>> we do not have a criminal investigation role. we have a fast enforcement role one of the most critical things agency does is to enforce the security laws. we also write the rules by the way for wall street and broker-dealers and investment advisers but we don't have the criminal authority. we have the power to bring the approval of our commission civil actions, civil fraud actions and negligence actions against those who violate the federal securities law so we can't send anybody to jail but we can assess civil penalties. frankly our level of penalties isn't as high as we would like to be and there's legislation congress to give us an ability to assess higher penalties. we can require those who commit wrongdoings to disgorge the

profits that they make from their wrongdoing and we have the power in the appropriate case to bar someone from the securities industry so they can't live another day to defraud again. speech treasury secretary jack lew says russia must be held accountable for its incursion in the ukraine and the is considering a wide range of options. his comments came during testimony before the senate finance committee on the president's 2015 budget request. this was the senators -- he replaced former senator max baucus who is now the ambassador to china. this is a little more than two hours.

[inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] >> good morning to all and the committee will come to order. before we begin today i want to

assure everyone that you did not accidentally walk into a meeting of the energy and natural resources committee which i used to chair. our friend max baucus is off to do an outstanding job in china and this is still the senate committee on finance with a storied history. now in the story department i learned recently that senator hatch was an outstanding basketball player in high school and i have learned through my sources that he had a great one-handed shot. he is even in the baldwin high school hall of fame for basketball. i played a bit of basketball myself so senator hatch and i've may try to figure out a way to get a regular finance committee pickup game going, except we are going to probably see if we can find some arcane rules so that

the young members don't make us look bad. i also want to welcome senator warner to the finance committee. senator warner demonstrates continually that our government can have a head and a heart and we are lucky to have his business expertise and bipartisanship on fiscal issues. [inaudible] >> the record will so show. i'm going to be brief this morning and stayed first that it's a tremendous honor to chair this committee and to work with all of you. this committee is to go-to place for tackling america's big domestic challenges. senator hatch and i intend to reserve the committee history of addressing these vital issues in a bipartisan way. in addition, the finance committee is the principle committee in the senate with jurisdiction over international trade. therefore, we are now looking at every economic lover to pressure

russia to step back from its unprovoked incursion into crimea. the fact is, russia has consistently used trade as it cut jill to oley its neighbors. the committee members will want secretary lew to tell us how the administration can best martial our country's economic might and defense of the people of the ukraine. now back on the domestic front, the committee has before it several issues with the date stamp on them. those issues include repealing and replacing the badly flawed medicare payment system for doctors and acting bipartisan tax reforms that make the tax code more fair and more progrowth, shoring up our transportation system and helping american workers to keep compete in tough global markets. we are very pleased to have the secretary here today to discuss the president's 2015 budget.

this conversation of the budget is different than it's been in recent memory because this year the congress is actually operating under a bipartisan budget agreement and the government isn't closing down. so there's an opportunity to pivot from these budget battles and to focus on the big challenges before the country. i would submit that the top challenge is sustaining and expanding our middle class. today america has what i call a dollar tree neiman marcus economy. as has been noted in several publications the bargain stores are doing well and the high and retailers can't keep enough expensive items in stock. but the stores that cater to the middle class are hurting. everyone of our big economic challenges depends on sustaining and growing the middle class. and just briefly i will tick off a few areas where we can boost that cause. the first is innovation. whether it's the tax code or

other action, investment in innovation and research can help turn creative startups into thriving businesses with good paying and high-skill jobs. that is why plan to move quickly to extend the number of expired tax provisions such as the research and development credit. over the long term that credit for comprehensive tax reform could be made even more useful for american startups. the obamaness rations budget includes a proposal for business tax reform. i believe a broader approach that comprehensively overhauls are broken and dysfunctional code would do more to give all americans especially the middle class the opportunity to get ahead. we are going to work in a bipartisan way with the closely on that matter. the second priority ought to be savings. a vast majority of savings are delivered through the tax system is time for fresh policies to give all americans a opportunity to accumulate wealth. the president offered one

proposal to help workers during the state of the union the budget includes iras. there is an additional idea that ought to be examined. as has been noted previously established in his savings account for every american child has had deep conservative roots and significant bipartisan support. the idea of helping young peoplf modest income, the part of the opportunity to accumulate wealth in this country is especially important and such accounts can open doors to higher education, homeownership and retirement security. third the committee is going to focus on education. this is another area where the tax code doesn't pass the smell test. there are 15 sept right incentives to help defray the cost of education and each has its own set of mindnumbing rules and definitions. there are ways to improve those

incentives not just in the short term but for the long-haul through real tax reform so that more americans can secure the economic ability that an affordable high-quality education can give. fourth you can't have big-league economic growth with little league infrastructure. the committee is now working to provide fresh thinking neck and pull some of the billions in dollars of private-sector capital off the sidelines and into infrastructure investments as part new job growth. america will soon need a solution to keep the highway trust fund solvent. we are going to go prospecting colleagues for bipartisan ideas in both areas. in closing this committee is going to focus on other issues outside our borders besides ukraine. one aspect of the international trade agenda the number of colleagues have spoken about his currency manipulation. some major challenge confronting american workers and manufacturers. i look forward to working with secretary lew in the department to ensure our country is doing all it can to address misaligned

currencies. finally secretary lew to depart for just a moment from your portfolio i would like to publicly thank the president for adopting a plan that senators crapo invented and i from the finance committee and senator risch and udall from the energy committee developed to reform federal wildlife policy. fires in oregon and throughout the west have gotten bigger and hotter but our policies have not kept up in this new system is going to allow us to get more value out of this in my view and also helping in a bipartisan way to address the challenge of these natural disasters. let me turn now to senator hatch for his comments and also again express our thanks to secretary lew for his appearance. >> thank you mr. chairman and mr. secretary we are happy to have you here. i want to welcome our distinguished friends from virginia to the committee.

i'm very pleased to have you on the committee with a business background. i think it will be a great deal of help to all of us on this committee. before i begin my statements mr. chairman i'd like to take this opportunity to welcome u.s. the new chairman of our committee. already you have hit the ground running and you are i think setting a very good example for all of us. i have really enjoyed the time we spent together up until now and i look forward to making a long-term working relationship with you and hopefully we can do even better for this committee as the future occurs. for those who don't know senator wyden always plans ahead and thinks about future opportunities and challenges. for example almost a decade ago senator wyden selected the senate office closest to our committee offices. if you look down the hall you will see the oregon state lied. it is unique among our nation-state flags in that the front and back hearts are different from one another.

on the front of the state seal and on the back there is a depiction of the. as typical of oregonians who think outside of the box and enter wyden is quite certain he will bring his unique talents to the job of sharing this committee. mr. chairman i look forward to working with you in this capacity and write up again i want to thank you for holding today's hearing. it's very very important that secretary lew here and to have this hearing on senator obama's fiscal year budget proposals. and again thank you secretary live for appearing before us today. to begin i'd like to note some problems with the process by which this proposed budget has been unveiled. first of all i received this budget just yesterday before the statutory deadline and what information we did receive

yesterday is incomplete. for example when you look at the appendix of the budget there is often referenced to a section called quote analytical perspectives unquote. those perspectives are nowhere to be found. the administration appears to be approaching this hearing in the same way as we did not receive the written testimony till late last night which is less than helpful. for let me get past the process into the substance of the president's budget we see that the administration appears to be short on new ideas. indeed this budget consist largely proposals from president obama's pass budgets which is surprising given that none of them have received a single affirmative vote in congress. these proposals represent a continuation of the three familiar themes. first we see the administration's continued insistence that we can achieve prosperity by adopting more

tax-and-spend policies that grow the federal government. second there are the proposal centered on the apparent leaf bat even more income redistribution will somehow lead to economic growth and job creation and finally we see another attempt to define tax reform as a process of raising taxes in order to fuel more federal spending by closing whatever the administration deems to be a quote loophole unquote in the tax code. they support on rosy economic assumptions the administration believes its proposals will reduce our high debt-to-gdp ratio but to get there and to help fulfill its tax-and-spend objectives the budget envisions well over $1 trillion of additional taxes in the face of a persistently sluggish economy. i think that bears repeating.

president obama's latest budget contains more than a trillion dollars in proposed tax hikes. the administration claims as it has for years now that these additional revenues are needed to restore fiscal responsibility and reduce the deficit as part of the quote unquote balanced approach. however we need to look at the facts. let's consider the deficit reduction that has occurred since the high deficit watermark achieved in the school year 2009. from the deficit of over $1.4 trillion in net year the deficit fell to a still high $680 billion in fiscal year 2013. of the $736 billion in deficit reduction, $670 billion came from increased revenue and only $66 million came from reduced outlays so in terms of budget realizations rather than promises for the future less than 9% of the deficit reduction between 2009 and 2013 came from reductions in spending.

the vast majority came from increased revenue yet remarkably in the face of that history the administration's insatiable desire for higher taxes leads it to propose more tax hikes along with even more spending. put simply the tax hikes envisioned in the president's budget are not what our struggling economy needs. unfortunately while having pledged to focus like a laser on jobs this administration decided over the last five years to focus on expanding government with a failed stimulus, the affordable care act and initiatives like the dodd-frank act that is growing the big banks and shrinking community banks. none of these efforts laid a foundation for economic growth. sadly the budget offered this week was not -- does not present a vision for such growth in the future. instead this budget proposal appears to be a political

document designed to shore up support for the president's left-leaning base in an election year. this needless to say is disappointing yet all of the real challenges our nation continues to face. as you can see mr. chairman we have a lot to discuss today when it comes to the proposals in this budget raid there are other issues at the treasury department that also warrant our attention today. for example i find it incredible even with all the challenges our nation is facing the treasury department has decided to place the singling out of 501(c)4 organizations for scrutiny near the top of its administradministr ative agenda. as with the budget it appears that the policies are driving the decision-making when it comes to promulgating regulations through treasury. in my view it would be useful for the administration to focus more on growth in the economy and jobs than on how the president's party will fare in

the next election. with those concerns in mind i look forward to today's hearing. thank you mr. chairman and welcome to the leader of this committee. >> thank you and particularly your focus on on the bipartisan shipley has been talking about. secretary lew we are glad to have you and we will put your prepared remarks into the record and please proceed as you wish. >> thank you chairman wyden ranking member hatch and members of the committee thank you for the opportunity to appear before you to the testify and the presidents 2015 budget. we have worked together for so many many decades and it's an honor to be your first witness. >> that is when i had a full head of hair and rugged good looks. >> it's also a pleasure to welcome senator warner here is the committee's newest member. a4a begins at me say a few words about the situation in ukraine. as president obama's explained

in no uncertain terms the steps russia has taken to violate sovereignty of ukraine's territorial -- or a breach of international law. at this time we are looking into a wide range of options including sanctions and ways to increase russia's political and economic isolation. our ultimate goal is to de-escalate the situation in ukraine. as ukrainian government prepares for elections it's it's made its critical of the international committee support economic stability. i've spoken with the ukrainian prime minister and number of times now and he is told me his government is ready to adopt vital economic reforms. we have are working closely with international partners in congress to develop an assistance package that will help the ukrainian government implement the reforms needed to restore financial stability and return to economic growth. as part of this international effort the united states has developed a package of bilateral assistance focused on meeting ukraine's most pressing needs. this package will include a

1 billion-dollar loan guarantee and legislation will support the ims capacity to lend additional resources to ukraine and help preserve continued u.s. leadership within a support institution at a critical time. while the united states will not increase our total financial commitment to the imf by improving the 2010 reforms it's important to note that for every dollar the united states can choose to the imf other countries have provided for dollars more. at a time when the u.s. is a at the forefront of international calls to play a central and active first responder role in ukraine it's imperative to secure passage of imf legislation now so we can show support for the imf in this critical moment in per server our leading influential voice in this institution. i want to be clear that even as we deal with the unfolding events in ukraine we continue to focus on our central objective expanding opportunity for all americans. over the past five years we have accomplished a number of

important things to make our country stronger and in a better position for the future. in fact since 2009 the economy has steadily expanded expanded our business is added 8.5 million jobs over the last 47 months, the housing market has improved and rising housing prices are pulling millions of homeowners from underwateunderwate r. at the same time household and business balance sheets continued to heal ,-com,-com ma exports are growing in manufacturing is making solid gains. the truth is as the president said in a state of the union we are more ready to meet the demands of the 21st century than any other country on earth. nevertheless our economy was thrown against the ropes rows are the worst recession in our lifetime and while we are back on her feet we are not yet where we need to be. everyone here understands that. the question is what are we going to do about it? a presence budget lays out a clear path to move us in the right direction. it not only fulfills a presence pledge to make this a year of action but offers a framework for long-term prosperity and

competitiveness. this budget addresses the critical issues we face as a nation and recognizes that while corporate profits have hit all-time highs middle-class wages have hit a plateau with long-term unemployment as an ongoing challenge. it recognized while the stock market is vibrant savings for retirement and paying for college is a little more than a dream for millions of families. it recognizes while our national security threats are shifting and we are bringing the war in afghanistan to a responsible end soldiers military families and veterans struggle in our economy and we recognize that while work is being done to put the final pieces of financial reform in place reforms like the volcker rule have made our financial system stronger and an engine for growth as well. the solutions flow from a frank assessment. they show the choices we can make to increase opportunity to bolster the middle-class. for instance a cornerstone of these proposals is to expand the earned income tax credit so it

reaches more workers through we know this tax credit is one of the most effective tools in fighting poverty and it's time to adjust it so does a better job of rewarding hard work. this tax cut which will go to more than 13 million americans was fully offset by ending tax loopholes would let high income professionals avoid the income payroll taxes that other workers pay. another initiative that will make a difference for hard-working men and women is an i.r.a.. this program will be viewable later this year and will allow americans to start building a nest egg that is simple and safe and never go down in value. will this budget puts forward essential program initiatives it also calls on congress to reinforce growth enhancing strategies by passing measures like conference of immigration reform in trade promotion authority but even as it does those things make no mistake this budget is also serious about building on the success we have made together to restore fiscal responsibility. the fact of the matter is deficit as a share of gdp has fallen by more than half since

the president took office marking the most rapid decline in the deficit since the period of demobilization following the end of world war ii. the deficit is projected to narrow even more this year and today we are charting a course that will push the deficit down to below 2% of gdp by 2024 and reign in the national debt relative to the size of the economy over 10 years. last year the president put forward his last offer to speaker boehner and his budget is part of the compromise. this year's budget reflects the presentation of the best path forward. while the president stands by his last offer he believes the measures in his budget of the best way to strengthen our economy. is this budget demonstrates the president is firmly committed to making tough choices to tackle our fiscal challenges and are fair and balanced solutions represent a comprehensive solution to this approach rings the deficit and debt by making detailed responsible changes to medicare while eliminating wasteful corporate tax loopholes and subsidies that do not help

our economy and scrap tax breaks for those who do not need them. increasing basic fairness in our tax code is not just about improving our nation's fiscal health. it's also by generating room we can make investments that will strengthen the foundation of our economy for years to come. that means helping to create more jobs by repairing our infrastructure increasing manufacturing boosting research and technology and fostering in production. means training american so they can get those jobs and promoting apprenticeships and work training programs remains improving education system by expanding access to preschool and modernizing high schools and it means making sure hard work pays off by creating college affordability and raising the minimum wage to $10.10 an hour and indexing to inflation. in closing let me point out this budget represents a powerful jobs growth and opportunity plan here it is carefully designed to make our economy stronger all keeping our fiscal house in

order. what's more it offers washington a real chance to work together. as everyone on this committee knows for too long brinksmanship in washington has been a drag on economic growth but we have seen a significant amount of bipartisan progress in recent months and that his health improved economic momentum. some say it's fleeting and some call it election year posturing but i don't agree. i believe this progress is real and i believe we can keep finding common ground to make a difference and i believe they can continue to get serious things done on behalf of the american people by working together. thank you very much and i look forward to answering your questions. >> secretary lew thank you and we too look forward to working with you. let's begin with ukraine if we might. it appears to me that vladimir putin's actions in ukraine represent a last gasp for grandeur. his efforts to expand russia's blueprint further two -- yesterday launched an

intercontinental ballistic missile but when was the last time a russian company launched an automobile company company or internet companies compete in the world stage. to me his efforts to show powers in the 20th century imagery only demonstrate the weakness that rush is showing under mr. putin's leadership. senator hatch and i have zeroed in on a number of areas particularly in the trade domain where we think we can promote sensible policies to hold mr. putin accountable such as ensuring russia's world trade organization agreements are fully enforced. they aren't now so we can use. tools at our disposal to help ukraine and similarly situated countries. what i thought i would do for the first question secretary lew is ask what do you think your best economic levers are at this point and then give us if you might your sense of how we might

have some guidelines to evaluate all of the proposals. i think senator hatch i have almost lost count of all the ideas that have been proposed for dealing with russia but if you might start their secretary lew what do you think the best economic levers are and what he think the guidelines are as they relate to timeliness as you make the point working with allies and would you think the guidelines or we might use? >> mr. chairman think the president has been clear and we have been clear that russia has to be held accountable for the actions it's taken and russia also has to have a path to step back from what is a dangerous escalation unless it stops. i think the actions the president has announced illustrate serious attempts and i think effective ways to start this process of increasing rushes isolation.

the g8 is a very important meeting to russia. we have already withdrawn from participation in preparations for it and we are in a path where i think it's clear that russia cannot sit at a g8 meeting while it's pursuing the policies that it is now pursuing we have withdrawn a. mission that was supposed to be working with russia to continue baking process on a national investment treaty. we have withdrawn a presidential delegation that was supposed to be attending this paralympics something we very much support that it's not a time for presidential delegation to be going to russia. the president has made clear that he has asked for us to develop further actions. we will continue to develop those actions and i'm going to reserve for the president to address future steps that he might take but we are clear that there need to be steps that hold russia accountable for actions taken to date and what we have

to do has to be responsive and proportional as we go forward. >> if you could mr. secretary because of the urgency of the situation let's say within 48 hours if you can particularly give us some measures are guidelines in terms of how we would evaluate the proposals and if you could get that to senator hatch that would be helpful ,-com,-com ma senator hatch and die. the question want to ask with concern to the domestic challenges while we all know the economy has improved a number of areas we still have enormous challenges in terms of dealing with the long-term unemployed. we have got lots of folks out of work who as a result technological change and a whole host of factors that have been unemployed for a long time. how does the presidents budget in your view best address the needs of the unemployed? >> it's not just one thing that

we have done. it's really the frame. we need to drive economic growth because the engine for creating jobs in this economy is economic growth. in its entirety that is what this budget is designed to do. specifically we have targeted areas where from extending unemployment did benefits for the long-term unemployed to skills training to establishing manufacturing hubs to extending the buy america bonds which we now call america fast-forward once to continue to fund infrastructure spending something that you are one of the champions on, these are the kinds of things we need to do. i think it's clear if you look at the policy for us building our infrastructure and skills training and by skills training i think it's important to start in early childhood and go all the way to retraining when someone loses their job. those are the things we need to do to have a vibrant economy in the future and is legit lays forth a vision on how to do that. >> colleagues up we are going to

stick to the five-minute rule i had better start by setting an example. my time has expired. senator hatch. >> secretary lew i appreciate your appearing here today and i appreciate what a difficult job you have. the nonpartisan congressional budget office says that over the next 10 years spending on social security and medicare medicaid and chip and exchange subsidies will total over $21.6 trillion. moreover that spending will grow at an average rate of 4.4% compared to growth and the size of the economy which is projected to average 2.8% and of course that means growth in entitlement spending is unsustainable. mr. secretary i have two questions regarding the entitlements that i just mentioned. first and might of the cbo projection of over $21.6 trillion with spending in the entitlements by how much does the president's budget

proposal spending and second is the budget to produce growth in entitlement spending at all and if so, how? >> mr. chairman i think the observation you are referring to is one that we have seen for a long time. it has to do with the demographic aging of the baby boom and the fact that people my age and older are retiring so we knew that there was going to be an increase in spending. the question is will our fiscal house in order to deal with back? what this budget shows as for for the 10 year period this budget we reduce the deficit to less than 2%. we are in a path that is sustainable and it's a solid firm foundation. in-app period way up institute additional savings and entitlements. we have four new billion dollars in specified savings in medicare and obviously these are challenges that we all know have been coming for decades. i think keeping our fiscal house

in order is of critical importance. how we do that reflects how we build an economy that's growing and growth has a lot to do with our ability to type the demographic challenge. unless we can get sustained growth into a healthy place those fiscal challengechallenge s will only be more complicated so i think this budget is a blueprint that deals in the right way with the next 10 years in the future. >> last year the social security trustees which included you reported the social security disability insurance trust fund will be exhausted in 2016. as a trustee's secretary lew you urge lawmakers acted a timely way to quote phase in the necessary changes and give workers and beneficiaries time to adjust to them unquote. mr. secretary in the face of the impending action austin of the disability insurance trust fund

what does the budget proposes anything to address the exhaustion of that fund or to address the impending exhaustion of the social security and retiremenretiremen t trust fund further down the road? >> senator hatch obviously the timeframe for the disabilitdisabilit y trust fund is much more immediate, 2016 versus decades away. i think what experts look at what the options are for the disability trust fund in the short-term there is general agreement that there is going to need to be a reallocation of rayman's that go into the trust funds for the short-term. in the longer-term water budget does is it lays out a program of integrity to make sure people who apply for disability are eligible for it -- eligible for it and we will work together with congress to make the changes to protect that critically important program to make sure it sounded a long-term and we look forward to working together on a bipartisan basis. >> on page 33 of of the budget met document that discusses the

unsustainable deficit and debt and alludes to a larger tax increase that is undefined in the document. specific way the budget identifies that even with reforms to medicare and other entitlements the tough choices on the discretionary side we will quote need additional revenue to maintain our commitments to seniors and i have two questions for you which i will read through and then you can respond. first if you agree that the department of legit in addition to the tax increases in the budget what tax increase in terms of dollars over the next 20 years or so or as a share of gdp does the administration believe will be necessary in what it identifies as needed revenue to maintain our commitments to seniors and second do you think the entitlements will have to be financed at least in part through value-added tax or

carbon tax or not income-based tax added to our existing tax system? >> senator hatch i think the budget lays out clearly our tax policies for the next 10 years. for a number of years the president has laid out as a pulse and how we look at social security reform and i would have to follow up with you on that. >> we would appreciate that a my time is up. >> senator burr and then senator scott. >> thank you mr. secretary and welcome. mr. secretary after lois lerner disclosed last summer that the irs had been targeting conservative organizations for more than a year both you and the president stated that you were in that quote outraged by that behavior. do you stand by that comment today? >> senator i have stood by my comments that actions taken reflected bad judgments and they were unacceptable and they couldn't happen again. we put in place and acting

director of the iras who did a fine job to bring things into order and we have -- we are committed to running the best irs we can possibly run. equally i'm convinced there was not any kind of malicious action there. it was bad judgment and that bad judgment is unacceptable. >> i ask you because what you express seems odd with the current attitude. if you and the president have referred to the iras persecution is those that disagree with you as a phony scandal to be quoting. i would suggest you were even going further than that in attemptinattemptin g to codify the bad behavior in the law. how can we interpret this new rule is anything other than an attempt to achieve the same stifling a 501(c)(4)'s the lowest lerner was effecting? >> senator i continue to believe

that the attempts to turn this into a scandal did not reflect the nature of the bad judgment that was involved. >> mr. secretary 100% of the 501(c)(4)'s at a tea party in their name or referred for extra scrutiny. the word progressive did not appear for extra scrutiny end of the 298 political cases only six had progressive in their name. what do you conclude from that? >> senator i think that judgment was equal opportunity. it addressed concerns of the right and the left and it was not good judgment. it was unacceptable but it was not politically motivated. >> 298-6. >> u.s. about the regulations and i want to point out those changes in regulations. after the situation was evaluated by the inspector

general at treasury there was a report that laid out actions to be taken. i made a commitment to keep all those recommendations, to follow through on all those recommendations. one of them was to clarify the rules where the confusion in the policy was what was at the root of the bad judgment that caused the problem. in the proposed rule it was actually a request. you will never find it detailed a policy as many people have said and we have gotten as you know 150,000 comments. we are going through them as we said we would. >> did you have any conversations prior to the tenth of last may when lois lerner major revelations concerning the rule restricting the political activities of tax-exempt groups? >> the ig report that came out, right after that we said we would follow through on all recommendations of the ig report

>> mr. secretary last june i sent a letter to the iras encouraging them to respect controlling omb guidance to suspend fy13 performance awards to irs employees as the former director of omb. i know you must feel following omb guidance is important. it's why i'm sure you share my concern that the new commissioners decided to reverse that decision and to pay out a portion of the bonuses. given that clematis behavior of the tax-exempt division and i think the damage is done to public trust in the agency's ability to perform its core functions do you believe the was of her groupie for those employees to receive a bonus? >> senator i have to start by saying the overwhelming vast majority of employees are hard-working public servant to do a fine job and deserve respect and thanks and that's something i think is an important thing for all of us to remember. secondly there was a suspension

of the bonus policy during the sequestration period and there was a challenge under some of the bargaining agreements. i 2 for two the commissioner of the irs as to how he as worked up a policy. >> did you pay bonuses last year to treasury? >> i don't believe so. i would have to doublecheck. >> do you intend to pay them this year? >> i am not sure that decision is come to me at. >> thank you senator burr. senator stabenow. >> thank you very much mr. chairman and first i want to welcome you to your decision. it's wonderful to see you in a position i look forward to the basketball games between you and mr. secretary welcome to you as always. we are happy to have you down at the end of the table so we appreciate you being on the committee. a couple of things. i want to start by saying given

everything that has happened at the iras i am pleased that you finally have the presidents person since the iras just for the record was operating under president bush's irs commissioner through all of this. and realizing there are legitimate questions and we certainly want things to go well. i'm glad for the last couple of months we have confirmed the president's team and i'm confident that going forward this will be addressed in a fair way. i just want for the record to say under which we are operating and secondly i think we are always going to have this debate about how to improve the economy and just for the record also legitimate differences but i'm for whatever works and i'm sure you would agree. we balance the budget within six months and i took full

responsibility for that mr. chairman. what was interesting was what worked was asking those doing very well in our country the wealthiest to contribute a little bit more and to help balance the budget making strategic cuts were we could on things that didn't work and making strategic investments in education and innovation and we balance the budget. then we tried a different approach next with the bush administration that reflected high deficit spending. at the same time rather than paying for them tax cuts, revenue loss to those that were the wealthiest americans and then unfortunately cutting investments to middle-class families opportunities for education so on. deregulation went forward and wall street lost jobs. now we come to the obama's back to trying to balance this and i

think it's pretty significant that we have seen the deficit more than cut in half and you were seeing a path to 2% of gdp in terms of the deficit. jobs are not coming back as fast as we would like them to but they are coming back and we are trying to rebalance by focusing on education innovation and those things that will glow the myth -- grow the middle class. so just for the record i feel mr. chairman we have approaches that have worked and approaches that have not worked and i think we have to focus on what works. my question mr. secretary as chair of the agriculture committee overseeing the commodities future trading commission this is an agency issue that is incredibly important as we strengthen our economy and create opportunities for investments in the cftc

overseas markets that impact everything from the price of groceries and the price of fuel interest rates and home mortgages and so on. when we look at the cf tc's increased responsibilities in the last number of years versus their budget i think we had more staff than 20 years ago and as you know their oversight has grown tremendously. futures markets have grown fivefold, roughly 10 times the size of the futures markets responsibilities. they bring in 2 billion in fines last year alone that receive only about $215 million to operate and i'm very concerned about the ability for this agency to be effective in supporting our economy so i'm wondering if you might just speak to the proposals by the administration and how the cftc funding matches up with other

funding mechanisms for other regulators. >> thank you senator stabenow. i must say thank you for your comments about the 1990s and being budget director trina three years that we ran a surplus and i couldn't agree more that we had a set of policies that work and we today have a set of policies that work and we know how to do this. as far as the cftc goes very briefly it has been a major issue that we have joined since dodd-frank was enacted. we need to have enough people to implement the rules and have cops on the beat to enforce them. we just got just enough money in the perforations bill this time to start ramping up to the point that we need to temperament the rules that we need to have a sustained level of funding predictabpredictab le and with the increases to reflect the extra work that is required to implement the new rules. we have suggested it would be a good idea to explore the self-funding mechanism but the bank regulators have so our

financial regulators do not have to worry about year-to-year ups and downs in funding but make sure their enforcement programs are there every year to protect american consumers. >> thank you. thank you mr. chairman. >> of senator schumer is willing center isakson can go and then senator schumer. is that acceptable?

policy, yes. >> i'll share with you. >> i trust it's correct. >> this is a little bit of parochial question certainly my own self-interest and that of senator chambliss. it belies everything your statement says. you may not know it and appreciate you following up on it. for 15 years neport of savannah has been authorized for expansion. we've gone through 15 years of environmental studies, noaa requirements, oxygenation requirements. the state has raised 2$248 million to match federal money to expand that port. i traveled with vceresident the mayor of philadelphia and baltimore just recently because of vice presidents intend to expand infrastructure projects for the same reason you state in your statement. on the 28th of february just a few days ago after everything had been done and i know two waivers and the house and senate

the president of vice presidents and i can't quote a present but the vice president said quote we are going to get this project done, hell or high water and everyone was prepared to sign a partnership agreement. no one had signed off an epa signed off. everything was done. the director of omb called the corps of engineers and told them specific weight not to sign the departure of agreement. two weeks before we passed the appropriaappropria tions act which i was one of the nine republicans who voted for it be met with the director of omb and the director of omb sent kirsanow from her office to meet with the staff to craft the language for the appropriations bill to ensure that she would have the authority to move money in the budget for fy2015 from intended to construction. all of a sudden friday of last week the phone started ringing.

the directions went to the corps of engineers to not sign the public agreement. three or four weeks after we met with omb staff to craft the language that they asked us to get in the appropriations bill so i can understand how the administration can say that it wants to accelerate projects when we get a last minute hold on a 15 year authorization which every guy has been dotted and every t. has been crossed. do you have an answer for that? >> as treasury secretary i'm not deeply in the individual project questions but i would say. >> i would appreciate your looking into it personally. >> i will take the question back but obviously it's not a treasury issue so i will have to get a omb with the question. i will say going back we have made progress in streamlining the approval process for important projects. in my home state of new york the

tappan zee bridge was re-permitted for construction in 18 months something that nobody believed was possible so this is something we are committed to and i will take back your question. >> mr. chairman can i ask you a question? >> of course. >> i'm correct that the minority majority side are investigating the irs situation with ms. lorne >> we are working on the investigation and we intend to work on it and do it in a thoroughly bipartisan way. >> the reason i mentioned that i'm taking every friday to do town hall meetings in georgia. the number one thing that i'm asked about is the irs targeting of certain groups for audits. the number one thing. it cannot be dismissed as an error in judgment until we get all the facts and find out the facts so i would encourage you at treasury being responsible for irs to let them know there is one topic of conversation and one april 15 comes they will be

the number one topic for a lot of reasons we are offer money with do we need to get to the bottom of that then senator burr is precisely correct. it is the public's number one concern. >> senator we have tried to be corporate or let's continue to be cooperative with this committee and the house committee's investigation and the irs commissioner has made a similar commitment that we understand you need to complete your investigations. i can just offer our ace -- terms of tax, such as the earned

american opportunity tax credit, the provision that i helped author and worked with you to extend, making it permanent is great. the child tax credit and on the spending side i know is not your department, but doing investments and infrastructure and education and research. those are the ways to get the middle class moving again and have my highest priority. i have a couple of questions here on specifics. the first is on the as pire act. i know the chairman mentioned it in his opening remarks. it's so important because one of the greatest block is savings and assets to many americans.

19 appearance of new york households and 31 appearance of households nationwide have no savings account. that's sort of unheard of. that's what's happening. i remember when i was in grade school we put a quarter into the king's highway savings account every week and got a bankbook and it showed -- >> the ridgewood savings bank. >> there you go, another fine new york institution. that's not done anymore and children from families face significant barriers attending college and owning a home. for several congresses i've introduced congressman gingrich was a sponsor, senator santorum. it has real bipartisan support, the aspire act that would establish a universal child savings account with federal seed money and matching contributions. i first am appreciative of the chairman highlighting this issue as one of the issues he wants to move this year i really appreciate. he mentioned it in his opening remarks. but i hope we can count on your

support and the administration's support for technical guidance as we move forward and support of the basic concept create ag lifetime savings fund for every child wen issued a social security number, teaching people to save, encouraging people to save, one of the great problems in america is we don't save enough the way we used to. would you please comment? >> senator schumer. we totally agree encourage iing savings is a critically important objective. that's one of the reasons we have made the proposal such a prominent feature. it doesn't sound like that. starting a an account for $25 and add iing it every pay perio is the same thing you're talking about. the aspire account is something we're happy to talk to you about and work with you >> that's at the other end, young people opposed to golden agers. >> we're happy to work with you on the proposal.

obviously, it's a question of, in limited -- with limited resources, how do we optimize the decisions we make and we're happy to work with you on this. >> great. well, thank you, and i look forward to -- i'm going to bother you until you end up supporting it. it's now or later, take your pick. okay. next issue is the aotc. i was glad to see you made it permanent. one of the great problems the middle class faces is paying for college. it's become so much more expensive. somebody, at one of the little forums we had, said when he went to college, paying for -- if he worked 40 hours a week on the minimum wage they could earn tuition in a year and now it takes something like 30 years working at the minimum wage to pay for tuition. it shows you both ends changing. it's a shame america is declining in the percentage of people who graduate from

college. we used to be number one. we always worried about our k through 12 system but we didn't worry about our higher ed system and still the number one worry about our higher ed system is expense. i think it's very important. i didn't understand, i really like paul ryan, i think he's a fine honorable man, like working with him on many issues. but he attacked this provision in his war on poverty report. i don't understand why our colleagues on the other si side -- this is a tax break to help middle class families pay for college. my question is, doesn't it .. doesn't it seem like the kind of thing that gets both parties? that's the kind of thing we could come together on? >> senator schumer, i hope that is the case and applaud the work you and senator snowe did on this and something we very much embrace. you look at our system of higher

education, we still have the best higher education systems in the world. you look at pathways towards opportunity, there is a dividing line for those who get a higher education and those who don't. if we really want to make sure we have the next generation with the skills they need to grow the economy and make sure everyone is willing to work hard has a chance, we have to open the doors to education and we look forward to working on a bipartisan basis and extend the aotc and make it permanent. >> thank you, mr. >> i am also looking forward to move down the roster to no longer scratching my knees or my staff. [laughter] i know you're here about theet budgets it reflects what we r believe as a country vet as

a vague talk about thehe budgets with said draft of the house ways and means committee that has complete elimination of the state's and local tax deduction for but that is a proposal that would impose a significant and unfair tax increase to millions of families and across a number of high cross states -- with the 1986 efforts show as most know any serious tax reform cannot be built on a shaky foundation. so in order for tax reform should they take into account the regional impact of a tax change? >> i should start by saying

chairman camp deserves a lot of credit for putting out a detailed plan figgie what many of us have had or disagree with. we always have to worry about the tax policy puts into effect would that the outcomes is on the policy with that specific state and local production we have created with other deductions we have limited availability of deductions for high-income but not remove it as a basic mechanism to permit the deduction at the state level. it is important to the stability of our economy and

with the complete elimination would be something that is a real challenge for many jurisdictions and it is not just the northeast but well beyond that. we would have to look very hard that went as far as that proposal. >> so there is a difference between the high wealth families and the economic body blow? i appreciate your thoughtfulness. i want to return to something since your nomination hearing we had a conversation on this that is reform. i just want to bring to your attention again the tax on their reaped shares on foreign pension funds was

due to administrative action not legislative. it seems the treasury can take positive action as you know, up through 2007, a foreign pension fund had the ability to invest in the reit to have shares determined it is -- treated similarly to domestic front. the president wants to clearly exempt foreign pensions to restructure domestic commercial real estate debt to start creating jobs all over the country. i have also heard from the president the eve plans to use executive authority on issues tedium's a priority in this was listed last year. i help -- hope you agree it makes sense for treasury to take us the and on reform and a promised we would send

documentation but it will come to you specifically but there are those seat october october 8th that the treasury has the authority to modify those pension funds in this is a bipartisan issue to deal with this it can be done administratively is a bipartisan effort remains unanswered. looked at it and read it with comments and conclusions with those who work with you at treasury to get to a point to pursue what the president wants to see. >> i will follow up and get a response to that letter. we are in total agreement they should change policy.

we propose legislation to work with the committee to get that done. we argue they don't have the authority but i have to look again. we have so many infrastructure needs the goal is to have been attractive place for a direct investment in the united states. it is a policy area that is not a problem and we will follow a patient explore the question would authority we have. the more straightforward way is to change the law to make it clear i hope we have the opportunity to work together >> i appreciate breezing -- raising the imf issue but with the ukraine it is a question if we want to be in a position to influence the issues that affect us here at home but stabilize opportunities. >> also thank you senator

mendez for what he has shown to put together a package for the ukraine and imf and the bipartisan support. >> i appreciate his points as well. we have three members in order of appearance. which did have each get there five minutes in before the vote. also senator carded as well so let's just aren't with senator warren. >> thank you. i want to commend you and your chairmanship and i did not know it went down this far. [laughter] but i know and appreciate you senator hatch comments even at the kids table your voice will be heard. i am grateful. i want to echo what senator mendes said.

to get foreign investment in job creation this should be a no-brainer in the state of the or of the bill i strongly support it. but to move to the budget and others have touched upon on infrastructure to think about this in a more aggressive manner with a proposal i am working on with his support with repatriation. for other proposals i would point out to my colleagues we are now seeing for direct investment in the united states fear real estate and now there is a lot of private american capital that does not or cannot invest in american

infrastructure so the budget proposed this approach of would point out taking some of the ideas made us more conservative rehab taken out energy generation with the investment grade investments in major the private dollar first dollar loss in the financing authority has co-sponsors and members who were interested italy scores that 7 billion but for my colleagues when interest rates are at a record low, not to take a vintage to get that private capital into infrastructure projects would be a great loss. we just received of grant that took one year to

process through tifia. to have the project financing infrastructure financing is terribly important it doesn't replace the need for a permanent funding source but financing is a key component. the reasons are simple. you need a place to get the long term capital. with the government backstop it could save 200 basis points a project could be $50 million. and third commanding the folks at tifia give your expertise around road, rail, water, ports, th at is important in virginia in one spot of we have the expertise on the private sector side to go against wall street. but particularly for smaller

states, but for smaller projects that we have modified to lower the minimum amount and increase the amount. they will not have the expertise at the local level without to draw upon. i don't want to overstate you have to have the funding sources as well but the notion of the infrastructure financing authority how to use private capital can you comment on that? >> senator we are in total agreement. we need to have conventional funding mechanisms to have federal infrastructure funding firmly secured also innovative funding mechanism also.

>> that financing authority. >> yes. and things like legislation for foreign direct investment. i just came back from that g20 meetings concentrated on growth and discussing how to make private investment and infrastructure to have been more easily and effectively. the things that the whole world talked-about that is why the one-stop coordination is important powdery eliminate the friction from the financing authority is so important but there is no scenario that takes government out completely. it is necessary for certain risk sharing and to keep essential projects that don't have a revenue stream going. so we are determined to make progress.

my view over three decades is bipartisan support it is not a party line issues so we should be able to make progress. >> i want 2.0 our legislation starts with 10 original co-sponsors but i believe we are the only industrial nation in the overall but does not have the authority to leverage private capital for infrastructure. thank you. >> we will call some audibles to keep this building because so many senators are interested. >> welcome to mr. warner joining us at the end of the dais we don't address the big issue which is mandatory

spending as retold by the cbo a couple weeks ago that the mandatory side of the budget is now two-thirds the budget and will grow over three-quarters especially with health care entitlements will increase 115% more than double. vague no these funds are in trouble already. looking at the future the other two trusts funds social security and medicare are both are depleted and will be bankrupt within the lifetime so i am very concerned we have the opportunity to invest. you can backtrack in terms of looking at these programs so my general question is what are we going to do about this issue if we don't

address it we will continue to squeeze the discretionary side like infrastructure. to put more pressure on our economy. on the economic issue you have over $1 trillion with the 600 billion plus and my concern is economic growth is already incredibly weak it trucks tax increases with how do you get the right kind of revenue? and this is we're looking at 2.5% growth that is less in tax revenue over the next decade from the latest report nine months ago. by the way every single one of their projections has been wrong that no translate into 2.$2 trillion to talk

about the bad economy but now these are issues that happened after he took office. growth. we have to get the jobs back and get the girls back. the president spent years fighting for the $600 billion tax increase now with the revenue from continued sluggish growth so 1.2 trillion of the taxes, a professor roemer one of the advisers says an increase of one percentage of gdp rollovers real gdp by 3% roughly. says the white house believe it can raise $1 trillion? here without significantly slowing growth?

>> if you look at the experience over the last several years we are on the path of economic growth and obviously a taco long time tyr dig out of the recession but we are seeing better growth in the united states and other economies and we put in place to get our economy moving right away, a financial reforms, also enacted the affordable care act. but with this new budget we proposed an investment program that we think is necessary to fill the economy in the future. we need infrastructure and skills training. >> but my question is taxes on the economy. let me give you an example. you say we need to increase taxes what is on investment capital the analysis says it

creates 30% minimum tax over $1 million to raise 71 billion over tenures most of the taxes will hit capital gains and dividends to come. let me ask you this is a possible such a steep tax increase for this investment income could reduce economic growth by even one 40th of 1%? from 2.four% which is projected at is that possible? >> i am happy to go back and look at different estimates but it is hard. >> the reason i ask you then the entire $71 billion is negated by slower growth.

>> that is the issue. i want to make sure the other senators get a chance. >> let me make a general point for crime disappointed we did not deal with the mandatory side will also achieve a bipartisan basis there are ways we can do it there is a means testing still in the budget but you backed off but we have to be careful of the tax code. >> senator brown. >> secretary lew, the expansion of the earned income tax credit for workers without children, a figure that is reflected in the legislation of 30 of our colleagues had introduced and it will matter for those without children and it will not make it permanent with the cost-of-living

adjustment for the child tax credit. there should be a bipartisan issue started under president ford, president reagan said to paraphrase the best anti-poverty program the federal government had. to be in by milton friedman as something we ought to pass. some have said in response to your minimum-wage proposal with the increased minimum-wage and a cost-of-living adjustment with the earned income-tax credit instead. last week ended a hearing on pension reform about people's retirement security is there is a huge number of americans that only have one leg of the three latest tool

if they have a 401k, just a few dollars without much security and very little or no savings. the issue is whether redoing about wages? we know workers and productivity has almost doubled the nonprofits are high and wages have been stagnant and we know the minimum wage has 20 or 30 percent less buying power than three decades ago. to talk about the importance of the minimum wage increase and the earned income tax expansion. but does it mean to economic growth? and what does that mean long term for those workers have a retiring 20 years from now after being in the lowest

quartile of income earners? >> senator brown, i think my answer to your question is the answer i would have given to senator portman if i had more time. i will combine a couple ideas. we need to focus on growth. we had no lack of vision, at the high end when we have seen leveling off and shrinking at the entry-level work force. i don't think anyone who doubts when you raise the minimum wage it doesn't answer the question about saving for retirement but it does about getting it back into the economy to stimulate activity. the most powerful engine to get people out of poverty young people who are trying to work their way through college ought to have the

benefit of the earned income tax credit. our challenge with savings to get them started in a way it is a habit that develops early as disposable income grows. even though it is the small number it is important to almost anybody can put away $5. $100 is better but you have to get started. people wait too long. we have to be honest about the trade-off if we have the fiscal policy fair and balanced to meet the deficit target we have to focus on the areas that are critical to growth. we think the tax proposals in a way that is consistent with economic growth to make sure the engine of economic growth picks up steam and infrastructure is a part of

that. so one has to look at these proposals but over the last several decades what will be due to change the direction of middle-class income in this country? >> also higher minimum wage does not mean they put $25 a week into savings but it does mean others get raises a little higher in social security benefit will go up pay a little bit spinet looking at the fundamental level anyone that has a paycheck at the poverty level. >> the vote has not yet started. >> welcome to the committee it is great to have you here.

mr. chairman it is nice to have you here and i congratulate you and working at -- looking for to working together. i appreciate your initial question is a very dangerous situation for globally i had a hearing on the subcommittee with the south china sea and china's reaction to the ukraine and what options they could use to let russia has done had adhering this morning with the helsinki commission with the west balkans. clearly but is happening in the ukraine affects the attitude of a round of

world. very much at their disposal needs to be utilized with regards to the legitimate border. let me comment briefly mr. secretary you have the difficult choice the compromise numbers are not what we'd like to see. a long-term budget agreement with tax reform and revenue. to help businesses in india with continuation to bring down health care cost and they need to get that predictability with the job growth is the big decision the administration has been

very bold to put suggestions and it does lead to job growth. yes we need to do a better job to put money into education and research and infrastructure but in the few minutes i have to have an agreement or disagreement of retirement savings. we did not save enough as a nation putting into retirement but senator brown is absolutely right with the minimum-wage these are valuable tools to get the stronger ability to put money away and that is a good idea. i remember when i was in school i think it makes sense to get people as early

as possible to put money away but we have shown what works and what doesn't. with a savers' credit we also know low-wage workers are not inclined to put money away just because there is a tax of vintage. they need money on the table that is the sabres credit where the sponsored plans come in. you have once again put a tax to limit what you can put away with a preferred retirement option which could have unintended consequences of terminating more plants because they eric covered by retirement savings i will work with you there are a place to work together but there is broad interest tumble sides to have more robust opportunity

is but i want to give you a chance to comment. >> we are in total agreement to create more savings opportunities to get on a path to have a strong amount of personal savings to look forward to in their retirement and the proposal we have with the availability of tax benefits is very narrow we'd just say once there is 3.$1 million additional contributions are not eligible for preferred tax treatment. for most americans 3.1 million of retirement savings is more than they can dream of. severity hits that limit we would have succeeded. >> also with a 28% deduction spirit that applies to a very broad range to say

those with the highest income bracket should get the same value for their deduction as those at $250,000 it does not take it away but just caps at the amount that benefits those that are at the beginning of bohai and. >> we will continue this discussion. >> at long last. first of a bite to welcome senator boarder to the kids table. that will happen over time senator kent congratulations to you we are delighted you're chairing the committee and we hope this can become the model that this congress needs. and that this morning with my county commissioner in colorado the most diverse array of people you could

imagine every political party urban and rural, people with very strong convictions and disagreements to very easily came together and the discussion we have suggests the next 15 things on the list we could all agree on. i take it is really infrastructure. you heard that throat the questions today with also won independence in iowa last first to look at that bill if there are ways to prove it i would love to hear about it but imagine we could do something on infrastructure.

one last thing. then i will shut up for or had the occasion to visit union station in denver where we have built a master rail station a bus station and light rail station it has local money of a billion dollars of federal money you cannot find another example of what we built in colorado unless you go abroad. i am proud because when you stand there what you say is this is too big of an asset for what we have to let you realize 50 years from now somebody will stand there and say it was good somebody thought about us. that is what our grandparents bought with the infrastructure they built in that we are not maintaining much less what we need to build for the 21st

century. >> i could not agree more inflation hope the future generations the infrastructure is built in this country in the thirties and fifties in the '60s and what has built the economic foundation in the united states will not last forever and we need to be sure prelease behind infrastructure for sustained growth in leadership. there are a lot of points of overlap we have obviously proposed taking the business tax reform debate with infrastructure together to pursuing a comprehensive tax reform. i think the obstacles will bring us back to the divisive issues on fiscal

policy. of the business side there is more consensus i hope we can make progress. >> i don't think we need to get tangled up in back. please do the pension reform god knows when that will happen but it is $50 billion but let's keep working on it. but i often think what is embedded is from the past and what it prints is an abrasion in our economy. that is important because of all the questions about median family income to solve that problem without having the most innovative

ecosystem on the planet because of the jobs created next week the budget has several types of proposals and also permanently increases what small businesses may deduct this is intended to support innovation in this country. >> with the primary driver with the cutting head to economy is the ability to translate technical and scientific breakthroughs into commercial endeavors the tax code encourages that on a predictable basis to how we would provide research and experimentation to meet the needs of

businesses today not 20 years. we always have to look forward can we have a tax cuts designed to deal with the challenges 1960 or '80 we need one that deals with the challenges of the 20th century. >> faq mr. chairman. i would say speaking of predictability than has other -- ever said that i will yield. >> they q. i had some going remarks about the chairman and of course, i did not mean that to reflect upon the chairman

who is originally from wichita kansas they're very proud there will beseeched the chairman with humankind is a and humble request with a little bonus appreciation. but i have a lot of pride but now to become chairman of this committee is said everybody gets lonely whether or not everybody gets along with him is rare but those issues i am always ask about whether anybody will ever be held accountable with the scandals that the i rs, have introduced legislation along with senator flake

palatinate get to it to. the bill would stop the irs from intimidating or targeting groups and 40 others have a sponsor this bill. i hope it is on the fast track and web halts action intel ongoing investigations have been started by the house ways and means committee i don't think it is controversial but for the irs to of new restrictions on any activity so it freezes further action for one year to make it clear it can only enforce regulations that were in place before but secretary do you think it is appropriate to propose

more regulations including this committee completing the ira's? >> senator your characterization to hold the countable does not reflect we brought in the new irs commissioner that replaced all intermedia levels of leadership through the incident that we said was unacceptable to be fully investigated and never done it again. policy equates to change and we all know the inspector general report had the recommendation that the rules need to be clarified. we have put out for comment a preliminary approach that does not provide the detail because we need a comet.

>> i am concerned we don't have all the details. i know your clarification argument but let me ask another question to develop these regulations why did the irs limit the new rules to not be regulated to other not-for-profit organizations ? >> the proposed rules looked for a broader range of areas the final rules have not been written one of the reasons is clear over 150,000 it will take a while. i am not sure any one has gotten more. >> why don't they play intel the investigation is over? then you could look at that. only one person was fired pepper but deals retired

without any sanctions and that was voluntarily. i will just ask the basic question to the new man there and he indicated he would fix things at the irs but he had nothing to do with the investigation other than to get behind everybody. is the irs equipped to regulate political activity? should we not reduce or eliminate their role to keep politics with the federal election commission? why do we have to go down this road? >> the rules in this area have evolved over a long period of time the clarification to start a process to classify so they don't have the ambiguity and we will work with congress as we review the amount of

interest that has been reflected. >> five overtime. i just have one other request back on february 26 article from "the wall street journal" be put into the record really gets to the heart of the matter how did this happen? february 16, 20127 members of the majority wrote asking for the investigation over conservative organizations. not where it started to begin with but a bit the pushing and that is obvious. i regret. my time is up. although the of would tell the acting chairman of that is the appropriate term that senator widen when headed the intelligence committee

when trying to confirm general hayden we had 20 minutes at that time not that we should not subject you to 20 minutes but then asking for another 20 and another 20. that is one hour i am over one minute 40 seconds maybe i can have an account that i could bank. >> i will ask one last question. [laughter] >> senator biden will be back. but one of the darkest moments president nixon sought to use the irs to target his political enemies thankfully for the state -- the commissioner at the time stood up to the president

and the white house and refused to allow the irs to be used for political purposes. just as the commissioner had a clear goal in rejecting or approving the recommendations to target based on their political abuse the commissioner has a clear rule in rejecting or approving fast current proposed irs regulations if finalized will make it more difficult for americans to speak out for bad public policy. treasury regulations make clear the irs commissioner can block those regulations prior moving up the chain. if the commissioner is opposed to the irs regulations truly committed to restoring the credibility as he claims he can block

them from moving forward no teeeighteen if you approve i must say you are wrong. can be released confirm the irs commissioner has the authority to choose to waterproof the irs target final he exercised that authority free from influence or pressure? >> senator hatch we agree with her to% the irs should be totally above politics and we all learned in the '70s the danger of crossing that line. i also know the investigations we have done with information available to us is there was no political activity behind that was exercised in the

five votes one c for reviews. the established between irs and treasury with policy discussions that go on treasury plays of the rule with the critical rule and one has to inform the other. i can guarantee it will be a full and fair and open it will take a while to go through but everything will be reviewed. that is what should happen. >> but what i am asking do you agree that the commissioner can stop this if he wants to? >> yes. in the role of improving policy as opposed to enforcement actions it is in

the domain policy is jointly through the secretary for tax policy and the commissioner and both have a role to play. >> when we get this straight. we have had this situation arises it looks like the irs is used in some people have acted improperly in the air in the middle of an extensive investigation all i unmasking if the commission decides to resolve this matter he has authority to do so? train wreck i tried to answer yes or no does he have the authority we will stop this? >> he does sign off on policy regulations so both

have signed off it takes both of them. >> in other words, if he decides they have gone too far and this is improper he still has to get your approval? on regulation? >> both the commissioner and assistant secretary of tax policies sign-off. those are the to approvals. i will not characterize why he would or would not exercise that judgment that is his to make but if he does sign off all commissioners sign-off. >> i will ask a different way. yes or no can the commissioner choose to stop the rule absent yours or white house pressure? >> i am trying to respond.

>> it is clear obscenity does have the authority to sign off for delegate he also has the right not to. >> if he does decide. >> i am not trying to speculate his motivation. >> i am just trying to establish she has the right to stop spending icky either decides to sign off or not. >> that is all i need. let me just ask one more. i have been watching the economic trade measures against the maturing in government. this is part of a larger pattern of russian economic coercion and. against its neighbors for

nothing but political reasons. i raise my longstanding concerns with russia's actions with the refusal to meet obligations and i urge the administration to have all tools said its disposal with the importance of complying with the obligations to have tools at its disposal if necessary. do you have any views about the efforts to improve the compliance with the international obligations that they're not fully utilized and what could be used to bring to bear with our friends and allies in the region? >> senator as i tried to make clear at the beginning of the hearing it is a very important matter for us to

be clear rushes action is unacceptable with consequences. also has to be a path for brushup two-step package and we will respond in a way that is proportionate to. we have taken action with the g8 readings and as trade delegation and a financial investment treaty and taking action by keeping the presidential delegation from attending russia put a huge amount into the olympics and para olympics and not participating but our policy is clear they have to be politically and economically from acting in a way inconsistent with international law. the president has made clear he is asking for other options.

the president will decide what to exercise but we're obviously looking at what other steps would be appropriate. >> apart from what has been made public so far it does not seem to have much about the trans-pacific partnerships in the transatlantic trade. i noted in the budget titled cuts coming consolidations, and savings the president calls for a plan of authority to him to submit proposals to the executive branch tripp fast-track procedure however i am not aware of anything for fast-track authority to negotiate our trade deals. mr. secretary given the potential for trade to grow

in the economy and create domestic jobs is is simply not a priority for this administration? >> he made clear in the "state of the union" the authority and the specific and atlantic agreement our priorities we will work with this committee as the chairman tries to move forward but most importantly to move forward so we can bring a the high quality items to promote economic growth. it is an area i hope we can have bipartisan cooperation spinet thank you senator hatch. >> secretary with the 501c4 i was out of the room thank you for your graciousness to make the votes a number of colleagues raised this issue

and i am parachuting into the matter because senator hatch in the finance committee staff on a bipartisan basis have been working on this interviewing 28 employees approximately five and a thousand pages of documents and it is my hope and expectation this report will be ready for release next month or early april we have agreed for senator hatch's helpful this and we will work on a bipartisan way on its. it is not appropriate for this committee or the senate's to take action until the investigation is completed. we will have a big debate when it is over.

i feel very strongly about the legislation it is the only finance bill now on the table and senator murkowski said it is time for them even stephen rule the same thing for the nra you do for the sierra club but for the long term it is a host of opportunities to get together to get on top of this issue but for the immediate situation i have not heard all of it with respect to the five of one seaport a shoe -- 501c4 issue it is not appropriate to take action and how the bipartisan investigation that was begun in a thoughtful way is completed.

>> 84 a acknowledging the enormous amount that has gone on with the cooperative to provide the committee we look for to the committee completing its work so we can see the results and move forward. >> let me talk about tax reform we have a few more minutes. you have been thoughtful to talk about the committee approach for the future. i have nine years' worth of sweat equity into this and begin with rahm emanuel and could not get any republican sponsor then senator gregg sat on the sofa with the every beak for almost two years to get the first federal income reform bill since 1986 and then unfortunately our colleague from indiana was going to

step in when senator gregg retired. there are certainly differences between the parties at this point revenues is one in particular but there is also areas for common ground to stake out early. then i want to recognize the senator for his question and san by the way also for another bipartisan efforts to in the digital goods area like cloud computing america has a strong economic advantage and i think the senator for of working in a bipartisan way on that. but democrats said we have really seen all the special interest breaks clutter up the code and republicans

said we are concerned the tax code is inefficient not do what is necessary. campbell sides they could support the other. the there was a major opportunity for coming ground we found another one that consumers drive 70% of the economic activity in the country we want to help the middle class. so we could come up with a pate for middle-class tax cut by eliminating a host of other special-interest breaks replaced with a standard deduction. give me your thoughts what are other areas where there is opportunity for common ground? we know there is difference of opinion on revenue but of

other areas to stake out early on that this tax code is a dysfunctional mass? a rotten carcass of an economic system. what is a possibility for common ground early on? >> i know you have worked for years to put together the bipartisan approach and we have talked about the technical issues and but it takes to have bills to be revenue neutral. on the individual side right now, we have seen several years the challenge beyond the fiscal debate. . . individual tax reform is something that would be very challen challenging without doing a broader fiscal agreement because it's not likely in a generation

dumais jor tax reform and come back and address the tax code again. that led the president to the view in july while he wants to pursue comprehensive tax reform and hopes we're in an environment we have a fiscal frame that permits us to make progress there, on the business side there ismuchore there is convergence of general approaches whereas if we were able to succeed you would do something new for the economy by having the business tax rate able to succeed we would do something very good for the economy by having the business tax rate, the statutory tax rate come down. our average tax rate is already lower because of all the loopholes that are bringing many companies special benefit. but our statutory rate is one of the highest in the world. th that's an extra burden for companies when they want to have their headquarters in the united states. it's an issue in terms of base erosion and our international conversations about making sure we don't have stateless income. i think it has t