the president's budget to boost job growth. i remember more than a year ago a lot of our republican colleagues were pointing to the new government in the uk as an example of how we should proceed here. we should have an austerity budget. well, i think the secretary can talk about what the gdp numbers -- growth numbers are in the uk these days. they're not very good. it's a good thing we didn't follow that proposal. the second is, as we look to the future, taking this balanced approach. the secretary's pointed out that when you take the kind of measures with respect to health care that we're taking in the chairman's budget last time, what you do is shift the risk of rising health care costs to seniors on medicare. and rather than take that approach, we need to spend a lot more time finding a way to reduce the growing health care costs throughout the american health care system. now, the reality is the affordable care act put in place

a lot of mechanisms that we believe will begin to do that. and will prove successful. but there is more work to be done there. what we need to do there is come together in a way that deals with the fundamental problem. not just shift the problem from medicare to senior citizens. that is at the heart of what this is all about in trying to find a balanced approach. because if you don't ask the folks who've done really well to put in more, then you're going to have to take more and more out of the middle income and seniors. mr. secretary, i just want to end by asking with respect to the experience we've seen with some of the governments that took strict austerity approaches, what is their -- what is the evidence so far? >> well, it depends on the circumstances. you're right to point out the uk experienced. we're not in the position the uk is nor anything like the rest of europe in this context in the sense that we enjoy still, and you can see it in the prices of

u.s. financial assets, enormous confidence around the world. this country, this congress, this city, this government will ultimately find a way to put in place a more substantial set of long-term fiscal reforms. and so there's confidence out there in markets that ultimately congress is going to come together and do the right thing soon enough in this context. and that's why we're able to borrow at relatively low rates. you see that confidence in u.s. financial markets. if we were to in the face of being able to borrow at 2%, if -- at ten-year money, if we were to now decide we're going to try and turn this deficit swollen by the crisis, swollen by the bush economic policies and try to reduce that to balance in two years or three years, you would kill this economy. you would kill this economy and you'd dramatically set back the long-term cause of deficit reduction because you'd swell the long-term deficits by inducing another crisis. that's not what the ryan budget proposes, i would point out.

although there are some people who have suggested we need to cut faster now. >> mr. garrett? >> thank you, mr. secretary. so let me get this straight. what your testimony's been so far. that you agree that the tax system that we have in this country is far too complex and is not working. but you're not going to give us a new tax reform system now that would be simpler, but rather would get a plan in this budget give us a more complex tax system until later on in the term. >> no. you don't -- i know you don't like the specific tax proposals -- >> is it more complex, what you just said? >> absolutely. if you try to get more revenues out of the current tax system in a rational way, you will do things that are complicated, no doubt about it. that's why it is better to do it through tax reform. >> that's my point. you're saying you're giving us a system that's too complex today. that you're giving us a proposal that's even more complex. >> it's the nature of the beast in this context.

>> mr. secretary, i think of all people, especially you, that you would understand our system is too complex for the average individual to understand how to fill out their tax return, that you would be coming to us not today, but prior to this, with a simpler tax system today and not waiting until the end of your term. >> i know we'll have a chance but i think we're aligning the fundamental difference. even in tax reform that raises the revenues that, for example, simpson-bowles suggests we need or domenici-rivlin suggests we need or the senate six suggests we need. in that context the effective tax rate on somebody's going to go up because you're raising revenues. >> mr. secretary, all due respect, that's not the question. >> it is. >> i'm asking the question so i know what the question was. the question is when are you going to give us a simple tax reform. your answer is not now. >> not in this budget, no, we're not. >> that's the question. when are you going to give us -- >> when we have evidence on your side you guys are willing as part of the balanced fiscal plan raise revenue through tax reform.

that's why we spent so much time with your leadership discussing in the summer. >> i understand. in other words -- go ahead. i will yield. >> that's leadership. so wait for other people to do something, then we'll react? >> mr. chairman, you guys just spent about six months threatening to default on obligations you gave us. you bequeathed to us. if you call that leadership, that's fine with me. we can have that. what we did and it was in the spirit that we could have to work this out in a bipartisan way is we sat down with your leadership for months to try to work out whether we could find consensus on balance -- >> reclaiming my time, mr. secretary. and during all those months, we never got from you the same thing that you said -- telling us right now you're never going to give to us. >> did the leadership share with you the proposals we discussed? >> we never got legislation, formal legislation from you. >> nor did we get it from you. we didn't get that from you either. >> on entitlement reform and tax reform -- >> not on tax reform you didn't. you just said -- you said we'd

like to get to 25. that was it. that's not a tax reform plan. >> where is your tax reform plan? that's why we're here today. is to learn where this administration -- >> congressman, if you you want to bludgeon me into admitting we're not giving you a tax reform plan, i confess. it's not in the budget. it's not proposed now. if you want to use your time for that, that's fine. >> my second question is where is your entitlement reform plan. >> we have in the budget -- >> are you going to do the same -- >> hold on. -- $360 billion of specific scorable savings in medicare and medicaid over the ten-year budget window and an additional $250 billion of other mandatory savings. those are part of the -- >> secretary, let me rephrase my question. where is your long-term entitlement reform plan? not ten-year budget window, the long-term reform. >> if you want to use your time that way, that's fine. we're not proposing to solve the problems of the country for the next 100 years because we feel

like if we can agree on how to fix them for the next ten years, people might have more confidence we can work on the next 50 to 100 years. if we can't agree on how to solve the next ten years why are you so worried about and focused on the next century or millennium. if you think we can't solve this modest problem -- >> reclaiming my time, mr. secretary. you're all willing to take shots at the plan that mr. ryan has proposed which does try to solve it over the long-term, and you are critical of those plans, significantly of those plans, all we would like to have is in a debate or a dialogue on this is to say, here's the plan that we have proposed, mr. ryan has proposed. where is the plan that you have proposed long term. not 100 years. not 80, 60, 40. >> you have to make a decision. can i say one thing? i think you have to decide for consistency are you going to say you do not like our plan which proves we have a plan or we don't have a plan? you can't have it both ways in

this case. we're not claiming to do what you would do to medicare. we're not claiming that. we're not going to do it. >> i'm going to run this tight. because we've got a lot of people here. you have a schedule. we don't see it that way. the chairman of the federal reserve doesn't see it your way. ms. schwartz. >> thank you. mr. chairman, i hope we are fair about that. there were seconds to go, and i'm not sure you have to gavel people down before the time was up. >> we were just getting momentum. >> i understand that, but it wasn't because the time was up. you were just finished with hearing it. i think really there is a very clear difference of opinion. >> is it going to go this way all day? >> not for me. you're going to have another 4 1/2 minutes of a little more comfort zone here. the fact is that there is a very different approach here, and i think that, mr. secretary, you spoke very well and very clearly about the fact that the president is putting forward a ten-year plan.

that's actually pretty good, i think, given that we've gone through a very tough time and seeing our way through it and growing jobs and stabilizing the deficit and being able to make the investments that ensure economic competitiveness would be a very good outcome over the next ten years. so we can disagree, the other side can disagree, but calling on the president for not having picked their time frame seems to be not what the argument really is. the argument is that they actually disagree with the plan that the president has put forward. what i wanted you to talk about a bit because you already well articulated where we have come from and the challenges ahead is that one of the keen differences between what the republicans want to do, which is simply cut everything, is to not only have a balanced approach but to make the kind of investments that are going to ensure americans economic competitiveness. you outlined some in your testimony. i wanted you to take a few minutes to talk about how important it is to make the kind

of investments in research and development. i'm particularly interested in advanced manufacturing and innovation. i did want you to not only talk about what's in the budget but to mention two ideas that i have. one you and i have talked about a good bit that's very successful already i'd like to see us do again, the therapeutic tax credit. this was $1 billion that we made sure went to over 3,000 companies. a start-up bio tech companies across this country. companies that are alive today working on therapies and devices that may cure -- save lives, save money. i would like to see that be done again if we reach some place where we can actually move forward. because i think it's really important for the united states of america to stay on the cutting edge of innovation, particularly in the life sciences and this is one way to do it. i appreciate the level funding for nih and the work you're doing in r&d. the other piece has to do with

the issue of insent vising innovative businesses that use patents. and this has been a tax policy in other nations that has been successful in drawing out new industries, innovative industries that are making products based on a patent and a new patent. so i'm working on legislation that would do that here, but provide some tax incentives. again, so we can grow those new. the growth industries. so i wanted to mention those two specifics and give you a couple minutes to talk about really in a very positive way how we're not only going to get out of this tough economy but we're going to continue to grow and be the leaders in the world economically. >> i am happy to take a closer look at those two specific proposals and welcome your support for them. the simplest way to describe what we think makes sense for long-term growth and opportunity is better education outcomes, support for basic science and research, not just nih and medical discoveries but, of course, across a range of parts

of science critical to future technological development. >> energy is a big piece of it. >> energy, better incentives for investment in manufacturing. >> greater productivity in technology. >> and a substantial long-term investment infrastructure. so that those core things, education, innovation, infrastructure, better incentives for investment, we think should be a core and if you look at the combined cost of those things, they are very modest, well within our capacity to afford as a country. but you've got to do so in ways that are responsible and pay for those things and we lay out how we propose to pay for those reforms. >> i very much appreciate that. again, i think that we'll try to keep this a little more civil, at least every other speaker, and give you the opportunity to really lay out what is a clear vision for this country and contrast unfortunately to the other side, and i appreciate what you said about willingness

of the administration. i don't know that there's another administeministration t reached out so often and in great detail to the other side of the aisle and not gotten the cooperation back. i will end on a positive note having just signed the conference committee approach. we got a conference committee working. it did its work. it reached a compromise. i think it protects 160 million americans who need that 2% payroll deduction and unemployment and of course on the medicare physician side, so i look forward to that. >> my compliments for that. saz as i said again, don't stop there. try to figure out a way to go further. >> mr. eagan. >> okay. i think the only place i'm agreeing with you is overall captions and headlines. i agree with that part and everything below it i have trouble with. >> some of your headlines we agree with, too. >> one of them is that you talked about maintaining national security and it seemed like another one was create,

grow jobs and the economy. those things i don't think you get any kick from any of us. first question is specific and that is does this budget set out in a specific plan something to prevent the se quest ration or 10% cut in national defense? is there something you are submitting that you want to -- so we don't take that 10% cut? >> good question. thanks for asking it. again, if you count the savings, 1 trillion in the caps we agreed on in august, and proposed an additional 3 trillion in savings roughly split 50/50 between spending cuts and revenues, the spending cuts alone are enough to meet the test you have to meet in the sequester and our spending reduction proposals primarily are the 350 or so billion dollars we'd save from medicare and medicaid and the 250 or more billion dollars we

would save from other mandatories. but the budget contains a range of other savings that would achieve that. we believe that mix of policies both spending and revenue side, it goes well beyond what you need to replace the sequester and be better than letting the sequester hit. >> if that happens is the sequester automatically repealed? >> i can't remember exactly the way the legislation is written. if congress were to embrace reforms that achieve more than the savings required by the sequester, then the sequester does not go into effect. >> do those reforms include tax increases? >> that's the judgment you have to make. we think they'll have to ultimately. we have a magnitude of savings proposals that would exceed the required amount to suspend the sequester. it's a different mix, though. >> first thing is i just came from the armed services committee and your top military leadership all saying sequestration is a total and complete disaster. second thing was jobs in the

economy. one of the items on your tax increases here is you're going to repeal the percentage depletion for hard mineral fossil fuels, i.e. coal. now, the administration has already been pretty tough on the coal companies in terms of permits. there's a lot of foot dragging, so they can't get their permits. increasing the size of and expanding the streams act, apparently, makes it very hard for longwall. and now this thing here will increase the taxes on coal companies. is that correct? >> you're right that we do propose and have for some time dialing back, eliminating, reducing the very generous substantial subsidies we provide for a number of parts of the energy sector, and we think that's necessary. we think it's good energy policy, good economic policy, and i would remind you that i think as you know -- >> let me just get real practical on you, though. if you get rid of the depletion allowance, it means the coal companies' taxes are going to go

up, right? >> if you remove a tax subsidy for a specific industry, yes, their taxes go up. >> their taxes currently are running about 22%. what will happen if you get rid of the depletion allowance for coal? >> i would be happy to respond to you in writing but it would be worth noting the average tax rate paid by american businesses today is in the high 20s, so the reason why they get to pay only 22 or 18, whatever it is for the energy industry, is because other businesses across the economy are paying more. that's not efficient. it's not fair. it's better to have a flatter, more even system. that's why we're proposing to remove those subsidies. >> the depletion allowance if you remove it basically will shut down the coal industry. i know the president, or at least i have heard it reported that he is pretty favorable to that idea. but the fact of the matter is, there's an awful lot of jobs. there's mines closing now all over the place. and so if you continue the foot dragging on the permits, you increase the groundwater situation so you can't mine

underneath an intermittent stream or something that has no water in it a good part of the year. then you get rid of this depletion allowance which makes a certain amount of sense. because when you dig the coal out, once the coal's gone there isn't anything there. they have the same thing for sod farms. you take enough sod off the top, there isn't anymore topsoil. you'll basically shut the coal industry down. that doesn't seem like jobs and the economy. to me it sounds like war on the private sector. >> we don't believe our proproseales have that riz k but i'd be happy to talk to you in more detail about what makes sense in this context. >> thank you. mr. blumenhour. >> thank you, mr. chairman. mr. secretary, i couldn't agree with you more that progress does not have to wait for another election or a new administration. it's interesting to watch what has happened. a year ago there were some threatening to shut down the

government over big bird and planned parenthood. then this summer, you know, you mentioned there were some who were seriously arguing that we not honor paying the debts that we've already incurred. >> it wasn't just a few. it wasn't just some. >> yes. later, in fact, this year we had people go home for the christmas holiday over the debate about the payroll tax, but actually the people sometimes are hurt. and we watched folks come back from the holiday and approve what had been essentially rejected, and we're going off to sign off on a conference committee that is extending it for the rest of the year unpaid for, which you couldn't have imagined if you just listened to the rhetoric including some around this table earlier in the year. i was struck by what our chairman said about 1986 and tax reform.

i thought that was a fascinating period. but i would like you to comment on a couple of differences. because i look at 1986 as something that made a difference. i don't have enough time to put the charts up that talk about much higher performance of this economy when the tax rates were much higher. there are things like investing in education, in infrastructure, that matter deeply. but 1986 featured -- it did not have 235 members of the house of representatives who signed a pledge that they're not going to raise anybody's taxes on anything because, as you well know, there were lots of changes in that reform that ended up raising taxes on a number of people, despite cries that it was going to shut them down. it actually didn't. ronald reagan signed off on something that correlated

taxation on individual work and investment. we had people in both parties who were working together, a president who repeatedly raised taxes. ronald reagan raised a gas tax in 1982 a nickel a gallon, back when that was real money. so it seems to me one of the big dif repss in '86 versus now is that we had two parties that were willing to make adjustments, raise taxes where necessary. they had some confidence going back and forth, working together. there were no signed pledges that things were off the table. so i wonder if you could just elaborate from your vantage point, because you really didn't have a chance to elaborate on some of the give and take where it appeared from those of us on the outside that the president and the speaker were making progress before somebody's chain

was yanked. but if you want to talk about '86 versus today or the process, i would be welcome -- i would welcome your thoughts. >> i do agree that it is going to be harder now than '86 because of the politics in the republican party and how that's changed. i think what's interesting about '86 is ronald reagan designed and reformed a tax plan that resulted in a substantial increase in taxes on businesses in order to pay for a substantial tax cut on individuals and subsequently decided he had to reverse and he reversed much to his credit because he was worried about the long-term fiscal problems, he reversed a substantial part of that individual tax cut in the coming years because he realized it was irresponsible and unsustainable. but i want to try and take the positive side of this debate. because -- >> please. >> the question is, is whether -- are we coming closer together or moving farther apart? i don't know.

if you look back the past year despite all the noise and despite how devicive visive it's been, we did some very good, important foundation laying with entitlement reform and tax reform. you saw the appropriation process work at the end of last year. took us longer than we thought but you just got a bipartisan agreement to extend the payroll tax cut and extend unemployment insurance. we think there's a lot of room still on things good for growth in jobs like infrastructure or on helping refinance mortgages, for example, or investment incentives where we think there traditionally is a lot of bipartisan support and we should be able to move forward on those things, so our hope is we can find practical things we can agree on even while we're trying to narrow our differences on the big things. >> thanks, mr. secretary. >> dr. price. >> thank you, mr. chairman. mr. secretary, welcome. i think that the american people by and large want us to get the job done. and there's a lot of misinformation and disinformation that comes out,

out of washington. we've heard some of it in this room this afternoon. the fact of the matter on the payroll issue is there were some folks staying in town trying to solve this and some folks that fled. the folks that fled were our colleague -- democratic colleagues in the senate. uncertainty in the market is destructive to job creation. i assume you agree. >> well, i guess i would say right now the biggest source of uncertainty is keeping growth modest is concern about the weakness in demand. >> uncertainty for employers, what their tax rate is going to be, what the consequences of this policy or that policy are going to be. when there isn't certainty when we talk to small and large job creators, they say, we've just got to wait. is that not the case? >> there can be. i don't think much evidence today about the long-term questions we're facing is having a material damaging effect on growth now. what's hurting growth now is the fact that people still have too much debt. we're still working through the

housing problems. and we faced a terrible triple storm, triple threat of europe, oil and japan last year, apart from the debt limit damage. >> let me take you up on the uncertainty. the uncertainty on the other side was a two-month fix to these things and we had passed through the house one year payroll -- holiday tax reduction. one year of unemployment benefits extension, and a two-year plug for the physician doc fox. but i want to talk about taxes on small businesses. yesterday i was intrigued because in one of the committees, i can't remember which one, in which you testified you said taxes on small businesses would indeed go up. with this plan. >> for 2% or 2% or 3% of american small businesses. >> and i appreciate that honesty. and if we look at the 2% to 3% of those that file those business tax returns, that's actually 32s % of the business owners and employs 33 million people. those 2% to 3% employ 33 million

people in this country in small businesses. >> i don't know if those numbers are right. as we talked about this before but let me mention two things in that context. that definition of small businesses includes most americans won't think of as small businesses includes lawyers and law firms and partners in law firms and partners in hedge funds, private equity firms. >> i promise you half of those small businesses you just referred to have income after expenses of more than a million dollars. i promise you who thinks those folks are small businesses are the secretary working for that attorney or physician. are the clerk in the small store, the small outlet. they certainly know they're working for a small business, and when you raise taxes on small businesses, what happens is that you get less of what the small business does. >> how are they doing? ask them how are they doing in the second half of the '90s? >> we're not comparing it to the second half of the '90s. we're comparing to where we are right now and where we could be.

that's the difference between this budget and the budget that we will propose. that is that we have a pro-growth budget, one that keeps tax rates the same s tax rates. because increasing taxes to chase ever increase in spending, which is exactly what your budget does, is insanity. the american people know it. which is why they look to washington and say what the heck is going on. >> congressman, are you saying the budget you propose will have no revenue increases in it? >> no. in fact, we do increase revenue and we do it in a -- in a neutral way so that we close loopholes, broaden the base, lower the rates. >> but is it neutral or does it raise revenue? >> we raise revenue over time so that you can accommodate the changes in the demographics in society. >> how do you raise revenue? >> i am happy to be on the panel at the treasury department when you invite me down. i'd be happy to do that. the fact of the matter is -- >> the reason i say this is -- >> mr. secretary, the fact of the matter is in this budget that you have, you increase

taxes $1.9 trillion. $1.9 trillion. if you're increasing taxes to balance a budget, that's one thing. if you're increasing taxes to expand ever-increasing spending, that's something absolutely different. that's what's so frustrating to the american people. >> that's a good question. but that's not what we're doing. you're right. as i said, we are proposing to raise taxes by slightly more than 1% of gdp. >> $1.9 trillion. >> slightly more than 1% of gdp. >> $1.9 trillion. >> over ten years. >> $1.9 trillion. >> we're doing that alongside roughly 2 to 1 the ratio of spending cuts. if you do not want to -- >> the spending cuts that you say you have are in fact already in law. already in law. you're raising taxes $1 for every 83 cents. >> congressman, that is not true. the good thing about -- >> i will be happy to talk to you about it. >> the point is -- >> we're running a tight clock. stop, please. >> no.

i've got to respond to the question. >> no. you're going to miss your schedule if we keep doing this. we're doing this -- you want to be out of here by 4:30, right? >> thank you, mr. chairman. mr. secretary, thank you for being here. i want to congratulate you on what i think is the clearest articulation of our short-term economic needs and our long-term challenges that i have yet heard and i think anybody watching your appearance here and listening to that would understand that we need different approaches over the next few years than we do for the next 40, and i appreciate that very much. secondly, i would like to say or ask you, we've seen all these charts with long, big lines going out 40, 50, 60, 70 years. with changes in technology, medical research, demographics, culture, world situations, so forth, how reasonably reliable do you think those projections are 40 years from now or 50 years from now? >> not at all. >> about as much as betting on