerned about the power of deficits. to destroy jobs, the sound dollar and ultimately their children's and our country's future. unfortunately, the president's budget features too much of both. it would result in record high deficits while pushing the federal tax burden to 20% never established in our nation's history and let me be clear mr. secretary americans are not taxed too little. we have more borrowing, taxing and spending is certainly not the answer to what ails our country. in 2009, we were promised that

spending $1 trillion on a stimulus plan would be at 7%. it's at 9% for 21 months stimulus advocates also promised 137 million jobs by now. we are woefully short of that mark as well. today, almost 14 million americans are looking for work that 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 are long-term unemployed and the average duration of unemployment is a record 37 weeks. that's almost double the level -- record level before this recession. vice president biden recently said that 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 full employment. and that's a long time to just hang in there. the fact is americans shouldn't to have wait any longer for some

real solutions and frankly this budget is a missed opportunity. in the words of -- i'm left bonding there wasn't a printing error because it looks almost identical to last year's budget. we again have massive tax increases now totling $1.9 trillion that will hit small businesses, middle class families, american employers with worldwide operations and investment income. the very investments we need to jumpstart the economy. even the same things are missing from this budget. there are platitudes about tax reform but tax policies that move in the opposite direction and there's nothing on entitlement reform and there's little more than lip service about getting the deficit under control. during the commission which three members of this committee were members of we heard testimony that once a nation's debt reached 90% of its economy,

that country would see economic growth decline by about 1% and in the u.s., that would cost us about a million jobs. and mr. secretary, we're not at 90%, our gross debt is now 100% of our economy and we can ill afford to lose out on the needed job creation simply because washington can't get its spending under control. despite that and other warnings what's being presented today fails to deliver real change. i hoped for so much more and i'm left wondering how many more experts need to ring the alarm bell before this administration acts on it and acts accordingly. i want to insert a "washington post" editorial president obama's budget kicks the hard choices further down the road. now i'm sure many of my friends in the minority can't wait to chime 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's not the issue. the issue is whether or not we will all be part of the solution. and, mr. secretary, you and i have had many good discussion business where this country needs to go. and today i'm not interested in boilerplate but interested in finding real solutions that reduce the cost and complexity of our tax code that deals with the unsustainable costs of our entitlement programs and that brings our debt back under control. all of these will help unleash the private sector to create good-paying jobs. so, mr. secretary, i look forward to hearing from you today and later this week we'll hear from your colleagues from the department 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 purposes of an opening statement. >> thank you, mr. chairman. the president's budget is in sharp contrast to the house republican c.r.

it embodies unnecessary combination of investing in economic growth and reducing our deficit. the republican 2011 blueprint, which the house will debate this week reflects starkly different priorities. it disinvests. it would take our economy backwards through extreme cuts. the president's budget charts a responsible path to a sustainable fiscal situation. it points -- its point of departure is 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 in 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 proven public/private partnerships. it supports jobs, innovation and growth. it makes permanent and enhances the r & d credit and extends the build america program which republicans oppose and which is financed over $180 billion in vital infrastructure and improvement. it also provides an additional 5 billion for the highly successful 48c tax credit. this tax credit provides a direct incentive to manufacture advanced energy products like solar panel and wind turbines here in the u.s. in one example that i know you, mr. chairman, is very familiar with, hemlock semiconductor

received $142 million in tax credits to help maintain its global leadership in producing the polycrystalline silicon used in manufacturing solar panels. this is one of the vivid examples of a successful public/private partnership. the house republican plan disinvests in jobs, in growth and in our community. it cuts more than $1 billion from the clean water revolving fund. it chokes funding for the energy advanced research projects agency which is conducting cutting edge research to foster the products and jobs of tomorrow. it completely eliminates the cops program. it puts police officers on our street every day. it takes a hatchet to the community development block grant program that is so important to local economic development, 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 forte time when tax revenues is a percentage of the economy are near an all-time low. according to the administration's estimates, permanently extending the tax cuts for upper incomed households alone would increase the deficit by nearly $1 trillion over 10 years. the president's budget focuses on preserving the tax relief for working families making less than $250,000. it would permanently protect the middle class from amt. and it permanently extends vital substance to 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 preds's budget as lacking a plan for tax reform. if we're going to have tax

reform, we're going to need to work together, not against each other. to make the difficult choices necessary for responsible reform. nowhere is more true than on the debt limit. as the secretary -- as you, mr. secretary, have made clear, the need for fiscal responsibility and the need for economic stability 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 necessary steps to prevent a recession caused by a financial crisis from becoming a

depression. we cannot risk a new financial crisis that would reverse the new momentum of economic growth. thank you, mayor. >> thank you, mr. levin. welcome, secretary geithner. you have 5 minutes. your full written statement will be part of the record, but you may begin your testimony and welcome to the committee on ways and means. >> thank you, mr. chairman, kemp, ranking member levin and members of the committee, it's a pleasure to be you before to 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, multiyear plan to cut spending and reduce deficits. our deficits are too high. they are unsustainable and left unaddressed, these deficits will hurt economic growth and 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 as a share of the economy by the end of his first term. these cuts are phased over time so that we protect the recovery. in order to make it possible for us to invest in future growth and to restore fiscal sustainability, the president proposes to reduce nonsecurity discretionary spending to its lowest level as a share of the economy since dwight eisenhower was president. to achieve this, the budget proposes a 5-year freeze of annual nonsecurity discretionary spending at its 2010 level. and this will reduce the deficit by more than $400 billion over the next at the point years. the president also proposes to reduce a request for defense spending to freeze civil service salaries, to improve efficiency in government services through a range of program eliminations and reductions. these savings create the

necessary room for us to make targeted investments in support of reforms that will help strengthen future economic growth. the most important thing 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 this strategy for growth, the president proposes reforms to our tax system designed to encourage investment. we propose to put in place a permanent, an expanded tax credit for 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 and to 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

income and investment outside the united states. and to close loopholes and tax preferences that we cannot afford. now, in addition, we propose to pursue comprehensive tax reform that would lower the corporate tax raid. -- rate. it combines a very high rate with a very broad range of expense jonbenet tax preferences for specific industries and activities. we need a more competitive system that will allow the market not tax planners and lobbyists to allocate investment, a system in which businesses across industries pay a roughly similar share of earnings. a system that provides more stability and certainty that is more simple to comply with. and we need to do all this without adding to our future deficits. we've begun the process of building support for comprehensive corporate tax reform. mr. chairman, i want to welcome your personal support for comprehensive reform. i believe we have the opportunity to do this now. the president's budget also

outlines some responsible reforms on the individual side. we propose as we have in the past to allow the 2001 and 2003 tax cuts for the wealthiest americans to expire. to limit certain deductions, tax expenditures for those same high incomed americans to restore the estate tax to the 2009 levels and to close the carried interest loophole. these proposals and i want to emphasize it this -- these proposals will help ensure that the savings we achieve together through spending restraint are devoted to deficit reduction, not to sustaining lower tax rates for the most for the fortunate 2% of americans. this budget would have the distraction reductions to stop the national debt from growing as a share of the national country and sustain our debt burden that will not threaten future growth. now, this is only a first step. a down payment on a long-term reforms necessary to address our long-run deficits. to address the long-run deficits

that we face over the next century, not just the next decade, we will to have build on the progress and the very substantial progress that's been achieved in the affordable care act to reduce the rate of growth in health care costs. although and in addition to that although it's not a contributor to our short-term or our medium term deficits we should work together across party lines to strengthen social security for future generations. now, we cannot grow our way out of these deficits. they will not go away on their own. and they will not be solved by cutting deeply into investments that are critical for future growth and competitiveness. we have to work together to find consensus on a multi-year plan that cuts deficits where we can so that we can invest where we need and that reduces our deficits. making a multi-year commitment will allow us to make sure the changes are phased in as the economy recovers and making a multiyear plan will help give businesses and individuals adequate time to adjust and prepare for the impact of those

changes on the economy. the president's proposals represent an important starting point for discussion. we recognize that there are many valuable ideas on both sides of the aisle and we know as you know that we need both parties and both houses of congress to come together to enact solution that is work best for the country. in december, we were able to come together to find bipartisan consensus on a very strong package of expenses to restore recovery and confidence. we want to bring that same commitment of restoring fiscal responsibility. thank you. i'd be happy to take any of your questions. >> well, thank you very much, mr. secretary. i think we can agree the economy is not adding jobs at the rate it needs to. i think that's particularly why i'm disappointed, you sense disappointment that the president's budget brings up the same tax hikes on america small business that congress even when both chambers were controlled by democrats already rejected about 75% of small businesses are

structured as pass-throughs or partnerships or s corp.s. yet these are the companies the president would subject to massive tax hikes by raising the top marginal rates. given that unemployment has been stuck at 9% for 21 consecutive months. do you really believe we should be raising taxes on small businesses and any tax reform we might move forward on would address the concerns of these employers? >> mr. chairman, a very important question. and you're right. i think to emphasize that our overwhelming priority now for the country should be to make sure we're re-enforcing this expansion, to get more people back to work 'cause we're still living with the scars of the damage caused by the crisis. you can see it in high employment rates in millions of people still at risk of losing their homes. the pressure on small banks, small businesses across the country. so that objective of

strengthening growth should still be our overwhelming focus and priority. now, we propose in the budget a series of very well designed targeted tax incentives for small businesses because as you said, they're so important to the job growth and to innovation. and so, for example, as i said in my opening statements we're proposing capital gains investment on small businesss to make permanent pretty generous investing on small business and capital equipment and you're right that we're proposing again to allow to expire on the schedule agreed to by the congress last december these taxes that affect the top 2% of individuals and small businesses in the country. they only affect 2 to 3% of businesses. and the vast bulk of those small businesses you referred to are structured as partnerships and we're talking here about our law firms, investment firms, businesses who choose to structure themselves as partnerships not as corporations. and the vast bulk of those small

businesses you're referring to earn very, very substantial amounts of revenue each year. and again, even in that case we're proposing to restore those tax rates to the level of prevailed in the 1990s where we had the best record of investment, innovation, job growth that the country has seen in generations. we think that's a responsible recommendation. we recognize it's not popular on your side of the aisle. but i want to -- i want to say our challenge is to figure out a way to restore sustainability and strengthen economic growth. we have to balance those two objectives. and we're not going to be growing in the future unless we make some tough choices to restore fiscal responsibility and those are the types of tax changes, tax reforms we think are consistent with our obligations to strengthen growth. >> well, i'm encouraged by some of the comments that the president has made and you've made and also in your testimony today about the need for the reform and the corporate tax code and -- but given those comments then to see a budget that goes in the opposite

direction instead of proposing reforms that broaden the base and lower rates which i think is the direction i think most people are saying on the business side, and trying to level of playing field, reduce complexity, this is -- this budget is proposing changes that continue to pick winners and losers that -- i guess my question to you is, how do you suggest we achieve tax reform particularly on the business side when the administration continues to push proposals that will raise taxes on some companies or some activities in order to offset spending that's unrelated to those activities? it's going in the opposite direction of i think the very encouraging comments that have been coming out of the administration and you as well? >> mr. chairman, you're right. in the budget we do not propose a detailed plan for comprehensive tax reform but we do propose a set of changes to the existing structure that would help as we -- as we see it improve investment incentives in the united states. and i think the way to look

about -- look at those changes is they help make the case for why we need comprehensive reform. and there's aspects of those proposals that make you uncomfortable, you should view it is an incentive for us to do comprehensive reform. and we are very serious as you know and we've talked about this a lot in trying to build consensus now on a set of fundamental changes to the corporate tax system that would improve incentives for investment, do so in a way that's fiscally responsible and to do that we'd have to lower the rate very substantially and eliminate or substantially reduce the broad range of tax preferences and incentives that now create a lot of unfairness and distortions in the tax code. but again what we did in the budget is say we'd like to work with congress on comprehensive reform but if we're forced to work within the current system, here's some changes that would help improve investment incentives in the short term but again, i view those is an incentive as the way to make a broader case for comprehensive

inform. >> thank you. mr. levin may inquire. >> thank you. mr. chairman, i'm glad you asked the secretary about -- about the position of the administration not to extend the high income tax cut. and i think, mr. secretary, you have helped to shatter the myth that this is basically an increase in taxes on small business. you've explained that, right? >> yes. >> and 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, yes. >> it's the estimate? >> that's the estimate. it's one estimate. >> and you indicated what percentage of businesses would be affected? >> only 2 to 3% of all

businesses in the country. and again, the vast bulk of those businesses make well over a million dollars in earnings a year. and of course many, many of those who make that much money are fundamentally what we would call law firms or investment firms or other types of companies that structure it that way to help lower their tax burden. >> all right. let me now ask you about investment because there's such a sharp contrast between the president's budget and the c.r. i think you have described it for the president it's invest and cut the deficit. for the c.r., it's essentially noninvest or disinvest. and cut the deficit except increase it by how much, the high income tax cut over 10 years? >> well, to extend the high

income tax cuts for 10 years would cost $100 billion maybe a trillion. >> now, mr. chairman, it's interesting. i think we need to have this discussion. .. >> we live in a very competitive world. we have to make sure we focus every day on how to make the country stronger and more competitive and wheeler going to be -- be able to meet a

substantial share of the growing demand for goods and services around the world we want more of that by investment in the united states and what the president's but it does is proposed a range of reforms to make it more likely that the next great american business in the next factory in the united states and the great foreign competitor of the united states builds or her next factory in united states and the tax code is working to encourage those investments and not to discourage those investments. it is very important when we think about the policy choices that we look at them through the prism of what is going to be a better strategy for growth and investment. not simply an exercise of reducing future deficits. that is very important to future growth but how you do is critically important. if you get the set priorities make sure you are preserving capacity to invest in things that it is important for every business in the country.

for example any business with the case of manufacturing will do you they need better access to high-quality engineers. they want our schools to do better job producing people with the skills they need to compete. they need to make sure they have better designed tax code to encourage investment in the united states. the proposal to make permanent the tax credit is a good example of those incentives but we want to make sure we look get these fiscal choices through the prism of what will be good for growth and investment in the united states. >> and a disinvestment proposal when we need more, not less. >> we all recognize they have to reduce spending. we all recognize we have to reduce our long-term deficits. the question is how to do that in a way that preserves incentives for investment, of those to improve education and strength of the public

infrastructure. >> hi join in greeting the secretary to hour hearing. secretary timothy geithner, on page 2 of your written testimony you state that, quote, we must restore fiscal responsibility over the long term by reducing the rate of growth and health care expenditures. i couldn't agree with you more. in fact that is one of the main reasons i voted against the health care overhaul twice in the last congress. the obama administration's and medicare actuaries have predicted that the national health care expenditures over the next decade would be $311 billion higher because of democrats's health-care overhaul. the health care law bends the cost curve up, not down.

yet on page 7 of your testimony, independent analysts have estimated the democrats' health care law will significantly slow the growth rate of medical costs. could you tell us who are the analysts you are relying on for this claim and is there a reason you are choosing to ignore the findings of your own administration's and actuaries? >> excellent question. as many of you have said the our long-term deficits that we face over the next century are primarily driven by rapid rates of growth and health care costs and to a lesser extent by social security obligations. the most important thing we can do to reduce long-term costs is reduced the rate of growth in health-care costs. in our system we rely on the

independent nonpartisan congressional budget office to analyze for the congress and the administration the impact of reform on costs. and the judgments that bind all of us find congress and the administration and the judgment of the nonpartisan independent cbo's than those reforms if enacted and held to overtime will substantially reduce the rate of growth in health-care costs for the public sector and may make the largest contribution to reform this country has considered in generations. and in recognition of the fact that the long-term fiscal responsibility for health care savings that these reforms made it through the congress are so important and we recognize that we have to build on that. we haven't solved that problem definitively and we welcome the chance to join with you in figuring out ways we can help

make a further or greater contribution to reducing those costs. one more clarification. if i'm not mistaken what the actuaries said was if congress does not enact those reforms than costs will grow more rapidly. he will make a prediction about what congress might ultimately do, not what the reforms were produced in terms of savings. >> last summer in an interview in lower court you said the administration wanted to prevent rates on capital gains and dividends from rising beyond 20%. can you please clarify with the 20% rate is inclusive of the new 3-.8% tax increase, included in democrat health care law? >> it is not. we do propose in the budget to make sure the top rates don't rise beyond 20 because we want

to have a budget that is encouraging investment in the united states. >> so it is not inclusive and it does rise beyond 20% in this area. >> this is a simplifying convention but when we think of dividend to capital gains we look at the tax rate in the budget and we think there's a good case to make sure that we keep the overall tax burden on investment income in the united states at a modest level. we think we can afford to do that. >> our concern is at a time when the economy is what it is that we hold to this. the american public, those who are creating new jobs, job creators can afford to have more money taken at it and that money could be used for investment. i yield back. >> mr. johnson is recognized. >> mr. secretary, of the congressional budget office shows permanent deficits in the social security program meaning

that social security payroll tax can't fully cover the benefits. in other words the cost of paying benefits is more than revenues coming in to pay. you would agree. we are in on a very tight time schedule so i will ask a few simple questions and i ask you to be brief in responding if you would. how are we paying benefits if we don't have sufficient payroll taxes. is 310 -- treasury paying social security interested is turning from the i/o yous treasury gave the system when it barred payroll taxes bumped social security to pay for other government spending? >> we have the ability to meet our commitments to social security beneficiaries and we will continue to meet that obligation but we recognize as many of your colleagues to that over the longer-term, we have some time to get this right, we need to make sure we secure social security for future

generations and that will require some changes and as the president said we are willing to work with all of you to figure out the best way to do that. >> how much of those interest payments going to be? >> i don't know but i would 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 $1.1 trillion. the fourth year in a row of twitter yen dollar plus deficits. meanwhile the debt held by the public will be near twelve trillion next year, double what it was in just 2008. where will the money come from to pay the interest to social security. >> i think you are making our point. it is very important that we find a way to reduce our long term deficit. that is not so we can deferred forever and the president's budget proposes a detailed mix of policies, spending restraint as well as tax reforms that will

bring those deficits down dramatically. >> i understand that but where are you going to get the money? >> we have the resourcess to meet those commitments for substantial time to come. we don't want to put off those questions for ever. it would be good for the country to come together to strengthen social security and we're willing to begin that conversation with the congress. >> clearly we are borrowing at record levels. that is the crisis this nation faces and the rest of the world soon won't want to lend us. what percentage of our borrowing comes from foreign sources? >> as a whole we are borrowing much less than we were three years ago. ran our current account deficit, we borrow to meet obligations, now half the level was at the peak in 2007 and what they mean the americans are saving more and funding a larger share of these deficits but substantial

share of our outstanding debt is held by foreigners. we agree and what this president's budget reflects is a recognition that if we're going to grow in the future we need to make sure we agree on reforms that bring down long-term deficits. >> your president's budgets as 40% comes -- thank you. i yield back. >> thank you, mr. secretary, for sharing your views with us. as we discussed the budget for 2012, we soon will have to look at continued resolution for this year and next. having said that, at what point in time the president of the united states indicated he was only advocating an extension of the tax relief for those people making less than $200,000 but this agreement as they said, the

president didn't ask for it but did agree that it would be for everybody. having said that, why understand the cost of the relief given to the upper income people is over $100 billion. the sea are the majority has given to us, substantial number of cuts, that doesn't necessarily mean it won't be ultimately a cause we're going to have to pay. my question to you, have there been any comparisons between the cost of extending this relief to where economists say we should not expect economic growth as a result of it, the negative impact of cutting programs which could cost spending as your office reviewed this to give us a direction. >> you are raising exactly the

right point which is as we think of ways to reduce these deficits you need to make sure they will be supportive of future growth. you need to make sure you are not cutting into things that will hurt future growth, ray as unemployment and longer deficits, what the president's but it does is reflect our view of where those choices should be made so we want to make sure we are increasing investment in education and infrastructure in research and development, not cutting those. if we do a smart job making investments and reforms in other areas, future growth will be stronger and more competitive. deficits will be lower in the future if we cut deeply into those investments. we will be weaker as a country and it will be hard to solve our long-term fiscal problems but those are the tread offs this committee and your colleagues -- >> the point i am trying to make

is the assistance on the overall tax increase did increase the deficit and that money was borrow in order to do it so to come back now and talk about savings seems to be a dramatic inconsistencies supporting both of those themes. >> those tax cuts were expensive. we can't afford to make them permanent. i agree that if we are going to make cuts in spending as we have to do, make those savings support investments and cutting future deficits. not sustaining tax cuts to the top percentage of americans we can't afford. >> i yield back. >> mr. brady is recognized. >> thank you. this doesn't add up for job creation or attacking dangerous deficits. they are tied together because consumers aren't confident that americans can tackle federal or fiscal deficit and businesses

don't believe congress is serious about this. you are repeating two mistakes in the last two years. one is using rosy economic forecasts. as you did last year and the year before, a yield. these forecasts 4% higher, doesn't sound like much. just that difference, wiping out three fourths in the next decade. 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. all we are doing is encouraging companies to manufacture and overseas. $87 billion more in energy taxes on u.s. energy companies encouraging them to send their workers overseas. this budget takes a whack at real-estate partnerships,

traditional partnership to build our -- movie theaters, office buildings. none of which can stand tripling of their taxes. so how does the white house believe it will begin up the economy which is very sluggish by taxing manufacturers and the creators, most likely to keep us out of these. >> excellent questions. let me respond to each one. if you look carefully at the economic assumptions in the budget, they're quite realistic and conservative. in some parts of the ten year horizon some estimates look higher and lower and more conservative. if you look at these, one example, the average growth rate over this period is significantly lower than the average. we are trying to be conservative. one great strength of our system

is in the end, assumptions governing in this case. we are going to rely on them, they recently conservative. very important as we think about tax policy we encourage investment. we are proposing to reduce some tax benefits in parts of american business community. we are proposing very substantial and broad based incentives for adjustment. if you look at the net impact in terms of tax revenue it is a very modest change and what it does is shift the incentive in the tax code if these were enacted to encourage the next company in the united states. i know you are right that we are proposing to eliminate those references that are expensive and don't have impact on growth and if we disagree with those things it is a reflection of the fact we don't have unlimited resources, face tough choices and we can't do everything we want to do. every time we look at a tax

provision, we ask two questions. one is is it improving incentives and does it have a substantial return in terms of growth impact and if it is too expensive relative to that we should fade it out? >> i will close out. please kerri back to the white house this message. because they kill jobs those tax increases said dead on arrival in the house. we have to find a better way to work together with you to get this economy going. thank you, mr. secretary, chairman. >> thank you for being here. it is just you and me. >> let's 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, i am worried the administration isn't paying

as much attention to small businesses in terms of creating jobs. i don't have to tell you the way small businesses are set up. many are income-tax those and i believe he number of things within the president's budget that impact small business owners. if i could read you a list of things, interesting to hear your yes or no answer if you think these are tax increases on small business owners the president's budget with personal exemption on itemized deductions, in addition it proposes to limit otherwise allowable itemized deductions commonly known as the limitation, you considers east to tax increases on small businesses, that are oftentimes partnerships, many of those

often itemize their deductions. >> to make it easier i agree on the following. those tax changes wooley impact 2% to 3% of small-businesses and those small businesses overwhelmingly affected are those that earn more than $1 million. many of them are structured as entities but in that context most of the ones that are affected by this are typically a law firm or partnership. >> the president's budget proposes to reclassify many groups of independent contractors as employees. you testified to this before for tax purposes and many of those contract with outside individuals. you consider the new payroll tax on those small businesses a tax increase on the more reclassified? >> i will tell you what the objective is. this is a very complicated provision of the tax code and hard to comply with it. we are proposing a simple thing

that congress authorize the irs to issue guidance for comment on how to make sure we simplify the ease of complying with this to make sure business is run a little better. the current system apart from being too complicated creates a lot of on fairness and give some businesses the opportunity to lower their tax burden in a way that is unfair to their competitors. we want a more level playing field and we are proposing that congress give the irs the authority to issue guidance for comments. once they go out with the draft anybody affected has a chance to comment on that and suggest how they can be improved. >> will be detained more? >> the band on their circumstance. what we think is fair one of the tax codes where businesses paid the same amount of income tax relative to earnings. in the current system is unfair.

some companies pay a lot more than the average and some less. we want to move to a system where it is a more level playing field and a simple system to comply with. >> another rate in the president's budget that has changed is the top rate for the estate tax. small business owners and farmers are concerned about what happens to the estate tax. the rate that goes up to 45%. is that an increase in taxes for small business? >> the change in the estate tax. we are proposing to restore the rate of the exemptions to levels that prevailed in 2009. with those rates, those exemptions, a small fraction of states are affected by those changes. that is the best way to balance our obligations for fiscal

responsibility with all the other objectives we share to make sure we strengthen the economy as all hole. >> there are roughly 50,000 people employed by the independent oil and gas industry. into a pretty big industry. most of these are employed by small business owners. a lot of family-owned businesses. the president's budget proposees repeal for intangible drilling costs to repeal the percentage depletion. do you consider this a tax increase and independent oil and gas producers? >> what it does is reduce a very substantial subsidy that now goes to the oil and gas industry. we are proposing to eliminate that because it is very expensive and works against the national priority to encourage the economy as a whole to shift

to less carbon intensive forms of energy in the future and reduce our dependence on the types of energy that contributes to climate change and could threaten future growth prospects. >> one of my constituents is a small business owner, family operations as if this proposal becomes law it will evaporate the industry and ohio. last year joint tax suggested this will not only hurt domestic production of oil and natural gas by radically increase our dependence on foreign fossil fuel. do you agree with that? >> no but here's another 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 other businesses in your state. you have to ask is that fair and does it make sense? it adds to eat the efficiency.

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

make sure the cost businesses there are reduced overtime and we can restore fiscal responsibility and sustainability to our long-term deficits. >> these ticket is ironic that the treasury secretary and justice department argues that it is a tax? >> i cannot begin to explain when lawyers and financial people disagree on a lot of things. >> thank you for your patience. we are going to take that 10 to 15 minute break. take a restroom break. we should be done in ten minutes and we will resume our hearing. that hearing will be in recess for 15 minutes. >> we will take a quick break but we will bring you the rest of the house ways and means committee hearing when we return. >> while the house continues a measure to keep the federal government operating through september the senate continues work on a bill reauthorize and

faa programs. follow debates on house and senate floor this week with c-span's congressional chronicle was time lines and transcript of the recession and a video archive searchable by keyword and member. congressional chronicle@c-span.org/congress. >> a three day presidential wheat and. live from the little white house in key west, might be related to an american president with a candid conversation with four u.s. presidents and historians and journalists and friends and associates of president kennedy on his place in history and the lessons he learned and their application today and visit the smithsonian national portrait gallery to learn the art of politics of presidential portraits. appendix. american history all weekend every weekend for the complete three day holiday schedule. to have our schedule e-mail to you go to the c-span alert

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>> thank you, mr. chairman. and thank you, mr. secretary for taking the time to explain much of this to us. we have recently received a letter from over 270 prominent economists. i presume you are one of the 70 which stated the affordable care act contains essentially every cost-containment provision policy analysts have considered effective in reducing the rate of medical spending. could you comment on how you

feel the affordable care act relates to constraining health care costs? >> very important question and thank you for asking it. with these reforms do overtime is a change incentives for how americans use health-care. and set in motion what we believe are the most powerful sets of ideas out there for reducing the rate of growth in health-care costs over time and of course there's a lot of uncertainty surrounding these estimates but as i said earlier we rely on the cbo to make these judgments for us and in their judgment these reforms over time will substantially reduce long-term deficits by reducing the rate of growth in costs. as the president made clear we want to build on those reforms. ultimately we have to do more and we welcome the chance to work with people on both sides

of the aisle to strengthen those reforms to deliver more savings in the future. but i agree with your characterization that the bill includes that we -- many if not most of the best ideas for reducing the rate of growth in costs. >> you everyone's awhile blog. i have been given a quote from a blog you did some time ago talking about in the absence of health care reform and i wonder if you could look back on facebook some place and send us a copy of that for the record. >> i don't want to use that term. i am happy to give you our analysis of what the reforms would do for our competitiveness as a country. is important to recognize that this is what they care about most. they carry a lot about that.

if we care about competitiveness and jobs, not just affordable care but make sure they are allowed to work overtime. >> mr. davis is recognized. >> thank you for joining us today. i would like to switch subjects to a different area that is returned from the standpoint of job creation and job sustainment and that is to talk about unemployment insurance. could you tell us who pays unemployment insurance taxes. >> i'm sure you know this based on your question. if you are an economist you have a more complex answer to that because ultimately the economy as a whole pays those taxes. >> ultimately comes out of someone's pocket. >> the direct emphasis is on businesses. some say -- and won't give you a more complicated --

>> the next question is as have you ever pay an employer these taxes? i have. i have written the checks every quarter. >> i have been in the public sector all my life. i have helped manage substantial organizations. >> no fault in that but it gives a different context. the reason i want to clarify that is the administration's budget describes your unemployment insurance proposals offering $9 billion in relief to employers through 2013 and subsequently tax hikes totaling $67 billion over the next decade. if you were an employer as i was for many of us on the committee were paying those checks, looking at long-term capital investment forecasts trying to decide whether to hire or not, what to do. having face that decision, getting $9,000 in relief now in exchange for $67,000 tax tab in

the future for increase unemployment insurance tax is a good deal. >> our job is to figure out what makes sense when we have limited resources. many of you have said we recognize we face and sustainable long-term deficits. they will be painful choices. we want to make a choices in a way that is careful and sensitive. this is just a proposal. congress has to reflect this to consider it and we are completely open to suggestions how to design it but what it does is short-term relief for employers with reforms that forms the base of these assessments more fair across companies as a whole. there may be different ways to do this. open to suggestions or work with you on better ways to do it. >> i appreciate that perspective. 2014 may be the ultimate year of

fulfilling the mayan prophesy with all these taxes bringing the end of the business world. the concern that i have got is we have so many issues that are hitting if they are not reforms to reform health care, dealing with things like this that can place a burden -- i constantly hear from employers back in my district that there is a lot of fear from small to medium business level to hiring now the we have another issue with the proposed tax increase. my final question would be if you are an employer and you are trying to make decisions with cash longer-term, do you think with this looming tax hikes that you would take on new liability to hire people? >> i would try to look at it, what businesses across the country are doing today. if you look at what has happened to the recovery in the last 18 months businesses are expanding investment that had exhilarated rate more rapidly than gdp is

growing overall and we created more than a million private sector jobs in the last three quarters. much more quickly than the last week to recessions. they were much milder recessions and so we have a long way to go but are making progress. looking at the overall mix of proposals in the president's budget. it is my view that if you look at the overall impact on business and competitiveness they're very strong investments in this country, they improve innovation. they're good for growth long term. you have to look at the whole package. not just specific tax cut for businesses but broader reforms. >> i appreciate your sentiment. if i were facing an increase in capital gains with things like this it might create a disincentive. with that i yield back.

>> mr. secretary, welcome. i remember two years ago your first visit to this committee. my question was on trade. you may recall that. i was a little concerned that there was only one sentence attached to the no cost stimulus. it has been referred to trade. 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 and also his recent developments in negotiating the trade agreement. i'm excited about the job possibilities and doubling of exports and the engineer will provide to the economy. so congratulations on that but it shows how much can change in a couple years so one thing i am concerned about and hoping

something might result in a change in the position you take. i will remind you of a letter, 118 members of congress signed along with myself, voicing our opposition to the tax simplification program that does a single return, a proposal that would have the irs prepare your taxes for you and mail you a bill. this is hardly tax simplification. it is more like the fox guarding the hen house. lot of people might agree with that. we are still aware of that proposal and i wanted you to be aware of our opposition and of there might be some change as we become a year or two later. i want to get back to the small business thing. i'm concerned the

administration's budget targets small businesses and some of the figures have already been tossed about. but as you said and most people recognize much of the burden is going to fall on these pastors businesses. partnerships and proprietorships is income is reported on their owners, individual tax return and as you said that is 3% of small businesses but the committee on tax found last year that roughly 50% of small business income would be subject to this tax hike. i am concerned about its impact on millions of small businesses located all over this country. do you believe 50% of the income, you believe higher taxes on hundreds of thousands of

small businesses, is that really a way to create jobs? >> let me start where you started. it is very encouraging what you are seeing now which is export growth is very strong and leading the recovery. exports are growing quite rapidly and across-the-board from agriculture to high tech and it shows how fundamentally resilience this country is. you are right to emphasize the question is how to make sure that continues. for that to happen you want to make sure you see more investment in the united states by foreign companies that will contribute to strong export growth alongside these trade agreements. and on your second concern -- >> thank you. the way i think about it is this. this is the fairest way to do it. those proposals go to a small fraction of small businesses. only 2% to 3%.

the incident falls overwhelmingly on businesses in that category that make more than a million dollars a year. >> how do you address that 50% of the income? >> the income you are referring to is concentrated in businesses that are not small. they are quite large and overwhelmingly those businesses are structured like law firms and you could say their communities of individuals that earn a lot of money because they're very productive and they are allowed to structure themselves that way -- >> is this way to encourage economic growth? >> it is. future economic growth depends on two important things. one is better incentives for investment and confident that we will reach our long-term deficits. we need to do both. if the american people are not confident we will reduce long-term deficits that will

invest less here and future growth will be weaker. we need to balance these objectives and those are the rates that prevail in the 90s which was the best record for small business creation and investment and productivity growth and income growth and employment growth than we have seen in 30 years. that is true and what we have resources. >> we will agree to disagree. >> mr. mcdermott is recognized. >> thank you, mr. secretary. the president's budget has huge cuts to the deficit but still invest in the country. the alternative by the republicans which we will vote on in 72 hours is to use savings to protect tax cuts for the wealthiest 4%. the republican spending plan is a dark view of the future that throws the middle class under the bus. republican plan if you read it

carefully sends one message to america's middle-class and the unemployed, we don't care about you. they want to cut spending half states to repair highways and bridges. they want to cut the social security administration so so social security offices) month next year. these will help put america back to work, won't help, and keep the lights out. republicans want to cut $758 million from the women and children program. that program provides funding to keep low income mothers, sin to be mothers as well as children, food and health care referrals. the program was signed into law by the great icon, president reagan to witch of republicans in congress pray every day as their patron saint. these are just a few at samples

of the disastrous cuts republicans are proposing. they don't cut defense even though the secretary of defense is desperately calling on us to stop buying weapons. they seem to think the wealthy have no responsibility to this country or those who have less fortunate lives in it but republicans don't understand the idea of investing. paul krugman has called these republican spending cuts feeding the future. that is from a native american saying that you can tell when a tribe is on its way down when they eat their seed corn. republican focus on cutting spending in these programs, they cut things that don't have an immediate benefit but take a while to hit the long term. republicans as they eat our seed corn and doing it at the expense of the middle class and the poor. the president is taking meaningful steps to balance the budget and bring manufacturing back to the united states. unlike to talk about the

question of the build america bonds and other investments and contrast that with what is in the republican budget. we understand $2 trillion sitting in private hands and they won't invest. we have no alternative but to do it from the government level because the private sector is not doing it. i would like to hear you talk about that. >> i can't improve on the contrast you describe although i agree the choice we face is a stark choice with different strategies for the country and we are trying to bring in a more confident vision of what it will take to grow in a world where we face a lot of competitive challenges. and the proposals in the budget which will be good for future growth, we propose to make permanent an expanded credit for research and development for personal zero capital gains for small business, expansion of a

valuable tax credit to help families afford college for their children, low taxes on dividends and capital gains so they're not hurting investment incentives. investment in education so we improve the quality of education. improving the overall quality of infrastructure. if you are in business in the united states dealing with our infrastructure it is like a tax. those things we think are critical to grow in the future to compete with companies around the world getting very good at things that we used to be uniquely good at. you have to make sure as we think about the budget we think about what the better strategy for growth and do that in a way that will be fair to the overwhelming majority of the american people. we are coming out of a financial crisis that caused devastating damage not just to low-income americans but across the board. you see that in-employment rates, millions of americans on food stamps, millions of

americans at risk of losing their homes and after decades of substantial increase in inequality. we have to find a way to make fiscal choices to restore balance but not at the expense of our ability to grow and compete in the future and not at the expense of basic principles of fairness for a country still suffering deeply because of the recession. the republicans are going to have the chance not just in the debate about the cr but when they put together their budget resolution they have the chance to lay out a ten year plan like the president does. explain how republican leadership brings these deficits down over time. and spending restraint longer-term and what makes tax reforms. that will give us a chance to have a good debate. we won't agree on everything but we will agree on something. the important thing is the

strength of the economy depends on sensible choices. >> just continuing your thoughts, mr secretary, president obama, this is his third budget and i find it peculiar that as you state just now you are waiting for us -- >> didn't mean to imply that. the president as president has a responsibility for laying out to the country and the world every year a budget that lays out a ten year path to reduce deficits. >> waiting for us to come up -- >> not at all. we have to take the lead of the initiative. you will disagree about some of those choices. we have to figure out what makes sense. what i meant is you are having a debate about current spending for this fiscal year. as important as that is, you have the chance to lay out an alternative vision about bringing it down. my point is to come back where

we begin your focus understandably as we are on how to demonstrate to the american people we can bring some restraint to spending that is unsustainable. >> in your report in your budget on page 52, you state -- the president's budget, not your budget. even with this fundamental change an aging population and continued high level of health costs will pose serious long-term budget problems. medicare, medicaid and social security will absorber 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 in risks that are unsustainable without further policy changes. but you don't -- you kind of punt on retirement reform and other subject in your budget. >> i listened to your colleagues say that but upon response, we

have an unsustainable deficit over the next ten years which we have to deal with. we have to bring that to something that is sustainable and after that decade and sustainable long-term deficit primarily driven by health care costs. the affordable care act brings very substantial cost savings to help reduce costs but we need to recognize we need to build on those. the president made a few suggestions on how to go beyond the affordable care act. >> i am glad you brought up medicare because when you look at the fine print when we go to the appendix on page 282 of the medicare trustees' report which you are using for your brilliant savings that now use of the medicare crisis over time where now is only $2.4 trillion according to your math but in the back the chief actuary says this. the chief actuary doesn't believe long-term projections. for these reasons financial

projections shown in this report do not represent a reasonable expectation for actual program operations in either the short range or the long range. i am assuming that because we didn't deal with its g r or unfunded liabilities. do you agree or disagree with the chief actuary in the medicare report? >> an important clarification. the way congress works, cbo is the judge of what reforms cost and save. with the actuary was doing was making a prediction about what future congresses may or may not do. that is your job. your decision. if congress does not enact these reforms or repeals them or modify them, they will save less money over time. that is the prediction what congress will do. not a prediction about what the law would do if congress were to stick with it. >> so you think if we stick with the president's current budget

without any policy changes through entitlements that we will be ok? >> if you enact the president's budget which is unlikely because you will want to change it but the degree of deficit reduction in the next four years you will stabilize our debt and share the economy at acceptable levels. if you leave in place the affordable care act you will have made a substantial contribution to those long-term deficits to start to accelerate in decades ahead. what the president said -- >> the last few years i heard you say the same thing. just worded differently. every year the budget problem gets worse over time. >> in some ways it is getting better because the economy is doing better than we expected but the way the constitution works the president proposes congress has to legislate. you will share with us the privilege of how to make

decisions about these long-term costs. what is very important to do and a better way to do it is locked in multi-year savings over time. if you try to do it in one year you will kill the economy. you need to give the business community and families the chance to look ahead and did just to changes over time. we can't do that on our own. >> my time has run out. >> secretary timothy geithner, good to see you again before the committee. at a time when every american is concerned about our ability to compete whether here or abroad it is apparent to many of us that the administration has launched a full-scale assault on american energy security. there have been denials by the end might -- administration that a moratorium exists, but permits are not being granted. just this past weekend the

second largest shallow water drilling company in the united states filed chapter 11. 1 thousand jobs at stake. this is all solely due to the administration's policies. it is not the economy or a foreign event. it is due to policy in the white house. i have questions you before and we have gone back and forth on energy policy. in a letter you sent to me while back there was one line that bothered me and i will read it back. to the extent credits encourage overproduction of oil they are detrimental to long-term energy security. this is referring to eight different provisions in the budget that will be repealed. these are tax preferences on oil and gas that have been in existence for long time. it is a simple question. is there an overproduction of oil in the united states today?

>> i would come at that question this way. when you allow individual initiative in the united states to pay much lower tax rates than other businesses hey all other businesses pay higher taxes than it makes the country less competitive. >> do we have an overproduction of oil in the united states today? really kind of a yes or no question. >> i don't run a energy policy. what i would say is it makes sense at a time when we have unsustainable deficits and are worried about our long term energy security issues that we have to figure out ways to clean the tax code out of special benefits to a limited number of industries that means the rest of americans pay higher taxes. >> to compete and grow, stimulate the economy and grow

the economy do you believe that oil is a very necessary part of our energy security and energy economy? >> i am sure it will be part of energy security for long time to come. we think it is good policy for the country to not provide very generous incentives and encourage production and dependence on carbon intensive energy. >> when you say generous incentives and if you compare actual equivalent energy metrics with wind and solar subsidies for those are much higher on a parade unit basis of energy than they are oil and gas. >> we would argue the overall return on those investments are higher. >> but that is not proven. >> we may disagree on that but for the country as a whole i know this will be painful for parts of the energy industry but

overall -- >> for every american. >> i don't think so. [talking over each other] >> if we tax our current energy production, obviously prices are going to go up. whether it is electricity or fuel at the pump. the problem with these tax benefits and the virtue of changing them is it will lot affect the price of energy to the american people. >> i don't agree with that and that is not what i am getting from the economists are have consulted with. >> economist can disagree on anything. we have to make these judgments. when you look at industry specific tax benefits it is important to recognize they only exist because of their businesses pay higher taxes. if you compare about business you need to scale those back. >> there is a provision with regard to dual capacity. this will affect you -- u.s.

companies making them less competitive than american companies. i have to question why should u.s. tax law favor state-owned enterprises, chinese state-owned enterprises and over and above u.s. companies? >> i would not support that and i doubt these proposals have that risk. we are not going to go into that but i would be happy to talk about that and i understand the concerns you began with about the impact of all these changes on specific companies and i would be happy to have my colleagues work with you on how to limit those. >> mr. neel is recognized. >> i am delighted with these comments because i can count on him in bermuda and switzerland as they compete in the insurance market. i am going to give you a chance to speak. give us an idea where we were with t.a.r.p. and wre