>> the president has put appointment forward. once again we have a destruction. so it's infecting every part of the government, and it's on display here today, and our committee, their not showing up.

they're not coming to do their work and they're using the rules to slow down the process to prevent a very good woman from being the epa administrator. another case as has been mentioned earlier by my colleagues, tom perez, very qualified nominee, using a technical process in the abuse of the rules to obstruct. and so what we have, what we have going on here is across the board in a number of circumstances, outright obstructionism. i think the american people, if you look at this, madam chair, would say, i think they would say the presidents entitled to have his team. just four or five short months ago the president of the united states was elected to a second term. he's trying to put his team in place at the epa, and here we

have this boycott. and you know, i'm just reminded a very short time ago it used to be the republicans would say, we're entitled to an up or down vote on our people. well, that's all we want. we want an up or down vote. that's what we're looking at. and so i would just recommend, others have said this here today, this is an outright abuse of the rules. our obligation as a majority is to rule and to take action and move forward. if we're not going to get any cooperation, we are going to get boycotts, then we have an obligation to move forward. and we should use the rules as best we can. i understand on this committee, madam chair, what we can do is if we have all of us present we can vote out the nominee. and i was just we do that as soon as possible. and i would also suggest that we

work with our leadership and find a way where there is some constructionism, that week come to the floor and we use 51 votes to pass these nominees and give the president his team. they should not be tolerated. it's something that is such an abuse of the rule that they can get you angry every now and then. here, we get angry, we get sad, and these are colleagues that we worked with. i don't understand why they do it. i don't understand why they are doing it, but they're doing it today and they're doing it across the board, and we need to stand up and governed. we were elected to govern. we have the majority in the senate. we need to carry out the policies and give the president his team. thank you, madam chair. it's a pleasure to be here with you today. and i just want to say, you have been a very good chairman.

you've tried to be fair to the republicans. the thing that's amazing that jade mccarthy is that, chairman boxer has leaned the other way. she has leaned into the republicans. she's helped them out. a thousand questions, the last republican nominee, i think had 300 questions. she's bending over backwards to try to make sure that we are fair to them. and then what happens? you do that, this has been pending i think since march 4, we had the nomination. so over and over and over again, and now we are already, we are down here, may the ninth, and they're boycotting. so i think it's our obligation to move forward. i would suggest to the chairman, let's move forward as quickly as we can. we know what the situation is.

we know they really don't want to answer questions. they just haven't showed up. so let's move forward. thank you very much. >> i want to thank you. before i call on senator merkley, i wanted to make a point you. we have held up this hearing for three weeks already. based on my been willing to give republicans the time they need. let's go back to levitt. it was very interesting. we asked 400 questions to levitt -- excuse me, 300 plus. and we said that we want answers to the questions, and so we said to the republicans can we're not going to come to mark them up into where the answers to the question that is what they said. senator cornyn called the democrats behavior political blackmail and center michael crapo said democrats are turning the nomination process into quote an attack on the

president. so this is what they said when we held up the leavitt hearing and markup for two weeks. they've already held her up for three weeks. they've asked three times the number of questions and they're not here. so you know, it seems to me unbelievable that after what they said when we wanted answer to questions from and we held it up for two weeks, now they have held out for three weeks with no, nothing insight. because the bottom line is they've gotten the answers to the questions, folks. they don't like the answers, because they're holding gina mccarthy hostage to their pro-polluting philosophy. that's what this is about. they want her to say, okay, i give up, i will change the cost benefit ratio so it helps the

polluters. a, issued a that she wouldn't represent president obama. this is his big, and b., she is come in her position has to enforce the clean air act. if my friends want to change the clean air act, try it. every time you tried it we had beaten you. so this is their way to try and to harangue the administration. harassing and haranguing. this nominee. i happen to know that. and it's because they are trying to get her to change the views of the obama administration and the views of the american people. i'm just going to show one chart. here's the deal. fringe, french. here's the last bowl. 78% of voters say that clean air is extremely or very important.

69% of voters favored epa updating standards with stricter limits on air pollution. they are out of the mainstream. they are forcing their pro-pollution, they're trying to force their pro-pollution stands on the obama administration. and they are not going to take it. and we are not going to take it. and i agree for nominees, it out to be 51. for nominees it ought to be 51. otherwise no president will dedicate 13, republican or democratic. >> thank you, madam chair. and thank you for the incredibly fair process that you had in this committee. of providing plenty of time in the first round in an additional round of weeks for questions to be fully addressed. what we have today is an embarrassing dereliction of public responsibility. and the word embarrassing doesn't capture the great harm that is coming from members of

this body, deciding to abuse the advice and consent obligations that this body has, this senate has under our constitution. to abuse it and turn it into a tax vote on judiciary and about executive branch. today in this room it's an attack on the executive branch. say we're going to use advice and consent to underline the other coequal branch, the executive branch of the united states government. just a few days ago, we had a situation where we couldn't get a vote on a judge for the d.c. circuit. then it was an attack on the judicial branch, and it wasn't just isolated incidents. a coordinated strategy, playing out at the committee level and on the floor, to undermine the bipartisan or nonpartisan nature of the judiciary, and to damage and delay the president because

he happens to come from a different party than the members who are missing in this room today. i am deeply, deeply disturbed by this strategy of abstraction. i have here, i borrowed the chairs binder clip full of questions, hundreds of pages of questions, asked and answered. i must say answered incredibly articulately and seriously, thoughtfully. and these are available. the public can certainly take a look at these. this lays out the thoughts of someone who works hard on the ground to make the law work, as it's been stated not the perspectives of an idle law. this is not soap book, soapbox responses. these are serious thoughts about the responsibilities under the law, as asked for in these questions. and so i just, once these

questions have been asked and answered as was pointed out, over 1000 questions asked and answered, then it's time to take the vote, an up or down vote. on the floor of the senate, we are seeing this strategy continue. and i have no doubt that after our nominee passes out of this committee that there will be a destruction on the floor as well, trying to prevent an up or down vote on the nominee. we had the first ever filibuster of a defense secretary, first ever in the history of the united states of america. and ironically that nominee was a former republican senator. but it was more about attacking and undermining a newly elected president from leading our nation in taking on the serious issues than it was about who the nominee was. and today we have an extraordinarily qualified nominee. it's not about the nominee. it's under money the ability of the executive branch to do what

is required under the law for clean air and clean water. you know, i think that if anyone doubts the public of clean air and clean water, just have to take a little trip to some of the countries in the world that don't have rules that control this. many of my colleagues on both sides of the aisle have been able to visit china where you can't see 100 yards. you can't see 100 yards because there's so much in the air that it's equivalent to smoking as i understand it more than a pack of cigarettes a day just to walk down the street. that is not the america we live in because of the work we've done to say that we want to keep those particulates, those pollutants out of here. we want to fish in our stream that you can ac ask we not only have the fish live, but beat the fish. this is part of our natural resource-based economy where our air and our water are an incredibly important resource. so, chair boxer, thank you for

your leadership on this. we as a cynic, as the body are failing to meet our responsibilities of advising -- advice and consent. that failure is unacceptable and, therefore, we need to have that conversation among our members about how we're going to change how the senate works. because the courtesy that has been extended has now become a courtesy abuse that is a complete dereliction of responsibility and an unacceptable attack on other branches of the government. so i look forward to working with the chair and my colleagues as we take on this very important issue so that the senate, once considered a great deliberative body, can at least become a functioning audie. thank you, madam chair. >> thank you, senator, for all your leadership and i want to thank my democratic colleagues are being you. let the record show that senator gillibrand had to leave in order to go to the white house for a meeting on another very important issue about sexual

harassment and crimes in the military. i want to just put in the record this other poll, actually this quote, by william and christie, who served as epa administrators republicans. it's easy to forget how far we've come in the past 40 years. we should take heart from all this progress and not, as some in congress have suggested, seek to tear down the agency that the president and congress created to protect america's health in the environment. well, i would say this to my republican friends if they were here, why don't you listen to these republicans who are mainstream republicans and get out of the french line? get out of the french line. the american people want clean air. they want clean water. they want safe drinking water. they want action. they want tougher rules and regulations to protect their health and the health of their family. ask how many of the kids were in

your state, as company have asthma, how many know? have the fans will get a. get out of the french lane. work with us. i would say this nominee, one of the most qualified ever in front of the eda company was put up on march 4. i'm going to close with some of her supporters. robert and go, vice president domestic policy at american automotive policy, upon confirmation, we look forward to working with gene mccarthy who has demonstrated a willingness to consider the views of those impacted by the agency and to find practical issues facing the audit and issue. not good enough for the fringe. javier, president and ceo of the united states hispanic chamber of commerce.

throughout her career she mccarthy has shown environmental responsibility can exist side-by-side with economic growth. they are mainstream. my colleagues should get out of the french. david levine, ceo and founder, america's sustainable business council. he says they apply the nomination of gene mccarthy. we believe ms. mccarthy can provide the strong leadership, including working collaboratively with the business community. so i say to my republican friends, get out of the fringe lane and join the mainstream of business in this country. it goes on and on. stephen harper, global director of environment of energy policy at intel. we haven't always agreed with every action taken under mccarthy's watch that we always respected her rocksolid dedication to protecting the environment and a commitment to finding solutions that protect our nation's economy. it goes on.

chairman and president of the southern company has beautiful things to say. william, partner at -- represents have beautiful things to say. and i ask unanimous consent, there's no one here, to put the rest of these into the record. it goes on and on. it's business. it's organizations. it's respected individuals in our communities. how about this? for republican governors, including jodi, republican governor of connecticut. she says gina's leadership on issues our national respected it comes as no surprise obama has reached out to her. she's a dedicated public servant. i mean, gene mccarthy is one

of the most mainstream nominees ever to come before the senate. and the fact that everyone of my republican colleagues on this committee would not show her the respect of being here today, and the hiding from the public arena. the fact that they would treat her in this way, after she answered respectfully over 1000 other questions, -- i guess not. did she say she wants to redefine the waters of the united states so that nobody has any rights to clean water? i guess not. did she say she wanted to overturn the superfund program? i guess not.

i don't know who they want to be the head of the epa. may be the head of some polluting oil company or coal company. that would make them happy. but that's not what the american people want. the american people want in overwhelming numbers their health protected. and if the republicans think we are going to be quiet about this, they have another guess coming. gene mccarthy is going to be, the poster child of their instruction is him. gina mccarthy is a woman who deserves this promotion. 78% of voters say that clean air is extremely or very important. 69% of voters favored epa updated standards with stricter limits on air pollution. i say to my republican friends on this committee, it's a pleasure to work with them on

infrastructure. but when it comes to the environment, there in the right fringe lane, and were not going to let the people forget it. we're going to take the story of gina mccarthy and her success, a record, her fairness, her broad support in america. we're going to take this to the american people. and so will the president, i assure you of that. and by the time this is over, i hope the republicans will recognize this is one of the best nominees either party could ever find to head the epa. and i want people to understand today that we did not intend to vote this nominee out with democrats. that was not my intention. i would not do that unless forced to. let's be clear, i would not have

voted this out just with democrats. i am asking my republicans to come home, to come back, to your response to the. if you want to be here and vote no, th be here and vote no, thas your right, but be here. so don't anyone say we would have voted it out if senator lautenberg and senator baucus was you. know, that was not the intent of the chairman at all. anyone saying that is incorrect, any reporter. today, we are asking the republicans to come back, and we will schedule another markup. it is my intention if they continue this obstructionism to report this nominee out, if i have to, with just the majority members. that was not my intention today. that was never my intention today. i never even knew they were

boycotting this until i got a letter this morning. so let's be clear. the republicans have blocked this. they have done it on purpose. they have done it by making up false accusations she never answered their questions when she answered every one of them. there in the record for everyone to see. and i will continue this. i will talk to senator vitter on the floor as we work together as a little bit strange that we're working together on wrda, and we will get that done. it is an odd situation, you have a team working together on public works when it comes to the environment. we have clashes every single d day. and this is an example of one of those clashes. unnecessary. and we intend to keep on

pushing, and we invite them back to do their job. maybe some of them slept in this morning. maybe this is a little early for them to get up. we stand adjourned. [inaudible conversations] >> on c-span2 this morning, senator bernie sanders talks about issues facing the u.s. postal service. >> the center for strategic and budgetary assessments is releasing a report on the future of u.s. special operations. this morning a discussion on the key findings from the report and have special ops has changed since 9/11. live coverage from capitol hill starts at 9:30 eastern on

c-span2. >> one week after president obama renewed his call for closing the guantánamo bay prison, the constitution center hosts an event on operations at the facility. you can see the event with the former guantánamo chief prosecutor live today at 10 a.m. eastern on c-span. >> you're watching c-span2 with politics and public affairs. weekdays feature live coverage of the u.s. senate. on weeknights watch key public policy events. and every week in the latest nonfiction authors and books on booktv. you can see past programs and get our schedules at our website. you can join in the conversation on social media sites. >> senator bernie sanders spoke wednesday at the u.s. postal service operations and effort to preserve saturday delivery service. he noted the postal service operated as a probable federal agency until the required to

fund 75 years of future health benefits for employees. here are his remarks. >> to say a few words about an issue that i think will end up a discussion here in the senate. it is of great concern to the american people in general, and that is the need for congress to pass comprehensive postal service reform as soon as possible. the postal service is of enormous importance to tens of millions of people, people in rural states like maine or vermont, to businesses all over this country, not to mention the hundreds of thousands of employees who serve us so well in the postal service. mr. president, about two years ago the postmaster general of the united states came up with a plan for the postal service that would have, and let me just tell you and the american people what it would've done. it would have eliminated about

220,000 postal service jobs, including the jobs of many american veterans. it would've closed about 15,000 post offices throughout the country, many of them in rural areas like the state of vermont. it would have eliminated half of the mail processing plants in this country. it would have substantially slow down the delivery of mail i eliminating overnight delivery for first class mail, and it would've ended saturday mail delivery. many of us here in the senate and in the house thought that that plan was a disaster for our country, for our economy, and for american workers. and we organized and fought back against that plan, and the goal was to convince the postmaster general to substantially revise the ideas that he had brought forth. instead of closing down 15,000

post offices, the postal service, in fact, came up with a plan to reduce the hours of service at about 13,000 post offices throughout the country, and many in the state of vermont. was i happy with that? know, to be frank with you. was it a lot better to see reduction of two hours or four hours dancing the entire world post office shut down? it was. instead of closing down, half of the mail processing plants in this country, the postal service is decided that they would keep about 100 of the mail sorting centers that were originally on the chopping block open. in other words, they did shut down some that not anywhere near as many as they had intended to shut down. instead of ending overnight delivery standards, the postal service has adopted a plan to keep overnight delivery going, although not as strong as it previously was.

and, although it took an act of congress to the appropriations process, the postal service for the time being at least as decided to obey the law of the land and not eliminate saturday mail delivery. mr. president, last year the senate passed a comprehensive postal reform bill that did not go as far as i would have liked, but it was certainly a substantial improvement over what the postmaster general had proposed. and we won that vote 62-63 vote, bipartisan support for. unfortunately, the house of representatives failed to even schedule a vote on the floor of the house, for any repost reform bill. as a result nothing was signed into law last congress, forcing us to start this process all over again. what i fear the most, mr.

president, is that all of the work that the senate did last congress, and the committee of jurisdiction worked hard on it, some of us put together an ad hoc committee of 15, 16 members of the senate who worked hard on that issue, but i feel very much that all of that work, to say the postal service, will go for not. if congress does not get its act together and pass a comprehensive postal reform bill as soon as possible. so, mr. president, in my view the time has come to send a very loud and clear message to the leadership of the house, the leadership of the senate, the postmaster general of the united states, and the president of the united states. and that is that in the midst of this terrible recession, which has significantly impacted the middle-class and working families of our country, it is imperative that we do not

destroy thousands and thousands of decent paying middle-class jobs, including the jobs of many veterans. and that's what happens when you make the kind of cuts that the postmaster general has been talking about. mr. president, in the midst of this terrible recession, it's important that we do not harm small businesses who depend upon the postal service to sell the product. this yesterday, i met with some business in the state of vermont for whom it is enormous important that they know that there is a strong postal service that can provide rapid delivery of the packages that they produce. it is in terribly -- terribly important that we understand many senior citizens depend upon the post office or their prescription drugs. it is also important again for the economy that we not slow down the delivery of mail, that

we do not close half of the mail processing plants in this country. now, here's the important point. there is no question that the postal service has financial problems, nobody disagrees with that. .. >> over a ten-year period. let me repeat that. the postal service as a result of a decision in 2006 is forced

to prefund 75 years, 75 years of future retiree health benefits over a ten of year period. clearly, no other government agency at the federal level, state level or local level comes anywhere close to that kind of onerous burden. and, in fact, to the best of my knowledge, no private sector corporation in this country is burdened with a mandate anywhere near that extreme. this prefunding mandate is responsible for about 80% of the postal service's financial losses since 2007. let me repeat that. you're going to read often, we read often postal service facing severe financial problems, so let me repeat. this prefunding mandate is responsible for about 80% of the

postal service's financial losses since 2007. before this prefunding mandate was signed into law, the postal service was making a profit, a profit. in fact, from 2003 through 2006 the postal service made a combined profit of more than $9 billion. that is a significant profit. and i should also note that despite from what we read in the media, the postal service actually made a profit of $100 million during the last quarter sorting, processing and delivering the mail. so if we are serious about dealing with the financial problems facing the postal service, first thing that we have got to do is to end this prefunding mandate once and for all and allow the postal service

to use the $48 billion sitting in the future retiree health fund to keep the postal service healthy and thriving for years to come. so when we talk about the financial problems facing the postal service, we have got to understand that through a very, very significant degree some 80% of the problem was caused by the united states congress as a result of a decision made in 2006. now, it is clear to me and i think all americans that we live in the year 2013, the world is changing, we are coming more and more a digital economy. but it is also clear to me that the postal service does not survive by cutting back on its services to the american people and to the business community. mr. president, ford to save -- in order to save and strengthen

the postal service, i have introduced the postal service protection act, s. 317, and i'm very proud to say that bill now has 23 cosponsors. and let me thank all of the senators who are cosponsoring this bill, and those are senators baucus, blumenthal, brown, casey, cowen, franking, gillibrand, heinrich, lautenberg, leahy, manchin, stab now, tester, tom udall, senator warren and senatorwide everyone. and -- senator wyden. and, mr. president, i would ask that senator cardin be added as a cosponsor to s. 316. i would ask permission -- >> without objection. >> mr. president, i am delighted that we are making progress on real postal reform not only here in the senate, but in the house as well, and i want to thank

congressman peter defazio from oregon for his leadership efforts in cosponsoring the exact same bill in the house as we have in the senate, and that now has 139 cosponsors. so we have 24 cosponsors now in the senate, and in the house that bill has 139 cosponsors which tells me that the american people and their representatives here in washington understand how terribly important it is that we pass serious postal reform. and let me just very briefly talk about what is many that legislation -- in that legislation, what the legislation, if passed, would accomplish. that bill would reestablish strong overnight delivery standards to insure or the timely delivery of mail. when people put a letter or a package in a mailbox or go to

the post office, they want to know that that letter or package is going to be delivered in a timely manner, and we do that. this legislation would prevent in order to make sure that we do have timely mail delivery, it would prevent the closure of hundreds of mail processing plants throughout this country and save the jobs of tens of thousands of workers. this legislation would end once and for all, as i just mentioned. the disastrous prefunding mandate that is the major problem facing the postal service. this legislation would allow the postal service to recoup over $50 billion that it has overpaid into the civil service retirement system. and this legislation would prevent the postal service from ending saturday mail delivery. further and significantly, our bill would give the postal

service the tools that it needs to compete if the 21st century -- in the 21st century. i understand, we all understand the world has changed. so it's not simply a question of finances. it's a question of giving the postal service the ability to compete in today's market. and to allow it to sell innovative, new products, new services, and as a result, raise more revenue. we need a new vision for the postal service. and this legislation would provide that vision. mr. president, many americans don't know this, but right now the federal law, federal law is tying the hands of the postal service in terms of the products and services it can provide. so we say to the postal service, we're upset you're not making enough revenue, and yet you tie the hands that prevent them from

going forth in terms of producing new products and services to raise the revenue that would help their bottom line. this legislation unties the hands of the postal services and would develop a process to allow the postal service to explore offering the best products and services that would raise the most revenue. let me just give you an example of some of the absurdities that the postal service is now operating under, mr. president. if you were to go into a post office in maine with a document ask you say to the clerk who was waiting on you say, listen, i need you to notarize this letter, what the clerk would tell you is, sorry, it is against the law for me to notarize that letter. now, that's pretty absurd. if you were to walk into a post office, as i'm sure every day people do, and say, listen, i need you to give me ten copies

of this document here, i've got to send it out to ten different people, they would say, sorry, it is against the law of the united states of perk for me to make -- of america for me to make ten copies or three copies or one copy of your document. furthermore, it is against the law for post offices to sell fishing or hunting licenses. well, in my state we're a rural state, and people might in certain parts of state or other parts of america like to be able to walk into a post office and say, hey, how do i get a fishing license? how do i pick up a hunting license? against the law. right now if somebody has a check that needs to be cashed, it is very difficult to cash that check in a post office. and what you see, by the way, all over america are payday lenders who are charging outrageous rates to low income

people to cash a check, a service that i suspect the postal service could do, make some money and save people a whole lot of money by not having to pay these outrageous rates. mr. president, today if you were to pick up a case of beer or a case of wine and you wanted to send it to a relative in california, it is against the law for the postal service to deliver wine or beer. currently, it is against the law for the postal service to engage in e-commerce activities. now, all of that, you know, what we say to the postal service we want you to go out, we want you to be competitive, but by the way, you can't do this, you can't do that, you can't do that. and on top of that we're going to cause a massive financial problem for you demanding that you prefund 75 years of retiree health care in a inden-year period -- in a ten-year period.

good luck. well, that has a lot to do with why the postal service is facing the serious financial problems that it is today. mr. president, we have got to give the postal service a lot more flexibility, and we have to give them the opportunity and the ability to develop a very different bids model that -- business model that it currently has. in my view, we need to give the postal service the authority to do what ore -- what other countries throughout the world are doing to respond to the shift toward electronic mail and away from hard copy mail. fewer and fewer people are using first class mail. we understand that. they're using e-mail. that's the reality, and we have to respond to that. let me give you just a few examples. this really is just a few, of what other postal services around the world are doing. in sweden the post office will physically deliver e-mail correspondence to people who are

not online or don't have access to a computer. could that work here? i don't know. it's an interesting idea. in switzerland people can have their physical mail received, scanned and delivered into their e-mail boxes by the postal service. in germany the post office will allow customers to communicate through secure servers. people, i think, are increasingly and legitimately concerned about who's going to get into their e-mail, and in germany they provide secure services. could that work here in the united states? i don't know. is it worth exploring, worth looking into? i think it is. mr. president, um, the point here is that the postal service must be given the opportunity to innovate and implement an expanded business strategy for a

changing world. can't keep doing the same old same old in a world that is changing. for over 230 years and enshrined in our constitution, the postal service has played an enormously important role for the people of our country and, in fact, for our entire economy. a strong postal service, a postal service that delivers mail and packages in a timely manner is extremely important for our economy. and that mission today remains as important as it has ever been. so, mr. president, let us stand together and fight to save the postal service, not destroy it. let us stand together in the midst of this recession to fight and save hundreds of thousands of jobs. i again want to thank the 23 cosponsors on my legislation, look forward to having more.

but let's go forward together to save the postal service. and with that, mr. president, i would note -- yield the floor and note the absence of a quorum. >> c-span's road to the white house 2016 is in new hampshire and iowa today. at 6 p.m. eastern, louisiana governor bobby jindal speaks at a new hampshire republican state senate fundraiser live from manchester. and live at 8 p.m. eastern, kentucky senator rand paul speaks at the iowa republican party lincoln day dinner many cedar rapids -- in cedar rapids. >> this department may be nearing a stage where the frequency of this crime and the perception that there is tolerance of it could very well undermine our ability to effectively carry out the mission and to recruit and retain the good people we need. that is unacceptable to me and the leaders of this institution. and it should be unacceptable to everyone associated with the

united states military. we need cultural change where every service member is treated with dignity and respect, where all allegations of inappropriate behavior are treated with seriousness, where victims' privacy is protected, where bystanders are motivated to intervene, and where offenders know that they will be held accountable by strategy and effective systems -- by strong and effective systems of justice. >> this weekend on c-span, defense secretary hagel outlines new initiatives to fight sexual assault in the armed services. saturday at 1:40 p.m. eastern. sunday morning at 10:30, gregory hicks before the house oversight committee on the attack in benghazi. on c-span2's booktv this weekend, google's eric schmitt and jared cohen share their world of one where everyone is digitally connected. and on c-span3, former cia chief

covert analyst jay klein sunday at 3. [inaudible conversations] >> treasury secretary jack lew and acting irs commissioner steven miller testified wednesday before a senate be appropriations subcommittee on their department's 2014 budget request and the effect of automatic spending cuts on their employees and operations. this hearing is an hour, 40 minutes. [inaudible conversations] >> good afternoon, everybody. the subcommittee on financial services and general government will come to order. today the hearing will be about

the department of treasury's request for their fiscal '14 appropriations, and we will also hear, take testimony from acting director mr. miller from the internal revenue service, and we will also be listening to the ig for the department of treasury to give us ideas and recommendations on how we can improve the functioning of government, avoid any boondoggles particularly in the area of technology and also we're taking hearing particularly on irs, we're not only going to talk about what are the best ways to collect the money, but also make sure we have a seasons of frugality on how we spend the money. so we'll look forward to that. i want to know that i'm kind of a pinch hitter today for chairman lautenberg. senator lautenberg is the chairman of the full committee,

and he wants everyone to know that he's eager to begin work on this new bill. he could not be with us today. and rather than make the perfect the enemy of the good with senator lautenberg chairing himself, i said i would move this committee forward. and, really, senator johanns, i'd like to thank you as the ranking member for your courtesy here. i know you also have to leave, so we're going to defer to you on some of the early bird questioning and really function in a bipartisan way. we're going to have two panels, as i said, on both the secretary of the treasury and focusing on irs. the treasury department's largest bureau, irs accounts for half of this subcommittee's funding. we're so pleased that secretary lew could join us, and he's serving in a new role, in a crucial role at this very important time in our economy. secretary lew knows better than

anyone after two tours of duty as omb director the importance of the appropriations process to create conditions that generate jobs today and grow our economy. that's why i support the president's budget level of 1.5 trillion same as we agreed to in the american taxpayer relief act that just passed four months ago. with we know there will be a difference of opinion with the house who is marking up at the ryan budget level of $996 billion. so, um, there are going to be issues there. but right now the issue is to hear what does treasury need and what it is that we need. this book -- this week is public service recognition week when we support public employees for their tireless work. the treasury staff are on the

job providing value for the taxpayers. they do things like sanctions, and there are sanction experts at the office of foreign asset control, target the sources of finances to disrupt pursuit of weapons of mass destruction. they're the intelligence analysts at the financial crimes enforcement network, and they follow the financial paper trail to make sure that the crime doesn't pay for terrorist financing, organized crime or the narco traffickers. they're the payment specialists at the fms service that insures that social security benefits get to our seniors, taxpayers get their refunds and benefits go to our disabled veterans. we could go through agency after agency, and these agencies are on the job serving america. i am deeply troubled about what we face during sequester, and i'm interested in the impact of is sequester both on the functioning of the department of

treasury, and mr. lew, we'll look to you for your commentary about it. i've heard it firsthand because i have world class treasury department agencies in my state from irs to fms and some other very important agencies. but we're also interested in what is the impact of is sequester as you see it on our economy and the failure to get, you know, our budget clear so that we could keep our economy on track. so we look forward to your commentary, and with that i'd like to turn to senator johanns for any comments that he'd like to have. >> madam chairwoman, thank you very much. my comments will be relatively brief because, as indicated, i have to move on in about an hour. but i did want to offer some opening comments to all of the witnesses who are here today. we appreciate your attendance.

today marks my first hearing as the ranking member of the financial services and general government subcommittee. i do appreciate the opportunity to serve on the appropriations committee given its important role in providing oversight over discretionary spending. as we begin our review of the president's budget for fiscal year 2014, i will note that i am pleased, i'm glad the president acknowledged that two important entitlement programs, social security and medicare, are in trouble and must be strengthened. to his credit, he has proposed a adjusting the formula that is used to calculate social security and medicare cost-of-living adjustments to more accurately reflect inflation rates. but that's just part of the equation. i am disappointed this budget does not make the necessary strides to addressing our nation's debt.

unfortunately, the budget's small move toward entitlement reform is overtaken by increased spending, added debt, higher taxes and, additionally, the president's budget calls for dismantling the bipartisan spending reductions he signed into law as part of the 2011 budget control act. this would leave less than 12 billion of annual deficit reduction compared to the this year's projected deficit of $845 billion. so the task before us is significant if not enormous. if the president really wants to stimulate the economy, i would recommend he reverse his record of increased spending and taxes. it just seems straightforward to me as a former mayor, council member, commissioner at the local level and governor that money left at home with hard working americans means more

money exchanging hands on main street. we have to reduce the deficit and forge a path to a balanced budget. to make any real progress toward reducing government spending and insuring the future solvency of social security and medicare, we all must engage in a serious discussion about how to put entitlement programs on sustainable path not only for my generation, but for the generation behind us. my hope is that the president's reck fission of the unsustain -- recognition of the unsustainable path of our entitlements is only a first step, one that will be followed by additional meaningful proposals and leadership. there are willing partners. i, myself, am a member of the group of eight senators who have been working for a long time on coming up with ideas to deal with the budget issues. as a member of this committee in

the senate, i will continue my efforts to do all i can to be a part of the approach to balance the budget and rein in spending. we do need to repeal costly mandates, lower taxes, increase regulatory transparency and accountability. americans are looking for us to do the work here in washington. we must work to promote stand bl economic growth -- sustainable economic growth. we do so through a tax code that recognizes that hard work and achievement are worthy of reward, not penalty, and by making difficult decisions necessary to put our country on a path to long-term financial security. so as we review the budget requests, i'll look forward to working with the chair and other members of the committee and subcommittee to do our part to address the mounting financial issues and promote a stronger economy for our nation. thank you, madam chairman.

>> i want to welcome two of my colleagues, senator udall who is new to the committee but not few to appropriations -- but not new to appropriations. excellent experience in the house, and to our colleague, senator moran. what i would like to suggest we go right to the treasury secretary. as you know, we had to change the schedule. senator johanns has to leave, secretary lew had to readjust. so i'd like to go right to him, comments you'd like to him, comments you'd like to make, and then we can hold down the fort. then i'll go down to my questions, and we'll follow the regular order. does that sound like a good way? >> that sounds like a -- >> mr. secretariesome. >> thank you very much, chairwoman mikulski, members of the committee. i appreciate this opportunity to speak about the treasury budget,

and i'd just like to say that i am sorry my friend, senator lautenberg, isn't here today, and i only wish him well and that he returns soon. i want to start by thanking the talented public servants at the department of treasury. tear thoughtful, dedicated, focused, tear goal is to further the mission of the department and the american people. it's really my honor to work with them. and i'd like to begin with an overview on the economy and then get into the treasury budget. our economy is much stronger today than it was four years ago, but we still need policies that will help create jobs is and accelerate growth. since 2009 the economy's expanded for 15 consecutive quarters, private employers have added 6.8 million jobs, and the housing market has improved. consumer spending, business investment are solid, and exports have expanded. but very tough challenges remain. families across the country are still struggling. unemployment remains high, economic growth needs to be

faster, and while we've made progress, we need to do more to put our fiscal house in order. at the same time, political gridlock in washington continues to generate a separate set of headwinds including harsh and indiscriminate spending cuts from the sequester that will be a drag on our economy if they're not replaced with sensible policies. the president's laid out a strategy to address these challenges. his path forward replaces sequestration, takes a balanced approach to restoring our nation's long-term fiscal health. it makes important investments in manufacturing, infrastructure and worker training. these investments are critical. they will help grow our economy and create jobs now and well into the future. i was in cleveland yesterday visiting with business owners and manufacturing workers, and it's absolutely clear the american people want us to focus our economic policies on growth and jobs. now, as our budget today demonstrates, treasury helps shape and implement the president's economic policies from streamlining the tax system and reforming the financial system to securing our interests abroad and increasing lending for small businesses at home.

and whether it's making social security payments or producing our nation's currency, treasury touch it is lives of almost every american. while our responsibilities are extensive, we're committed to meeting our obligations as efficiently as possible and at the lowest cost to the taxpayer. over the last four years, treasury has made enormous progress to make the department leaner and more efficient. today we build on that momentum by identifying nearly $400 million in additional savings. in this budget we wring out wasteful spending and consolidate redundant programs, we cut travel costs and sharply reduce expenses. we use materials more effectively at the bureau of engraving and printing, we save on rent at the bureau of fiscal services, and we provide more of our services electronically so we can continue to cut down on paper and paperwork. in total, we're reducing spending by 2.3% when you exclude the irs and compare this year's budget to what was provided during the past fiscal year. the irs is the pain area where

we're -- the main area where we're requests increase. these resources will allow the irs to improve enforcement. with this new funding, the irs will crack down on those who are evading the law and bring in more revenue. we expect to collect $6 in revenue for every dollar we spend. the irs can meet its responsibilities under the health care law which lowers the forecast budget deficits by more than a trillion dollars over the next two decades. the affordable care act is helping to slow growth of health care costs and continued implementation of the affordable care act will help improve the quality and efficiency of our health care system. nevertheless, in order for the irs to carry out its obligations as mandated by congress under the health care law, it needs the appropriate resources. beginning in 2014 millions of americans will receive unprecedented tax benefits that will make buying health insurance affordable. the irs must have the necessary funding to assist americans as important provisions of the law go into effect.

for example, the irs must invest in new technology and modify existing irs tax administrative systems. these efforts will facilitate prompt and accurate information of the premium tax credits while protecting taxpayer information. i'd like to point out that sequestration has taken a toll on treasury, but we're doing everything we can to absorb these cuts before reducing services. we've scaled back training, delayed contracts and limited purchases. but even with these measures, the brunt of the cuts is being felt by treasury's hard working public servants. at the irs, for example, workers will have to stay at home without pay for as many as seven days between now and september. this will erode our ability to provide quality service by forcing the irs to answer fewer calls and creating unexpected and unwanted delays in responding to taxpayer questions. it will also lead to fewer enforcement actions and reduced revenue collection. the fact is the sequester is not only hurting treasury's employees, it's or hurting taxpayers as well.

as i said before, sequestration must be replaced as soon as possible. the president's budget does that, and i hope this committee and your colleagues will take action so we can get this done. with that, i thank you, and i look forward to answering any questions that you have. >> senator johanns? >> thank you, madam chair. secretary lew, thank you for being here again. let me, if i might, focus some questions on a piece of legislation that was passed a year or so ago, dodd-frank, which you're very familiar with. and i'd like to review -- revisit a question that was posed the you about a month ago -- to you about a month ago, and it was posed in a very bipartisan way. senator tester and i wrote to you. you are the chair of fsoc, and the question is this: what metrics is fsoc using to

determine which nonbank companies are designated systemically risky? more me it seems like -- for me it seems like a very important question because those entities that are going to be hugely impacted by this designation should know where the lines are. and so i'd just like to pose to you again what those metrics are and whether you think it's important for those metrics to be public. >> well, senator, the general approach is something that is public. we're looking at whether or not there's a risk to the financial system, and that really amounts to a question of a combination of factors including what the nature of the institution is, the size, the scope, the transmission mechanisms that would indicate whether or not if there were a financial problem with those firms, there would be

contagion in other parts of the financial system. the individual analyses that are going on are matters that are being discussed with the companies, but we haven't disclosed a public list of the companies, and i don't think that would be appropriate unless and physical designations are made after this point in time those companies would have the ability to, you know, exercise any concerns they have in the review of those regulations -- of those actions. so i think there is going to be every opportunity for the fsoc to make a determination to put forward the analysis and then for that analysis to be reviewed. >> i don't want to get stuck on this although it's a hugely important issue. but as a former cabinet member myself who regulated industries, it seems to me extremely important that you be able to say to the industry this is what qualified you to be regulated,

this is what excludes you from that regulation. and i kind of look at this in the same way. seems to me fairer to just alert people out there, companies, whoever. this is why you're going to fall into this kind of hyperregulation under dodd-frank. what am i missing here? >> well, i think that the designations are still being reviewed. so to some extent, to the extent that there are nonbank designations in areas where we've not yet taken action, there's not yet a public record to review. if actions are taken, there will be a public record to review, and it will be very much substantiated by consistent analytics that get at the question of the scope of risk and the -- whether or not the risk would spread. and there's a great deal of attention being given to make certain that those questions are

being asked in a systematic way. i think that as we, you know, we're in the early stages of implementing a lot of dodd-frank. this is a new, the financial stabilization oversight council is a new entity. bringing together part regulators to make decisions like this is something that is being exercised for the first time. so it's difficult of to have a long history of experience to go back on. but i can tell you that as chair of fsoc i am very much focused on making sure there is a kind of procedural regularity about the way it's being reviewed so that there is consistent analysis that when it's reviewed can withstand scrutiny. so i'd look forward as, assuming designations are made going forward, being able to to demonstrate that by the actions. >> if i might just wrap that up by saying i also seven on the banking -- serve on the banking

committee. we spend hours in hearings trying to come to grips with this concept of systemic risk and what to do about it. and so whatever brain power you can put behind it and as much transparency as possible is very critical. i'm confident in saying that's what we were driving toward as members of the banking committee. let me, if i might, stand on the same piece of legislation. chairman bernanke testified in front of both the senate banking committee and the house financial service committee that dodd-frank's section 716 does nothing to make banks safe or, and the only -- safer, and only increases the costs of derivatives for end users. it's an end users issue, and it should be fixed. his testimony was very clear on that. do you agree with that? i think there's a willing group of republicans and democrats saying we've got to do something on this. i've been working on this since

the passage of dodd-frank, although i'm not -- i wasn't a supporter of dodd-frank. congressman frank supports it, sheila bair, paul volcker, others. do you agree that we immediate to fix this? >> senator, i think that we're still in the process of seeing how these issues are addressed by the regulatory agencies. the fed still has some rule this is this area that are not yet completed. i think there are questions about end users, the definition of end users is always a challenging one. but i think we have to see where they end up in order to come back hen and see -- back then and see whether it addresses the concerns that have been raised. >> i'll wrap up with this, because i'm out of time, and i don't want to dominate the questioning here. senator tester and i have been working on this. again, i think we're trying to be very fair, very bipartisan about this. this is not a gotcha sort of thing.

we just see some problems that we'd like resolved. if you could send your staff in our direction, we'd be happy to lay out for you our thinking and what we're proposing to try to deal with these issues. >> i'd be happy to have our staff follow up, senator. and i think there are legitimate questions, you know, for, you know, a firm that is trying to just run its business and have its process, you know, fuel on site. but the line between taking care of your regular business and speculating is a thin one, and i would like to see where the regulators end up before reaching a determination as to whether or not there's a need for further corrective action. >> thank you, madam chair. >> mr. lew, you have a big agency and a very, very complex agency. and looking at this year's appropriations, we see that for treasury if we take out irs

which is the biggest agency under your umbrella of agencies, of course, the treasury department is really an umbrella function, very key function that the request is to fund you at $1.3 -- 1.35 billion. that is, in other words, that's what you're funded in the 2013 cr omnibus. this is nearly identical to the 2012 enacted level. now, under sequester your cut $66 million, am i correct in that? >> request i believe that's correct. >> well, it's roughly more or less 66 million. my question to you with all of the issues that you have to deal with in treasury from moving on a new framework related to dodd-frank, with those other things that we ask you to do, to

help the president formulate the fiscal policy, promote economic growth, promote exports, our currency, all of these very complex issues along with implementing sanctions which this congress heartily supports, particularly our stunning success with iran sanctions, two things at the local community that are near and dear to my heart and i know to senator lautenberg, the cdfis that have transformed neighborhoods. my question to you, sir, is what is the impact of sequester on the functioning of your agency, and is it a benign impact or draconian impact? what is the impact of -- >> senator, it is a very real impact. i already mentioned some of the impacts in the internal revenue service. i think it's a very significant thing if taxpayers are

inconvenienced by having difficulty reaching an office to get the assistance and advice that taxpayer assistance offices are meant to provide. i've spent a lot of years in government trying to shorten waiting periods and improve the service that taxpayers and citizens get when they reach the government. if waiting periods get longer and if questions don't get answered, i don't know how you measure the cumulative impact. but for every person who's kept on hold for 15 minutes or half an hour or doesn't get a clear answer, that's a taxpayer who hasn't been well served. for every dollar we don't raise in revenue that should have properly been paid but because we didn't have an enforcement officer, you know, that's just -- it's key to our tax system that we enforce the law and we enforce it as best we can. on the program side, there are real impacts in terms of the direct services we provide. our build america bonds aring being, the benefit is being reduced: our cdf grants, the

benefit is being reduced. they're providing financing for important infrastructure projects. these are the kinds of things that we wouldn't, i don't think we would have chosen to cut. but because sequestration is across the board and it treats everything equally, they all get cut. i don't think that there's any way to have flexibility to fix the problems at an agency like treasury or the other agencies of government. i think that it's just shifting around reductions after years of having tightened our belts. i think that the challenge going forward is going to be to replace across-the-board cuts with a sensible policy which is balanced between revenue and spending cuts. and i think there should be some entitlement savings in a balanced panel where we solve -- package where we solve the medium and long-term problem. something that's not specific to treasury but i think all of us should worry about is

cumulatively sequestration is going to reduce our economic growth by a half a percent or more of gdp. that translates into 750,000 full-time job equivalents across our economy. right now our economy is grow, but not as fast as we would like. if i could sit here today and testify for some other way to increase economic growth by a after a percent of gdp and to create 750,000 job, people would think that is really important. well, sequester takes that away from us. we could get the benefit of half a percent of gdp growth and 750,000 jobs by replacing sequestration which is why the president put tough things in his budget as an alternative to sequestration. >> so, first, sequester has a big impact on the functioning of your agencies. in your proposings the -- appropriations the bulk of the requests for treasury is 12.8

billion for irs. for the functioning of headquarters, the implementation to sanctions to financial crime, other fms, important agencies, it's a billion, 316 million. my point is this, you're saying that because what we're doing with sequester in our government whether it's at treasury, whether it's dod, the bill impact on contractors and civilians to nih, the future thinking of tours and things that exports and medical devices and pharmaceuticals that we can sell around the world and end misery, are you saying we're not only sequestering employees, but it's having a draconian impact on our economy, is that right? >> it's absolutely having -- >> and would you give us a sense of you've now been in europe

where they've got austerity bigtime, a with a capital a, whether it's the french or whatever. what is your view of a, of an approach with the sequester on our economy, and not to be critical of other governments and their policies, but the consequences. has it really -- it might have lowered some public debt, but where has it got them in terms of their economy? >> well, i think before you even get to sequestration, the decisions that the united states made in 2009 to take immediate action to deal with getting our economy growing after a deep, deep recession to fix the financial system that was in collapse, our economy is back on its feet. not growing as fast as we would like but we're growing. europe took a different tack. they started with austerity, and their economies are not, in general, growing very well. now, i don't think we disagree fundamentally that there needs

to be deficit reduction in the medium and long term, and we can't have deficits growing infinitely to dangerous levels. but when your economy is weak, you can't cut your way to growth. you have to get growth going and make the cuts when you can afford to absorb the cuts in the economy. now, getting the sequestration, this is not a time when just as an economic matter putting, you know, 50 or $100 billion of drag on the economy is a good idea. i think we need to get growth up to a level where we're seeing the benefits of growth in terms of higher income and lower spending because people are working and not drawing as much benefits and have the savings kick in when the economy can bear it. i also think that if we take a long-term view, cutting discretionary spending is very short-sighted at this point. we've made big cuts in discretionary spending. in 2011 we -- 2011, yeah, we

agreed collectively to cut over a trillion dollars from discretionary spending over ten years. so the caps that we're working with are already very tight. and to take the caps down below that means you're doing things that i don't think we would choose to do if we were looking at the policies not in an abstract way. i don't think you could find a lot of either elected or appointed officials who want to cut cancer research. but that's what you do when you reduce the caps the way we have. >> senator moran. >> madam chair, thank you very much. i was on this subcommittee for the last who year, i'm glad to be back. -- two years. mr. secretary, congratlations on your nomination and confirmation. madam chair, pleased to be with you. hope senator lautenberg is able to return to the senate in the near future. let me first start on this issue of growing the economy. one of the things i think that treasure key could -- trish ru could do -- treasury could do is

to assist our community banks and ore financial institutions -- other financial institutions in the regulatory environment they faced. senator johanns focused on some of our largest institutions. we pay a lot of attention to community banks, credit unions, their ability to make loans. i am absolutely con convinced based upon the conversations i have with bankers but also their potential borrowers that the regulatory environment is handicapping the ability to make good, solid loans to people within a community because of the regulatory concerns. i have a number of bankers who told me they no longer make home loans, real estate loans to people within their own community because of the onerous nature and potential penalties for making ap error -- an error. and then beyond that the increased regulatory cost is reducing the number of community banks that we have. the necessity of growing your bank, acquiring more banks in other commitments, you have to have a -- other communities, you

have to have a significant increase in the number of depositors and loans in order to cover the increasing costs of hiring people to comply with the rules and regulations. and i'm interested in knowing whether or not you as the secretary of the treasury have thought about how we can unleash the opportunities that banks have to make loans in communities across our country, but particularly in rural communities and community banks. >> senator, i've met with community bank representatives and actual community bankers even in the, you know, eight or nine weeks that i've been at treasury. >> yes, sir. >> and i've been, i've been trying very hard to listen to them, um, as they describe to me what they've describe today you. i guess i'd make a few observations. fist, -- first, both the laws that have been enacted and the rules as they're being enacted are taking cognizance of the concerns of smaller financial institutions. i think one of the challenges we

have in general is that there was a delay in the implementation of certain provisions of dodd-frank, frankly because it was still a political debate as to whether or not dodd-frank was going to be implemented or whether it was going to be repealed. i think we're beyond that. i've made implementation of dodd-frank and getting the rules out of all the agencies that still have rule makings to do a very high priority. because one of the things that's going on is there's a concern about what they don't yet know. there are rules that haven't been settled down, and they're concerned that they're going to go in a way that won't reflect either the legislative or prior regulatory sentiments that took account of the concerns of smaller institutions. i can't sit here today and say exactly what each of the different regulators will do, but as i discussed this issue with representatives of each of the regulatory bodies, i am quite confident that they are thinking about this very hard and trying to address these

concerns as best they can. um, i think that the size issue alone, um, is one factor. we are not taking the view as we implement dodd-frank that a small institution that presents no risk, um, should be treated as if it were a money center bank. i don't know any agency that's doing that. on the other hand, each of the regulators is canning the question is there a -- is asking the question is there a systemic risk that needs to be addressed. and i'm certainly hopeful it will provide the kind of clarity so that some of these issues will subside, and i hope that's in the near future. >> mr. secretary, thank you. i appreciate that answer at least in part. the uncertainty is clearly a problem. >> i've heard that uncertainty is much substance as they're would about. >> and i've had this conversation with your predecessor, with the fdic, other regulators. i serve on the banking committee, serve on this

subcommittee. the suggestion that we take into account is one that is always offered in return to the dialogue or monologue that we just had, and the complaints continue. and so i'm happy to hear you pursue the certainty. please take into account the lack of systemic risk. i only have less than a half a minute left. i'm going to submit for the record a question to you and to acting commissioner miller, and it deals with this issue of the irs' inadvertent release of tax returns that appear to involve contributions to certain political organizations and the information that is released ends up in the hands of other kind of politically-oriented organizations. and i'm going to outline a number of instances where that has happened and ask you and the commissioner to explain what's going on at the irs, what's happening at the treasury department. how did these releases occur, what actions have you or the commissioner taken to make

certain they don't happen in the future, that employees if they are culpable have been punished. nothing i've seen has suggested that the issue of this release of very personal and confidential information which may be used for political means, political outcomes, that there's been any reaction or response from the irs or the treasury department. and i'll submit that for the record, but i'm very interested in making sure that every american whatever their political views are, they can know that their tax return is nothing that's going to become public. >> i'm happy to look at it, and i can say as a principle we totally agree that there should be no politics in the execution of our tax laws. >> thank you very much, mr. treasury secretary. >> [inaudible] >> thank you. thank you very much, madam chair. secretary lew, thank you for joining us here today and thank you for your very nice comments about senator lautenberg. we all hope that he returns very, very soon. and i also want to thank the

chairwoman for, and the members of the committee and the staff, for all their hard work on these issues. you've done an excellent job. secretary lew, i completely agree with your statements that even though our economy is improving, more work is necessary to support job creation and accelerate growth. in every community across new mexico, i hear the same concerns: jobs are hard to come by, and businesses are struggling to stay open. hard working new mexicans feel the recovery hasn't come to main street and to rural towns. can you speak to what efforts treasury has underway to help the recovery reach main street, how are the treasury programs sporting vibrant -- supporting vibrant local economies in cities and small towns, and how do these efforts help support a strong, building a stronger middle class? >> senator, i think we have to

start with the big picture. we need to get overall economic growth growing faster because we do need to grow more and create more jobs to reach all the parts of our country that need to get the benefits of a growing economy. so part of it is at the macro level which gets me back to we shouldn't be creating headwinds for the economy. on a more narrow basis, the treasury department has a number of programs -- some of them we've talked about a little already this afternoon -- from cdfis, the build america bonds that do provide direct support to communities and institutions that are really getting at the need for growth in parts of our states and cities that otherwise might be left e behind. you know, we -- can we're very proud of what we've accomplished in programs like cdfi. we are, through our home

ownership programs, you know, hamp and harp targeting the communities that have been hardest hit. there's more work to do. and i think that we can't look at treasury alone. we have to look at treasury together with what we're doing in the other agencies working together, you know, so we have transportation programs going into some of those communities, we have education programs going into some of those communities. and we've tried in this administration as much as we can to concentrate the efforts of the different parts of the federal government so that we go into an area in a coordinated way. something that i think is very important in our budget, it's not in the treasury budget, is the manufacturing hubs that the president's proposed. you know, i was in ohio yesterday, and, you know, it's really pretty striking when you talk to a business person who was able to get into an abandoned warehouse and create a

high-tech company because we brought the kind of power of coordinating what we do in an area together in less than a year. and, you know, i think if we were to build 15 more of those, that would be 15 more pockets of growth in areas of the country that might otherwise be left behind. i think as you look through the president's budget, there are many things that are about getting at the hard-hit communities. they do all require resources, and it's a trade-off when we make budget decisions both in terms of where we allocate resources and how we make the trade-off between revenues and spending. i think the spending to grow the economy is something that would leave us stronger and leave our economy stronger. >> thank you very much more that answer. and you talk about manufacturing hubs. we are very hopeful in new mexico that having these two stellar national laboratories, good universities, the kinds of resources that you've talked about there in ohio to all put

forward and try to get one of these manufacturing hubs going. i think it's the key to the future, the key to getting in front of the issues we have. so we really look forward to working with you on that. >> and i'd just add, senator, we've done these things successfully before, and we've done them on a bipartisan basis. i was proud in another administration, the clinton administration, to work with the republican speaker, speaker hastert, on a new markets initiative tahas done the same thing -- that has done the same thing through tax benefits. so when we put our minds together and say we're going to target a program to really help build communities, we can get a lot done. >> thank you, madam chair. >> mr. secretary, um, senator lautenberg had some questions which i'm going to submit to the record and ask you and your team to respond -- >> happy to do that, senator. >> -- over the next few weeks. they relate to iranian sanctions

and their implementation and efficacy, also the implementation of alcohol and tobacco tax evasion and ten, also, his very deep concern about the efficacy and the good works of the treasury foreclosure relief programs particularly as it affects new jersey. i'd like to submit them to you in writing which is, actually, in his own words which are pretty clear and direct as is his way. >> be happy to respond in writing, senator. >> also i just want to say that as the chair of the full committee and a member of the intelligence committee, we would like to be in conversation with you about cybersecurity. both you as well as acting commissioner miller are the keepers of such an enormous amount of data, particularly in terms of individuals and

businesses related to everything from our concern from identity theft to other things related to even cyber espionage. also the concern that our appropriations committee has, um, for the protection not only ofdot.gov but also dot.com and the impact that we're concerned about the rising attacks on financial services that have occurred both overseas and the attempt here, the attack on nasdaq and so on. and the implication that that could have for our economy. so we don't think that this is the forum for kind of the robust and meaty conversation i know our colleagues and those on defense and homeland security as well as myself chairing the fbi subcommittee because we really want to protect critical infrastructure.

that's number one. number two, we really want to pick sure that our financial -- make sure that our financial services and the private sector are well protected, and we have the right legislation to do that. and the we could is to make sure we protect the dot.gov that are the repositories of an incredible amount of information about american people, american citizens and american businesses both small and large. and i'm particularly worried about the small guys because they don't have the wherewithal to act with the security of bank of america and these others. so -- >> senator, i think you've just put your finger on a very important problem. i've put a lot of my own time into cybersecurity issues since i've been at treasury and before because i think it's on that very short list of really dangerous things that could happen on our watch or right after. it's emerging as a bigger and bigger risk, and every time i'm

out in my office or in the country talking to business people, it's on their minds, and i think it's on individuals' minds because of the individual identity theft as well. you know, one of the things that i'm committed to doing is making sure that we don't just solve the problem we see today and say we're done. we have to stay on it because the threats evolve, and they change, and it's not like you get to check the box and say, we did that. there's a new way of life that we just have to stay on, and it's one of the reasons why we also need to have the resources to stay on top of it, because that takes putting people on these issues. i've met with bank representatives a couple of times already to discuss what can we do to help them big and small. the big institutions, i think you're right, are focusing a lot of resource on this. the smaller ones, i'm afraid, are not necessarily doing it as much. i think they're beginning to. but that's where we have a special role to play

coordinating and making sure we share information and that we can make it possible for them to share information. and legislation is really necessary. the executive order the president put into effect is a very important step, but legislation is necessary to really give us the tools we need. >> well, the president has issued his executive order, and i'm contemplating exercising my authority as full committee chair to have a full committee hearing on cyber, because this affects financial services, dod, ohmland security. homeland security. the implementation of the president's executive order, information sharing and some others, that we have the wherewithal to move ahead on that. and at the same time that the full committee grasp what this is so we're all moving in the same direction in enabling agencies such as yours to take the necessary steps to protect

dot.gov while we're working in partnership to protect the dot.coms. >> we would look forward to working with you, senator. >> thank you. and i say that to my colleagues. well, mr. secretary, thank you very much for being here today. we're going to move now to taking testimony from the internal revenue service -- >> thank you. >> -- as well as the inspector general. so thank you, and until we meet again. and now we ask mr. steve miller and mr. jay russell george, treasury ig for taxpayer -- for tax pay where ares. and i must say, mr. george, we welcome you to the table. we have two distinguished georges in maryland, mr. george russell. so you've got these names transposed here a bit, but i gather you are as distinguished as my two colleagues.

[background sounds] >> colleagues, i invited mr. george to testify as i have on my own subcommittee and encouraged other subcommittee chairmen so we have the benefit of thanking the igs. they identify management problems, give us a heads up if we're heading to some technology boondoggles which i know we're worried about, and i just think it's a way to be really, a sense of frugality, smart government and perhaps some reforms that we would even come together. having said that, mr. miller, you're the acting commissioner of irs. you have a big job, and we're going to give you a big opportunity to tell us what you

need. would you, please, proceed. >> thank you, chairwoman mikulski, ranking member johanns and the members of the subcommittee. i appreciate the opportunity to testify today. before i give more detail on the proposed budget, if i could, let me report on this year's filing season. i'm happy to report that the current filing season ran very smoothly. through april 20th the irs received 130 million individual returns, issued 94 million refunds for a total of $250 billion. this unfolded despite the difficult challenges presented by substantial tax law changes that were not enacted until january 2nd. in terms of fiscal 2014 budget, our request, i believe, represents a fair balance of service, enforcement and innovation. the taxpayer service highlights include improving our phone service and providing for more online self-service options. enforcement initiatives include increasing the resources and

tools available for identity theft, addressing international issues and improving the manner in which we use data. note that for each dollar we receive, we will return multiples of that to the united states trashy. if en-- treasury. estimated to increase revenue collected or protected by more than $3.5 billion. my testimony outlines our recent accomplishments. we've deliveredded a smooth filing season now and in the past and successfully carried out core duties while making important progress on a number of other initiatives. an example is our effort to address identity theft. over 3,000 irs employees are working on identity theft, more than double the number at the start of last filing season. last fiscal year the irs expanded nearly $330 million of our budget on identity theft and refund fraud, and it was money well spent. during fiscal year 2012, the irs protected more than 20 billion of revenue up from 14 the prior

year. so for this filing season, the irs has suspended or rejected over 3.3 million suspicious returns. now, i know that the current budget environment is tight, but it's important to understand that these ask and other accomplishments are not sustainable if our budget continues to atrophy. yes, i think we'll continue to succeed with the filing system, and we will continue our effort toss maintain excellence in performance, but that performance will begin to reflect the impact of the large budget cuts that we've received over the last few years. means that there will be a steady erosion in the service we provide to taxpayers and the amount of money that we collect. in this regard, let me note the effects of sequester. we've said publicly that the irs faces up to seven furlough days this fiscal year. we anticipate a considerable reduction in the revenues we collect and the calls we can answer as a result of sequestration. some of these impacts, in particular our ability to answer phones, will begin to be felt

now that the filing season is over. we've become more efficient even as our budget has been reduced by around $1 billion since 2010. that represents an almost 8% cut in our budget even as we have been asked to tackle senate new challenges including identity theft and aca. we've met some of this by cutting expenses in almost half a billion dollars in recent years. the 2014 request contains another $355 million in savings efficiencies, and we've been strategic in using buyouts and expenses in nonlabor areas as well. by closely managing hire, we've seen a reduction of of our full-time permanent employees by almost 8,000 between 2010 and currently. note that this filing season we ran nearly 10,000 employees below where we are during the filing season in 2010. in our nonlabor spending, we've

limited operating travel to mission-critical needs and increased the use of virtual delivery in meetings and training allowing the irs to reduce costs of $158 million on an annual basis, a 55% reduction from fy-2010. there's also been reduced spending on professional and technical services by $200 million and $60 million in printing and postage savings as well as aggressive reduction in rent payments. madam chairwoman, we will continue our efforts to be fiscally prudent and to make wise investments in strategic priorities and business modernization. however, as i've noted, without a change in the current budget environment, the american people will see rogues in our ability to see -- erosion in our ability to serve them. thank you for the opportunity. >> thank you, commissioner. mr. george, we'd like to also hear there you now, sir. >> thank you, madam chairman. chairwoman.

madam chairwoman mikulski, ranking member johanns and senator udall, thank you for the opportunity to testify on the irs' fiscal year 2014 budget request, our recent work related to the most significant issues currently confronting the irs and the fiscal year '14 budget request for the treasury inspector general for tax administration, also referred to as, the igtadtigta. approximately 12.9 billion, this is an increase of slightly more than $1 billion from fiscal year 2012 enacted levels. the affordable care act, also known as the aca, contains an extensive array of tax law changes that will present many channels for the irs in the coming years. the irs' fiscal 2014 budget request includes additional funding of $440 million for the

aca. now, while the department of health and human services will take the lead in developing the policy provisions of the act, the irs will administer the numerous tax provisions. the development and implementation of new systems for the aca provisions present major information technology management challenges. these include rapid implementation of interdependent projects that require extensive coordination within the irs and with other federal agencies. one key health care provision takes effect december 31st of the this year. this provision is a requirement for individuals to maintain minimum essential health care coverage or face a continuous penalty. starting in calendar year 2012 -- 2014, the irs will be responsible for implementing the premium assistance tax credit as well as implementing the penalty

on applicable individuals for each month that they fail to have minimum essential coverage. these two issues have a far-reaching impact on irs and will require significant resources to design and build the new computer systems and prepare for increased customer service as taxpayers turn to the irs with questions and issues about the aca and their tax and health insurance requirements. customer service has been declining in recent years with fewer taxpayers being served at their local offices, and the irs answering fewer telephone calls. the aca will further stretch these already limited resources at the irs. a serious challenge confronting the irs is the tax gap which is defined as the difference between the estimated amount taxpayers owe and the amount that they voluntarily and timely pay for a tax year. the most recent growth tax gap

estimate developed by the irs was $450 billion for tax year 2006, and that's $450 billion each year. the following are examples of strategies that could help improve tax compliance. enhancing information reporting by third parties to the irs could reduce evasion and help taxpayers comply voluntarily. however, identifying additional reporting opportunities can be challenging because third parties may not have accurate information that is readily available. also adding reporting requirements creates a burden for both third parties as well as the irs. to determine the appropriate level of enforcement resources, the irs would need to consider how to balance taxpayer service anden forcement and how productively it uses its resources. we reviewed enforcement trends

and noted that in fiscal year 2007 the irs collected over $59 billion in taxes, penalties and interest. .. mesh the foreign accounts act information reported by financial institutions in foreign countries and u.s. citizens regarding offshore bank accounts. simplifying the tax code could

help taxpayers understand and voluntarily comply with their tax obligations and limit opportunities for tax evasion. incidence of identity theft have continued to rise since 2011 when the irs, again identified more than 1 million incidence, in 2012 the i as identified almost 1.8 million incidence. they irs has placed emphasis on this area over the past year but there is still work to be done. emphasis on this area over the past year, but they have identified 1.5 million undetected tax year 2010 returns were characteristic of identity theft, and $5.2 billion in refunds that were inappropriately issued. the irs administers numerous refundable tax credits, the most

significant refundable credit is the earned income tax credit, which the irs reported improper payments of 12-$14 billion in fiscal year 2012, two of the refundable credits include the additional child tax credit and the american opportunity tax credit, also referred to as the education credit. if the irs freezes a questionable earned income tax credit claim, it will later disallow the additional child tax credit claims, 67% of the time. the irs could have produced -- prevented $419 million in erroneous additional child credits had it reviewed the child credit at the same time as the earned income tax credit. they also reported as of may 2010, over 2 million taxpayers reserved $3.2 billion

in potentially erroneous refunds for the education credit. as demand for taxpayers services continues to rise, resources have decrease, thereby affecting the quality of customer service that the irs is able to provide. in september 2012, it was supported an increase of called men and limit resources continue to adversely affect the irs is level of service for toll-free telephone lines. continued enforcement on human capital remain important. more than one-third of all executives and almost 20% of nonexecutive managers are currently eligible for retirement. within five fiscal years it will be 70% of all irs executives, and nearly one half of the managers are projected to be eligible for retirement. overall, 40% of the irs is employees of the retirement eligible within five fiscal

years. finally, madam chairwoman, the budget as you requested, information on common includes mitigating risks associated with modernization, security over taxpayer data and employees, procurement fraud, tax gap, implementing major tax law changes and human capital challenges in forming both the irs as well as to do. in addition to responding to the growing number of threats against irs employees, we will continue to put that at a priority. recent audit work of any this use of resources by the irs concerning air cards, wireless cards for wired can -- wireless computer services, a black their use, shortcomings in the irs compliance with the improper payments and elimination of recovery act, ma and imperfections in the way the irs refers and recognize indicatio

indications. furthermore it has been determined that has can improve processes that will increase visibility and prevent issuance of fraudulent refunds resulting in identity theft. madam chairwoman, ranking member, senator udall, thank you for the opportunity to share my views and am happy to address any questions that you may have. >> thank you very much. that was a third content rich presentation. senator johanns, your time, i will turn to you. >> gentlemen, thank you for being you. having worked with an inspector general when a secretary of agriculture, i have great respect for what you folks do. and while i say i enjoy the meetings with the inspector general, but, you know, the oversight was very positive and it challenges the departments to

be better. if i could focus a few questions on the affordable care act, and i would suspect either one of you would be capable of answering this. at the first of the year, there's of course a mandate that goes in place, under the act are basically we say thou shalt have this, or if you don't you get penalized. the supreme court has weighed in, upheld the validity, said this is a tax. i guess that means the irs is now involved. so let's say you have millions of people out there that are not complying with the act, taxpayers. i'm assuming, inspector general or mr. commissioner, that normal rules of collecting a tax apply. is that a safe assumption?

>> so, i'll start, senator. and actually under the act you are talking about the individual shared responsibility, which is in the first years of $95 tax, the normal rules don't apply actually. the collection rules are different and a lighter touch is required of the internal revenue service with respect to 5000 individual mandate. >> could you withhold, commission, yet something you wanted to offer? >> i was just going to say, i agree with what mr. miller stated, but i think you were alluding to this, it would be in the ability of the irs to withhold a refund from the noncompliant taxpayer. and that's the way they would enforce the quote unquote penalty. penalty. >> right. i'm not suggesting, commission, you go put liens against houses and start selling houses across america.

but if you owe the irs money, one of the ways you have of collecting that is, if you're on the positive side in terms of your refund for the next year, that can be seized, in effect. and applied to the penalty. commissioner, my assumption is you have every intention of doing that to taxpayers but if they have the money, you hold the refund. >> so i think i'll set rules do apply, precisely what we did in the first year will be a topic of some discussion because i'm quite sure the be some confusion and will have to take a good look at exactly how we do that. we are talking of filing in 2015 in terms of that, of that decision-making. >> there's always a day of reckoning with the irs though, isn't there? there will be a day when you will collect whatever penalties owed, if they have a refund, you will take -- >> i was him like any other position of law we will enforce the law, yes, senator.

>> in terms of the law itself, very complicated piece of legislation. the regulations, you've seen the pictures of this seven-foot high stack of relations that have been almost aided by different folks implementing this law. -- promulgated by different. it seems to me that willing or unwilling, you are a major player in how this law works. you've got to determine a hell bunch of things about taxpayers to see if they qualify for the premium assistance. you've got to determine, do they have an appropriate policy, should they be penalized you've got businesses out there that maybe choose not to provide interns that should be providing insurance. they've got to be penalized.

it's just kind of goes on and on, and i'm not even mentioning half of it. do your systems today have the information in place where, on whatever effective date you are dealing with, you hit the switch, boom, you're ready to go. you can say, mike johanns, you qualify for premium assistance? >> let me, i think the answer is more complicated than that. let me walk the a little bit if i could, senator. by the world into two pieces. the first piece of the world begins in october of this year when the health exchange is open up. health exchange is our state and federal partnerships, hhs is the face of health care with respect to the exchange is for the federal government. our job with respect to the october time frame is to make sure that the information is available to the exchange to make a reasoned decision as to

whether that advanced premium credit is available or not. we are not really involved other than providing information. that piping has been work done. i believe we will be ready. that's the first piece. the second piece more goes to your first question, which is why we set up to do the matching in 2015 for the year 2014 when these things first come and play? the answer to that question is where not yet ready for the. we are working on it. part of the budget request goes to that, frankly. but we are working that as we speak and i've no doubt we will be ready, but that is how we build assistance that will receive 1090 nines that are specific, how we receive information from the exchange is, insurance companies, and employers. that is not completely done yet. there's no need for it to be. we are years away from that. >> yes? >> as you are well aware of the are already aspects of the aca

in effect. this includes a number of other provisions are the ultimate implementation of this is over the course of a number of years. we have at tigta conducted few reviews of the irs progress thus far in implementing the law. alone will require approximately 50 changes to the tax code. very complicated in many respects. the irs has a huge responsibility to inform the american taxpayers about both taxpayers as well as businesses, individuals and what have you of the new requirements under the law. again, thus far our assessment has been said that a sufficient job, but it's just the beginning. there's a lot more that needs to be done. and really the bottom line is, with the limited resources, whether through sequestration, recession, what have you, the

irs is going to have two take from peter to pay paul. whether its enforcement, customer service, i don't know how they're going to be able to publish this huge responsibili responsibility, but i will defer to the acting commissioner to respond further. >> i'll wrap up there because i've used up all my time. that's what i like inspector general's. they are straight shooters. you know, they don't try to color this. this is a difficult problem that you have, and i just can't imagine how you get from point a to point b., and i appreciate the candor of your response. i really do. thank you. >> i concur, senator johanns, we hear this, and it's not colored. its unvarnished and independent. that's why we so value the inspector general. and it shows the complexity of implementing the affordable care act. but in order to implement the

affordable care act, you can't use the appropriations committee or sequester or other things to derail a policy that has now been passed into law. and that's what i'm concerned about. we have now passed the affordable care act. we have voted 39 times to repeal it, and i would hope as we go to our regular order we don't use the very appropriations subcommittee to go after the affordable care act why proxy. so mr. miller has a big job, and also he's still a very complex hand, one of which is the certainty of his appropriations request through the president and then also the impact of sequester on implementing common not only that, but other laws. i'm going to be clear on the request. as i understand it the president has requested for the