automobile line or internet company that could compete on the world stage. to me, his efforts to demonstrate power through 20th century imagery only demonstrates the weakness russia is showing under mr. putin's leadership. senator hatch and i have zeroed in on a number of areas particularly in the trade domain we think we can promote sensible policies to hold mr. putin accountedable, such as insuring russia's world trade agreements are fully enforce. what do you think your bestd economics are at this point andu hell gu he might evaluate the proposals. i've almost lost count on all of the ideas that have been proposed for dealing with russia

but if you might start there, secretary, what do you think the best economic leverage our and guidelines as they relate to timeliness and you made the point working with allies. >> i think the president has been clear and we have been clear russia has to be held accountable for the actions taken and also has to have a path to step back from what is a dangerous escalation unless it stops. i think with the actions the president has announced and illustrates serious attempts and in effective ways to start the process of increasing the isolation. the g8 is a very important meeting to russia. we have already withdrawn from preparations and we are on the path where i think it's clear that russia can no longer sit in the g8 meeting pursuing the

policies. we have withdrawn a trade mission that was supposed to be working with russia to continue making progress on the international investment treaty. we have withdrawn a delegation that was supposed to be attending the paralympics, something we very much support but it isn't time for the delegation to be going to russia. the president has made clear he's asked for us to develop further options. we will continue to develop those options and reserve future steps that he might take but there need to be steps for the different date and what we have to do has to be responsive to that proportion as we go forward. >> if you could mr. secretary because of the urgency of the situation let's say within 48 hours if you could particularly

give us some measures or guidelines how we would evaluate the proposals and if you could give that to senator hatch. the question i wanted to ask with respect to the domestic challenge is i think we all know that while the economy is improved in a number of areas we still have enormous challenge dealing with the long-term unemployed. we have lots of folks out of work as the result of the technological change. how does the president's budget best address the needs of the long-term unemployed. the entire budget is in answer to that question because it isn't just one thing that we've done. we need to drive the economic vote. in its entirety that is what the budget is designed to do.

specifically we have targeted areas where from extending unemployment benefits for the long-term unemployed to the skills training to establishing manufacturing hubs to expanding the guy in america bonds which we are now calling america fast-forward bonds to continue to fund infrastructure spending, something that you were one of the champions of, these are the things we need to do. i think it's clear that if you look at the policy of building our infrastructure and skills training, and by skills training is important to start 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 displays forward the vision of how to achieve that. i better start by setting an example. senator? we appreciate what a difficult job you have.

the nonpartisan congressional budget office says that over the next ten years spending on social security, medicare, medicaid and exchange subsidies will total over $1.6 trillion. moreover it will grow in average rate of 4.4% compared to the growth in the size of the economy projected to average 2.8%. that means the growth in the entitlement spending is unsustainable. secretary i have two questions regarding the entitlement i just mentioned. in light of the projection of over $21.6 million of the spending in the entitlement come and not just some of the entitlement but how does the president's budget proposal readers that spending in the second does the budget produced for growth in the end title meant spending at all and if so, how?

>> the observation that you are referring to is one that we have seen it for a long time it has to do with the demographic 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 increased spending and the question is what the fiscal house in order to deal with that. the budget shows for the ten year period we've reduced the deficit to less than 2%. we are on a path that is sustainable and it's a solid foundation. and i period we have instituted additional savings and entitlement and have over $400 billion of specified savings in medicare. and obviously these are challenges that we have all known were coming for decades. i think that keeping our fiscal house in order is a critical importance. how we do that reflects how we build an economy that is growing and growth has a lot to do with our ability to tackle demographic challenge. unless we can get growth

sustained into a healthy place, those fiscal challenges will only be more complicated for the budget is a blueprint for deals in a right way with the next ten years and the foundation for the future. >> last year the social security trustees, which include you, reported that the social security disability insurance trust fund will be exhausted in 2016. as a trustee you urged the lawmakers act in a timely way to phase in the necessary changes and give workers and beneficiaries time to adjust to them. mr. secretary, in the face of the impending exhaustion of the disability insurance trust fund, what does the budget proposes anything for the exhaustion of that to address the impending exhaustion of the social security retirement trust fund further down the road? >> senator, obviously the

timeframe for the disability trust fund is much more immediate. 2016 versus decades away. i think that when experts look at what the options are for the disability trust fund in the short-term, there's a general agreement that there's going to need to be some kind of a relocation of premiums that go into the trust funds for the short-term. in the longer term, with the budget does is it leaves out a program of program integrity to make sure that people who apply for disability are eligible for it. and we would work together with congress to make the kind of changes we need to protect the critically important program to make sure that its sound in the long term and we look forward to working together on a bipartisan basis on that. >> page 33 discusses the future unsustainable deficits and debt and eat loads to a larger tax increase that is undefined in the document. specifically the budget

identifies even with reforms to medicare and other n. title meant and tough choices on the discretionary site, we will, quote, need additional revenue to maintain the commitment to seniors. i have two questions for you. which i will read through and then you can respond. first, if you agree the first part of the budget then and in addition to the tax and uses the budget, with tax increase for dollars over the next 20 or so, or as a share of gdp does the administration believe will be necessary to get what it identifies as needed in additional revenue to maintain the commitments to seniors? second committee you think the entitlements will have to be financed at least in part through the value added tax or carbon tax or some other non- income-based tax adding to the existing tax system? >> i think the budget lays out very clearly the tax policies for the next ten years for a number of years now the president laid out the

principles that should govern how we look at social security reform and i would be happy to follow up and work with you on that going forward. >> we would appreciate that. >> senator burr and then senator stabenow. >> let me also welcome you to the chair. mr. secretary, welcome. mr. secretary, after lois lerner discovered the irs had been targeting the conservative organizations both you and the president stated that you were, and i quote on outraged by that behavior. do you stand by that comment today? >> i have stood by my comments about the actions taken in the reflected that judgment and they were unacceptable. they couldn't happen again. we put in place and acting director that did a fine job to bring things into order. we have a new commissioner in the irs who is equally first-grade and we are committed to running the best irs we can

possibly run. i would equally convinced that there wasn't any kind of a malicious action. it was bad judgment, and that that judgment is unacceptable. >> i ask you because what you'vu expressed them seems at odds with the current attitude. ot win at the president has gone far to refer to those that disagree with you as a scandal, to be quoted. i would suggest you are either going further to codify that bad behavior into law. how can we interpret this new rule as anything other than an attempt to achieve the same stifling of the 50134? >> senator i continue to be leave that to the attempt to turn this into a scandal will do not reflect the nature of the bad judgment that was involved. >> 100% of the 501 c. four that had a cheap party in their name

were referred for extra -- the word progressive did not appear for extra scrutiny and of the 298 political cases, only six have progressive in their name. what do you conclude from that? >> i think bad judgment was closer to the. it addressed concerns of the right and the left. it wasn't good judgment and it was unacceptable. but it was not politically motivated. >> 298-6? >> you asked about the regulations. i want to point out the proposed changes and regulations. after the situation was evaluated by the inspector general into treasury, there was a report that laid out actions to be taken. i made a commitment to keep all of those recommendations, to follow through on all of the recommendations. one of them was to clarify the

rules where the confusion in the policy was at the root of the bad judgment that caused the problem. in the proposed world that we put out it was a request for broad comment. it didn't provide as detailed a policy as many people have said. and we have gotten as you know over 150,000 comments. we are going through that as we said we would. >> did you have any conversations prior to the tenth of last may when lois lerner made her conversations concerning the new rule respecting political activities of tax-exempt groups? >> well, be a ig report -- i don't remember the date of the report for the as after that we said that we would follow through on all of the recommendations of the report. >> last june i sent a lette send purging them to respect the controlling guidance and suspended by 13 performance awards to the irs employees. as a former rector of a windy, i

know that you have -- you must feel the following guidance is important. that's why i'm sure that you share my concern that the new commissioners decided to reverse its decision and to pay out a portion of the bonuses. given that calamitous behavior of the tax-exempt provision -- and i think the damage that it has done to public trust in the agency's ability to perform its core functions do you delete it was appropriate for those employees to receive a bonus? >> i have to start by saying the overwhelming vast majority of employees are hard working public servants who do a fine job and deserve respect and thanks and that's something that's important for all of us to remember. second, there was a suspension of the bonus policy during the sequestration period, and there was a challenge under some of the collective bargaining agreements. i would defer to the

commissioner on how he has worked out a policy subsequent to that. >> did you pay bonuses last year at the treasury? >> i don't be leave so. i would have to doublecheck. >> do you intend to pay them next year? >> i'm not sure that that decision has come to meet yet. >> senator stabenow? >> thank you very much mr. chairman. first i want to welcome you to your position. it's wonderful seeing you in that position and i look forward to the basketball games between the two of you. mr. secretary, welcome as always after the senator from virginia, we are happy to have you at the end of the table, so we appreciate you being on the committee. a couple things in addition to the question i want to start by saying that given everything that has happened at the irs, i am pleased that you finally have the president's person since the irs for the record was operating under president bush's irs

commissioner through all of this. and realizing that there are legitimate questions and we all want things to go well. i'm sure the last couple of months we have been able to confirm the president's team invite you confident that going forward that this will be addressed in a fairway. i just want to for the record say under which we were operating. second, i think it's -- we are always going to have this debate about how to move the economy. and for the record also, legitimate differences. i'm sure that you would agree it came under president clinton in 1997 into the house about without the budget i took full response ability for that mr. chairman. but what was interesting is that what worked was asking those doing very well in the country, the wealthiest americans to contribute a little bit more to help tell if the budget, making

strategic cuts where we could end up making strategic investments in education and innovation. and we balanced the budget. then we tried a different approach next in the bush administration that reflected high deficit spending on the war. we could debate the war they were not paid for. at the same time rather than paying for them, the tax cut, revenue loss to those that were the wealthiest americans, and then unfortunately ending up in the cutting investments to middle-class families and opportunities for education and so on, deregulation went forward and lost 8 million jobs. so, now we've come to the obama administration back to try to balance this. and i think it's pretty significant that we have seen the deficit more than cut in half and you say that we are on a path to create 2% of gdp in terms of the deficit and jobs

coming back not as fast as we would like to but coming back and we would like to rebalance by focusing on education, innovation, those things that would grow the middle class because we know that we will never get out with 10 million people out of work. for the record i feel like we have approaches that have worked and approaches that haven't worked. and i think we have to focus on what works. my question, mr. secretary. as the chair of the agricultural committee overseeing the commodities future trading commission, this is an agency as you know that is incredibly important as we strengthen our economy and create opportunities for investment and the cftc overseas markets that impact everything from the price of groceries and the cost of fuel, interest rates, home mortgages and so on. when we look at the cftc's increased responsibilities in the last number of years versus

their budget, i think they barely have more staff than they did 20 years ago. and as you know, their oversight has grown tremendously. futures markets have grown fivefold roughly ten times the size of the futures market new responsibilities. they bring in 2 million in fines last year allowed but received $215 million to operate. and i am very concerned about the ability for this agency to be effective in our economy. so i wonder if you might speak to the proposals by the administration and how the cftc funding matches with other funding mechanisms for other regulators. >> i must begin by thanking you for your comments about the 19 '90s i had the honor of being the budget director for three

years when we ran a surplus and we couldn't agree more we have a set of policies that worked and today we have a set of policies that work and we know how to do this. as far as the cftc, it has been a major issue that we have joined really since dodd frank was enacted that we need to have enough people both to implement the rules that have cops on the beat to enforce them. we have enough money in the appropriations bill this time to ramp up to the point that we need to implement the rules, but we need to have a sustained level of funding predictable and with the increases to reflect the work that is required to implement the new rules. we suggested that it would be a good idea to explore the kind of self funding mechanism of bank regulators have said that our financial regulators do not have to worry about year-to-year ups and downs but they can make sure they're in funding programs are there every year to protect american consumers.

>> thank you mr. chairman. >> if senator schumer is willing, senator isakson could go into them if senator schumer. senator isakson. >> think the senator from new york. mr. chairman, congratulations on the chairmanship. my work with you the last nine years i'm sure will be an enlightening period of time and i look forward to serving with you. >> circuitry i called your attention to the bottom of page three in your remarks where i quote the following. the president has called for streamlining and accelerating the permitting process for infrastructure and the budget includes the interagency permitting improvement center to help with these efforts is that correct? >> i don't have it in front of me but that is the policy yes. >> this is a little bit of a parochial question. certainly my own self-interest and that of senator chambliss

but it has everything your statement says and i want to give you this information. you may not know and i would appreciate you following up on it. for 15 years the port of savanna has been authorized for expansion. we've gone through environmental studies, requirements, requirements by the corps of engineers. the state has raised $248 million to match federal money to expand the board. i traveled with vice president beit into panama city with the mayor of philadelphia and baltimore recently because the vice president intend to expand infrastructure for the same reasons that you state in your statement. on the 28th of february just a few days ago, after everything had been done to the waivers were both in the house and senate, the president and vice president -- i can't go to the president of the vice president and i said we are going to get this project done, hell or high what her. everybody was prepared to sign the program partnership

agreement. no one signed off and epa signed off into the money int in the b, everything was done. the director of omb called the corps of engineers and told them specifically not to signed a partnership agreement. two weeks before we passed the omnibus appropriations act which i was one of the nine republicans that voted for it we met with the director into the e director sent to personnel from her office to meet with the staff of mine and the staff of senator chambliss to craft the language for the appropriations bill to ensure she would have the authority of the right wording into the right of the ready to move the money in from fy 2015 from intended to construction. all of a sudden friday of last week of phone started ringing and the directions went to the core and they didn't find a partnership agreement. i personally got calls saying we couldn't do what we were doing. before we met with the staff to craft the language they asked us to get in the appropriations

bill. so, i can't understand how the administration can say that it wants to accelerate the projects when we did a last minute hold on the authorization, which every ie has been dotted and t. has been crossed. do you have any answer for that? >> iem box deeply in the individual project decisions why cannot address the questions and i would refer the question to the omb director. but i would say -- >> i would appreciate you looking into it personally. >> obviously it is and the department of treasury issue so i'm going to have to go to the omb for the issue. i would say that going back, we have made a lot of progress at streamlining the approval process for important projects. in my home state of new york and senator schumer, the bridge was permitted in 18 months. something that nobody beauty was possible, so this is important and something that we are committed to. >> i would appreciate it very much. mr. chairman, can i ask you a

question? i am correct go to the majority and minority site are still investigating the irs situation; is that not correct? >> we are working together on the investigation that began coming and we intend to continue to work on it and to do it in a thoroughly bipartisan way. >> the reason i mention it is your edification and/or benefit in the last month i've taken every friday to do town hall meetings in georgia. the number one thing that i am asked about is the irs targeting a certain group for audit. the number one thing is not -- it cannot be dismissed as an error in judgment until we get all the facts to find out if that's what it was. so i would encourage you being responsible for the irs to let them know they are the number one topic of the conversation and when april 15 comes to your going to be the number one topic for a lot of reasons we are familiar with, but we need to get to the bottom of that and the senator is precisely correct it is the public's number one concern. >> senator, we try to be cooperative and we will continue

to be cooperative with this committee and the house committee investigation into the irs commissioner has made a similar commitment, and we understand you need to complete your investigation. i can offer our judgment based on what we know. >> thank you. senator schumer. >> thank you for the wonderful job you are doing. we are glad you are there. as a new yorker and more importantly as an american. if i want to applaud your commitment in this budget to focus on the middle class like a laser. the deficit is a problem though question about it. but we have made good progress on the deficit and i would pause that the number one problem facing america is the decline of the middle-class incomes. it affects our economy in so many ways. it affects our politics, it affects our whole way of being as americans. doing that kind of things that you have done in the budget of in terms of taxes such as the

american opportunity tax credit and the provision that i helped to author and worked with you to extend begin at permanent, the child tax credit and on the spending side, which i know is not your department, but doing investments in infrastructure and in education and research, those are the kinds to get the middle-class moving again and doegoes atdoes at least have myt priority. i have a couple of questions here on specifics. the first is on the aspire act. i know the chairman mentioned that in his opening remarks, and it's so important because one of the greatest barriers to the financial stability for many americans is the lack of savings and assets. 19% of new york households, 31% of households nationwide have no savings account. that is sort of unheard of but that is what is happening. i remember when i was in grade school we put a quarter into the savings bank every week and a ia little pink book that showed.

>> another fine new york institution. anyway, that isn't done anymore and children from families face significant barriers attending college and owning a home. so for several congresses i have introduced the congressman was a sponsor, senator santorum. so it has real bipartisan support. the act would establish a universal title to savings account with federal seed funding and matching contributions. and i am first appreciative of the chairman highlighting this issue as one of the issues he wants to move this year which i approach appreciate he mentioned in his remarks. but i hope we can count on your support and the administration support for both technical guidance as we move forward with this proposal and also support of the basic concept creating a lifetime savings fund for every child when they are 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 that we used to. >> we agree that encouraging savings is a critically important objective. that's one of the reasons we have made it the apostles such a prominent feature because it doesn't sound like much but starting with $25 extorts the habit of saving for retirement and it's the same idea that you are talking about. it's something we are happy to work with you on technically. >> that is at the other end. >> we are happy to work on the proposal. it is a question of limited resources how do we optimize the decisions we make and we are happy to work with you on this. >> i look forward to -- i'm going to bother you until you

end up supporting. so it is now worth liter. take your pick. okay. the next issue i was glad to see that you made it permanent. one of the great problems is paying for college. it's become so much more expensive, and somebody said that when he went to college, 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 and it shows you both ends changing. it's a shame it's declining in the percentage of people who graduate from college. we used to be number one. we always worried about the k-12 system that we didn't worry about the higher education system and it's still the number one worry is expensive. so, i think it's important.

and i didn't understand. i like paul ryan and i think that he's an honorable man. i like working with him on many issues, that he attacked this provision in the war on poverty report. i don't understand why colleagues on the other sites if this is a tax break to help families pay for college and my question is doesn't it seem to you to be the kind of thing it used to go in bipartisan support and it was offered by senator snowe and myself when she was on the committee. doesn't it seem to you the kind of thing that should give both parties -- that is the kind of thing we could come together on. >> i would certainly hope that is the case and i would applaud the work that you did on this. you look at the system of higher education and we still have the best institutions in the world. when you look at the pathway towards opportunity, there is a dividing line for those that get a higher education and those who don't. if we want to make sure that we have the next generation with the skills they need to grow the

economy and make sure everyone is willing to work hard and has a chance, we look forward to working on a bipartisan basis to extend to make it permanent. >> thank you mr. chairman. senator menendez. >> first i want to congratulate you and i look forward to your progressive leadership in the committee and i'm also looking forward to having moved down the roster. i'm here to no longer smashing my knees or that of my staff from the other end. so, let me talk about -- i know you're here about the budget and also about values and in my perspective if it reflects what we bb does a country. but as we talk about the budget, i also look at the draft of the house ways and means committee chairman tax reform plan that has a complete elimination of the state and local tax

deduction. that's a proposal that would impose a significant -- from my perspective unfair tax increase on millions of families in my home state of new jersey and across a number of high-cost states in the country. and unfortunately for the reality of the prospecting experience of the 1986 effort to show that as most tax experts know any serious tax reform effort can't be built on such a shaky foundation. so my question to get a sense from you is for the tax reform to become a reality, do you think the tax writers should take into account the regional impact of any tax change? >> i guess i should start by saying the chairman deserves a lot of credit for putting the detailed plan out of there. they reflected the thinking that many of us have had and many of us disagree. and the question of the regional

impact we always have to worry about whether or not the tax policy or the spending policy would put into effect is fair and affect the country in a way the outcomes are something that we would want as a policy. i think on the specific issue of the state and local deduction, we have obviously approached it in a different way. we have created along with other deductions where we think there's an argument to limit the availability of the deduction for the high income but not too remove it as the basic mechanism to permit the deduction of the state and local taxes. state and local finances or import into the stability of the economy, and i think the complete elimination of the state and local deduction would be something that would be a challenge for many jurisdictions and regionally it isn't just the northeast. it certainly is well beyond the northeast. so i think it is something we would have to look hard at anything that we did as far as

that proposal. >> there's a difference between high wealth individuals who may have limitations and regular middle-class families that this would be an economic body glove. i appreciate your thoughtfulne thoughtfulness. i know that we recently had a conversation on this and that is the reform. i just want to bring to your attention again the tax is owned by the foreign pension funds to the administrative actions. we have the authority to take some positive action here. as you may know up until 2007, the foreign pension fund had the

ability to invest and have their share is treated similarly to the domestic pension fund. this is an area the president has done that he wants to accent the foreign pension as a way to restructure domestic commercial real estate and create jobs. i've also heard from the president about his statements he wants to use executive authority on the issues that he deems a priori. this is one of those issues that was listed last year. so i hope that it makes sense for the treasury in this case to take some sort of action and i promised you we were going to send some documentation. i want to call your attention there are tax experts that wrote the treasury on october 8. the notice to accept the foreign

pension funds and i'm disappointed to find out despite ththe importance to both the administration as a bipartisan issue by the way are legislation to deal with this legislatively is a bipartisan effort and remains unanswered. i ask for the letter to look at it and read it and come to the conclusion with your -- those that work with you to get to the point we might actually be able to pursue something the president himself wants to see. >> as i would follow up and get a response to that letter, we are in total agreement there should be a change of policy. we've proposed legislation and we would like to work with the committee to get that done. our view is that we didn't have the authority to take another look at it. we have so many infrastructure needs in the country and our goal is to have an attractive

place for foreign direct investment in the united states. this is a policy area that is a problem, and we will follow up and work with you to explore the questions on what authority we have. it's the most straightforward way would be to change the law and to make it clear and i hope that we have an opportunity to work with you on that. i appreciate the secretary raising the imf issue as we are dealing with it in the foreign relations committee. but i think it's beyond ukraine as a question of what i want to be in the position to the world to be able to influence the economic issues that affect us here at home but stabilize economic opportunities abroad. >> i would like to thank senator menendez brother leadership he has shown for funding the imf and frankly for the bipartisan support that is getting. >> i appreciat appreciate senatr

menendez. we have three colleagues in order of appearance senator warren, bennett and roberts. we do have each member get there five minutes. we have senator cardin and we will be able to get the senator in as well as begin with senator warner. >> i want to join my colleagues on commending you and your chairmanship. i didn't know it went down this far but i appreciate you and senator hatch comments. even if you're at the kids table your voice will be heard. i want to echo what the senator said as we think about getting the investment and job creation this should be a no-brainer whether we could do it administratively i strongly

support that. i want to move to a part of the budget others have touched upon on infrastructure i want to commend the president for thinking about this in a more aggressive manner and whether that is through a proposal and working with senator bennett taking a lead on his supporter and ally in the repatriation or other proposals i would simply point out to my colleagues that we want to get to for indirect investment in the united states now know as you are well aware there's lots of private american capital that does not invest in american infrastructure right now because we don't have the financing authority and the president's budget proposed this approach and i would point out this is an approach we have taken some of the ideas that were in the infrastructure bank the president proposed earlier

and made it more conservative where we have taken out the energy generation and have guaranteed investment grade and vestments lead we make sure the price of the dollar first dollar lost and the bridge at has five republican cosponsors and democratic cosponsors and other members that were initially capitalized and underscores the 7 billion. and i would say from my colleagues when interest rates were at a record low not to take advantage of trying to get that private capital into our infrastructure projects would be a great loss particularly if there's a very good job but we have just received a grant that took a year to process. the idea having the central point for the project finance and infrastructure financing in the united states government i think it's terribly important and it doesn't replace the need for permanent funding source

that financing is a key component and the reasons are quite simple. you needed a place to get the long-term patient capital with the government to backstop you can save 200 basis points on a multibillion-dollar project that can be 30, 40, $50 million of the project cost. third while i commend the folks you need to concentrate the expertise around the road, rail, what are, energy transmission ports, something that is terribly important for the senator and me and virginia in one spot if we are going to have the expertise of the private sector to go against wall street. it's more commercial but it's also a point that i think for smaller states this is an asset if modified in previous proposals that would lower the minimum amount and increased the amount that goes to the

communities. they are not going to have the expertise to do that without some ability to draw upon the national expertise so i would like you to -- i'm not going to overstate you needed funding sources to leverage the private capital. but the notion of the financing authority or how to get a private capital in the infrastructure needs expects to comment on that. >> we are in total agreement. we felt it was a choice. we need to have our conventional funding mechanisms, and that is why i would vote for the reauthorization and the funding mechanism to have the federal infrastructure funding firmly secure it's so important. we also need mechanisms like the infrastructure bank and we need to look at things like the -- >> it's better if the college financing authority and things like the legislation can change. so the foreign direct investme investment. i just came back from the g. 20 meetings which were concentrated

on growth and within the growth the question that we spent a lot of time talking about across the world is how to make the private investment in infrastructure something that could happen more easily and more effectively. and the things that a whole world of talk about or how we get the things permitted. because once we stop the coordination it's so important and how do we eliminate the friction of the system which is why the financing authority is so important. but there is no scenario that takes the government out completely. it is necessary for certain risksharing and it's necessary to keep certain essential projects that don't have a revenue stream going. so i think that it's kind of all of the above and we are determined to make progress on it. and i must say my view over the last three and a half decades there is bipartisan support for infrastructure. it's not something that is a partyline issue so we should be able to make progress. >> i just want to point out that

our legislation starts with ten original cosponsors five republicans and five democrats and i would also point out i think we are the only industrial nation in the world that doesn't have an authority or ability to leverage private capital investment in infrastructure. thank you mr. chairman. >> we are going to call and keep this going because so many senators are interested in the order of appearance next is senator portman for five minutes. >> thank you mr. chairman and welcome to mr. warner joining us down here at the table at the end of the dais. secretary, thank you for coming before us again. you know my disappointment on the budget and we don't address the big issue which is mandatory spending we were told by the congressional budget office sitting in a chair like that when only a couple weeks ago that the mandatory side of the budget which is the part we don't appropriate every year is down two thirds of the budget and is going to grow three quarters of the budget the next

ten years and specifically he said health-care entitlements are going to increase by 115%, more than double and we know the trust funds are in trouble already and looking at the future, the disabilities 2017 the other trust funds are the security and medicare trust fund. both will be depleted and therefore bankrupt in the lifetime of most people retiring today. so i'm very concerned we aren't addressing it and the president had an opportunity to do so in fact he backtracked from what he had in his last budget looking at these important programs, so my general question i don't want you to answer now because i want to get into taxes is what do we have to do about this issue and if we don't address it we will continue to squeeze the discretionary side of the budget including infrastructure since my colleague talked about that defense and everything else and put more and more pressure on our economy. on the economic issue, revenue

over a trillion dollars of taxes in this budget after the 600 billion plus and the new revenues in a la obamacare. economic growth is already incredibly weak and it trumps the tax increases in terms of how do you get the right kind of revenue into the budget and the baseline said we are looking at 2.5% growth that downgraded his 1.5 trillion over the next decade from the last reports nine months ago. by the way, every single one of the projections has been wronged. the repeated decreases and economic growth are transferred to $1.2 trillion of reduced tax revenue to 2024 and keep in mind we are not talking about the bad economy the president inherited. these were additional downward economic provisions that occurred after the president took office. so, growth. we have to get the jobs back. getting jobs back.

and i would just say the president spent years fighting for the 600 billion-dollar tax increase in effect america surrendered $2.2 trillion in revenue from the continued growth during the period. if you look at it as a columnist boy. 1.2 trillion u.s. proposed here the professor who was present chairwoman of the council of economic advisers said an exogenous tax increase of 1% of gdp lowers gdp by roughly 3%. so, does the white house believe it can raise a trillion dollars and 620 in the fiscal cliff 1.2 without significantly slowing down the economic growth? >> i think if you look at the experience over the last several years, we are on a path of economic growth. it obviously took a long time to dig out of the recession from 2,008 and 2009, that we are

seeing better growth in the united states than a lot of other economies and we have put in place a number of important things. we got our economy moving right away with the recovery act and put in place financial reforms but we also enacted the affordable care act so the policies are in place and we are growing. in this new budget what we have proposed is an investment program that we think as was necessary to build the economy of the future. we need infrastructure and skills training. >> secretary whitney if i could my question was about the impact of taxes. let me give you a example we have the buffet will and we need to increase taxes on what is investment capital because the latest joint tax committee essentially creates a 30% minimum tax over a million dollars to raise 71 billion over ten years the payroll taxes count towards the minimum and most of the taxes are going to

hit the capital gains dividend income so that's basically what we are talking about here which will help investment to bring economic growth. let me ask you this as an example is it possible such a steep tax increase for these types of investments in income could reduce economic growth by even one 40th of 1%? in other words, from 2.445% which is projected to 2.420%, one 40th of one person come is it possible this kind of taxes on investment income could do that? gimmick i'd have to go back and look at different estimates. on the back of an envelope it's hard to -- >> the reason i ask is the entire 71 billion that you are raising is mitigated by the slower economic growth. that's the issue. >> i just want to make sure the other senators get a chance. estimate i'm sorry i was watching my time. let me make this general point if i could. obviously disappointed we didn't you with the mandatory side and i know we have to on a

bipartisan basis and i talk a lot about us there are ways we can do it. i'm pleased there is means testing still in the budget and i know that's been controversial but you have backed off of other things but we have to be careful that we do reform this and we don't put more taxes on the economy at the time. >> we have to go to senator brown. >> enqueue mr. chairman. the president budget includes an important expansion of the earned income tax credit for workers without children. thank you for that. that's reflective of the legislation senator wyden and/or colleagues introduced. it will matter for workers without children and it won't make it permanent as it is particularly important on the cost-of-living adjustment for the child tax credit. this should be a bipartisan effort and a bipartisan issue that started under president ford, president ronald reagan's head if i believe said it was the best anti-poverty program that the government had.

it was championed by milton friedman the american enterprise institute as something we ought to be able to pass. some have said in response to the minimum wage proposal from the president that $10.10 per hour with the tipped minimum wage and with the cost-of-living adjustment that we should do earned income tax credits instead. let me ask one sort of central question about this. last week i did a hearing on this subcommittee on pension reform and social security at about people's retirement security and it's clear there is a huge number of americans, moderate and low-income americans who have really only one leg of the three-legged install. they simply don't have to find pension benefits if they have a four o. one k.. there are just a few dollars without much security. they have very little or no savings. so the issue in many ways for

retirement security is what are we doing about wages in this country? we know that the worker productivity is almost doubled in the last 35 years and profits are high. we also know the wages have been stagnant for most americans and the minimum wage has 20 or 30% less buying power than it did to work three or four decades ago. all of that together talked about the importance of both a minimum-wage increase and an earned income tax expansion. in two ways one, what does it mean to economic growth and a second, what does it mean long-term for those workers that are retiring ten and 20 years from now after being in the lowest quartile or the two lowest quartiles of income earners? >> senator brown, i think that my answer to your question is the answer i would have given to senator portman if we had more time to resign going to combine a couple of ideas in answering.

we need to focus on the growth in this country and we have had no lack of income at the high end over these years where we have seen at leveling off and shrinking. income in the middle and entry level of the workforce. i don't think there's anyone who doubts when you raise the minimum wage every dollar people earn is spent. it doesn't answer the question about saving for retirement but it does answer the question of getting that money back into the economy into simulating economic activity. the idc has been the most powerful engine to get out of poverty and get them to work. young people trying to work their way through college and loving comes off to have the benefit of the e. i t. c.. they are going to spend the money that they have disposable. our challenge in terms of retirement savings is to get people started saving and to do it in a way where it's a habit that develops early and builds as people's disposable income

grows. that's why even though it's a smaller number it is so important. almost anyone can put away $5 a paper cup. when you can put $100 all the better. but you have to get started and too many people wait for too long. i think that we have to be honest with ourselves about the trade-offs within the system tray if we are going to have a fiscal policy that is fair and balanced and meet our deficit targets, we are going to have to focus on areas that are critical to growth. and we think that the attacks proposals in this budget burdens where they can be born and in a way that is consistent with economic growth and invest in the things we need to do as a country to make sure the engine picks up speed and infrastructure and skills training is part of that. that isn't what you asked about but it's on a continuum so i think one has to look at these proposals on the whole and look back not just of 2008 and 2009 but over the last several decades but are we going to do to change the direction of middle-class income in the country and i think the budget

deficit. >> i would add a higher minimum wage as you said doesn't mean you raise up to $10.10 it doesn't mean they are going to put $25 a week in savings but it does mean others get a raise a little higher than that. they may be able to save a little bit and it also means the social security benefit will go up a little bit because the lowest wage workers obviously have the lowest social security benefits cut too. and it would work full-time in this country ought to take him a paycheck that is at least at the poverty level. >> the clock is running in our favor. the vote hasn't started. senator harding and senator bennett. first i want to welcome senator warner to the committee. it's great to have him here and i know he will be a great addition to the committee. welcome and it's nice to have you as the chairman and i congratulate you on your elevation and we look forward to working together as a team for our country. i appreciate your initial questions to the secretary in

regards to ukraine and the tools that are available. it's a very dangerous situation not just for ukraine but globally. i had a hearing yesterday on east asia pacific subcommittee, and we were talking about security issues in the south china sea. and china's reaction to what's happening in ukraine and what options they may use if there is not a robust response to what russia has done in ukraine and had a hearing this morning. the reason i was late on the commission in the western balkans, and clearly what is happening in ukraine effects the attitude of the countries to respect borders around the world, so very much every tool we have at our disposal needs to be utilized to make it clear that russia cannot violate its international commitments in regards to ukraine's legitimate borders. let me also comment briefly on

the budget mr. secretary i. know you had a difficult choice the budget numbers are compromised and not what we all would like to see. and we all -- of the administration has been clear about this. the long-term budget agreement that yes deals with tax reform and revenue so we have predicted ipredictability in the tax code that deals with progress made in bringing down the health care costs that would bring down entitlement spending and we need to get that predictability in the budget that is what i hear most in the private sector on that job growth is to make decisions in the administration has worked hard and has been bold about putting forward suggestions in that regard and i applaud you for that because it leads to job growth that senator brown has been talking about and we need to do a better job at job growth and allow us to invest that in the search and

infrastructure. that's helped me create jobs. but let me in the few minutes raise a question where we have some agreement and disagreement and that is retirement savings. we talked about this before. in the best of times we didn't put enough away for retirement and in tough times even more difficult. senator brown is right in regards to the minimum wage and with regards to the valuable tools that get stronger ability of workers to be able to put money away for abou that retiret and it's a good first step. that's a good idea i render when i was in school we put away every week for savings bonds i think it makes sense to get people as early as possible putting money away. but we have shown what works and what doesn't work and things that work let's build on that. automatic enrollment, that works. but we also know that the low-wage workers are not

inclined to put money away just because there is a tax advantage. they need money on the table and that is where the credit comes in and employer-sponsored plans come in. .. ed pl plans come in. my concern is you once again have put a tax on caps to limit what you can put away in preferred retirement options which could have unintended consequences of terminating more pla plans, allowing less people to be covered by retirement savings. mr. secretary, i want to work with you because i think there are ways we can obviously work together. there is broad interest on both sides of the aisle to have more robust opportunities for people to put more money away for retirement and savings. i know you're open to that but wanted to give you a chance to comment. >> senator, we are in total agreement about the need to create more savings opportunities to get people started, to get them on a path

towards having a strong amount of personal savings, to look forward to in their retirement. the proposal we have on limit ing the availability of tax benefits for savings is very narrow. we don't say there's any limitation on the amount one can save. we say once there's $3.1 million in an account additional contributions are not eligible for preferred tax treatment. so for most americans $3.1 million in retirement savings is more than they can even dream of. if we can get everyone to the point they're hitting that li t limit, we will have exceeded. >> i think you're also limiting 28 appearance deductions on some. >> the 28 appearance limitation applies to a very broad range. that's just saying people in the highest income bracket should get the same value for their tax deductions and credits as people who earn $250,000 a year. it doesn't take away a taxes

deduction, caps it at the amount that is benefitting people at the beginning of the high end. >> we'll continue the discussion. >> we'll continue the discussion. >> thank you, the very patient michael bennet. >> at long last. mr. chairman, first, i'd like to welcome my friend, senator warner from virginia to the kid's table. nice to be sitting at the big kids table but that will happen in time >> i feel like i'm getting younger and younger. >> mr. chairman, congratulations to you. we're all delight you're chairing the committee. my hope for you and for all of us is that this committee can become the model of bipartisanship this senate and this congress needs. i met, before i came here this morning, with my county commissioners in colorado. it's the most diverse array of people you can imagine. every political party was represented. urban and rural represented. people with very strong convictions and disagreements, who very easily came together on

the six priorities they have for the state of colorado and the discussion we had suggested that the next 15 things on the list, if there were room for it, we could all agree on. i think one of those things, mr. secretary, welcome back, by the way, really is infrastructure. you've heard that throughout the committee's questions today. mark warner has a bill, i have a bill called the partnership to build america act. it has seven republicans, five democrats and an independent on it. that's pretty good. i know of the chairman's interest. i would ask first you take a look at that bill. if there are ways we can improve it, i'd love to hear about it. i don't know whether you followed it at all. i would encourage us to imagine we can actually do something on infrastructure in this committee. i don't know if there's anything else you'd like to say about it. i have one last thing and i'll shut up. i had the occasion to visit union station in denver

recently. where we built a passenger station, heavy rail station, light rail station, bus station. i was working for the mayor of denver when all this started. it has a bunch of local money, billion dollars of federal money. you can't find another example of what we built in colorado unless you go abroad. i'm really proud what people did there. when you stand there, what you say to yourself is this is too big an asset for what we have right now. what you realize is that 50 years from now somebody's going to stand there and say, you know what, it was really good somebody 50 years ago thought about us. i think that's what our parents and grandparents thought when they built the infrastructure we're not now maintaining much less building the infrastructure we will need in the 21st century for up or kids. there's a little bit of question in there but i will turn it back over to you, mr. secretary. >> senator, i couldn't agree more on the need and gratitude we have to past generations and should hope future generations have to us. the infrastructure that was

built in this country in the 1930s, infrastructure built in this country in the 1950s and '60s is what's built the economic foundation for growth in the united states. that's not going to last forever. we have to be on the job and we have to make sure we leave behind infrastructure that can meet 21st century and sustained growth leadership in the united states. we have looked at the legislation you put in. i think there are a lot of points of overlap between that approach and ours. we have proposed taking the business tax reform debate and moving it aside and doing business tax reform and infrastructure together while we pursue broader comprehensive tax reform and broader issues of fiscal policy on the business side and a lot of con ssensus

basis and hope we can make progress. >> i understand that. i don't think we need to get tangled up in all that. we obviously need to do comprehensive tax reform, god knows when that will happen. this is a modest, in some sense amount of money, $50 billion to capitalize. we don't have to reform the whole tax code to get it back. >> we're happy to work with you on it. >> speaking of taxes, when i look at the code, i often think what's embedded here is really a fight between the future and the pats. you have a bunch of incumbent interests protecting incumbent interests. what it threatens is innovation and our economy. that's important to me because of all the questions we heard today about median family income continuing to fall. i don't think we solve that problem without educating our people and without having the most innovative ecosystem on the planet because it's the jobs created next week and businesses created next week. the budget contains several tax proposals i think are consistent

with that strengthens research and development and makes it permanent and increases the amount of start-up expenses small businesses may deduct. would you take your last seconds here to tell us how else this budget is intended to support or tax provisions in particular support innovation in this country. >> you put your finger on the primary drivers. obviously, what's made our economy the cutting edge economy is our innovation and our ability to translate technical and scientific breakthroughs into commercial endeavors. we should have a tax code that encourages that on a predictable basis where it's not changing constantly. we tried to do structural changes and how we would provide the tax credit for research and experimentation to make it meet the needs of businesses today, not looking back 20 years. i think we always have to look forward. we can't have a tax code designed to deal with the challenges of either 1960 or

1980. we need the -- a tax code that deals with the challenges of 21st century and we tried to put proposals together that do that and look forward to working with this committee to get that accomplished. >> thank you. thank you for your testimony. thank you, mr. chairman. i was talking about my county commissioners earlier, speaking of predictability, not a single one said they ever passed a continuing resolution as way of resolving their budget issues. with that, i yield the floor. >> thank you, senator. we turn to senator roberts then. >> thank you. senator, i had some glowing remarks about the chairman and, of course, we are talking to an empty chair here, so i didn't mean that to reflect upon the chairman, but, anyway. he's originally from wichita, kansas, and they are now discovering his chairmanship. they're very proud and they're going to beseech the chairman with the milk of human kindness

and humble requests. maybe a little frankincense and mur and a little bonused appreciation for the aircraft industry, if that would work out. i have a lot of pride that a good friend and colleague has now become chairman of this committee. people ask me how do i get along with ron wyden. i said everybody gets along with him. you might not agree with him. everybody gets along with him. that's rare in these times. mr. secretary, one of the issues senator burr referred to and senator isakson, i'm always asked on my visits home whether anybody will be held accountable for the scandals at the irs. i have introduced legislation along with senator flake -- let me get to that here. the bill would stop the irs from

intimidating or targeting groups for their beliefs. 40 other senators have co-sponsored this bill last week, the house passed very similar legislation. i hope this is on the fast track. it would simply halt further action on the irs's proposed regulations until ongoing investigations are completed by the justice department, house, ways and means committee and this committee, the finance committee. i don't think it's controversial, just let the full light of day shine on these practices before allowing the irs to move to new restrictions on any political activity. the bill freezes further irs action for one year and make it clear the irs can only enforce regulations in place before all this mess began. mr. secretary, do you think it's appropriate to propose more regulations before the relevant committee, including this committee, have completed the investigation of the irs actions? >> senator, i mean, i think that your characterization of being

held accountable -- no one being held accountable doesn't reflect what we've done. we brought in a new irs commissioner. he replaced all the intermediate levels of leadership in the chain to the incident we have said was unacceptable and had to be something that was fully investigationed and never done again. policies were put in place to change the practices. as i think we all know, the inspector general report had a recommendation, all the things i described were recommended but additional recommendation the rules needed to be clarified. part of the problem was unclear rules. we have put out for comment a preliminary approach, which i might add doesn't even provide all the detail because we said in order to develop the detail we needed comment >> i know it doesn't have all the details. i'm concerned about that. >> that -- >> i know your clarification argument with regards to all this. let me ask another question. in developing these regulation,

why didn't the irs -- or why did the irs limit the new rules to c 4s and not apply them to regulated other regulated not-for-profit organizations such as unions? >> well, the -- the proposed rules went out and asked for comments on a broader range of areas. the final rules have not been written. one of the reasons for going out was to get comment. we've gotten it from right and left. there are over 150,000 comments. it will take a while go through the comments. i'm not sure any rule has gotten more comments. >> why don't we just wait until the investigations are over and then you can take a look at that? i think only one -- only one person was fired. everybody else retired without any sanctions. that was voluntarily. let me just ask you the basic question here because i talked to mr. fix-it, who i refer to as the new man there. he indicated that he was just

going to try to fix things at the irs and he didn't have anything to do with the investigation other than trying to get things behind everybody. but is the internal revenue service equipped to regulate political activity? should we not reduce or eliminate the agency's role in this area and keep regulations and politics where it belongs the federal election commission. i don't know why on earth we had go down this road. >> senator, the rules in this area have evolved over a long period of time. the clarification proposed is intended to start a process of clarifying it, so that there won't be the kind of ambiguity. we look forward to working with congress going forward as we review the extensive amount of interest that's reflected in the comment comments. >> i'm 24 seconds over time. i don't see anybody else. i would say to the acting chairman, i just have one other

request, the article by bradley smith, back on february 26th in the "wall street journal" be put in the record at this point. >> without objection. >> it really gets to the heart of the matter. everybody asks how did this happen? how did this start? feb 16, 2012, seven members of the irs wrote to the conservation organizations, not saying that's where it started to begin with but that sure gave it a push. that's pretty obvious and i really regret that happened. my time is up. although you know -- i would tell the acting chairman, if that is the appropriate term, that senator wyden, when i was chairman of the intelligence committee, and we were trying to confirm general hayden as a cia director, asked for 20 minutes -- we had 20 minutes that time, not five. not that i'm saying we shouldn't

subject you to 20 minutes, sir. at any rate, then he asked for another 20 and another 20. now, that's an hour. so i am probably over here ab t aboabout 1:40. maybe i could have an account or something, i could sort of bank on that or something? >> i think what i'm going to do is ask one last question. >> all right. >> if i can. >> i appreciate that. thank you, mr. secretary for coming. i appreciate it. >> we're kind of ping-ponging. i went over to the first thought and then senator wyden will be back. hopefully this won't be much longer. in one of the darkest moments in modern political history, president nixon sought to use the irs to target his political enemies. thankfully, for the sake of our nation and our democracy, the irs 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 irs commissioner decades ago had a clear role in reflecting or -- excuse me, in

rejecting or approving president nixon's recommendations to target americans based on their political views, the irs commissioner of today has a clear role in rejecting or approving the current proposed irs regulations, that if finalized will make it more difficult for americans to speak out against bad public policies. treasury regulations make clear that the irs commissioner can block proposed regulations prior to those regulations moving up the chain to the treasury department to become final. in other words, if the commissioner is opposed to the irs regulations and truly committed to restoring the credibility and reputation of the irs, as he claims, he can block the regulations from moving forward. secretary lew, if you approve of those regulation, i must say you're wrong. but can you at least confirm,

i'm not saying you do, but can you at least confirm that the irs commissioner has the authority to choose to not approve making the irs targeting regulations final, and that he may exercise that authority free of influence or pressure from treasury and/or the white house? >> senator hatch, i think you and i agree 100 appearance that the irs should be totally apart from politics and i think we all learned in the 1970s of the danger of crossing that line. i also know that the investigations that we have done, in terms of information available to us, i hope this is confirmed by the investigations that you conduct, is that there was no political activity behind the very bad judgment that was exercised in the case of the 501(c)(4) reviews. i think the development of regulations between the irs and treasury is a well established practice, where there's a policy

discussion that goes on and treasury plays a lead role in developing tax policy, but irs plays a critical role in the implementation of it. one has to inform the other. i can guarantee you that the process here will be a full and fair and open. 150,000 plus comments will take a while to go through. everything will be reviewed. that's what should happen on an important policy matter? sure. but i think what i'm asking is, do you agree with my view that the commissioner can stop this if he wants to? just like the irs commissioner during the nixon years. >> in the role of approving policy, opposed to enforcement actions, enforcement actions are totally in the domain of the irs commissioner, as is appropriate. policy is signed off jointly by the irs commissioner and the assistant secretary for tax policy. both have a role to play there. >> let me get this straight.

we've had this situation arise where it looks like -- like the irs is being used and that some people heavy -- have acted improperly at the irs. we're in the middle of an extensive bipartisan investigation by this committee. all i'm asking is if the commissioner decides to resolve this matter he has the authority to do so. >> i tried to answer the question. >> lure going back and forth and all around. yes or no. does he have the authority to say we're going to stop this? >> he does sign off on policy regulations, as does the assistant secretary of tax policy, so both have sign-offs. it takes both. >> indoo other words, if he decs they've gone too far and that this is improper, and that that

he still has to get your approval? >> to put-the. >> on the regulations? >> when we publish rules, both the irs commissioner and the assistant secretary for tax policy sign off on them. so what i'm saying is those are the two approvals that go in. i'm not going to character rise for what reasons he would or wouldn't exercise that judgment. that's obviously something that is his judgment to make. but he does sign off as irs commissioner. all irs commissioners sign off on regulations. >> let me just ask it a different way, yes or no, can the irs commissioner choose to stop the rule absent your or the white house pressure? >> i'm -- i'm -- i am trying to respond your question, senator. >> i think the answer is clear, he ought to be able to. >> he does have the authority to sign off or delegate to his deputy the right to sign off. he also has the right not to sign off. >> no, if he does decide to-

>> i'm just not going to speculate on what motivation goes behind the decision. knew can't decide what he's going to do. the thing i'm trying to establish he has the right to stop this type of stuff. >> he -- he either decides to sign off or not. >> all right. i think that's all i need. could i ask one other question? >> yes, you can. i'm getting ready to ask another one as well. >> let me just ask one more. secretary, i've been watching with deep concern the economic trade measures against the ukrainian government. this is part of a larger pattern it seems to me of russia and economic coercion. certainly, against its neighbors for nothing but political reasons. in a letter i sent yesterday i raised my long standing concerns with russia's actions and its contin

continuing refusal to meet its national economic obligations. in that letter i urged the administration to use all tools at its disposal to demonstrate to russia the importance of complying with international obligations and offered to work with the administration to put more tools at its disposal if necessary. mr. secretary, do you have any views about the administration's effort to improve russia's compliance with its internal international obligations which existing policy tools are not being fully utilized? what further tools can be used to bring pressure to bear on russia and bolster our friends and allies in the region? >> senator, as i tried to make clear at the beginning of this hearing, it is a very important matter for us to be clear russia's actions are unacceptable and there have to be consequences. there also has to be a path for russia to take to step back and

we will respond in a way that is responsive and proportional. we've already taken actions with regard to the g8 meetings very important to russia sand taken action with regard to a trade delegation supposed to be investigating the national investment treaty called back. we've taken action by keep ag presidential delegation from attending the paralympics, very important. russia put a huge amount into the olympics and paralympics. not participating is a clear sign. our policy is clear they have to be politically and economically feeling the isolation that comes from acting in a way that's inconsistent with international law. the president has made clear he's asked for other options. we are developing those options. i will leave to it the president to decide what options to exercise. but we're obviously looking at what other steps would be appropriate. >> okay. mr. secretary, the parts of the budget that has been made public so far do not seem to have much,

if anything, to say about promoting growth through trade, including the transpacific partnership or tpp and the tr s transatlantic trade and investment partnership. i noted in the page and half section of the budget entitled "cuts, consolidations and savings unquote the president calls for a grant of authority to him to submit proposals to organize the executive branch via a fast track procedure. however, i'm not aware of any call by the president in the budget for fast track authority to negotiate our trade deals, called trade promotion authority or tpa. mr. secretary, given the potential for trade deals to grow, the united states economy and create domestic jobs, is tpa simply not a priority for this administration. >> senator, i think the president made clear in the

state of the union trade promotion authority and two agreements, pacific and atlantic agreement are both important priorities. we want to work with this committee on bipartisan basis as the chairman takes a look at tpa to move forward. most importantly we want to move forward on tpa and ttip so we can bring the kind of high quality agreement that will bring u.s. world economic growth back to the congress. it's an an area i hope we can have bipartisan cooperation. we agree. >> i hope so, too. >> thank you, senator hatch. secretary lew, on this matter of the 501(c)(4)s, i was out of the room. thank you, senator hatch, for your graciousness so i could make the votes, but we've had a number of colleagues raise this issue. of course, i am sort of parachuting into this matter because, as you know, chairman baucus and senator hatch and the finance committee staff, on a

bipartisan basis, has been working on this. they've interviewed 28 irs employees, received approximately 500,000 pages of documents. it's my hope and expectation this report will be ready for release next morning or in early april. senator hatch and i have agreed, and i thank senator hatch for his thoughtfulness. we will meet every week. it's my intent to work with him in a thoroughly bipartisan way on it. it just seems to me that it's not appropriate for this committee or for the senate to take action until this bipartisan investigation is completed. obviously, we're going to have a big debate when it's over. for example for the long term, i feel very strongly about the legislation. it is the only bipartisan campaign finance bill now on the table here in the senate.

the bill i have with senator lisa murkowski and she puts it eloquently. it's time to apply the even steven rule, the same thing due for the nra is what you do for the sierra club. for the longer term, i think there are a host of opportunities for democrats and republicans to get together and get on top of this issue. for the immediate situation with respect to the debated you heard this morning and i have not heard all of it with respect to the 501(c)(4) issue, i just do not believe it's appropriate for this committee or for the united states senate to take action until the bipartisan investigation, which in my view, senator hatch and chairman ba baucus began in a very thoughtful way is completed. you don't have to comment on that. >> i'd like to thank you for acknowledging the enormous amount of document production that has gone on. we've tried to be cooperative and provide the committee what

it needs and looking forward to the committee completing the report so we can all see the results and move forward. >> let me talk with you a little bit about tax reform. we have a couple minutes before the vote. you have been thoughtful to talk about approachin inges for the . as you know, i have about nine years worth of sweat equity into all of this. really began it with rahm emanuel when we couldn't get a republican sponsor, then senator gregg sat on a sofa with me every week for almost two years to get what still is the first bipartisan income tax reform bill since the 1986 reforms and then fortunately senator dan coates, our colleague from indiana was willing to step in when senator gregg retired. as you and i have talked about, there are certainly differences between the parties at this point.

revenues would be one in particular. there are common grounds we ought to stake out early. that's what i really want to talk to you a couple minutes about and i want to recognize senator thune for his questions. by the way, i want to thank senator thune for another bipartisan effort you will hear a lot about, that's our effort in the digital goods area, areas like cloud computing america has a strong economic advantage. i thank senator thune for working on it. what brought 86 together is democrats said we've really seen all these special interest tax breaks clutter up the code. there have been thousands and thousands of them. republicans said, okay, we're concerned the tax code is incredibly inefficient. it's not doing what's necessary for growth. in effect, both sides said they could support the other.

nerds, right at the get-go, there was a major opportunity for common ground. i think we found another one given the fact consumers drive about 70 appearanpercent of thec activity in the country, we ought to do something to help the middle class. senator gregg and senator coates and myself and anoer haveco .. for middle class tax cut, paid by eliminating a host of the other special interest breaks and tripling the standard deduction. give me your thoughts if you might for a minute before we recognize senator thune, what are other areas where there's opportunity for common ground? in other words, we know that there's difference of opinion on revenues. any thoughts on other areas we might stake out given this tax code is a disfunctional mess. i call it a rotten carcass of an economic system. it clearly doesn't work.

what are the other possibilities for some common ground early on as we tackle this in a bipaisan mr. chairman, i know you worked for years trying to together bipartisan approaches here and we talked about some of the technical issues and what it takes to have bills that are revenue neutral. i think that on the individual site right now, we have seen for several years challenge of getting beyond the fiscal debate and the notion of doing revenue neutral individual tax reform is something that would be very challenging without doing a broad fiscal agreement because it's not likely that in a generation you do major tax reform and then you come back and address the tax code again. so that's led to the president to the view in july that while he wants to pursue comprehensive tax reform and hopes that we are in an environment we can have

the fiscal frame that will permit us to make policy on the business side there is much more of a coming together of view, this kind of convergence of general approaches where if we were able to succeed we would do something very good for the economy having the business tax rate, the statutory tax rate. our average tax rate is already lower because all of the loopholes that are bringing many companies special benefits for the statutory is one of the highest in the world. that is an extra burden for companies when they want to have their headquarters in the united states and its hand in truth you could issue in the conversations about making sure that we don't have a place income and it has the benefit of adding that there are savings where you really have to choices read you can either use that money to reduce the deficit which is a laudable objective so we don't discredit that as an objective or you can use it for one time expenses.

what you can't do is lower rates if they go on forever because then in the next period you are losing revenue. that's why the president proposed pairing the tax reform with an infrastructure initiative. i think there is a basis where you have seen the proposals on both sides that have elements of agreement and i think it is something that the more we talk about across arty lines and with each other, the more important to have an opportunity to get done. >> thank you mr. chairman. it's nice to have you back. i also want to welcome the new chairman and look forward to working with him as the chairman jan we worked together on a number of issues, digital good, digital trade. most recently the letter signed by 33 senators in support of maintaining the tax reform because we be needed very strongly in the importance of the contributions and i noticed

again that i did this year did have that 20% limitation on the itemized deductions that many of us think is going to negatively impact the charitable giving. i wonder the rationale for doing that. should we do everything we can to increase their charitable giving that the government hasn't been able to assist? >> i think we totally agree that we ought to provide incentives for the charitable giving and the limitation doesn't take away the incentive. what it does is a set is the value of the deduction should be kept at 28%, which is roughly where the $250,000 a year income puts the value of the tax deductions right now. i would point out we have seen tax rates higher and lower. we haven't seen a small changes on the margin needed to a decline of the charitable giving. most people give because they want to give and there's a tax benefit that goes with it.

so i don't think that we have seen historically when the tax rates went down we saw a decline in charitable giving. so i actually don't believe the proposal would have the adverse effect that some have worried about. we also expressed an interest working with congress because we share the goal of making sure that there is a strong encouragement to charitable giving and such important work in the country that goes on dot through government through commercial activity and through the not-for-profit sector. so i think that we are in total agreement on the importance and we don't have exactly the same view with the impact. i think the history with the experience of different tax rates support or in our system to. >> i've seen a lot of analysis. i don't think people give because the tax deduction but it does effectively and out of the give. i've seen a good amount of analysis that capping it would reduce the amount that people get. people are still going to give to those causes but it's not going to be on the same level.

>> we didn't see the amount of giving o'dowd when the rate came down so it isn't quite as much as variable. but we are happy to continue the conversation. >> i wanted to ask -- i know you've answered questions on this already, but i get from my constituency biting from people across the country to the whole issue of the bonuses that went out to the irs employees whether or not it's appropriate to bonuses be paid out at an organization that is so brazen between the public trust. and even if you don't agree, and i don't think that you probably do, that the target and consumer groups are politically motivated but it's hard to deny that there was a gross incompetence there and negligence with regard to the agency processed the applications of the social wealth organizations. and so, do you think that these

employees associated with that decision whether it is politically motivated or not to target these t. party groups to deserve bonuses? >> i think that it's important not to describe such a large agency as the irs as everyone was involved in one activity. we have made clear that what happened in the c-4 experience was unacceptable. we believe it was bad judgment and you will reach your own conclusion when you complete your investigation. we have seen no signs of political interference in any of the reviews we have done. i think that the policy on the compensation for the irs has to reflect the fact that we had an enormous amount of people that are tireless, hard-working public servants that do a fine job under very difficult circumstances and we are not seeing the level of funding for the irs to make it possible for them to do everything that we need them to do. in that world, making sure that we have a proper augmentatio con

and i would note that there was a pause in those payments and there were collective bargaining issues and in the revolution of it there is a new policy in place. >> i would say i know there is a lawsuit in the union issue that you but there were an awful lot of bonuses paid out to the executives that were not a part of the lawsuit. i think that it's awfully hard to justify to the american people in an agency whose credibility has been so badly damaged that somehow you could pay out to bonuses. i think it flies in the face of everything that is logical in the face of the american people to have the american people have to see what's happened with this whole episode which is reflected i think very badly on the irs and then find out that they are being rewarded bonuses?

>> i would report to other things that in a bipartisan basis applaud over the same period of time. we've implemented a law that passed with bipartisan support to make sure that we would have transparency across the country line so that you legal tax evasion could be stopped. the work done by the irs on this has become the world standard. i go to international meetings and what i hear other finance minister is saying is we want that for all. so, we have done -- we have people that have done fine work during this i just think we have to recognize that it's a large agency doing a lot of things. >> and if that's true -- a big mission and a big agency. but we know for sure that there are certain folks and certain officers who were associated with these actions that have i think reflected so unfavorably on the agency, so the only comment i would make and perhaps in a follow-up question is there

a way that you can selectively figure out how not to reward the people who are doing these sort of things and the people that are doing the things you just alluded to it if please don't reward the people responsible for this kind of behavior. >> the commission would be better equipped to address that i self. but i would note for senior managers who were anywhere in the chain of command who exercised bad judgment and running the program are no longer there. and i think that reflects the seriousness with which we took a bad judgment and consequences and the fact we had an acting commissioner that took action in kosovo we share the view that anyone that was responsible for doing things they shouldn't have done should be held accountable. >> thank you mr. chairman. >> thank you senator. a couple of business matters and then we can wrap this up on the question of hearing from you with respect to ukraine all we are interested in is getting a

sense from the department what kind of guidelines and principles we ought to be using and evaluating the host of proposals that have been advanced by senators in terms of holding russia accountable for the incursion into ukraine. obviously adders like timeliness and effectiveness is what we want to hear from you on if you could get that to senator hatch, that would be great. also i expect to the senators they want to submit questions in writing and we will hold the record open until friday on that and also, just because i know members and staff have some questions with respect to the business meeting they've been noticed for this morning. we don't have a quarterback this time but we do have some important organizational issues to work through, and it's my intent to consult with senator hatch and find an appropriate time to convene the business meeting off the floor.

secretary, we thank you and we thank you for your patience. it's been a long morning, and we didn't expect all these votes and on a personal level i want you to know how much i look forward to working closely with you. >> thank you mr. chairman and i look forward to the same. >> the finance committee is adjourned. >> [inaudible conversations] earlier we had live coverage of the conservative political action conference taking place in the washington, d.c. area.

suffice it to say, most of the health policy isn't really health policy at all. it is essentially budget policy. and so the congress just docs on so many of the big issues and into putting together something that in the parliament of washington might be called a patch. maybe it's an extension. maybe it's called a stopgap. but the fact is it's docs the big issues particularly on medicare when you have 10,000 people eligible for medicare everyday there is a very real cost attached with that. so now, the challenge is to try to find a way to move beyond

this fixation on budgeting. it would be one thing if it was a sound budget policy, but so often as i've indicated we don't get the structural kind of issues, and moved beyond this kind of budgetcall-in id to: eo another to come up with some sensible budget policy. >> we do not have a criminal investigation. we have an m4 is mental. one of the things the agency does is to enforce the federal securities law to make sure that

wall street abide it we have to write to the rules by the way for wall street and the broker-dealers and investment advisers but we don't have the criminal authority. we have the power to bring with the approval of the commission to civil actions, civil fraud actions against those who violate the federal securities laws. we can't send anybody to jail, that we can assess the civil penalties. frankly our level of penalties isn't as high as we would like it to be and there is leverage to give us an ability to assess higher penalties we can't require those that commit a comd wrongdoing to discourse their ill-gotten gains as they are set in the profits they make from their wrongs and we have the power and appropriate as to bar somebody from the security industry so that they can't basically live another day to fraud again.

>> now to a discussion on the conservative movement on this morning's washington journal. >> host: about 15 miles south of the capital is national harbor maryland that's right on the potomac river and that is where cpac is having their union and david is the longtime chair of the american conservative union what, 1984 to 2011? is that when you served as chair? panic that's right. what have you been doing since then? >> guest: i served as the president of the national rifle association and in the last eight or nine months i have been serving as the editorial and a penny -- opinion editor. >> host: did you have to found that? >> guest: i wasn't at the founding. it was founded actually in the late 1964 right after the

goldwater campaign. bill buckley was crucial as puttinatputting it together ande time you can imagine after the loss there was a big effort to try to put things back together. >> host: in the 50 years from goldwater to some of the speakers that you have today how is conservatism changed in your view? >> guest: back then it was a small group if you will. when the first cpac withheld 41 years ago in washington, the speaker was ronald reagan of california and there were about 100 people or more in attendan attendance. out here today we have ten or 11,000 people that attend. so it has grown, but just as importantly, the conservative movement has grown. the conservative movement isn't the same as the republican party that the republican party is

influenced significantly now by the conservative movement which was not true back then. >> host: yesterday there was quite a roster of speakers. who stood out to you? >> guest: i don't like to pick favorites, but i think they all did a pretty good job yesterday. and this is an opportunity for people to come, potential candidates and the like to meet the conservative activists. the people that attend the conference are the people that anybody whether they are running for state or national office have to rely on to do the hard work in the campaign to support them and do all that. so they want to come here to talk to these people. it's the only place in the country, and anyone here where these people get together. years ago ronald reagan in 1981 gave his first major speech outside of the white house at this conference. and he told me at the time and said in his speech he said the

reason i'm here giving the speech is i believe that you dance with those that brought you into these are the people that worked for my election and got into the presidency and that's why i'm here to thank them. so potential candidates recognize that just as true today as it was then. so they come here to essentially auditioned before the movement. so that people can get a sense of them, their positions and whether they like them or not. >> host: i want to ask about a couple headlines. day number one the showcases they divided the gop. this is the hill newspaper. and politico says paul ryan touts the gop, quote, creative tension. is there a creative tension at cpac? >> guest: creative tension is a good term. if the conference over all these years the conservatives have deviated and discussed and considered different strategic actions in different positions on various issues that are

important to them, paul ryan is very much represents that feeling that it's fine to be opposed if you want to blame you have to highlight what you're going to do and that's what he talks about. it is and that they disagree. but most people here generally agree in terms of principles. they also disagree in terms of strategies and tactics and often among them they have different priorities. we have national defense people, conservatives and i think that paul would be a very good example of that and social conservatives and all of those people, while they like each other, they emphasize different aspects of the movement and different issues. >> host: a lot of the speakers yesterday we didn't hear very many mentioning was off relatively hot topics for conservatives on marriage. why is that? >> guest: it's up to the

speaker to pick his topics and discussions. i don't know whether there is a panel on that or not at the cpac, but the odds are that there's not. i haven't seen anything about it. >> host: is it still a hot topic on the conservative circles? >> guest: there is a strong belief of the conservatives. there are many conservatives who belief that marriage as it was historically shouldn't be the function of the state. that's a religious and civil ceremony. so, that argument goe the argumn the movement. and there are those that believe, i think most believe that you shouldn't be discriminating, you shouldn't be hurting people that are different than you, but neither should you be forced to accept things that you have objections to. i think the discussion among the conservatives is more the tendency on the part of some

supporters of marriage for example, or rights to try to force other people to agree with them or to go along with what they want as opposed to letting everyone lived. >> host: from your newspaper this is a news article, but mcconnell works to reassure conservatives. what did you think of mitch mcconnell's speech yesterday? >> guest: i thought it was fine. it was an honor for the senator of oklahoma who you know is leaving for health reasons which mcconnell came the senate leader to present him as an award for his service. that is the reason that he was here and you know, this goes to the whole strategic question. back in the 60s and in the early 70s when there were disagreements in the republican coalition if you will see between the ronald reagan's goldwater and rockefeller if you sat them down they had different

visions of what should be done. today if you were to talk to ted cruz, mitch mcconnell and some of the others, their vision of what ought to be accomplished is and to her very much. there is sort of a consensus on the values and goals. the differences over her, and sometimes they are very divisive over the taxes and strategies. and i think that mcconnell here was emphasizing that he shares the vision of the people here in this convention. >> host: if you lived in kentucky mr. keene, would you support which mcconnell? >> guest: i would. >> host: what do you think of the fact that he is having a rough time right now in his reelection? >> guest: while i happen to be one that the leaves that primaries and fights for the nomination within the party are ultimately helpful to the party. i know it's a candidate being challenged but i would be willing to bet that mcconnell

overcomes the challenge and goes on to win the general election. you know it's easy if being a party leader is a tough position as a legislative leader because you don't have the freedom to simply issue press releases and take the position that this is the way the world ought to be. you have to work with the coalition of people in your own party to trick you get votes from the other party where it's possible to achieve some progress. so the party leaders position is always a position that is open to criticism. and work knows, mitch mcconnell has been criticized sometimes unfairly and sometimes fairly. but i think that anybody that looks at what he's been able to do and what he's been able to accomplish what agree that he's a pretty good leader. >> host: david keene, lead editorial in the "the washington times" this morning. perry's house of cards talking about the majority leader. did you write this one? >> guest: i did not because i

was busy here. i'm not the only person with a pen. [laughter] >> host: demonizing opponents to avoid an argument over ideas is one of the oldest tricks in politics. this editorial says principles or heavy baggage in the climb to power as mr. reid and frank underwood, hezbollah old, learned the next season of house of cards is a year away where we will see whether he's headed for a fall. we won't have to wait that long to see whether kerry read takes a tumble that he deserves. election day is only eight months away. >> guest: i wish i had written that. >> host: david keene is our guest from cpac at national harbor. the phone numbers are on the screen if you would like to produce within the conversation. we are going to begin with this tweet that has come in for you. are there any democrats speaking at the conference or are they extinct like the dodo bird? >> guest: i don't know that they are extinct. but as you go back again to

history in the 60s and 70s, the two parties were not as ideological homogeneous as they are today. so you hav had a lot of conserve democrats and a lot of moderate to liberal republicans. today that is not the case. there are some conservative democrats here. the sheriff of milwaukee is an elected democrat and he is going to be speaking. there mayb may be some others, t obviously there are not any democrats from the united states senate for example which tends to march in lockstep to the demand. >> host: why was the panel meeting room so popular, standing room only? >> guest: because conservatives are really working to get their message out to different communities around the country, and they are very interested in that. it's interesting because of the intellectual side of the conservative movement, there are a lot of minority people.

but in terms of politic the pold getting support, there hasn't been that much effort and that's true of republicans and also of conservatives. it's interesting to me because when you look at the politics of it, it amounts to getting out and doing the work that is necessary to meet people and get them on the board. but the value of the communities are the values that this is really the votes tend to line up with the people at the conference, and i think they want to know how to make the connection that goes from those values to the people that hold them. >> host: when you have look at demographics, mr. keene, is immigration reform important to get the hispanic vote for the republicans? >> guest: i think it's an issue, and it's important in many ways. but i don't think -- one of the things that sort of offended me over the last couple of years in

the debate over immigration reform is that it's been argued on those kind of grounds if we do that maybe we will get some votes. something as important as the immigration rules and who we let in and how we let them in and how we enforce the border policies shouldn't be decided on the basis of how many votes you are going to get from this group or that. it should be decided what's good for the american republic and what's good for the economy in this country. so, i don't really look at it in terms of the politics. i will say this among the republican congressman, the congressman that gets the highest percentage of the so-called hispanic vote in his district as a congressman from new mexico whose very anti-immigration reform that is out there coming he knows his constituents. he is out there meeting them. as he puts it, you don't always have to agree with them. but if you get to like them and

they like you coming you get the support you want. so i think it's important, but it has to be looked at in terms of what is good for the country. and people differ on that. i do think -- i do think that the two extremes in terms of debating over the immigration reform ought to wake up and realize that neither one of them are going to have their way and they ought to sit down and decide what's realistic and how can we fix some of the problems that we have. >> host: when is the straw poll? >> guest: is released on saturday afternoon at all of the registrants as they register and during the conference vote and they pick their favorite into the results are tabulated and announced on saturday. and you know, it's interesting because the press likes to say okay, this year this guy is the favorite in terms of conservatives for president. that's fine. that's interesting. but the reason that straw poll

is put together over the years is to find out where conservatives stand on the important issues on immigration reform, for example, or all of the others and that is what we look to when we analyze those results. >> host: david keene is our guest from the "the washington times," the opinion editor. we have a call from la crosse wisconsin on the democrats line. .. conservatives that they have lost the popular vote 5 times in the last 6 national elections? see from thean speeches, the body is moving further to the right. nobody is going to vote, independents and others are not going to vote for someone that far to the right. guest: that is what i say about the democrats, they keep moving to the left. it