industries and advanced manufacturing. these are growth industries in our nation. we're excited about the increase in manufacturing that's happening in this country. but this is so important that the president is making clear investments in an inventive sector, going to create jobs for americans right now and into the future. and if not done, could seriously hurt our economic growth in the future. >> agreed. we are seeing the signs of recovery. but we've got a lot of work ahead. 8.3% unemployment is completely unacceptable. the president is making investments to continue the job growth. it starts with the payroll tax holiday, which i know you're making progress on. extending unemployment. fixing, as you said, sgr. the president looks forward to signing something soon. >> we would like to fix it permanently. >> that's a different conversation but let's get it done. let's get payroll tax holiday done so there is not a tax increase on 1600 million

americans. it starts there. there is is a call for an immediate $50 billion investment in infrastructure, which i think is important both for jobs and for global competitiveness. on manufacturing, we are seeing manufacturing job growth which is great. manufacturing jobs are great jobs. well paid jobs. they have great spill-over effect to other service jobs. there are investments in this budget to continue r&d around manufacturing, particularly at nist and other agencies. continuing to do research around clean energy and at the same time encouraging manufacturing companies to locate here and manufacturing here. there are tax incentives to manufacturing to do manufacturing here in the united states. you mentioned health care even in this difficult environment, maintaining nih's funding at increasing the number of grants. >> thank you.

all extremely important to our economy. thank you. >> thank you, mr. chairman. i'm tempted to ask you if you were drafted for this job or you volunteered, but i won't go there. because it's a tough job that you have. i know that. i appreciate you today to present the president's budget. i'm also fascinated by this discussion we have and we get into baselines and all this kind of stuff. the american people really don't care about baselines but i do find it interest that you're eyeing to use oco savings when there is not an account in treasury with all this money in it that we're doing to save and not spend. that's the reality. as i remember, it was the bush administration that signed the status -- what was it, the status force agreement, and we've known oh we were going to be coming out of iraq for a number of years. so to count a continued effort as we have had in the last several years for the next ten years and then say we're saving it is just phony, which a lot of this budget is, quite frankly.

i'm just a simple guy from id o idaho. what the american people want to know is how much deficit are we going to add to our current deficit if we were to pass this blueprint this year, which i understand is $1.3 trillion. how much would it be at the end of the ten-year cycle which i understand is going to be still around $750 billion. what would the total deficit be at the end of a ten-year cycle if we adopted the president's spending plan? point one. point two is the point that mr. garrett made. every budget i've seen except the ones propose bid this president, previously and this year, never put a target out there of when we expect the budget to be balanced. and you ought to at least present a budget which says, i don't care, 50 years from now, make it some time, but tell us when, if we adopt this spending plan, when we will achieve a balanced budget. and quit adding to the debt.

the question i have is, does this administration really care about deficits and debt? they talk a lot about it but their budgets don't reflect that. and i also hear a lot of talk about simpson bowles, which i support, but you know what? this administration walked away from it. >> well, there's a lot of lines and let me try to respond and i will do it quickly, mr. chair n chairman. first of all, i'm honored to be in this job and i'm honored to serve this president and honored to present this budget. on oco, i made the points, i'll repeat them. it closes the back door. i think we all agree that cbo is our refer free cbo scores it as savings. as for the deficit, the back door is more discretionary spending. second, on deficits, i don't think you want to look at this in nominal dollars. no one thinks a dollar today is worth a dollar tomorrow. so i would rather have the dollar today than tomorrow. let's pivot to gdp.

>> no one cares about that. they care about what the dollar amount is that you are creating deficits. >> at the end of the day -- >> the constituents talk to me don't say, as a percentage of gdp what is our debt going to be in den years? >> as a percentage of gdp -- >> how much are we spending and how much are we going in debt and are we becoming greece? this plan is greece's plan. >> let him answer. >> right. >> i mean, i think what you're seeing is declining deficits in real dollars, which is the right way to look at it. you're seeing debt stabilize as a percent of gdp. we are hardly greece. look at our interest rates. people want to invest. people will continue to invest. this budget achieves significant savings in the ten-year window. it is a step. it's an important step. there's more work to be done. and president has shown his leadership and his willingness to work with congress to achieve deficit reduction and let's start by getting this budget, the policies in this budget enacted into law.

that's a good -- we will achieve a good milestone by doing that. >> you do a great job of trying to defend it but i tell you that this budget leads us to greece. at some point in time, we have to balance this budget. and i don't see this administration taking any steps to do that. yes, they make little savings there and little savings here and make phony comparisons against a baseline that they've created and say that we're saving money when we're not. i will tell you that the american -- >> we are -- >> -- are fed up with this. >> -- we are not greece. >> i'm fed up with this. >> we're not grease. >> we're not greece yet. >> we're not going to be greece. we will make sure this country continues to be a great place to invest in. i believe in this country. i believe in our workers. i believe in our competitiveness and the president's budget supports it. >> so does everyone in here. the rhetoric, i wish the budget matched the rhetoric you put forward. i appreciate you being here, because you've got a tough job. >> thank you.

>> thank you, mr. chairman. appreciate your being here. >> thank you. >> it's interesting for me, just as i have two points of reference as i listen to my colleagues go back and forth. one is to look at what is proposed on this by the presidential candidates running for the republican nomination in terms of more defense spending, no revenue adjustments, and even people like george will pointing out that it's just an absolute fantasy land and it will be fun to watch in the unnorth nate circumstance if you have a romney budget here, and some of you are sentenced to the budget committee again, reconciling

what he was talking about with this impassioned rhetoric. when the republicans were in charge with the bush administration, republicans, what we were presented every year looked better because it wasn't anywhere near an honest budget. i really commend you and president for not being in a fantasyland that somehow these overseas adventures are unforese unforeseen, supplemental funding. it's free money, congress. that somehow we're not dealing with alternative minimum tax, that we're not dealing with the sustainable growth rate for medicare reimbursement for physicians. if we did the fantasy budgeting that my republican friends accepted and, in fact, participated in with the bush administration, this $700 billion number would look more

like, what, under $200 billion if you engage in fantasy budgeting which didn't bother people when republicans were in charge. i appreciate your laying it out. i appreciate the notion at looking at some longer term investments because you could not be more right. we're not greece. and the world would not be lending us billions of dollars at very low interest rates if they thought we were even remotely. so that our challenge is how do we move forward over the next ten years to start bending the cost curve. >> yes. >> and i think you've got a number of things here that presumably, even republicans and democrats can agree on. i would like to zero on one, where there's been some support around this table, the chairman and i have worked on some agricultural reforms in the past.

and they were even part -- one of the good parts of the budget. the administration proposes reduction in agricultural subsidies. i wonder you could elaborate on that a little bit. >> absolutely. i mean, it is a time of strong profitability in the farm sector. there are direct payments go to some farmers, even though they're not producing. crop insurance, the returns, the irr on crop insurance is too high. so there are opportunities to save about $30 billion by getting rid of these unnecessary subsidies and, at the same time, you know, continuing to be -- have a very competitive agricultural sector. that's part of the savings that i mentioned that were part of the other mandatory savings. >> well, i think this is an example of where maybe we can stop sort of the pot chsturing.

we'll do some political posturing. we've done it before, we'll do it again. this is an area where i think the administration has outlined something that ought to be able on this committee can get behind. we have a farm bill that is expiring september 30th. we can move forward with actually more substantial savings. >> the exact number in the president's budget, i wasn't off by much, is $32.3 billion, real money, that i think makes sense to put into law as soon as possible. >> i would hope, mr. chairman -- >> i think that's the one thing we agree with him on. >> -- that this is something that the committee might roll up our sleeves and do some work this year providing budget committee leadership. i know you believe in this. the administration beliefs in it. >> the only thing i would say -- >> sorry. we're fighting sort of a

juggernaut on the floor but this is something we ought to be able to set our sights on, deliver some real savings, show that we can work together and do something that will help the american public and actually are help more farmers. >> if i may just make one point. i do think it's important that as we work together and achieve real deficit reduction, we do it in a balanced way. so it's important to find savings in agricultural, it's important to find savings in health care. it's also important to get revenue. >> thank you. >> this budget has $2.50 of spending for every dollar of revenue. we need to maintain a balanced approach and not cherry pick here and there. >> time constraints. obviously we disagree with that number. but mr. calvin. >> thank you, mr. chairman. i know mike left but i want to certainly associate myself to his remarks. i really do, looking through this budget, i think it's a lack of leadership that's put us on

an unsustainable path, that if enacted would lead to this country's economic demise. that's why there's little support in the house for this, there's little -- no support for it in the united states senate. and i suspect very little support throughout this country. thankfully there is a lot of people in this room and throughout the country to make sure this doesn't hold. and you know, i think the budget we've done here is a responsible budget. at least it puts us on a pathway to economic insolvency. and i want to congratulate the chairman and the committee for the good work we're trying to do to keep this country fiscally sound. i also serve on another committee so i want to get into some other issues. on the issue of defense acquisitions, i serve on the defense house appropriations subcommittee with my good friend

mr. pull, and obviously we're looking at how to do the acquisitions. as bud jget requests delays and programs including the joint strike fighter, army ground combat vehicle, and the replacement for the navy's ballistic missile submarine. you're claiming that these delays will save taxpayer money. historically, stretching out to these defense acquisition programs to those reduce costs or are you just shifting those costs outside the budget? >> i'd like to start with your comment about our economic demise. maybe i'm just more optimistic about this country but i think a budget that puts people back to work and at the same time puts us on a sustainable path to deficit reduction -- >> claiming my time. i'm optimistic too because i know your budget is not going to see the light of day so we're going to move ahead with our own

budget plan which will actually pass the house. >> as to the dod -- >> the question on the department of defense is what i -- >> so on dod, i think it's really important to understand that this is strategy first, budget second. so this is a strategy which is with what secretary panetta, his leadership team and the president all believe is the right strategy. the budget follows. the budget, as you know, does have a 1% decrease in dod. so the secretary is making tough choices. i think you should talk to him about specific programs. i think he can't generalize -- i do know a little bit about contracting and procurement. i think you can't generalize on that. i think you need to look program by program and any specific questions you have i would direct to the secretary. >> i will be talking to him tomorrow. but as you probably well know, being from the private sector and i'm from the private sector myself. when you push off these large

acquisition programs, your costs increase in a number of studies that show that the cost increase on this is as high as 40% increase and the actual acquisition cost. but that won't show up in the budget numbers because you're shifting those numbers beyond the budget window. so it's something that we're very concerned about. one in additional costs that puts on these programs, which makes it more difficult to explain to the american public why we're expending as much money for these particular programs as we are when it's unfortunately because of the way we're acquiring these weapon systems. >> i think secretary panetta has a very well thought through plan and i suggest that you put that question to him. >> thank you. thank you, mr. chairman. >> thank you. >> thank you, mr. chairman. thank you for being here and for your testimony. quick question in relation to something that mr. garrett

raised the issue of the -- however you characterize it, fine tax under the affordable care act. you said there were no new taxes in this budget. if i'm not mistaken, that final budget or tax was in existing law prior to this budget being submitted. therefore by the chairman's own standards those things that are in existing law you don't get credit for or blamed for. the implication that in some way this budget raised revenue through that vehicle doesn't meet the standard the chairman said. would you agree with that? >> i think it's important in this budget there are no increases on families earning less than $250,000 and, in fact, important tax breaks, including the america opportunity tax credit which is up to $10,000 for tuition credit, tax against

tuition, which is important as part of our groebl competitiveness and ensuring that people can afford to go to college. so the middle class is -- we need to rebuild and make sure that we're doing the what's right by the middle class and this budget does that. >> thank you. ism going to get a bill parochial for a second. >> please. >> over the last three years the administration proposed to appeal the accounting method and i understand that by your calculations that would result in about $78 billion worth of revenue. obviously that accounting method has been used for a long time and has been considered a valid accounting method for certain businesses, including one that's near and dear to the heart of all kentuckians, the bourbon distilling industry. bourbon by law has to be aged for quite a long period of time. i have a fortune 1,000 company

based in my district, brown foreman distilleries which would be adversely impacted to the tune of several hundred million dollars by this change. meanwhile, it does about $3.4 billion worth of business, about half of that is exported. so it is contributing to our helping our trade balance. my question to you is while calculating the impact the change in life for accounting methods in terms of the revenue sides has omb calculated. the other implications, economically, of that change including the possible death of some businesses in the country. >> right. on the lifo, that disproportionately benefits oil and gas producers who have record profits. there was a lot of game that can go on through that lifo system.

the treasury secretary is the point person on specifics around individual tax policies. so i'll have to defer to geithner on the calculation and how cost to benefits are weighed. >> i appreciate that. i have raised that with secretary geithner as well. quick question. when i'm home this weekend and anymore costco, mr. simpson says people don't care about it. if i'm walking through costco and kroger or someplace and a citizen says, why should i care whether this is a -- the deficit, debt, percentages of gdp as opposed to nominal numbers, whether it's the $11 trillion here in this calculation or in the republican budget that was passed last year, the $6 trillion, why does that matter to the average citizen? >> i think it matters because we need to make sure the sandwich citizen understands that we're doing what we need to do right now to bring down the

unemployment rate and make sure that people are employed and there are plenty of jobs that we're making the investments to make this a more competitive country. we're doing it at the same time as we're bringing our deficits down and creating a sustainable level of debt to gdp so this one maintains our standing in the world as the place to invest. you see it as we mentioned earlier in our current interest rates and we need to maintain an environment that has both american companies and global companies investing here. >> and that would be the difference between united states and greece? >> absolutely. >> thank you. >> thank you, mr. chairman. just a couple of questions. you just said a minute ago this is the budget that puts people back to work. boy, it would be nice if that were, in fact, true, but i'm not so sure that i'm sold on that idea. first of all, on a larger context, when you tax small business owners in increased

taxing them, that is going to make their business less competitive and harder to create jobs. specifically i wanted to call your attention to your tax increases that you've got. my understanding is that under american energy producers you have a repeal of percentage depletion for hard mineral fossil fuel, i.e. coal. so you're going to repeal a percentage of depletion for coal. how is that going to effect the income taxes of a coal company? >> it would increase them. >> increase them. about what amount? >> i don't know. i can follow up with you on that. >> you don't really need to. i know. okay. they're paying about a 22% tax, this would double it. what this does is it basically puts coal companies out of business. there are a bunch of mines already closing down but this thing here is going to shut down the coal industry. now, i don't understand how shutting the coal industry along with some other administrative policies such as delays permitting and expansion of the

streams roll to make it so you can't dig under half of the coal in an area that makes long wall mining just goes out the window. what you're doing is you're shutting an entire industry down and this is a key part of -- this budget is a key part of driving the last spike in the coffin of coal. so how you can say that this thing is a budget that puts people back to work, i just don't feel like that's a reasonable assertion at all. >> may i respond? >> yes, you may. >> i think you might be overstating the impact on coal companies but we can continue that dialogue. overall on -- >> double it on coal taxes is pretty significant? >> overall -- overall on small businesses, we, the president, has done 17 different tax breaks for small businesses. this budget has further tax breaks for small businesses. it allows small business toes write off 100% of their investments. also gives them a tax credit as they increase their payroll. so the president believes that small business is vital to this

economy and the brogrowth of th economy and support small business necessary a very vigorous way. >> let's see how we're doing that in a vigorous way. increase in death taxes. that makes it hard. that's an increase on the tax of small business pep second of all -- >> are you talking about the estate tax? >> estate tax. >> just to respond to that. the '09 level, $7 million exemption. i believe that it impacts less than 0.3 of 1% of estates. >> well, the point of the matter is you go death taxes and capital gains, that's the money, that's the seed corn financially of people making investments which gets the businesses going. if we have a policy of first of all taxing them more, so this is a budget that's going to tax them more and then we follow that up with, of course, all the other regulations that you're burying them in. i don't understand how this is going to help. but particularly, i take extreme exception, not only to that --

not to even mention what you're doing to defense and the 10%, another 10% cut coming. but this isn't a budget that does anything but puts people back to work, i think this is a budget that's going to specifically destroy a lot of industry and a lot of jobs. i yield back. >> thank you. we're making up some time. >> thank you, mr. chairman. when does the budget balance? i think that's a great question. and you were put to the test by the ranking member, my friend from new jersey, when he asked you that question in different ways in different times. and he claimed that you never answered the question. you know, dante's inferno is a terrace and we're looking at it right now. the budget that was presented to us, not that long ago, mr.

chairman, your budget, your budget, was balanced on the positive in terms of the percentage of gdp in 2063. let me finish, please. >> if you want to be accurate -- >> i'm going to get back to you. i always allow you to speak. 2063 -- 50 years. balanced budget. >> that was when the debt was paid off. >> you took, if your budget, i thought you were courageous to present one, so hear me out. i said that to you once before. you took revenue off the table, oil revenue. no increases. the cbo said we had annual deficits of 3.5 and 4.5% of gdp. so it was estimated that in the

budget that you presented, and please correct me if i'm wrong, to add 62 trillion to the debt before going into balance out. it's difficult to have a five-year budget, let alone a ten-year budget. you don't know what's going to happen. you don't know the emergency. of course when you're not paying for anything it doesn't matter. but reare paying for things now. we're trying to do it. i think both parties are trying -- >> would you politely yield? draw a figure eight if you can. here's the point. this is really tough stuff. >> it is. >> it's really hard given the tough fiscal situation our country is in to balance it. so the question is, what path are you putting the country on? what your trajectory? >> i agree with that. >> ours is you can see balances the budget, it takes a long time. but the key is you're getting the doubt downward and paid off, which is that date you're talking abilitalk ing about. the baseline, what this budget

does, sends our debt in the stratosphere. that's the point. >> we have different stratospheres, i understand that. if we would work together we perhaps move towards some tangible evidence. so you can't over simplify these things. you can't ask director out of context. it's a simply fication. it doesn't work. it doesn't work. now, as a former member of the transportation and infrastructure committee, i believe that fund for roads, bridges, buses, trains, is an investment in the economy. i have never seen an economist say otherwise. they are right once in a while. according to the american society of civil engineers, our structure is graded as "d" minus. that's no surprise to anybody around the table if president's budget includes $50 billion in

up front investments and a $460 billion six-year reauthorization which is 80% increase. this is in contrast with the budget of the transportation committee that's coming up, not today or tomorrow, in the future. headline news. on that topic, we learned yesterday that the congressional budget office found that this legislation leads the highway trust fund $78 billion more in the hole. but i got to take exception to one thing in in budget. i have an exception on many. i am supportive of the budget transportation budget in the president's proposal. i got a major problem with the retroactive cab on a municipal bond tax preference. how long are we going to take to