and here is what we are left with. we are left with a budget that has only $400 billion in a defic deficit reduction over a 10-year window. if you strip out the accounting tricks and gimmicks, it's a budget that spends $47 trillion with a net deficit reduction of $400 billion. so i just don't understand how you can claim anything other than this. let's go to figure number one. let me ask you this. how much does the debt increase under your budget? >> can i respond to the run you just did? >> sure. >> you keep building on top and it will be difficulty. >> let's go back to figure two. >> thank you. i think we all agree that the $2.3 trillion, it's hard to read from here, came from the bca and

we have been talking consistently about a minimum of $4 trillion of a deficit reducti reduction. we started the race months ago so taking credit for the savings makes sense. second, on oko, very importantly closes the back door -- >> can i get you there, why do you count the stimulus spending and the increase in domestic spending? >> i'm sorry? >> if you are going to count things that happen in the past, why only count the things that benefit -- >> as part of the budgets -- >> it's not in the numbers. >> so the bca, this summer, that counts towards the $4 trillion deficit reduction we have been talking about all along and secondly, on oko, we are closing the back door to spending by capping oko.

cb cbo scores it as savings, and it's this president that is responsible for the draw down in afghanistan. i don't know how you are cutting the chart here but you have left off $1.5 trillion of revenue that neepds to be raised. revenue that is part of balanced deficit reduction. the president proposes that. >> this is the spending side of the ledger. >> and then on the spending side, i'm not sure how you are cutting it. there are $360 billion of mandatory savings and other programs. the ppcg, the federal retirement and agriculture programs. further savings there and you have debt service from bringing down the spending. >> so we net things out that is what balance sheets do. when you net it all out. not claiming credit for

something somebody else did or congress and president did before, you cannot say this budget has policy changes which achieves a result that was achieved before, it's not achieved in this budget. with respect to war, we passed ed supplementals to fund wars. it's not a surprise, it's a flaw in the baseline that they assume we are going to be at a full war for ten more years. it t it -- it does not work to cut us off. please do not interrupt. we pass supplementsupplementals budget has a inceased spendi ii

and of taxes and that is how you result with the $400 billion in deficit reduction. these are krour numbers -- these are your numbers that we are using. how much does this add to the debt? >> it's debt as a percentage of gdp >> but how much actual money is added to the debt? >> let's pull it from one of the tables. let me have my team gather had that, while i answer the question the right way, which is to think of the debt as a percentage of gdp and this budget stabilizes debt as a percentage of gdp which is important for maintaining the investment environment that we all want which is making america the right place to invest. let me circle back to oko, i think we all agree that the cbo,

i think we would all agree that the cbo is the referee and i want to make it clear that cbo scores oko as savings. >> so, if we a assume we are going to be at war for ten years in the baseline, because that is what the law requires cbo does by the way. and all of a sudden we are going to have a pull out from iraq and afghan before ten years is over, this money is all of a sudden a spending cut, it's savings? >> savings relative to the baseline according to the cbo. >> if this is how we measure reality heaven help us. i'll use your budget and your chart, bring up figure one. i have your number for you. so we will get into it if you want. you are adding $11.4 trillion to

the debt, excuse me, the baseline adds that to the debt. that means if we do not do anything. we sit still, we add 11$11.4 trillion to the debt. your budget adds $11.2 trillion to the debt. how on earth do you claim deficit reduction when your own numbers show instead of increasing the debt by 78% it increases it by 76%? >> two points that i would make. one, it's important that we are starting with an honest base with -- with an honest baseline. the idea that we patch it year over year is not a reality. you have

economic situation that was the great recession. >> if they were unpaid for how do you claim savings for them? >> they were unpaid for at the time and we are capping oko and getting the savings. >> i think you see my point. if had this -- we agree the baselines are messed up around here. that is not, that is not a source of contention. but approximaif the baselines a up and we a agree, you cannot have your cake and eat it too. if you add thisly all up, net it all out, it's a $1.5 trillion.

these are your numbers, $1.5 trillion in net spend increases and a tax increase and that is resulting of a $400 billion of deficit reduction over a ten-year period. and look, i know we love to go back and bash the last administration, this is your fourth budget, it's not as if the president came ins of a month ago. this is his fourth budget, a repudiation of cutting the deficit in half of his last year of his first term. of his term. i don't know how you can run away from your own numbers. >> i want to go to the bottom line. and the bottom line here is more than $4 trillion in deficit reduction. the bottom line here is that we get the deficit as a percentage of gdp, below 3%, and we get to

stabilize debt as a percentage gdp, to we have more work ahead? absolutely. this reaches an important milestone. >> i want to give chris his time and ask one last question. you claim to want to give ipad more tools to consider quote value based benefit design changes. but you also prohibit ipad from changing costs for arrangement of beneficiaries, if you are saying that but ipad now will have the power to design, value based benefit design changes, what does that mean? >> at the end of the day, we put forward in the budget more than $360 billion of health care savings, what they are based on is what i've seen in the private sector and i know you've seen, and there's a doc in the room,

there's tremendous variation in how health care is delivered and there's not a great comparative about the cost and effective health care. we need to decrease variation and care, driving towards best practices, having the same productivity that other sectors have enjoyed. that means you drive down costs increase quality at the same time. we are driving toward more productive, efficient, and effective care for our seniors and we need to continue to do that. >> we are going to give ipad more power to value how that is achiev achieved? >> ipad is a back stop on the system, we are making sure we are driving toward more effective, more efficient care and that we are not in any way

violating the basic compact with our seniors the to provide them quality care. >> mr. van hollen. >> thank you mr. chairman and there director zients. the bipartisan commission said $4 trillion in deficit reduction as their window. and they set something in that range. included in their recreatioomm d recommendations was reducing expending by over a trillion dollars. as part of the budget control act we passed we cut discretionary spending by approximately $1 trillion, it seems reasonable and i think as

understands that you should count the effort you made towards the $4 trillion, after all it was recommended we do it and we did it. that is a trillion dollars. and you have a mechanism to achieve another trillion dollars through a sequester, it has across the board cuts to defense and nondefense investments and what you proposed is another better, more balanced way of achievi achie achieve the reduction. just because it's built in that this massive $1.2 trillion cut that nobody feels that is the best approach, just because you came up with a better way of doing it doesn't mean that your

budget should not be credited with that. that makes sense. let me is say something about the war savings, if you look at the appropriations budgets today, they are already using so-called or oko or savings as a bit of a slush fund when it comes down to it. the reality is closing the door on that slush fund, i believe whether achieve real savings as we move to the out years and the decisions that the president made with respect to afghanistan and iraq will help to speed up is that effort. i would point out that the chairman, when he presented the republican proposal here before the budget committee last year and said that their budget achieved a $5.8 trillion cut out of the cbo baseline, that included the o can ko spending. it does. but, we will have that conversation. because cbo includes that in

their baseline as you pointed out. >> yes. y yes. >> let me turn to what is the essential question that we face, which is how do we achieve the deficit reduction we all recognize we need to get to over the ten-year period, how do we, you know, get the balanced budgets over the longer term and stabilize the debt as a percentage of gdp and really that means that there are choices to be made. and, you know, 98% of our republican colleagues in the house signed this pledge saying they will not close one tax loophole for the purpose of deficit reduction. not one penny can go to deficit reduction from closing a tax loophole. you get rid of a subsidy, you cannot use that for the purpose of deficit reduction. i think what the president proposed is that we want to achieve a net of 1.5 trillion

dollars in additional revenue, doing kn ining it in a way that middle earners and asks those at the top to pay more. we hear, the wealthiest are paying a growing share of income, it's not because their tax rates have gone up, it's because they have done better than all other americans t productivity gains from the 1990s and 2000s, did not accrue to middle income americas, it went wealthiest of americans, and that is great. i should not say that is great, but i hope everyone will look at the cbo report that came out last fall on growing income inequality in the united states. what this chart shows and that red line there at the top are

the top 1% income gains. again, pro portional, and you can see what people in different quintiles did, this is why the folks at the top are paying more in terms of taxes. because they are making a whole lot more than everybody else. that is simple math. this is not about the politics of envy or class warfare, this is how do we solve a deficit problem in a way that asks for shared responsibility. and what this chart he shows is that we should ask the folks at the top to pay a little more because if we don't, we will have to do what the republican budget did last year which is slash important investments in education and whack medicaid and end the medicare guarantee. here, we also hear the president's budget will lead to the huge tax inkrocreases that

going to weigh down the economy. what this chart shows is that if you go back to the clinton years, you had revenue at 21% of gdp. the simpson-bowles proposal takes revenue to 20.6% and hen the president's budget has less revenue of a percent of gdp at the end of the window. the point here is that, this is a balanced approach which doesn't even raise as much revenue as we did during the clinton years when the economy was booming or in the bipartisan simpson-bowles proposals. here is what i'm going to ask of you, layout clearly why it's important to day a balanced

approach and deal with the revenue side of the equation as well as the cutting side of the equation and what the consequences are for middle income americas and all americans. if you do not take a balanced approach, if you try to deal with the deficit issue the way the republican colleagues have suggested which is without taking one penny of deficit reductions from closing tax breaks. >> i think, first of all, you mentioned discretionary spending, this budget takes discretionary spending down to 5% of gdp, so we are making very, very hard choices in achieving that. the balanced approach of course which is at the center of the president's plan has been at the center of other plans. you mention simpson-bowles, that has a balanced approach and in

fact raises more revenue than we are talking about raising here. when a serious group looks at this, there's a recognition that we need to increase our revenues. we cannot increase the revenues from the middle class. the president has no tax increases for families less than $250,000. in fact there are further tax cuts. we need to increase revenue from the wealthiest and they are being asked to do their fair share so we as a country can succeed and have a healthy growing middle class. makes a lot of sense. as someone who was part of the private sector during the '90s when the tax rates were the tax rates that enabled us to have that share that you have on the screen, there was plenty of incentive to grow businesses. plenty of incentive to invest. so we need to have everyone do

their fair so we need everybody to do their fair share in order to get the country in a better position than they are in today, to have us have deficits less than 3% and stabilize debt as a percent of gdp which is very, very important for our long-term investment environment and our long-term growth. >> thank you, mr. chairman. let me just conclude by reading from the statement from the co-chairs of simpson bowles commission with respect to the president's budget. i think we all agree, we should all find ways to achieve greater deficit reduction as we move into the outyears especially. but here's what they said. in the framework the president announced in april and what he submitted to the select committee the president embraced many of the goals and principles outlined by the fiscal commission and incorporated some of the policies we proposed. we are pleased that the

president's latest budget continues to focus on deficit reduction and are also encouraged to see real specific policies for limiting tax expenditures, slowing health care cost growth, and reducing spending throughout the government. that's the quote from the bipartisan co-chairs of the president's fiscal commission. and again, i think what withe president laid out here is the balanced approach rather than a lopsided approach that will ask middle income families to take the brunt of our national effort to put the country on a long-term fiscally sustainable footing. and with that, mr. chairman, i thank you. >> all right. >> thank you. >> mr. garrett? >> thank you. appreciate your testimony today. appreciate you also being here from the private sector. you probably feel a little lonely at the white house in that respect. one point you though, you did just say there are no tax

increases for those folks making under -- >> $250,000. >> -- $250,000. >> families under $250,000. individuals under 250k. >> if i am part of a family who does not buy health insurance in violation of the president's health care program and i got to pay because of that, that is not a tax on me? >> the affordable care act saves money. >> i understand that. is that a tax on me then if i do not pay that, or is that not a tax? >> i'm not sure i'm following the question. >> you say there are no tax increases on people who make under $250,000. if i make under $250,000 and i do not buy health insurance as i'm supposed to, is that a tax on me or not on me? a moment ago you said there are no tax increase. but that's not a tax? >> no. >> that's not a tax. okay. i just want to be clear on that because that's not the argument the administration is making. let's move on -- before the supreme court. i appreciate again that the fact

that you are from the private sector. two decades in the private sector leading public companies. in that area of responsibility did you always have a budget like you're -- you always have to present a budget for those company, right? >> absolutely. >> that's why i commend the administration for coming forward with this budget. do you anticipate that this budget will be taken up in the senate? >> i look forward to the policies in this budget being put into law. i'm not an expert in the process of congress or process of -- but i will tell you that i look forward to policies that are embedded in this budget become law. >> when you were with public companies would it be responsible to have a budget, in public companies. >> absolutely. >> when you were leading public companies would it be fair to say it would be irresponsible not to have a budget? >> yes. and i would say that as the ceo of a public company, if you think as the president of a ceo of this country, that ceo has

come forward on multiple occasions -- >> that's why -- >> -- with serious proposals. >> i appreciate that. i thau thank the administration and i thank you for being here. it's a hard seat to put here. i thank the administration for putting pen to paper. that's good. >> i want to emphasize it's not the first time the president put forward in april, september -- >> i'm not going back in history. i appreciate that. i'm hearing from you that it's responsible to have a budget. last year the president proposed a budget to the senate and he got zero votes, if i understanding. recently the senate president said he has no intention of putting a budget up, so as far as i understand right now, i common you and i commend the president for coming forward with a budget. as of right now, if what you said before is responsible thing to have a budget, it's irresponsible not to have a budget -- it's seen as though it would be irresponsible for senate president reid to not take this budget up and have a vote on this. would you agree with that? >> as mr. sherman said, the

president and obviously the legislative bodies put into effect the balance that the bca last summer, that serves as a budget. and that's a real accomplishment. >> we don't need this budget? >> what we need is this budget, we need this -- the policies embedded in this 2013 budget the president has put forward -- >> that will only be done -- trillion dollars of deficit. >> it only will be done if it passed into law if senator reid takes this up as -- in a budget, in the senate, so we -- we are both on the same page. encouraging -- >> i hope the senate and the housework together to make sure that the president's policies are enacted into law as soon as possible. we achieve the deficit reduction. >> if we do that. another quick question and give me one answer. if we pass this budget tomorrow, when does the budget balance in this country, under your proposal? >> we achieve significant progress -- >> i'm looking for a year.

>> achieve significant progress -- just a year. when does this budget balance in this country under your proposal? >> this budget makes a serious -- >> just a year? >> no. >> just a year. can you tell me when this budget -- >> that's not a year question. >> sure it is. you put a chart up here -- what this budget does -- >> i can put a project here on the rnc budget. i can put a -- i'm looking for -- he's not answering the question. it's a simple question. i'm looking for a year. paul's budget can tell us when the balance of the rnc can tell us when it's balanced. a simple year. what year would a zero budget? >> this budget makes signature kabts pro seg across this decade. the president is willing -- >> is your answer that this budget -- >> willing to do more work to drive it towards progress. >> is your answer that the budget nerf ball lances? >> time is short. obviously not going to answer the question. >> thank you, mr. chairman. i want to make a comment or two about the conversation that's been going on, the questioning. two points i wanted to make

quickly on the last questioning. you may want to -- you were gracious not to, but to point out that the oh ryan budget last year voted by the republican house did not reach balance in the ten-year window. so that's the standard -- i think the president's doing pretty well. just a comment, also, about the chairman's not wanting to acknowledge what i understand to be the budget process, which is to take current law even -- which might be a law passed in the past. and apply it to our current budget and to the ten-year window. he wanted to take away the fact that this president, president obama, actually put more expenditures in the budget rather than considering them emergency spending every year. and so did anticipate those expenditures in the future to be honest about budgeting. >> yes. >> and the fact that we're now not going to spend all of that is a good thing for this country. but it means it gets acknowledged in the budget, right? yes. >> absolutely. >> secondly. on the same thing on zerks er,

the anticipated cuts that never -- only happened once in the last decade. again, this budget deals with that in a way if the chairman is suggest that we don't have to actually make up for that difference in str, boy, would that make it a lot easier for us, if we don't have to acknowledge it's the law of the land and, quote, pay for it, which i also consider an accounting problem. the chairman in his analysis, if you take all that off, means we don't have to consider current law in our budget. that's kind of stabbing. i don't know how we would -- may want to change the budget process but we're in the middle of a budget process. if we were at home, home budgets. and someone said your mortgage is going to go down, even though you've anticipate ed what your mortgage payment is going to be for the next ten years, if someone says they're going to go down, you change what you were going to spend next year and the year after and the year after that. at that all this is doing, is acknowledging the reality of current law and how that affects future budgets. the chairman of the budget committee just said he doesn't

consider that process legitimate. nobody considers it legitimate but that is the process of the way the budget is determined and how we deal with it. you've done that. the president has done that. to his credit he is dealing with reality of both more savings, savings that that accomplishes, and the cuts that are not going to happen. so i -- i don't know how we begin to have a discussion about baseline when the chairman of the budget committee just denied the way we do it. anyway. want to take the next 2 1/2 minutes just to quickly ask you what i think is what is on the minds of most americans. which is, how the president obama and moves forward in the budget in making sure we grow this economy. and we don't do anything to hurt this fragile economic growth. maybe even more importantly, makes critical investments in the future, particularly in growth industries. so i wanted to just take a couple of minutes, if you would, to talk about the critical investments that are made and everything from basic research on energy and life sciences to