would follow that presidebudget then go for the budget. the president's budget -- i'm talking more to the people through those who are watching they think magic happens here and there's a budget process that lays out the expenditures of the federal government. actually, the president proposes the budget. we set it aside. we write our own budget. then the appropriators set it aside and then we appropriate money and then the president must spend toward the appropriations. is that a fair -- >> yes. >> so it's great all this show and tell that's going on here, but it's not reality. and the poor folks that are watching us believe that we have a budget, we'll take the president's budget. we'll amend, we'll vote on it, and then have a budget. that's not how it works. it's really somewhat appalling. i know the chairman has been working on trying to align the things when the president proposes a budget then we follow it. just for the education of the folks that are watching, it's

great show and tell here today, but the fact is at the end of the day it's a whole different process. so i just wanted to make sure in a nutshell. thank you for that very decisive answer you gave on that. let me hold you there. second, i'd like you to produce a document for us. i think it's very interesting what we have already seen. the president's budget, when the president proposes a budget then there's a deficit built into it, under the last administration, in this administration. then the cbo, the congressional budget office, goes into some room and magically comes up with another number that they project. and then there's reality. at the end of the year. let me give you an example. in 2008, not under this administration, i'm going to give you another one. $2.9 billion budget proposed, deficit $240 billion proposed. cbo says 226 is really going to be the deficit and actually it was $459 billion.

cbo off half. the administration off half. then take the following year. $1.1 trillion budget. deficit requested $400 billion. cbo says it's going to go down. 342. actually, it went to $1.4 trillion. so you know i want to make sure -- i want to get a chart if you could produce with those lines, i want to know exactly at the end of the day, we have the numbers but i want to be confirmed the actual expenditure rate. >> we can provide that. >> okay. >> go back to '06 through today. what's interesting when you check the difference -- i heard the comment earlier, surge in spending. i heard that. when i look at the actual budgets, i see, you know, i'll use the last three years since i have been here. $3.5 trillion, approximately $3.7 trillion, $3.77 trillion.

actually slid a little bit. now surge usually means i have seen surges. >> right. >> you have a sue matsunami tha surge that wipes out things. yes, one of the years we had a pretty big one because we were in the worst recession in history. if you show me -- i think the american people need to understand what we're talking about. we use a lot of words around here, because it gets headlines and politico will write something and roll call and all that. so if you could produce that, that would be very important. and just to clarify, you're not replacing the automatic budget cut -- or you're suggesting another route if the budget cuts don't happen. here's another suggestion. if the budget cuts happen because we're unable to act, they're happening, right? >> absolutely. it's a terrible policy. the president is clear that that forcing function remains. >> right. but if we don't do something,

your budget will have to adjust to reflect that. >> yes. >> in some ways you have tried to do that through another means. if we don't act, we don't have the money, you don't spend it. is that fair? >> you're speaking of sequester? >> yes. >> yes. i would it would be a terrible outcome if that's how we did the spending cuts. >> i would like too say automatic spending cuts because no one understands the other words we use around here. let me say this. on the 2011 budget control act, if you can follow up. under section 255 the veterans administration was exempt from the automatic budget cuts. but then section 256 establishes a process for them to be reduced. can you send us some clarity of -- are they part of the -- >> this question came up earlier. >> okay. i missed it, i apologize. >> we're hopefully not at a point where that matters, because we've replaced the automatic cuts. but we'll work on that for you.

>> thank you, mr. chairman, for letting me go on a little bit here. last, has omb done an assessment or analysis of if there is a milita military brack put into place, can you do that if it comes down to reality? >> let me have my staff follow. >> thank you, mr. israchairman. >> thank you. i think i have a graph that will show you the surge in spending and to understand senator sessions' question to you -- >> i eel look to omb to give me that. no disrespect to my friend. >> this comes right out of table s-1 from president obama's budget last year. and then table s-1 from president obama's budget this year. it's called total outlays in ten years. you can see in the '90s, go go '90s we spent $16 trillion and then we spent $28 trillion. last year's budget showed spending of $46 trillion.

this year's budget in the tables, in president obama's budget shows $47 trillion. so again, i'm doing you a favor in answering senator sessions' question for you. this budget spends more than last year's budget and spends more on the base line. i actually have a question for you though. you're claiming $4 trillion in deficit reduction. but again going back to your budget, last year in schedule -- in table s-14, it shows total gross federal debt in the year 2021 and it showed a figure estimated it at $26.3 trillion. this year's budget table s-15 shows total gross -- same year, at $25 trillion. that's reduction of $1.3 trillion but didn't we pass this as part of the budget control act $900 billion in the first bit? >> well, the $4 trillion of deficit reduction is the

sequester money which we believe should come through a balanced approach. and then there's $2 trillion -- >> but mr. zients, i realized those are your segmented talking points, but if you look at the growth in debt, one year versus another for 2021, the base line last year would have debt at $23.6 trillion. this year's budget shows it at $25 trillion. >> we have a much more honest base line. we have a base line that assumes -- >> but we're now reducing it by $4 trillion. if you were that debt level would go from $26.3 trillion minus $900 billion for the budget control act. so then you'd be at $25.4 trillion and then take away -- we should be at $21.4 trillion. if we were reducing deficit by $4 trillion. >> we're taking into account what is truly business as usual, using a base line that includes annual package of sgr.

>> that is smoke and mirrors, it is not being reduced by $4 trillion. not even close. >> it is being reduce by $4 trillion versus the business as usual approach of patching things like sgr and amt. >> anyway, so everybody understands we are not reducing the debt and deficit in this budget by $4 trillion. it's not happening. in response to what's a fair share, you quoted a couple of figures. so on the one hand you said it would be fair, fair share, that you'd be satisfied, democrats would never come to us again, saying the rich have to pay more, their fair share. at 39.6%. i didn't come prepared to put this on a chart, but congressman paul ryan has done a pretty effective job showing with the healthcare law, marginal tax rates are going to rise about 44.5%. so that would above the fair share, wouldn't it? >> i'm sorry, i'm still focussed on your prior question. >> no, because i want to move

on. so anyway, you said 39.6% top marginal tax rate would be the fair share. >> that's what the president is proposing in the budget law. >> but with the healthcare law and congressman ryan has laid this out we're at 44.5%. that's above the fair share. >> well, we're talking about ordinary income rates. there's different taxes obviously. i'm talking about the president's budget, the president is suggesting that the 35% which was enacted in '01 and '03 go back up to the clinton era. >> and then some. then with obamacare knocked it up to 45%. now you're thinking that's fair. another way you said it would be fair is if we went back to the share -- the top 1% paid during the '90s. during the clinton administration. the average over the clinton administration's eight years was 32.8% of the total income tax burden was paid. under bush it was 36. 7% and

then the top 1% paid 40.6% which was a larger share than the entire bottom 95% of the -- now, again, you're saying that's not quite enough. that's not a fair enough share. >> senator johnson, the root cause there is the tremendous wealth accumulation by a few. and the fact that our middle class has not -- has not benefited. >> we have a very progressive tax rate. that's why when we have recessions we have such a falloff. it's not fair enough that the top 1% maid here than 40% and paid more than the entire 95% bottom part of the income tax. >> i think it's fair that we near a situation where we need deficit reduction and that reduction should come in part through revenue. the president is proposing $2.50 in spending cuts for $1 of revenue in fair share and that

the wealthiest 2% should paynary fair share and we should have no tax cuts on those under $250,000. >> thank you, mr. chairman. >> senator nelson? >> good morning. >> good morning. >> senator hutchinson from texas and i have had quite a round with omb and the two of us having responsibility for passing the massive bill back in 2010 and then going through the process of getting it funded. and basically, nasa had not unto the head of omb came and met with us nasa basically had stone walled that omb -- that omb had

stone walled the nasa budget. and since you are now the acting director, i think the constructive dialogue that we have with mr. lew having come and met with the congress and continued the discussion on nasa funding so that there was some certainty in the program i'd like to know what your attitude is about continuing those discussions? >> well, as you know, it's a difficult budget environment. nasa's held about even in this budget environment, and what we have done in this budget is to honor the 2010 discussions around the appropriation between the things like the heavy lift rocket and the international space station. i would love to continue those dialogues. >> i believe that you have, and

i think that the budget was basically a flat line budget, and given the cutting edge agency of research and development that it is, it has to have some certainty in those programs. but when there is a complete lack of dialogue with omb, that's what makes it difficult and i want to raise that issue to you that has been the case in the past. and until it finally got to the point that mr. lew as the director understood that we were going nowhere, we finally had a meeting of the minds between omb, the white house and the congress. >> let's make sure that we continue those dialogues. >> very good. all right. i want to ask you about housing. we have tried a bunch of programs. we have tried the home

affordable modification program, hamp. we have tried the home affordable refinance program, hart, and then the hardest hit fund. what makes this most recent attempt to help homeowners different? >> this is a hard problem and the housing market is starting to stabilize and it's a mix. i think last week is an important settlement. that will get the money out to approximately 2 million homeowners to help with modification an refinancing. the program that the president just announced which takes advantage of one of those charts that we talked about earlier, the historic low interest rates, we have too many homeowners paying interest rates above the

rates. yet they're stuck and they're current and in the president's program which he announced, will allow those folks, both gse, those mortgages that are owned by fannie and freddie and non-gnon-g non-gse holders to refinance and take advantage of the historic low rates. >> i applaud you for this. what is the source of revenue you're going to use to basically fund what is the underwater mortgages so that people who are current on their payments, but their mortgage is way under water and they never could have a chance getting the bank to refinance it? so you're going come in with a fund that's going to basically make up the difference? >> yes. >> where's that money coming from? >> it's estimated to be

$5 billion to $10 billion and and that will come from a tax or a fee of the recipients of t.a.r.p. that will be recouped through the t.a.r.p. financial responsibility fee. >> and that's going -- >> so no expense to taxpayers. >> that's going to be pursuant to us passing legislation that would allow you to enact that? >> yes, we do need congress to act. >> do you have any flexibility administratively in case congress is wound around the axle and can't get it done? >> we're pushing it hard as we can on programs like tamp and hart. we need the congress to act on this. we'll continue to push as hard as we can, but on the refinancing and the backup of the fees being paid through the financial responsibility fee we need congress to act. >> do you need that same revenue for refinancing the underwater mortgages in fannie and freddie? >> the -- that money goes to

primarily to the fha which will be the vehicle to refinance the non-gse mortgages. >> so do you need a source of funds to fund that? >> yes. that's the $5 billion to $10 billion. >> so it's the same as in the mortgages that are not -- >> that will allow -- the $5 billion to $10 billion paid for will allow for the program across the gse and the non-gse held mortgages. >> thank you. >> thank you, mr. chairman. i want to thank the witness for being here today. i appreciate it. you know, it's astounding to me about the president's budget as i reflect upon it is he manages to propose the largest tax increase close to the history of our country, while still having a $1.3 trillion deficit in '12

and bringing our national debt to $26 trillion in the next ten years. while again proposing this huge tax increase. it's like the worst of both worlds. it's staggering to me. i guess i have a fundamental question for you, which is the medicare, the trustees of medicare, independent group, not republicans, not democrats, have said that medicare's going to go bankrupt in 2024. and so what is the president's plan to preserve medicare? >> well, i think just to come back to your first comment, i think we have to look at the bottom line here and what the bottom line is, is by 2018 deficits as a percent of gdp are below 3% and debt as a percent of gdp is stabilized. i think it's wrong focus on our

current and instead look at the deficit reduction -- >> am i missing something though? if you look ten years forward, is our national debt not close to $26 trillion under the proposal? >> it is if you look at it on a gross basis. a lot of that is what the president has inherited in terms of unfunded 2001 and 2003 tax cuts, and unfunded, unpaid for medicare part "d." wars that weren't paid for. so the president inherited a lot and in an economy, as senator conrad said up front, which was in a great recession. >> but he did add during his presidency close to $5 trillion to the debt, did he not? >> so to pivot back to your question on medicare -- >> well, just to be clear, just so we're clear because you were coming back at me in terms of what the president inherited, but during his presidency, we have added close to $5 trillion to the debt. >> i think the key here is the bottom line. the bottom line is we get below 3% of gdp and we get it to a

stable -- >> well, just so we'r. >> just so we're clear, did he add close to $5 trillion to the debt? >> i'd want to confirm that. >> 4.9? >> so you don't know the answer to that question. >> the root cause problem here is what the probabesident inher in terms of unfunded medicare part d, unfunded bush tax cuts and we are now putting ourselves on a much more sustainable path, one that results in debt as a percent of gdp -- >> but if we owe $26 trillion in the coming. our national debt goes to $26 trillion in the coming ten years, how are my children going to repay $26 trillion?

this budg >> this budget represents a major milestone. we should work together to make it law. >> i just want to be clear. so it's your testimony that a budget that increases our national debt to $26 trillion, close to, in the next ten years, is a mark of leadership by this president? >> a budget that ensures that we continue this economic recovery, create jobs, brings counsel unemployment, gets us with -- to a situation where the deficit is a percentage of gdp is below 3%, where debt as a percent of gdp is stabilized is a major milestone and step forward. there's obviously more work

ahead. >> you and i disagree on what a major milestone is. back to my original question, by 2024 medicare is going bankrupt. what is the president's plan to save medicare? >> the affordable care fact saves over a $ billion in the first decade, more than a trillion in the second decade. in the president's proposal is $360 billion of health care savings. these are all steps forward. >> is that going to save medicare? can i go home to my seniors and say that's going to be enough to preserve medicare so my grandparents in 2024 won't have to worry it going away? >> medicare needs to continue as we talked about earlier its productivity, decrease the variation in care, which leads to often times poor outcomes and higher costs. we need to just keep going after medicare in terms of making sure that we preserve the compaq we

have with our citizens and continue to drive down costs. >> my time is up but i don't see anything in this budget that will preserve the compact we have with seniors which would require restrong leadership to preserve medicare, which shortly in 2024 is going bankrupt, which is a huge driver of our budget issues. i just wanted to point out as critical as you have been for the tax state and blaming that for the $5 trillion of debt that the president has added, it was the president who signed those tax provisions into law in 2010. so i appreciate your being here today but i do not agree that putting our national debt to $26 trillion in the next ten years is the mark of leadership of the fiscal responsibility we need to address the debt crisis our country faces. >> senator enzi. >> thank you, mr. chairman.

we appreciate this opportunity. in the 2013 budget there's a variety of proposals to eliminate any tax preferences for oil and gas and the coal industry, they call them preferences or incentives or expenditures or whatever. but repealing those tax preferences in one year will eliminate a lot of small businesses who won't have the cash to be able to pay that -- what's accumulated over a period of time. i worry about the transition on any of these tax preferences. but this proposal is like a broken record. it's been in the budget every year. never moves forward. and yet we continue to claim the savings as though it moved forward. isn't it disingenuous to claim savings from this proposal when you're unable to pass it when democrats even had total control of the president, 60 votes in the senate and the majority in the house? it's never been done. >> specific question around the oil and gas? >> yes. >> so we're at a point of record

or near record production, our imports are the lowest they've been. oil companies are making a lot of money. they don't need this subsidy. and it has been a good idea to get rid of it and it continues emphasize that a to get rid of transition. if you're a small businessman, if you impose those elimination of taxes instantaneously instead of putting them over a small period of years, put a lot of small businesses out of business. you don't put those big companies -- >> as you suggestied, we've bee signaling this is good business for a long time, we should be investing in clean energy, reducing our dependence on foreign oil and improving our efficiency through cafe standard -- >> i think even all of business would agree with you on that

with a transition. i've got to have some other questions here. there are some trust funds what get delved into in this budget. i thought we had a policy we weren't going to take away any trust funds. >> what are you referring to specifically? >> most concerned about is the abandoned mine land that dreams with health care for orphan mine exwhich are ones where the mines already went broke and it accelerated the rate at which we would reclaim mines in states that had very little revenue coming in and it would repay money from the trust fund that some of the other states had paid in that they'd never been able to get, primarily those westmsissippi. i'm just hoping that does not

become a policy of this administration or any other administration to delve into the trust fund. like the social security trust fund, which is mostly bond, which means we'd have to put money in to take money out. there is a feeling by the people in this country that there is money in trust funds. >> yes. >> and there is not money in trust funds and i didn't find out about it until -- >> the social security is certainly a trust fund and it's. as to your specific question on the mining, i'll make sure my staff gets back to you. >> thank you. thank you. that's the composite interest rate we're paying on the debt right now. >> interest rating are at low levels. i think it's around 4%. let me give you the exact numbers. >> i think i have that chart now. >> right now we're paying

about 1/10 of 1%? s-14. >> depends whether you want to use the 91-day treasury bill note, which will be a lot lower or the ten-year treasury note. the ten year is currently at in 2013 the budget year assumed to be 3.5 and it goes up to the low 5s, which is consistent with historic average. >> looking at your table s-5, i wasn't able to get the interest -- the net interest that we're paying to ever match up with the interest rates that you're showing in your other chart. but i did notice -- >> it's hard to do realtime but can i have my staff follow up with you to make sure everything squares there. >> i'd appreciate that. i notice on s-5 the deficit increases every single year in actual dollars, i understand -- i understand the gdp stuff but i

don't think america understands gdp stuff. they don't get to pay their bills based on their gdp and holding down -- getting a continual loan to cover so they just have to pay the interest rate. they actually expect us to pay something down at some point in time. >> right. >> and this shows accumulation of dollars and that means an accumulation of interest. and i'm really worried about the international situation now and the rate of interest at the international and what's going to happen to that. i think these estimates may all be low which means we're going to be spending $850 billion a year in interest rates. that's got to come out of somewhere. >> as we know right now, the interest rates here are very low, which reflects our standing in the world. make no mistake, if we don't get our deficit issues under control and get on a sustainable path of deficit reduction and stabilize debt at aer