later tonight. book tv is live saturday from the savannah book festival. coverage starts at 9:30 a.m. and then on the army's first bloond officer. then on the changing of the israeli conflict. to ray, looks at who is afraid of post-blackness. part of a three-day presidents day weekend on c-span's book tv. acting white house budget director jeffery zients took questions on the 2013 budget request before the senate budget committee. he was asked about the fr

projections and deficits. this hearing is two hours. >> the hearing will come to order. i want to welcome acting director zients back to the budget committee. director zients testified before the budget committee task force on government performance in 2009 in a hearing chaired by senator warner. he was there in his role as the administration's chief performance officer. i want to welcome you back.

today, we'll be examining the president's fiscal year 2013 budget proposal which was sent to congress yesterday. i believe the president's budget would continue to move the nation in the right direction. according to the administration, under the president's budget, the deficit is a share of the economy would fall from 8.5% of gdp in 2012 to 2.8% in 2022. that represents real progress. it is important to remember the economic crisis the president inherited. i think all of us remember back to 2008 and 2009 when we experienced the worst recession since the great depression. the economy actually contracted, it shrunk, at a rate of 9% in the fourth quarter of 2008.

we lost 800,000 private sector jobs in january of 2009 alone and unemployment was surging. those are the conditions the president inherited. they were not of his making. he was asked to come clean-up crew. he also faced a housing market that was in crisis with home building and home sales plummeting and record level of foreclosures. we faced a financial market crisis as well that threatened to setoff a global financial collapse. we have come a long way since then. the federal response to the crisis, including actions taken by the federal reserve and the final days of the bush administration and the obama administration did as well as

congress participated. those actions successfully pulled us back from the brink. and president obama, i believe, deserves considerable credit for avoiding what could have been a second great depression. as i noted earlier in the fourth quarter of 2008, the economy shrunk at a rate of almost 9%. positive economic growth returned in the fourth quarter of 2009 and we have now had ten consecutive quarters of economic growth. we see a similar picture in the private sector jobs market. in january of 2009, the economy lost more than 800,000 private sector jobs. private sector job growth returned in march of 2010 and we now have had 23 consecutive months of growth with the last month over 250,000 jobs created

in this economy. i think all of us would like to see stronger economic growth and more job creation, but although unemployment is still too high, it has certainly come down substantially. the pace of this recovery is somewhat predictable because the best scientific evidence we have now is after a financial crisis, it takes longer to recover and weak unemployment continues for a longer period of time. looking forward, i believe we need to remember that we really face two critical problems in this economy. one, short-term and one longer-term. short-term, we are still recovering from the worst recession since the great depression. that was not the result of the policies of president obama. he inherited that condition. although the economy is

improving, we still have relatively weak demand for goods and services which is holding back stronger economic growth. longer-term, we face a debt threat. job one is to improve economic growth with steps to strengthen demand. simultaneously, we need to enact a credible plan to bring down our debt. our republican colleagues have completely overlooked the first problem, demand, and make that problem worse by imposing fiscal austerity right now. they focus on the longer-term debt threat. as a result, the policy proposals of fiscal austerity now would further weaken demand. it would kill job creation and choke off the recovery. i just say to my colleagues, i believe they have it half right.

absolutely we have a long-term debt threat. we have to cope with that. but in the short-term, what we have is weak demand and we also have to cope with that. the republican proposals for immediate fiscal austerity would fit a circumstance in which we saw rising interest rates, but we don't see rising interest rates. in fact, interest rates are at a record low. the problem we have right now is weak demand. here's how another leading economist dr. joel capran described this in the testimony weeks ago. he stated the number one problem that small businesses say they have to deal with right now is lack of demand. they do not say access to capital. they do not say the burden of regulation. they say their order books are

thin. that's what we hear in every corner. the chairman of the federal reserve has told us that. the head of the cbo has told us that. that is why companies are not hiring as fast as they do. they have record profits levels and $2 trillion sitting on their balance sheets. but we do need to address the second problem of rising debt and this is where i agree with our colleagues on both sides who made thaa we should not wait to respond. but not by imposing fiscal austerity right now, but by adopting a plan that phases in fiscal discipline as the economy strengthens. we really need an economic first, we need short-term strengthening of demand by investments and infrastructure. that would put people to work and make america more competitive. second and simultaneously, we should adopt a credible and

serious plan that puts us back on a sounder course by fundamental tax reform, by reforming the entitlements and by cutting wasteful spending. all of that is required. in his testimony before the senate budget committee last week, federal reserve chairman ben bernanke addressed the need for this kind of two step approach. he testified and i quote, even as fiscal policymakers address the urgent issue of fiscal sustainability, they should take care not to unnecessarily impede the current economic recovery. fortunately, the two goals of achieving long-term fiscal sustain ability and avoiding the head winds are fully compatible. they are mutually reinforced. the president's budget includes

a number of proposals that include, one, extending the payroll tax cut and unemployment insurance benefits through 2012. i welcome the fact we seem to have a break through at least on the payroll tax cut front. second, providing $50 billion in up front infrastructure investment for the construction of roads, bridges, rail and airport facilities. third, extending the 100% business depreciation. asmall business participant, i can testify to the value of that. provide $30 billion for modernization. provide $30 billion to help states hire and retain teachers and first responders and establish project rebuild by restoring distressed communities. finally, creating a new tax credit for small businesses that

add jobs and increase wages. so, my own evaluation of this budget is that it moves in the right direction. it does substantially reduce the deficit as a share of gdp cutting it by two-third over the budget period. it reduces discretionary spending to the lowest levels of share of our economy in 50 years. actually in 60 years. you can see discretionary spending was 13.6%. this brings it down to 5% of our national income. that is a substantial change. this budget also indicates the need for additional steps. but for additional steps to be taken, it's going to take all of us to find some way to come

together. i very much hope that even though this is an election year, we will come together on the longer term challenge that we confront. with that, we'll turn to senator sessions for his remarks and then we'll go to the testimony of our witness and then go to each of the members for their questions. >> thank you, mr. chairman and for your good leadership and we appreciate the opportunity to work together. mr. zients, thank you for appearing before the committee. i wish it were in better circumstances and we had more money. the president of the united states, in my view, has no higher duty or responsibility than to protect the american people from a clear and present danger. every expert and testified before this committee. they said that we are on an unsustainable financial course

that can lead to major deficit. or financial crisis. those appearing before our committee have often called for a minimum of $4 trillion in ten-year deficit reduction. many of us, including chairman conrad, would like to achieve savings beyond that figure. what we are really trying to do and should do is layout a plan to balance this budget over a period of years. ten years would be a good goal, in my opinion. we are not attempting to a massive a massive austerity problem. yet, in the face of the existential economic threat, president obama has submitted a budget yesterday which makes no alteration in our debt course. under the president's budget plan, using the white house's own numbers, the total federal

debt will hit $26 trillion. an increase of 75% from 2011. 75% increase in total debt. interest costs will rise from $225 billion this year to $850 billion annually. the spending overall will be increased by your budget submission. this will be the fourth consecutive deficit in excess of $1 trillion. meanwhile, medicare and social security, for which the president proposes no reforms, will continue on the path to inn solvency. if this were not bad enough no serious solutions to serious problems, the white house is deliberately misrepresented the budget to the american people. the intent is to lull them into

complacency. the president says it achieves $4 trillion in deficit reduction over ten years. i guess we should all relax. this is false and i hope you won't repeat that number. under the president's proposal, we will accumulate $11.2 trillion in new debt. under the debt limit agreement that we achieve as part of the debate over the debt limit last august, current law, the law today, we will accumulate $11.5 trillion to the gross debt over ten years. at most, there is a $300 billion of deficit reduction in the president's budget to $11.2 trillion. despite the almost $2 trillion in job killing tax increases. i would like to put to rest the argument that your predecessor

mr. jack lew, now the white house chief of staff made about avoiding short-term cuts in favor of long-term savings. that's the mantra. the chairman mentioned it. but there are no spending cuts, short or long, in this budget. mr. lew, now the president's chief of staff made another false claim this weekend. the senate is not doing a budget for the third straight year because it requires 60 senate votes. the law is clear. it only takes 51 votes to pass a budget. if the republicans are giving the honor by the american people on to lead this chamber next year, we will pass a budget and it will be an honest budget and it will change the debt course of america. by contrast, the president sadly uses accounting tricks to conceal the budget's true cost. for instancinstance, the white appeal is $1.2 trillion and the

cuts we made just last summer, he doesn't count that as new spending. repealing the cuts we agreed to. in law, they rightly -- your budget rightly stops the planned cuts to medicare providers, the doctor cuts, but without any money to pay for it. the budget takes credit for discretionary caps, spending limits that are already in law. not part of this budget. and the budget pre-tends that war spending will continue at higher levels so long-planned reductions in borrowing, magically produce free money, that can be spent somewhere else. the war costs were not paid for by dedicated streams of money. it was paid for by borrowed money. there is no money there to harvest. so mr. zients, i hope we can

have a candid discussion today. i hope we can move past sound bytes. the american people deserve a budget that takes them off the unsustainable debt course washington spenders have put them on. your budget does not do so. i look forward to discussion today and perhaps we can reach some agreements. even in this election year, that would at least modestly alter the course we are on. thank you, mr. chairman. >> thank you, mr. sessions. mr. zients, proceed with your testimony. welcome to the committee. thank you for your service. this is a very tough at a difficult time and i, for one, think all members of the committee appreciate your service. >> i appreciate being here. i hope want to thank you, mr. chairman, and rankingnsnd other

the committee. before i joined omb through years ago, i spent all of my time, about 20 years, in the private sector. one thing that i found was that it was often helpful to boil things down to a few key graphics. so, i'll use some graphics here on the screen to walk through the highlights of the president's 2013 budget. i'll cover four topics. first, the current policy baseline. second, the key elements of deficit reduction. then an overview of the investments in the areas that are critical to the future competitiveness and growth and finally, the bottom line of the president's budget and how it puts us on a sustainable path. first, the baseline. we believe we have a baseline that accurately reflects current policy. in essence, in business, we

think of this as business as crucial. the baseline includes the extension of the 2001 and 2003 tax cuts and estate cuts. the extension of the amt and sgr, the presentation we believe is more honest than patching these year after year. enforcement of the bca caps and joint committee sequester. and accounting for future disaster costs rather than ignoring them. the baseline results in annual deficit of 4.7% of gdp at the end of the budget window in 2022. this is where we start out before our policy takes effect. let me now turn to our deficit reduction policies. last april, the president put forward a framework to achieve more than $4 trillion in deficit reduction. you can see it here. i'll take a few minutes to walk

through this. he maintained the $4 trillion commitment in his proposals to the joint committee last september. and this year's budget is very similar to the september proposal with the addition of a year to the budget window. as you can see on the far right in the green bar, the budget actually includes over $5 trillion of total deficit reduction with the addition of the extra year to the budget n wind window. let me walk you through the critical elements. i'll go left-to-right to build up to the $5 trillion. first, you see on the far left $676 billion in savings from the appropriation bills enacted last year. including both the 2011 appropriations in april and the savings in the 2012 appropriations. next, over $1 trillion in reductions in discretionary spending consistent with the caps in the bca.

there are $362 billion in reductions from medicare and medicaid and other health programs to make these programs more effective and more efficient. then, $272 billion in savings from reforming non-health mandatory programs in areas such as agriculture, federal civilian worker retirement, the pbgc. these costs are net of the costs mandatory of the initiatives. the next category, $1.5 trillion of revenue for deficit reduction. including the expiration of the '01-'03 tax cuts for the highest earners and elimination in the inefficient and unfair tax breaks. the $1.5 trillion is a net number as we further cut taxes for the middle class and small businesses. next, $617 billion in net savings from capping oco and

investing in a six-year surface transportation reauthorization. capping oco closes the back door on security spending. then there are other categories. a net savings of $141 billion. a bit of a catch all. disaster adjustments and program integrity and general fund transfers for the programs that are no longer necessary given we are paying for them in the previous bar. debt service costs decreased by a total of $800 billion. finally in the small pink bar, there are $176 billion of investments in short-term job initiatives that cut in the other direction. these are investments. this is the remainder of the $354 billion of job initiatives that aren't spent in 2012. i want to be clear that we do

not count the sequester in our total deficit reduction. we believe the sequester is bad policy and we propose that it be replaced by this larger, more balanced package of deficit reduction. the bottom line is these efforts represent a total of more than $5 trillion in net deficit reduction. even as we achieve this deficit reduction, we continue to make key investments in priority areas. these include short-term measures for job growth totaling $354 billion. tax breaks and continued inve investments in our long-term priorities. these include training for workers and innovation in r & d. we make these investments in a budget that abides by the tight

spending caps and makes for the hard tradeoffs. let me pull this all together now. on the left, i compared the adjusted baseline we discussed in the first slide with the results of the president's policies. as you can see, in 2022, deficits from the president's policies are below 3% of gdp compared to 4.7% in the baseline. furthermore, debt as a percent of gdp is stabilized from 2018 on. this is important for maintaining a strong investment environment. the president's budget replaces the sequester with the balanced budget. with $2.50 in spending cuts for every $1 of revenue increases. we made tough choices and we all

need to work together to maintain this balanced approach. in closing, as a business person and now as acting omb director, i believe the president's budget makes the right investments to make us even more competitive in the global marketplace and achieving declining deficits and stabilizing our debt is critical for business confidence and investment. this is good for business, good for the middle class and good for america. i look foosrward to taking your questions. >> thank you, director zients, for that testimony. let me start out by saying i have seen the president criticized for not cutting the deficit in half in his first term. what was the deficit of the share of gdp that he inherited, do you recall? >> it was over 9%. >> i believe that first year it was 10.1%.

in 2013, what will the deficit be as a share of gdp? >> 5.5%. >> that is pretty close to being cut in half. what will it be in 2014? >> it will achieve the cutting in half, the exact percent, i can get for you. by 2014, we will cut it in half. >> all right. the second question i have is question of revenues. under the president's plan, revenues will average what share of gdp over the budget period? >> a little below 20%. >> little below 20%. i just say the fiscal commission which has been lauded for reaching a bipartisan agreement had level of 20.3% at the end of its budget period. during the clinton years, revenue averaged about 19.4%.

so the level of revenue that the president is calling for is completely in keeping with what the bipartisan fiscal commission members recommended and what we saw during the clinton years which was the longest period of economic growth in history. let me ask a third question. the ranking member has said that the president over the 11 years that is included in his calculation, increased spending 62%. do you know how much president reagan increased spending in the eight years of his administration? >> i believe that was 69% across the eight years. from '81 to '89. >> can you tell us how much president bush increased spending in his eight years?

i'm talking about bush 44. >> from 2001 to 2008, 89%. >> the fact is the republican presidents over shorter periods of time increased spending much more than this president is proposing. so i just think those facts are important. again, president reagan in just eight years increased spending 69%. president bush increased spending 89% over eight years. this president is being criticized for increasing over 11 years, a longer period, 62%, which is less than either of the others. with respect to the question of mr. lew's statement of budget requiring 60 votes.