these are targeted. one study finds that single, less single, less educated women are likely twice to fall short for retirement. while we do not need to reinvent the wheel, we need to do something. i am in favor of auto enrollment pension plans. ..

so personal savings can only go so far for these individuals. at the same time though social security treat single women far less well than it does married women so they are not getting much help from that end of things either. that's one reason i and others have proposed reforming social security to provide a flat universal benefit for all retirees regardless of income participation. on top of that individual would save in accounts provided through their employer or of not available through the government. this approach is qualitatively similar to that of the u.k. australia canada and new zealand. in the u.s. context you can affordably reduce the elderly poverty rate from today's level of roughly 9% to approximately 0% while increasing the retirement savings among the middle and high high-income workers who truly should be saving more.

the lesson in all this is that there is no simple problem and no simple solution but a small if more complex problem is better in the retirement crisi crisis -- then a retirement crisis. >> senator brennan we have a hearing in a few minutes we will start with him. >> thank you mr. chairman. thank you for this special dispensation here. 1970 a political scientist named ben wattenberg decided to try to find out what person represented america the best, who was the prototypical american and he settled on a white woman in dayton ohio married to a union machinist who had a pension plan, a defined benefit pension plan. in those days of family income was about 60,000. she was right in the middle. half of america was poorer than she and half of america was wealthier than she. today that machinist wife in

dayton probably wouldn't, she certainly wouldn't have a defined pension benefit. she and her husband would probably have less equity in their home. depending on the estimates if she is in her mid-50's she would have savings of somewhere in the vicinity i know scholars differ on this from as little as $11,000 she would be worth. if you look at fed numbers to up to $50,000 take the middle, whatever that number is she will have to rely on social security for most of her income when she retires. in fact today in my state ohio is not much different from other states the majority people on social security rely on social security for more than half of their income. the person in the middle will get no more than 13 or $1400 a month so we know an enormous percentage of the american worker she is in the middle. half are poorer than she is.

for this number social security is in doubt. you make a number of important points about adequacy. one point is about the high cost funds and too many choices can rob sophisticated investors those in the middle or slightly lower can rob in their ability to adequately save. my question to you is should congress make it mandatory to auto one role and auto escalate into low caste -- low-cost index funds? >> auto enroll is easy to say why not have it mandated. i for one would be the champion for index funds. for heaven sakes let's look at this way senator. all of the investors in america all of us total the us total stock market together. they are a giant index fund so they can go to an index fund -- or the stock market for two to

five basis points and if they want to fight among themselves to see who is the bus and get managers to help outguess the others they will get the return less 200 basis points. so it's mathematically correct and i probably shouldn't get into this here but it's probably politically undoable. it is should be made a more important qualification for entry into the system. >> is auto escalate good? >> auto escalate as good. >> is people's income go up a slightly higher percentage will go into that fund. >> these things are right and correct as principles and the fact of the matter is every family is different. should you want to escalate for a man with six children all going to college and a wife who is maybe ill? in other words when you go from generalities and particulars it's a tough.

>> but that mr. bogle is why you have the option to opt out. thank you mr. bogle. dr. madrian he said he should not have to be in the middle class to get access to tax preference same as vehicles. they should be designed to help workers get into the middle class. what policy changes do we need to make to ensure this happens for instance ways -- raise the minimum wage? what policy changes do we need to give people a lift to give assistance to get into the middle class to get access to these vehicles? >> in my mind the biggest problem with the current system is that many workers don't have access to save for retirement through payroll deduction because their employer is not offering a savings plan or they are not eligible for the savings plan that their employer is offering.

so i think initiatives to encourage small employers to offer a savings plan and a small employer is a lot like the individual investor. joe from joe's pizza doesn't have an mba, doesn't have dedicated human resources professional and is no better at picking a savings plan for his employees and his employees are at picking from 8000 mutual funds what's the best way to save for retirement is. so having an option that the ec for joe's pizza and other employers like joe would help close the access gap. so allowing communities to have the chamber of commerce sponsor a multiple employer pension plan where joe doesn't have to worry about fiduciary liability, picking the right or wrong investment options and the

employees who are in the same workforce and locality have a similar benefit plan. they can talk about it and they can learn about it. things like that would go a long way towards closing the access gap. providing incentives for companies to open a savings plan to all employees so if some companies part-time workers are excluded. these are simple measures that could go a long way. another point that i brought up in my testimony is current law right now does not allow for companies to give a small financial incentives to sign up for the savings plan in the first place so if he didn't have automatic enrollment or even if you did to encourage employees to opt in rather than opt out you could not for examples they sign before the end of the month and you will get a $50 amazon gift card or sign up by the end

of the month and we will let you in a drawing for an ipad. things that banks have used in the past to get people to sign up for a savings account, phone companies that used to get employees to sign up for their cell phone plan. those are not allowed under current law even though the literature on employee behavior suggests small and medium financial rewards are in fact very effective types of incentives. >> we have to move on at this point. thank you senator brown. senator hatch. >> thank you mr. chairman. i would just assume you go ahead of me. mr. betts you have been trying to convince small employers to adopt a retirement plan for their workers. can you explain further number one what are their motivations when they make a decision to offer a plan and what would convince him to say no to setting up a new plan? >> thank you senator hatch for the question. working for many years it's been that the incentives that the

government has allowed in these plans incentivizing employers to set them up. incentives motivate the employers to buy this retirement plan for their employees and there's a very powerful incentive. many employers like to do it because it's the right thing. it's also many jobseeking employers that have the 401(k) plan but that incentive is a key piece. if that were changed or removed any employer would end those plans. also the incentive is what allows new employers to start and get benefits in these plans. so i think the power that is their bit as demonstrated in the numbers of americans that are saving today. >> thank you dr. betts and

dr. biggs the end result many proposals i read about what effectively cap employee deferrals. all of these proposals seem to align on the premise of lower contributions for workers to increase their savings rate. the proposals also assume their reduced tax incentives for companies would have no effect on the willingness of the business to keep its plan in operation or to start a new pl plan. i don't believe that. i think if we go back to the time it was enacted increased tax incentives to save two things will happen at a minimum. first businesses venturing to pension plans because they are too complex and expensive to put up with without adding tax incentives and secondly employees saving so much because the tax incentives will be left for most workers. i don't think academics generally understand either of these points. mr. betts what is your real world experience working with

business people making these decisions tell you and after you finish maybe dr. madrian he would care to comment. >> is very powerful and the middle-class americans making these decisions the tax incentive to contribute is very motivational. i agree with a lot of the auto on romans that has added to the number of americans participating but it's really the incentive that motivates people to enter those plans. >> dr. biggs. >> there are two points i would like to make here. the first is about the tax incentive and what is the incentive to save? this is really the key question. as you know the current system for retirement savers is that we do for our taxes so when we make a contribution we do not pay income taxes on the money we put in or the earnings they build up but when we take money out of the traditional retirement plans a 401(k) or an irs we pay the

income tax when it comes out. it's therefore a deferral not a deduction or an exclusion exclusion in what the deferral does is it effectively gives a zero tax rate on investment income in that plan and that is the incentive. if we move the tax and allows the return for the investor to come to a market return as opposed to a below market return. why is that important? some of these proposals to cap the upfront deduction would actually turn on its head the tax incentive. one example for instance is the upfront deduction that 20% will give you credit. anybody with an income tax level above 20% let's say 35% would have to pay a tax going into the plan and then they would pay their full tax rate coming out the plan. what this effectively would do

is disincentivized someone who is putting into that plan in the upper income level and actually make it almost preferential to put into a taxable account. they would have to hold the money that retirement plan for 13 years to catch up for that extra tax hit at the beginning. i think these proposals to cap the deduction may get a credit and put a tax penalty on a would be very detrimental because hiring calm, many of them would be -- the second is the contribution limits are important. one reason that contribution levels are important is because people's ability and willingness to save for retirement changes over their lifetime so we find individuals as they move into their 50's and 60s are more likely to participate in good shape at the limit. 15% of people in their 50's and 60s there can contribute in at the contribution limit. >> thank you mr. chairman. >> senator hatch please go ahead.

>> i would like to ask a question of dr. madrian. while behavior economics has shown a couple of successes some of us are concerned that the field contains some who rather than providing a nudged to help people navigate difficult decision-making would provide full-fledged -- of private citizens. it seems as though some behavior is the notion of academic and government technocrats are infallible and need to tell private citizens of their mistakes and how they should leave their -- lead their lives greatest example the former treasury professor has written about a fairly informed financial services regulation unquote. one of the proposed schemes is to nationalize all late fees on credit cards, gift card issuers a small amount determined by some government technocrats and hughes funds for financial education and other ways to help

private citizens. dr. madrian what do you feel about such a proposal and you believe infallible government technocrats need to effectively make decisions for private citizens on credit cards or retirement savings under the notion that those citizens are not doing what the technocrats wanted to do? >> i will have to confess i wasn't prepared to answer that question when i walked into the room. i knew who you were talking about and i have read the articles more than once that you refer to. i guess i would say. >> take a swing at it. [laughter] [laughter] >> how about if i answer slightly different question which is i mean i guess my view is behavior economics is, what it does is it tries to expand the scope of understanding of what is driving behavior and what are the tools you could use to influence behavior? and what you want to take a

light handed approach or a heavy-handed approach that is a matter of personal preference so if we were painting all behavioral economist with the same brush i think you are going to find people along an entire spectrum. that i would be happy to go back and look at that article and send you a response. >> i would like to have that. mr. chairman i have to leave but i want to mention this is an excellent panel. i have apologized apologize that we have run out of time. >> thank you senator hatch and as you and i have talked on the past it's going to be a focus bipartisan tax reform. senator stabenow. >> thank you very much mr. chairman to you and are distinguished ranking member. this is a very important issue and i appreciate the focus now and i look forward to working with you. i really felt like saying i'm a little surprised at what feels like an optimistic view that

more people are saving and somehow people are going to have enough and they are doing well. i would throw out a couple of different numbers. retirement research in 2010 we have $6.6 trillion deficit in terms of what people were saving. last year, 2013 national institute on retirement security said 92% of working households did not meet the targets they needed for savings. somewhere between 6.814 trillion so i'm concerned about the differences there. but i want to ask specifically about a group of folks that i think we haven't talked about this morning. that is as we look at what happened in the great recession and people losing their jobs in their homes and they lost their equity in their homes which was a major way that people saved, middle-class families as well as

retirement and we look at what has happened to so many folks. we know that a lot of people took withdrawals from their retirement accounts and they were told they increase as much as 40%. folks were saving it than they had to take a hardship withdrawal because of what was happening to them. i am very concerned about folks who are now in a deficit position who were doing the right thing and were caught short because of what happened that was way beyond their control in all of this. mr. bogle i would ask you first come are their options that you would suggest that would help these workers build secure retirement who got behind the eight ball because of the recession? >> that is a problem to be solved senator but i do think we

have to face up to the fact that according to the ici 33% of our population of households have no retirement plan at all. the federal reserve who is a very reliable source about a quarter, only a quarter for households are preparing for retirement. i look at that kind of data, those kind of data is more important than how many dollars are here and how many dollars are there. here's a a case where i think common sense should override complex data which includes just about any answer you want. how to help someone who is in real trouble is not easy. we should face the fact that the lower quintile of american incomes are $20,000 a year before taxes. unchanged on a real basis with living adjustment since 1979 of

those people are not able to save. if we want to help them there is no recourse and increase benefits at the lower end of social security. it's complex but the money has to come from somewhere and that would be the best answer i could get to your question. we have to look elsewhere in the private retirement system. >> i would ask each of you if you could respond. right now it's costing $800 billion over the five years alone as we look at retirement accounts and pension contributions. i certainly support this is a major area where we are focusing our tax policy but we also do no according to the cbo the top 20% of households received nearly twice as much of the tax benefits for retirement savings is the bottom 80% combined. we understand why that is but that is that the questions as that is that the questions as we are looking attacks reform you know the households that need

the least help in retirement are getting the biggest help in the people who needed the most are getting the least help. so how would you suggest or would you suggest that we do anything to improve the targeting of the tax incentives for retirement and also if anybody else has a thought on how we help the folks who got put in a hole during the recession i would appreciate that. >> first looking at the high-end of that and i will stand in for ellen schultz because i read her book. >> so did i. >> the people behind income the income scale have so many retirement plans. things that are in my opinion socially outrageous if you can handle an opinion that strong get all kinds of benefits above and beyond what we can do and think about in our retirement system. i would say that's a good place to begin reform and whether

those savings are making retirement so easy for wealthy citizens can somehow be transferred to those lower on the income scale. i can tell you how to do it today. >> thank you very much and i will ask everybody briefly dr. reid? >> a couple of things here. the first is if you look at the entire retirement system just putting employer plans together with social security it's still a progressive system. and it's really a combination of the two that creates the joint incentive. the second point is that i think this is where we provide caution is that if you begin to scale back and really right now the contribution limits are pretty modest relative to where we were historically win a race i was first i was for setup and individuals to take advantage of them have to be in their peak earning years. if you begin to carve that back or began to tinker with how the tax incentives are created you could have higher income

employers and employees may decide it's better to give him current compensation and not offer a plan. we could end up reducing overall participation. the example of that is a 1986. he removed the ability of high income workers to participate in the ira in the following year higher income people no longer participating. it's complex when it happened but i think it's a precautionary tale. >> i guess what i would say mr. chairman is -. >> i would increase incentives or remove the disincentives out of the plans that can be put in by employers so they can expand the access. >> and you would do that for everyone? >> their disincentives built into the system that are difficult for the small employer

to start these plans. senator hatch has a number of ways to remove those disincentives to make it easier for small person to start so americans -- more americans can be saving. >> if you are worried about low-income and global taxpayers i think many individuals are not particularly financially literate and you can create all sorts of complicated tax incentives and you're not going to get a lot of attraction because the tax incentives aren't solving the problem. a recent households aren't saving is because they are facing small tax incentives because they don't know what to do or their employers don't offer a plan. a far more sensible margin for saving public dollars would be to create the incentive for employers to offer savings plans and automatically in world the low-income workers because that solves the problem of inaction and individuals not knowing what to do.

>> anything to add? >> i would reiterate a point for my testimony which is the folks who end up retiring without a lot of savings and wealth are often people who are sporadically attached to the workforce during their working years. these are folks for whom and lawyer based savings plans are going to do much but they are also folks who evolved from the social security. social charity serves a lot of people not particularly well because it's an earning base programming because it has odd distribution benefits even with low-income people. i think we do need to rethink who was fallen short and what do we need to do for them? >> i'm going to have to stop you at this point. senator grassley. >> i'm going to start with mr. betts. in your testimony state that a current savings tax system is quote more progressive than our progressive income tax. that's an important important point from my standpoint because

critics of current savings incentives frequently argue just the opposite. i'm going to give you a chance to elaborate on how the current savings incentives are progressing. >> thank you senator grassley. yes in my testimony it demonstrates that americans who earn less than $100,000 basically represent 28% of the tax collection. the same group of americans received 49% of the benefits to the employer-sponsored retirement plans. that seems quite a bit more progressive. in addition what is not noted are the many employers that provide employer contributions in these plans because of the way they are designed. the nondiscrimination rules offers incentives for employers to put more dollars in that are covered in this.

>> for dr. reid as you know there are currently several proposals that would limit the ability of upper income individuals to deduct retirement contributions, the 20% limitation is an example. he discussed this with senator hatch from the employee standpoint. i would ask you how does your research suggests employers offer defined contribution plans would respond to proposals such as the president's? >> it's important to keep in mind senator that a 401(k) plan is an employee benefit in something that when an employer is looking to attract an employee they know to attract high-quality employees they want to offer an incentive like they would any other benefit. if you have a benefit to some attractive for a group of potential employees employers will say i'm going to use my resources elsewhere.

i may simply increase wages or something else and not offer a plan. the example that i gave them was by putting a cap or a credit in place what will happen a certain individual employees would have to pay a tax going into the 401(k) and they would have to pay the full tax rate coming out. actually for some of these employees would be better off putting their savings in a taxable account outside of their employers plan. the employer that begins to happen will say that's a benefit that some of my employees want. i'm not going to offer that anymore and as as many of the panels appointed out of having that employer employer plan there and in place and being able to in many cases auto enroll people that increases participation and i think we would be taking significant steps backwards from the actions that congress has taken over the last 50 years. we would actually potentially reduce plan participation. >> i want to go back to

mr. betts. employer-sponsored retirement plans are an important component of any retirement plan. while 80% of full-time workers have access to a retirement plan this number is only around 50% for employees working for small employers with fewer than 100 workers. mr. betts is someone who worked for businesses and the administration of their retirement plans what do you see as the biggest barrier to employers particularly small employers offering retirement plans but probably a more important question would be the second one so spend more time on this. what single reform is implemented would do the most increased number of small businesses offering retirement plans? >> thank you. there are several older rules in the nondiscrimination rules put in place early on in these plans. newer rules have done better at managing the nondiscrimination

requirement in these plans. one of the ones that could be removed would be the top every requirement. that has disincentivized many small employers because of the risk for how much employer money they may have to put into a plan to satisfy that rule. another big step in the right direction would be senator hatches start k to provide an employer plan. employers can contribute where there's nowhere to the employer contribution until such time that an employer becomes more financially stable and can benefit from a large plan. >> my last question would be to mr. biggs and mr. reid what would push retirement savings into ira's and should congres congress -- or is it important for individuals to have more options?

>> senator we are all in favor of simplification. one of the concerns we would have in terms of potential -- as some of the proposals like senator hatch's better trying to find ways to make it simpler for small employers to offer plans to actually narrow the options and make it more difficult for small employers to offer a plan. that is why we have been in favor of concepts like start k to iraq or the scope of an employer offering a retirement plan. >> mr. betts do you have anything to add? i am done. >> thank you senator grassley. senator cardin. >> mr. chairman for solving you for holding this hearing and i agree this is a critically important issue. it's been 15 years since congressman portman and i recognized we had a significant problem in our economy and 15 years ago our economy was growing. our workforce was growing and income was growing.

we let the world be a economic indicator. we also recognize we do not have enough money and retirement security for americans particularly low-wage workers and younger workers. so we tried to do something about it and we were able to get a couple of significant provisions incorporated into our tax code. i want to sort of build on that. our first principle was to simplify and to increase the limits particularly the catch-up contributions from the point of some of you have raised. when you're young you have a family and you have homes in you have all these issues come education and you don't think about retirement until later in life and the limits prevent you from building up enough to provide for retirement security. and it's pretty simple and that's access to retirement plans. if an employer does not offer a plan there is going to be limited access. if you simplify the limits are

high enough to make a worthwhile they will provide plans and that's been the result of higher limits and more simplified pla plans. we also recognize that when employers put money on the table more people will participate. the federal thrift plan. our workers participate in it. why? because they don't want to put money on the table so when employer setup of match it's more likely the workers will participate. that's one of the things we try to encourage. the alternative to that is to try to put money on the table for the government because as important as the tax deferral is it's not enough for lower wage workers and younger workers to participate at the levels we would like them to. the savings credits works. millions of americans today are using the saver's credit so we have been able to get more participation. automatic enrollment was

important not just for people and rolling mr. chairman but also the default investment option is more sensitive to persons age which means there will be better investments rather than making decisions themselves. lastly you mention financial literacy and investment advice. all of that is part of what we try to do over a decade ago. as a result we made progress. more people have retirement plans that wouldn't have retirement plans and more retirement options -- you know we have gone through a recessi recession. in a recession you try to encourage people to spend, not save in as a result we have lost ground. there's no question about it. we have got to do a lot more. we have been on the defense and last for five years trying to preserve the options we currently have. that has been our strategy. we now have a strategy to move forward and that is why i was pleased about this hearing. how can we build on what has on what his work and how can we do with the issues that many of you have talked about with old-age workers and younger workers not

putting enough money away for retirement. mr. chairman there are many things we could do. senator portman and i have introduced legislation to deal with the plan clarification. it deals with the practical problems that your plans have with erisa and another thing we can do we have the freeze legislation because you have companies that have defined contribution plans and they're trying to do what's right by preserving those options but th challenging. we should act on that. i would hope these modest changes could be done quickly because they are affecting the retirement options and we shouldn't wait for the comprehensive when we can get some progress made. we should move forward and approve the saver's credit. you should improve being automatic enrollment and continue to try to simplify but i would like to ask dr. reid a question.

one of the things that has frustrated me is that when we design these plans we made it too easy in my view for people to take retirement money out for things other than retirement. you also made it easier for them to take lump sums than earned income. one of our objectives is to have retirement retirement security to have an income source it takes the pressure off of social security which was never intended to be the sole-source of income for people who are retired. what can we do to encourage more lifetime income options for retirement funds that are there rather than having money taken out too early through a lump sum or other purposes? >> i think the current system certainly if you look at what people do with in their 401(k) or ira please find the vast majority of money is rolled to ira and we find individuals tend to start tapping the money as 7.5. it's a minority of individuals that don't. i think ideas to help individuals to spread out the

savings over their lifetime are valuable. our concern is driving tax incentives for particular product. for many low-end moderate income households they are -- to social security and they may have that lump sum for emergency purposes or health care needs or something like that. you wouldn't want to penalize these individuals were wanting to keep the lump sum to be able to tap but other types of proposals that help people spread that savings over time would be valuable. we just want to make sure that these are good approaches. >> one of their proposals is to give an exemption for a certain amount of retirement funds for minimum distribution for the purposes that you just said. so you can keep a nest egg. one of the concerns is that people take money out that shouldn't and we want to do incentives and not for any one

product but incentives for income flows that could help people not outlive their income which happens to break only. thank you mr. chairman. >> thank you senator cardin and also want to be clear that i'm very interested in working with you and senator portman. for those who are following this this important legislation does what it sounds like. thrift plans and retirement plans that generally aren't subject to erisa so we have a situation where you ought to preempt state law to add auto enrollment features that are so popular. i wanted to know we have it pending. we are going to work with what i think is a sensible suggestion. >> thank you mr. chairman. >> senator casey. >> mr. chairman thank you and i want to thank the panel for your work on these issues. i will start with mr. bogle not

only because of his pennsylvania residents and his impact in our state and our country. i want to ask you about the basic dynamic that has played out over a number of decades n now, the shift from defined benefits benefit to defined contribution and implications of that. as you noted the transfer of trillions of dollars in savings and risks to individual investors and from corporations. give me a sense if you can as we try to design policy around the question of giving those individual investors the tools they need to deal with that basic change. the question of educating investors, what more can we do, what model works in terms of giving them at least the

opportunity to become better educated? >> to begin with what we have to do is make what was designed the 401(k) for example turn it into a retirement plan. if we can just think that one through we will get close to where we want to be. in terms of greater utility in efficiency for investors there's no question in my mind that their investment returns will be improved if they get the cost of the system. by owning an index but even more than that lets call it owning the stock market senator. it's such an easy thing to conceptualize, picking the right manager and what he or she doesn't do well in picking another manager and we find investors in mutual funds and this is my testimony because of the confusion and the idea you can pick a good manager for a lifetime for infesting simply does not work. investors lose because they have

a cost built-in at 2% a a year work is a staggering number in making the wrong fund choices is another 2% a year. 4% is -- so if we would simplify the system and take the cost out of that investors would have a lot of the mystery removed and be much more willing to sign up for a plan. >> is there any experience based upon your work were based upon the work of vanguard as to the period of time in an individual's life where education can be especially significant? in other words is starting earlier? i now we have had legislative attempts to make sure even students at a very young age are exposed. is there any strategy that vanguard has that has been successful?

>> to give you my own person the way we introduce young people to investing is to have the stock picking contest, sending exactly the wrong message to them. we should start with the compound interest table and show them how a percentage point difference in returns mounts up over a lifetime to an end astonishing amount. when you get to a higher level of age i don't think there's a single, well very few to be fa fair, business school or finance school who wouldn't tell you what i'm telling you. if it is an inefficient system and its serving mutual fund investors. i have in my prepared testimony a statement that's stronger than that by david swanson the manager of -- and the person of impeccable integrity. you could easily say i have a vested interest but anyone can

start one. i would like to have more competition in the index area but it comes down to simplification and owning the market and managers if you are investing for a lifetime. >> i will be able to submit questions for the record for mr. bogle and others and less than a minute i have dr. madrian i want to ask you about the appointed reference to automatic enrollment, the benefits of that. if you have to look at this purely from the point of view of the tax code either where we are today or where we hope to be any recommendations for improvements we can make to the code to make it more effective in light of ours should say make changes to the tax code to make savings

incentive? >> i have a one-word answer. simple. >> simplified. but mechanically what's the best way to do that? in other words when you look at where we are today the code as it stands today what change would you hope we would make? >> that is an excellent question. i think the tax code overall is very complicated. i think for middle and higher income taxpayers the alternative minimum tax and how that interacts with the rest of the tax code makes it a complete mystery. you have no idea what the incentives are that you are facing or the penalties. on the lower end of the income scale you have interactions between the tax code and all of our social welfare programs. i think very few individuals accurately understand the tax incentives that they are facing.

i think the saver's credit, the motivation behind that is to give low-income families and incentive to save his well-intentioned but a few comments someone with a ph.d. in economics for m.i.t. can't figure out in 10 minutes it's too complicated. i think the fact that we have so many different ways to save makes it complicated so am i better off saving and it's not just a retirement system. if i'm an employee and my employer offers an employee stock purchase plan, a 401(k) plan and a health savings account and i have a limited budget for how much i can save it's very complicated to figure out where should i put that money plus we have 529 plans. we have lots of different ways to save so some simplification and some consistency across these different plans would be helpful. why a 403b plan has to have

different plans than a 401(k) versus an ira, a lot of that doesn't make sense to me. i think there a lot of things to do to make things simpler and more straightforward for employers offering plans and for individuals trying to decide how do i save for health care for education retirement and for mortgage? >> thank you very much. >> senator portman i don't know if you were here that you are on a roll this morning with your church clarification plan so as to promote iowan womb is so just keep going. >> excellent. well thank you. did you say you agreed with it and it will be an active? >> we are bringing forward as quickly as possible. i think it's a constructive idea and we are looking forward to working with you. >> i appreciate your just in the your just in the area and having the hearing today and i was here earlier to hear some of the great testimony. what a terrific panel and thanks

for what you are doing. ben cardin was here earlier and as you know we did work together in a house on these issues and we have this plan recently but also soon we will introduce a bill on the whole issue of the nondiscrimination testin testins something we have talked about to treasury in open testimony and i think this will be a good clarification plan. i'm excited about what we have been able to do over the years. it has made a big difference and i'm looking at statistics here. i know some are critical of these programs and here's the reality friend with her tough economic times we have had during the financial crisis. we have gone from $45 trillion in assets and 401(k)s and iras's to 10 trillion last year.

so that's not bad given again what happened during 2008, 2009 in 2010. we have to figure out how to get small businesses to provide these plans and that is the key, encouraging every small business owner so every employee has the opportunity and keeping it simple. we have a simple plan that came out of the house for small business actually called simple but there is more work to be done in terms of taking out some the complications and the costs and liabilities. the saver's credit i think it's worked well. i would like to hear your views on how we can make that better. i wonder on that issue. when i talked to companies and i know you talked about this earlier but we go from 75% to 95% and that's obviously a great opportunity. there is more opportunity there i believe obviously to expand that to more companies and

recently senator warner and i introduced a bill which is simply in the thrift savings plan moving the option from being government bonds to a lifecycle plan. i don't know what you think about that but the lifecycle fund to me makes a lot more sense for federal employees. so i ask you all what you think of that for a savings plan and maybe dr. reid you could start. >> certainly in the private sector the rules that congress put in the lifecycle funds have been extremely popular. i think they do help get younger investors into an saving more heavily in the stock market and even while there was talk about younger investors pulling out of the stock market the lifecycle

funds certainly keep individuals who are in 401(k)s contributing. i think another point here that we would like to make is ways of expansion going to your broader question is the net concept begins with smaller employers to help them more easily offer a plan would be very beneficial change and adding to our system as well. >> thank you. >> i completely agree with changing the default fund. a huge volume of evidence shows the default fund is extremely persistent under automatic enrollment so the default fund will be flowing into the bond fund and to hearken back to senator casey's question earlier how do individuals learn and become more financially literate? the best is to say they learn through experience over one individuals to understand how the stock market works and

diversification works having them invest in a lifecycle fund which contains assets makes a lot of sense. >> there are so many things i would love to talk to the expert panel about them one of them is distribution. should we eliminate minimum distribution rules for plans under certain amount say 100,000 bucks? a lot of people at 70 and a half or so working as you know and unfortunately i just left the ceo of a major steel company and they are trying to keep younger workers there because they have a serious skills gap so what you think about that? >> i think in a way which we can encourage people to spread out their balances over a longer period of time we find that most people wait and don't withdraw until they hit that 70 and a half and given the fact life expectancies have increased in the minimum distribution age has not changed it merits looking at

whether or not it needs to be adjusted and as long as these are product neutral again. i think again we want to make sure we encourage that minimum distribution age is available to everyone. >> i think your conclusion is correct that there are to be some incentive for a thousand dollars that can be taken out. i would also say on the thrift savings plan i do think the thrift savings plan needs an option where investors can say i want my money safe before retirement let's say. i don't know what the market is going to do. no one knows that so what we really want is protection late in the period before he retires. he should have faith safe -.

>> does this theory with the lifecycle funds. i need to look at them more carefully over the last two years. let me ask you a general question and thanks mr. chairman for the indulgence. there is a discussion if you know about savings in general and our low rate of savings in the country and how it affects the economy and senator cardin and i believe that and i think the chairman does as well. there is talk about the universal savings vehicle. the bush demonstrations come up with discussion about new ideas on the universal savings vehicle available to everyone. the analogy is what they are doing in canada if you follow that at all. it's a rock type vehicle there. what do you think of that as it relates to retirement savings in the deterrence is if you have to pull out for anything you have

less assets for retirement but that's okay because you are increasing savings and financial literacy but maybe if you could comment. >> quickly witnesses that we can get senator cantwell in. >> i don't know the particulars that we are talking about but i don't know what makes sense to have a savings plan where you would put money in and take it out for anything unless you have much stronger incentives to encourage accumulation that plan. if you are going to let people take out for anything you have to be putting more money and in the first place to cover everything they are doing. you need every lover out there. if it was a counterpart we know from behavioral economics of people engaged in mental accounting and organizing their financial accounts. one problem with the retirement savings system right now as we do allow people to take money out so it's not clear whether

the 401(k)s or retirement plan plan or a universal savings plan. >> i'm sorry senator cantwell. i wanted to see if you want thoughts on that and we will do follow-up questions as well. >> thank you senator portman. senator cantwell. >> thank you mr. chairman thank you for this important hearing. according to new america foundation 92% of americans are not using their retirement savings. as we look at our budget for social security and medicare programs like s.n.a.p. this will have an impact on them so to me i want to look at ways to encourage more savings and certainly offer more of a lifetime stream of savings. mr. betts i was wondering if you could comment on programs like a lifetime guarantee annuity product as a way to end sent americans to further save and a

way to help them make more efficiency out of their dollars? this is something that could be further incentive by congress. >> our business is helping employers design and implement and manage retirement plans. we don't get into a product but we have seen current legislation introduced opportunities into these plans to have annuity-based structures and things to help with these plans. our biggest focus is expanding the access so more dollars are going in. we would like to see less of the disincentives that prevent small employers from starting these plans so more and more americans can be contributing. and as they grow the employers will put more employer dollars m..

it's from our perspective getting access and contributing sufficiently. we know in retirement there is a variety of different situations and people need the flexibility to make their retirement systems they need. the right amount of tools for an american is important. >> do you like the annuities and you think they are successful? >> they have a place for the right person who meets that type of structure but that's not something we work on in our business. >> mr. bogle any input about annuities? >> the problem with annuities today anyone with a fixed income portfolio are the rates are terribly low. i've always felt there is a place for an annuity and a guarantee that eliminates longevity risk and a place for bonds but those returns are so unattractive today i think investors in their visors have to at least vaguely think about

whether they are attracting investments. if you think about the universal savings plan we know from history there is inflation and putting into money in savings long-term and is a losers game at 1% a year as the cost of living is adjusted so we have to think differently about short-term investments and long-term investments. i think annuities have a place but we have to come out the commercial system and go into a more public system where the annuity gets a fair return. >> and how would you do that? >> tia crafts does a pretty good job. it has to be annuity run for the investors and for the salesman and it comes down to that. the costs are horrendous and life insurance products if you will forgive my expression but i don't think anybody would disagree with that. if you take the cost out the rates are still going to be low but for a certain type of

investor who wants to ensure the longevity risk and has no other assets i think they are an attractive option. >> what don't you think given the crisis that we are we are facing that it's important to have that opportunity? >> yes we should have that opportunity. >> thank you. thank you mr. chairman. >> thank you senator cantwell. let me tell you first of all this is very helpful. obviously there are a whole host of issues to be examined. it's not a topic for today but i feel strongly about getting people to start saving early in life and that is why we have been talking about child savings accounts and here again there are commonsense approaches you can take. ..

with what you all have been talking about with the median ira account balance in 2012 2012 being about $21,000, and it is pretty clear there is some important work to be done. i think i would like to do, just in terms of wrapping up , have you all almost pretend that the roles are reversed here. you are up on the side of the deus.

we will try on a bipartisan a bipartisan basis to stimulate retirement saving. the way it we will start when we get to it is right now the american taxpayer is putting up about $140 billion each year to subsidize retirement accounts. this is the second biggest tax expenditure, the second biggest tax expenditure in the code. you take that and juxtapose it next to what what the general -- gentle -- general accounting office has told us about the mega iras and $21,000 that $21,000 that people have, the median amount in their account, and it is pretty clear this committee will have tough choices to make. i would like to go down the row and ask each one of you for one suggestion of where, as part of that effort with

the hundred and $40 billion that is used to assist these accounts, where would you make a change to get a bigger bang for the taxpayer buck? you get to make one choice because this will be fairly similar to the debate here in the community as part of tax reform. >> the first thing you would obviously do -- >> one. you don't get a first. [laughter] >> thank you. one thing we would do is eliminate the large deductions or have a tax credit. i would not do that in that situation. >> very good. >> i would try to expand the system to make sure more small employers were easily able to offer plans. >> all right. >> a similar answer, to remove the disincentives and create incentives for small employers.

>> and one way you would like to do that. >> starter k, multiple programs. >> well, you well, you don't get to $5 million by investing up to the limits we currently have an and putting it into well diversified mutual funds. you get their by putting it into employer stock and getting lucky. for every for every winter with employer stock their are lots of losers whose companies go bankrupt. i don't think it makes sense to encourage gambling through the tax code by allowing employer stock as an investment option in tax savings plans. >> you would support a change. >> yes. >> okay. >> i would echo with the other witnesses said and simplify plan offerings for small employers to get at the low income workers, improve incentives.

>> okay. at this.we have sen. nelson on his way. i think what i would like to do is ask our guests, can you all stay a few more minutes? okay. what people do is when sen. nelson returns he we will ask his questions and then the finance committee will be adjourned. with your leave we will suspend here for a few minutes and the sen. we will senator will come wrapup. thank you both for your professionalism and your patients with us on a hectic day. for this scholz must still be stranded somewhere. >> tried to help. [inaudible conversations] >> all right. [inaudible conversations] >> senator nelson has

arrived and has had a a hectic day. senator nelson, it is our plan that you we will ask the questions that are important to you, you, and at that.you we will adjourn the community. >> okay, mr. chairman. questions that are important to you because you are a member of the committee as well. we had a hearing about the extraordinary debt that is carried, and would you believe by seniors, of all things student loan that. and to the.at which seniors if they cannot pay low and behold the social security is garnished, and that

brings them below the poverty level because you can garnish down to $750, down to that level. $750 a month for a a senior citizen today is lower than the poverty level. >> sen. senator nelson, you are doing very important work. i am sorry. i am going to have to go. the fact that so many seniors have racked up these eye-popping debts that are going to color so many of their retirement decisions in the future is especially important, and i look forward to working with you. >> what i wanted to ask the panel is what impact does that have long workers on workers trying to put money aside for retirement? anyone? >> it puts them in an impossible position. student loan debt is enormous, and i don't see

how you can save beyond say beyond that when you are still trying to pay off. >> that is right. and now we recently had somebody talking about, you know, our thrift savings plan here. and the and the senate has a very successful thrift savings plan if you were in a company a company they would call it a profit-sharing plan. the question was proposed, an idea of opening up a thrift savings plan type entity to everyone. want to give any thoughts? >> senator, i mentioned this in my written testimony. i reference your colleague from florida who has advocated this idea.

there are obviously practical issues that need to be overcome in the sense that the thrift savings plan is plan for government employees. it is in in that sense an easy plan to administer and handle. i do favor the idea of giving savings options for low income workers who are not offered pensions by their employers. explicitly or through a structure that looks very much like the tsp, i think that is a good idea. it is it is extremely well-run, simple, low-cost, offers annuities. it answers a lot of the questions we have about retirement security. we can design a good plan.

>> and how would you go about setting up administratively a plan like that for anyone who wanted to buy and? >> the question is, do you have it run through those individuals employers were they would not run the plan but it would deduct the money and send it, or do you run it something like an ira where the individuals themselves have to do it? having their employers do it puts an administrative burden on employers. if you run it in an ira setup where the employee makes the decision, that has no burden on the employer, easy on that end. on the other end, many employees will fail to do it. how do you make it cheap and do you make it cheap and easy? the problem for small employers, electronic, electronic bookkeeping, electronic wage records, that is fairly easy. your computer will do it for you. small employers are most likely to be writing out the check by hand each month. how do you make it work? that goes back to one of the points we all made. a key is making it easier

for small employers to offer these plans. >> sen., the thrift savings plan essentially with all of the long-term money in it, 100 percent index. they charge about 0.025 .025 per year, two and a half basis points which you could argue is even better than the vanguard 500 index fund which charges a shocking five basis points. however, the thrift the thrift savings plan has their portfolio accounting for the participants and beneficiaries paid in a different source. probably about the same. essentially a thrift savings plan in a different guise is already available to any employer of any size. >> senator, to echo both points, if you would open up thrift savings.to potentially millions of employers you would not have

the thrift savings plan anymore because the relaxed savings they get from one employer with long tenured employees with very large accounts, those efficiencies would obviously galway. there are options with in the private sector that through mutual funds you can be index, low-cost actively managed funds, and you can call up any one of the fund companies and open up an ira for a small employer plan working with one of them to open a payroll deduction plans. so the private market actually does have something that actually is working very well. >> i am not able to speak -- >> turn on your might. >> sorry, i, i am not able to speak to the tsp plan. i can say that my colleagues expanding the accessibility savings plans is very important. one of your bills, the

suggestion to expand multiple employer plans which would allow more small employers to offer these retirement plans, savings plans with some of these types of investments. >> yes, ma'am. >> i agree with with what the other panelists of said. >> thank you. thank you all for participating in this. and anything further? okay. the hearing is adjourned. >> thank you. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] >> coming up tonight a senate subcommittee looks at epa proposed regulations to cut smog and ozone pollution united nations sec. gen. comments on foreign policy matters in his year-end news conference. after that members here testimony on retirement savings in the us tax code. pres. obama has announced that the us will normalize relations with cuba.

here is a look at what pres. obama had to say in a news conference to those who disagree. >> to those who oppose what i am announcing today let me say i respect your passion and share your commitment to liberty and democracy. the question is how he upholds this commitment. i i do not believe we can keep doing the same thing for over five decades and expect a different result. moreover, it does not serve america's entrance to the cuban people to try to push cuba toward collapse. even if that works, and it hasn't for 50 years, we no that countries are more likely to enjoy lasting transformation if the people are not subject to the chaos

calling on cuba to unleash the potential of 11 million cubans by ending unnecessary restrictions on activities. in that spirit we should not allow us sanctions to add to the burden of cuban citizens that we seek to help. >> one of the most vocal opponents of the knew policy, florida senator marco rubio. here here is what he said to reporters today. >> this president is the single worst negotiator we have had in the white house in my lifetime, who has basically given the cuban government everything it asked for and received no assurances of any advances in democracy and freedom. let me close by reminding everyone that god bestowed on the cuban people the same rights to get on every man, woman, and child that ever lived, the inalienable rights the inalienable right spoken about in our founding documents.

the cuban people look to america to stand up for these rights, live up to our commitment to the god-given right of every person to life, liberty, and pursuit of happiness. these exist not just for people born in the continental united states but for people everywhere. it is unacceptable that the only people in this hemisphere that do not no democracy and have not known democracy for more than five decades is the people of cuba. that should be our overriding objective, to do all we can to bring about political and democratic openings in cuba and the free cuban people can decide whatever economic model that want. the measures taken today we will do nothing to bring about that day and i fear it will significantly set it back. today by conceding to the

oppressors this president and this administration his administration have let the people of cuba down. >> you can see all of the remarks as well as comments online anytime at c-span.org. >> providing live coverage of the u.s. senate floor proceedings and keep policy events. every weekend teesixteen, the only television network devoted to nonfiction books and authors. watch us in hd, like us us on facebook, follow us on twitter. >> now a senate a senate environment and public affairs subcommittee hears testimony on the epa proposed regulations to cut smog and ozone pollution. epa acting administrator janet mccabe. mccabe. from capitol hill, this is an hour.

>> good afternoon, everyone. i will call this hearing to order. welcome to what is virtually assuredly the last congressional hearing of this congress. most of the building is empty but for us, us, and we are relatively empty here as well. i am pleased that we are here, and i think the witnesses for coming today. the clean air clean air act requires epa to review national ambient air quality standards, which, if you

initialize that it tends to an aa q's which in turn gets pronounced as max. that is why talks about it in this area requiring epa to review standards for ozone and five other pollutants every five years to ensure the protect public health. the current 75 ppb ozone standard has been too high since the day it was finalized by the bush administration back in 2,008 that decision by the bush administration was so out of line that the scientific advisory committee actually pushed back after the fact and wrote a very unusual letter to administrator johnson telling him that he had made a mistake and the number could not be justified. given the priorities of that administration, the scientific advice was not

reckoned with. that is that is where the standard was set, and since then we have had false comfort that the air we breathe everyday is safe. the revised standard is a significant improvement based on extensive scientific research including over a thousand studies. this is a particularly big deal. the congressional research service has looked at the history of the air quality standards and has in its report a mac from the epa green book that shows the nonattainment areas. just in the middle of the area. there is a significant reason for that. and providence and kent counties in rhode island get f grades for hires on days

in the american lung association's 2014 state-of-the-art report. regrettably report. regrettably there is not a lot that we can do about it because the causes tends to be out of state. specifically they include out-of-state power plants that for years dodged providing adequate pollution controls and at the same time used particularly tall smokestacks to launch the ozone forming pollutants that they produced up into prevailing wins that moved northeast from the midwest and the ohio valley from that heavy coal burning area and come landing on us. it is actually a pretty deliberate path to ozone formation that pollutes the air and the lawns of people

and down when states like mine. now, the industry claims and ozone standard that protects public health will devastate businesses in the economy, but when you look at history over and over again those claims have been shown to be exaggerated in this case i believe mr. mccabe will testify that in terms of cost and benefit the benefit of this is three times the cost. epa analysis shows that health benefits of a 65 a 65 to 70 parts per billion ozone standard translate into economic benefits that excluding california which i guess already complies with this would be 4 billion to $23 billion higher than the cost in 2025. it is epa regulations and already lowered the number and severity of bad air days of the united states, days were ozone levels are so high

that it is unhealthy for sensitive individuals like the elderly or infants to be outdoors. we get those in rhode island in the summer. a perfectly nice day, driving day, driving into work, listening to the radio , and the voice on the radio suddenly says today is a bad hair day and advises the elderly and infants and people with breathing issues to stay indoors, basically a day of those people has just been taken from them by out-of-state polluters should have been reckless about complying with walls. and as climate change once they no it actually makes the conditions for ozone formation more common and therefore more bad air days more likely. the science advisory committee is recommending that epa set a standard within the 60 to 70

ppb range noting that 60 ppb would offer more public health protection and a standard between 65 and 70 parts per billion. i hope they we will set the standard that prioritizes public health protection and thank ms. mckay for being here and invite her to proceed. >> thank you, chairman, for the opportunity to testify today on the recently proposed updates to the ozone national ambient air quality standards. because the air we breathe is so important to our overall health and well-being the clean air act requires epa to review every five years to make sure they continue to protect public health with an adequate margin of safety. for at risk groups including millions of adults and children who have asthma this is critical. establishing and implementing is a two-step process for improving air quality. setting the standards is step one, defining what is clean air to protect public health, implementing the standards is step two and involves the

federal government, states, and tribes putting measures and programs in place to reduce font for pollution. epa examined examined thousands of scientific studies and based on the law -based author of review of the science, based on the recommendations of the agencies independent scientific advisors and based on the assessment of epa scientists and technical experts the administrator has proposed to strengthen the standards to within a range of 65 to 70 ppb parts per billion to better protect americans health and welfare. this is a proposal. taking public comment is how the process is supposed to work. the agency welcomes comments including on setting the level is low as 60 ppb, and we we will accept comment on retaining the existing standard as well. we are also proposing to update the air quality index rose on. the tool that you have just

referred to, sen., that gives americans real time information to help them make the best choices. choices. and we are proposing to make updates to monitoring and permitting requirements to smooth the transition and ensure the public has full information. all of these updates are designed to ensure americans are alerted when ozone approaches levels that may be unhealthy, especially for sensitive people. to protect the environment from damaging levels of ground-level ozone is required by the clean air act the epa epa has proposed to revise the secondary standard to within the same range to protect against time to trees, plants, and ecosystems. the science clearly tells us that ozone poses a real threat to our health, especially growing children called her americans, those of us with heart or lung conditions and those who are active or work outside. the proposal to strengthen the standards is designed to better protect children and families. for example, we estimate that meeting a

level of 70 ppb would prevent hundreds of thousands of missed school days and asthma attacks and hundreds of premature deaths which would yield annual health benefits of 6.4 to $13 billion. these include these include the value of avoiding asthma attacks, heart attacks, missed missed school days and premature deaths. states will ultimately determine what measures beyond the federal ones are appropriate for their cleanup cleaner plans. epa has estimated illustrated annual costs at $3.9 billion for a standard of 70 ppb. the estimated benefits billion. the estimated benefits outweigh the estimated cost as much as a ratio of three to 1. meeting a standard of 6565 parts per billion is projected to provide additional benefit. implementing has always been and will continue to be a federal, state, and travel partnership. local communities, states, tribes

have already shown we can reduce ground-level ozone while our economy continues to thrive. nationally average ozone levels have fallen by one third and 90% of the areas originally identified as not meeting the ozone standard set and 97 now meet the standards. we have reduced air pollution and our economy has grown. we expect his progress to continue. resisting proposed federal standards is leading to substantial reductions and ozone nationwide which we will help improve air quality and helped many areas meet any revised standard. exposure to ground-level ozone, a key component of smog can have serious consequences for health and the environment. we are looking forward to you the public thinks. there will be be a 90 day public comment timeframe which starts today, and he we will be holding three public hearings as we work toward completing the final standard october 12015.

sen., i look forward to your questions. thank you. >> thank you very much. let me welcomes individual brand. it is no surprise to me that she has taken the trouble to come to this hearing. our states are on the receiving end of the ozone that other states and the power plants in the state submit. describe what you think the methodology is likely to be for compliance with the standard in other states.

>> measuring their effect we will be a part a part of the compliance. do you expect their will be new compliance is? >> when it comes to power plants we have the mercury will, the cross state air pollution rule, the clean power plan which is moving forward as a proposal. there are other tools that either we or states would look at, the cross state air pollution comes from our good neighbor provisions in the clean air act. act. states are obliged to address pollution

contributing to downwind areas. we will be working with the state to assess whether there are those kinds of contributions in light of the other programs and as appropriate we and the states with work together to put in place requirements that might affect large sources like power plants. >> so a power plan owner looking at this proposal could expect that the improvements in emissions that they would be obliged to make as a result of the good neighbor policy would count toward a knew ozone standard and would likely help reduce their emissions of ozone precursors as well. >> that's correct. correct. it all depends on what the monitors show. any any program helping those monitors show compliant air quality is open. >> epa analysis that the benefits of between six and

13 billion, that analysis is not a first effort by epa to have looked at the question of cost-benefit analysis, clean-air regulations for many years. >> we do. >> what is the track record of your estimates? >> we generally are conservative and estimating the cost of the measures that would be put in place. there is a fairly steady track record of technologies coming in at lower cost than we expected. >> you are pretty confident in the tractor to five in the track record of your previous estimates which gives you some confidence that these estimates have merit. >> and i should note also that these are illustrative

because it we will be up to the states ultimately to determine what makes the most sense. they will look for the most cost-effective approaches. approaches. we do our best to do an illustrative case. >> and what costs that would be required to meet the standard also be costs that would be pertinent to meeting the good neighbor will? >> we don't double count things. if costs have been assumed in other rules we don't count them again here. we try to make very clear that the cost for each rule is associated with several. >> senator joe brand. >> thank you so much for sharing this hearing today. i am eager that we have a chance to address the epa proposed national ambient air quality standards for

ozone. i want to want to thank assistant administrator janet mccabe for joining us. at a time when pictures of smog filled foreign capitals are making front pages around the world the united states should be taking the lead on the issue of air quality. we have to take it seriously. if you are long overdue for updated air-quality standards. this past april the american one association released its annual state of the airport and found that nearly half of all americans live in countries were ozone or particle pollution levels make the air unhealthy to breathe. although some air quality indicators improved levels of ozone and smog worse the last year. the report found that most slot defund most smog polluted cities had more high smog days on average. the richest and most innovative country honors, it is stunning it is moving back in his direction, and we have to reverse the trend. as global temperatures prepared to rise the risk for smog we

will continue to grow. i have heard from many new yorkers whose children have asthma about the challenges they face in addressing air-quality in their own community. this is something we have to be concerned about for our seniors and anyone with any type i or heart disease. i find it especially disturbing that children live in countries -- live in counties that have poor air quality. i am concerned about the levels of bronchitis and lung infection, and we are failing them if we cannot enact more stringent and quality controls. the southern california children's health study looked at children who grew up in more polluted areas and came to the stunning conclusion that lung function and for those children. a present as if these children grew up in a home with parents who smoke except the side effects came from playing outside.

i have a couple questions to ask that i can submit for the record if we don't have time, but for new york city -- >> just us. >> dropping since 1990, with values are still at or above the current 75 ppb standard. what are measures that can be put in place to help meet the proposed lower standard? >> i mentioned the tier three fuel standards that the agency finalized at the beginning of the year. those go into effect starting in 2017 and will significantly reduce the emissions from motor vehicles in a populated place like new york, rhode island, and the east coast it we will have a tremendous and quick impact. reductions by power plants will also have an impact, and that has been mentioned already.

ozone is a regional president, so emissions reductions that happened many miles away can help reduce the impact of local areas. there are a number number of local measures that areas can take to reduce local emissions. in many areas that have put those in place already. those areas have done that, but we no that their are continued reductions that can be achieved locally and regionally. >> thank you. throughout the history of clean-air act we have continually heard claims of strong clean-air standards that they cannot afford to clean up emissions the implication is that somehow we cannot have a clean environment and healthy economy, something i strongly disagree with and we have not seen the doomsday scenarios.

we are hearing the same industry chorus saying it is too costly to have one of the new proposed ozone standards. can you address some of these claims had on? how do you see the ability of industry to adapt? can you address the cost savings that we will come from taking more pollutants out of the air? >> the first thing to emphasize is the decision the administrator proposed and is out for public notice is all about the right level that means safe air-quality? it is not about implementation. there are processes laid out to address that. this is about making sure americans can no what is a safe level to have in the year. that is probably are all about. however, i will go on to say that over the last 40 years that the clean air act has been in effect

air pollution has declined by 70+ percent, 70 plus percent, the economy has tripled, the record just is not bear out that a a clean economy and clean-air don't go together. i share your view on that, that, and we found time and time again that american industry, american engineers have enervated, enervated, develops technologies that we did not know existed at the time that the standards were established or existed but were not in widespread use for work costly, and those costs came down and the technologies have become the norm, things like selective catalytic reduction, catalytic converters for cars, low or zero vlc coatings, technologies that have developed and has helped to bring clean-air and to grow industry and business. >> thank you. thank you, mr. chairman. >> one last question with respect to the emissions from the power plants, how are those reduced?

>> typically technology like selective catalytic reduction or nonselective catalytic reduction are the two main technologies. >> equipment is manufactured in order to clean up the emissions. >> that's correct. >> thank you. thank you for your testimony. good luck with the rule. you have a lot of input data view. >> thank you. >> i will now call the next panel.

>> all right. what i would like to do is to introduce the witnesses who are here. and then i will invite them to speak sequentially. sequentially. our first witness is an associate professor of epidemiology and the associate director of the environmental health technology at brown university a public health. his work is focused on the ambien effect of air pollution on the risk of cardiovascular events and its effect on cardiovascular physiology. he received his bachelor of science and masters of science in philly out to and his doctorate from harvard university. he has been doing groundbreaking work in rhode island studying heat

related deaths and hospitalization. he will be followed by vickie patton who is environmental defense fund general counsel and manager of the organization's national and regional -- clean-air programs. patton worked at the us environmental protection agency's office of general counsel where she provided legal counsel on a variety of air quality initiatives serving as a member of the epa national clean air act by three committee, received her hydrology from the university of arizona. dr. thomas furcal is the heart man professor of pediatrics and the professor of cell biology and physiology and director of the multidisciplinary division of pediatric allergy immunology and pulmonary medicine at the washington university school of medicine. in addition to his work he is the president of the american thoracic society,

an international organization with over 15,000 members. he says is a member of the american board of pediatrics suborder pediatric pulmonology. a graduate of case western reserve and the ohio state university college of medicine. the remaining two witnesses on our panel are no-shows. they were invited. they accepted they accepted the invitations and confirmed their attendance. we informed them that the hearing would proceed as clearly as allowed under seven bowls. it is unfortunate they have chosen not to attend this official senate hearing, but we we will go ahead with the witnesses who did tuesday the 10th. if you could proceed, thank, thank you for coming down from rhode island. >> thank you, you, mr. chairman. it is a pleasure to be here. thank you for the opportunity to testify.

i i am an associate professor of epidemiology and associate director of the brown university center for environmental health and technology. i earned my doctorate in environmental health and epidemiology from the harvard school of public health and previously served on the faculty at harvard medical school, conducting research for more than 15 15 years, and it is my pleasure to provide testimony. there is broad scientific and medical consensus that the current standard of 75 ppb is outdated and a protective standard should fall within the range of 60 to 70 parts per billion. this will save lives and improve air quality for everyone, especially vulnerable populations. for the reasons i will detail in a moment i encourage the epa to giving full consideration and to finalize a standard to

protect public health. there is a a broad consensus in the scientific and medical communities that ambient ozone is harmful. fourteen leading medical and public health organizations including the american academy of pediatrics, the american heart association, the american lung association and the american thoracic society goes on the letter to the obama administration to save lives and reduce health care spending to support the most protective healthcare standard under consideration epa staff and the clean-air scientific advisory committee, a panel of external independent scientists have concluded there is a causal relationship between short-term ozone exposure and respiratory health effects, based on the findings of more than 1000 studies carried out over decades and overall demonstrating that ozone exposure leads to increased risk of respiratory death, hospital admissions and emergency department visits,

increased respiratory symptoms, reduced lung function and increased airway reactivity. as one example a 2010 study by the scientists at emory and georgia institute of technology found that in the atlanta metropolitan area ozone was linked to hire high rates of pediatric emergency department visits for asthma even at levels well below the current standard. many other studies also indicate measurable adverse health effects. for example, meaningful and statistically significant reductions in lung function one function have been observed in exercising young, healthy adults exposed to ozone levels. other studies have found increased respiratory symptoms during controlled control exposures to ozone levels of 70 parts per billion.

these controlled exposure studies have been conducted in healthy adults. it is expected people with asthma including asthmatic children would be even more sensitive to these effects. the scientific evidence clearly shows the current standard is inadequate to protect the public health. the clean-air the clean-air scientific advisory committee concluded that there is clear scientific support for the need to revise the standard and that there is adequate scientific evidence to recommend a range a range of levels for a revised primary ozone standard from 70 to 60 pp. lowering the primary ozone standard would have significant public health benefits including fewer deaths, deaths, fewer hospital admissions and emergency room visits for respiratory diseases,, especially amongst the most vulnerable members of the population. in rhode island the state that you represent and where i work at brown university asthma rates in adults and children are above the national average and sharing ozone pollution is a safe

levels will save lives and improve the quality of life for the people of rhode island and people across the country. rising temperatures from climate change could further exacerbate. research has shown formation of ground-level ozone is affected by weather and climate and there is strong link between higher temperatures and increased ozone levels. a major greenhouse gas and important contributor to global climate change, thus reducing ozone pollution would not only provide immediate and long lasting public health benefit but help slow the pace of future climate change. at the same time addressing climate change could help reduce ozone pollution. in conclusion epa proposal to revise the ozone standard is based on scientific and medical consensus and supported by extensive scientific evidence. i encourage full consideration to set in the primary standard about protective level of 60 parts per billion.

thank you for your attention and i'm happy to answer any questions. >> thank you. very much appreciate you have come down to give not only are scientific perspective but your rhode island perspective. thank you. >> chairman, chairman, thank you very much for your on behalf of clean safe air for our communities and families we sure appreciate it. the united states commitment to clean-air is a broadly shared american value whether you live in a red state, blue blue state, purple state or in the case of my own home state in the heart of the rockies in colorado, americans want clean, healthy air for communities and families. the establishment of the health-based air quality standards -based air-quality standards is really the bedrock foundation of our nation's clean-air laws, why congress as instructed the administrator of the environment protection agency to establish those standards on the basis of human health. the question for the administrator is whether the air in our communities is

safe to breathe, and this determination on the basis of human health was affirmed in a landmark supreme court decision penned by justice antonin scalia who probably affirmed that it is they saw and responsibility of the epa to establish health-based ended for ozone on the basis of whether the air in our communities is safe to breathe. we know as others have already commented that it is not safe to breathe on the basis of the current health -based standard. the clean-air scientific advisory committee established by congress to give epa rigorous independent advice on the scientific foundations of the national health-based air quality standards has concluded that the current health a standard is not adequate to protect our children's health, our nation's health and we do reduce need to strengthen the standard in a range

between 60 and 70 parts per billion and further recommended a standard in the lower range would be appropriate and questioned whether a standard in the higher range we carry out administrator responsibility to protect human health with an adequate margin of safety we know that the effect of ozone are profound. there is difficulty breathing, asthma attacks, emergency room visits, hospital admissions and premature death. death. one of the most significant findings since the bush administration reviewed and revised the ozone standard is the strong basis of science linking ozone concentrations to premature death. the populations at risk include our children and individuals with asthma, elderly, those who are

outside working, exercising, and living. the clean-air scientific advisory committee looked at a whole host of information and concluding that these effects are significant and the populations at risk are imperiled, including clinical studies, epidemiological, epidemiological studies, anomie toxicological studies , exposure and risk assessment. we have heard the numbers of health impact, but if you are a mother a mother or a father of a child with asthma and that child suffers an asthma attack on ohio sunday the impact is profound. it changes your families fabric in so many fundamental ways. this is why congress as long instructed the environmental protection agency to establish the health-based

standards on the basis of science, on the basis of public health. we already talked about how we are well on the way to achieving those standards. we talked about the fact that our nation can achieve both human health protections and grow our economy and in her own home state of new york there are manufacturers that we will be making the claim their technologies that we will help deliver a fundamentally cleaner vehicle and that we will reduce ozone forming pollutions by 80 percent beginning with model year 2017. there has been lots of skepticism throughout the history of the nation's clean-air laws that we cannot meet these challenges, cannot deliver cleaner, healthier and grow our economy. in the nation confronted this challenge there was one senator who commented at the time that if we move forward

with strong ozone health standards are her salons would be imperiled. we achieved cleaner. >> i want you to no who is here today. mom's clean-air forces here today, here in the audience listening to this hearing. they represent over over 400,000 moms across our nation, moms to our faith-based moms, moms to our and purple states and red states and moms who are united by their abiding commitment to clean-air for our children. those moms know that when we check our children into bed at night we are overwhelmed by our

love for them and our commitment to ensure a clean and safe and healthy environment for our children your in ensuring that we have a strong, health -based ozone standards is one of the single most important gifts you can give to our communities, families, and all children who are threatened by unhealthier. thank you. rex thank you and welcome. as a dad i would be the first one to admit that when a young child is in an emergency room with an asthma attack it is likely to be the mom who had to take off work to go sit their with them. it is likely to be a mom who is called omen has to organize coverage for the child who is not in school. even if it is not affecting the lines of the mom, it is sure affecting their lives.

>> thank you for the opportunity to speak today. i am a division director of pediatric ecology, immunology and pulmonary medicine at washington university in st. louis missouri. i've care for children with lung disease, some with severe, even life-threatening disease. you have my written testimony before you. already provided scientific background on why reducing ozone pollution is important for public health. i have a few brief points over like to make that i think to the discussion. with each breath the lungs and the airways are exposed to the outside environment. breathing is not an option. airborne pollutants are unavoidable, and and children are far more vulnerable than adults to the effects. so long is not completely formed at birth. still growing, developing, and the

developing lung is particularly susceptible to the harmful effects of air pollutants. air pollutants. air pollution is associated with impaired lung growth that may be permanent. what is happening during childhood does not end in childhood but continues on well into adulthood. ozone ozone exposure increases the risk of developing asthma in childhood including children that seemingly were previously healthy. ozone pollution is particularly harmful to children who do have one disease command that is not surprising. for children with asthma the most common chronic disease of childhood that affects nearly 7 million children and adolescents in the united states alone, ozone levels below the current apa standards are associated with increasing respiratory systems and the need for rescue medication. in some cases it requires greater, higher doses to control asthma symptoms which may sound okay except that many medication

increases doses lead to unintended side effects. school absences, emergency room visits, hospital admissions are all clearly associated with mbna pollution. this is common knowledge. every pediatrician who cares for a child with asthma understand this relationship. sometimes it means children with asthma die, which is tragic and i like to think avoidable. third, ozone exposure as a child can lead to deficits that persist well into adulthood. i mentioned that before. the data is emerging and there are several lines of evidence that clearly showing that early exposures of air pollution, including ozone pollution have long-term effects. it is not surprising that exposure during childhood impacts london development later in life. very few to cut very few people begin their lives as adults.

when we in the medical community talk about the ozone impact on public health it sounds like public health is a high-level concept. it really is not. public health is the accumulation of all the personal stories that make up america,, including the mother of the child with asthma who was in the emergency room worried whether there's some will recover. ..