>> thank you, mr. secretary, for your time. i just wanted to ask you a couple questions and then i thought before my time is ended that you might want to take a few minutes to respond to several things that you didn't really have an opportunity to respond to because your time ran out. but you said a few minutes ago that you felt that the budget that you're presenting stabilizes the debt burden in a few years as a percentage of the gdp. i think you said down to 3%. i wanted to know if you could specifically describe a few ways that that happens. >> it takes $4 trillion in deficit reduction over ten years to get the deficit down to the level where you achieve that measure of sustainability. we've proposed to do that with a mix of spending cuts and revenue increases in the ratio of roughly two and a half to one.

the spending cuts come in the form of the trillion dollars in caps and cuts on discretionary, meaning defense and nondiscretionary spending we agreed to in august, combined with an additional 1.5 trillion spending cuts composed in part of substantial reforms to medicare and medicaid and other manned tor programs like, for example, farm subsidies. then alongside that, proposed a little more than $1.5 trillion in revenue increases which is roughly 1% of gdp. the combination of those things would reduce the deficit over the next five to seven years to below 3% of gdp which, again, is a level you need to achieve what people call primary balance. that's the place where revenues cover your expenditures minus interest. for an economy like ours which normally grows at 2.5%, that's a level that would stabilize our debt burden at a manageable level. again, that only buys us ten

years or so. ten years is a long time, though, pretty substantial contribution. we'll have to go beyond that and build on the affordable care act reforms and these medicare reforms to helm get our health care commitments to a more sustainable level. >> thank you, i appreciate that. as i listen to my colleagues on the other side of the aisle, especially in the early questioning, there were several questions that came up around tax reform and also entitlement reform. and i'm new here as a freshman member. it's just my second year. but i wanted to know if maybe historically you could give a couple of examples where a president put forward a budget that included major policy changes along with the budget? it would seem to me, and i certainly want to see tax reform especially, but i don't know if it would even be appropriate for it to be included in a -- >> the chairman would know this in some ways better than i.

you're right that the major tax reform changes that come were not proposed in budgets. they were done through a separate process, normally beginning with broad frameworks by the administration and that started a process of negotiation on the hill. the tax writing committees normally took over the burden of that responsibility. on the entitlement reform side, you're also right to point out that the most successful example we've seen of entitlement reform which is the social security agreements reached under president reagan came out of reforms proposed by a bipartisan commission chaired by chairman greenspan at that point, also not included in reagan's budget. that's good history and good example. so we've laid out both in the budget and outside the budget some framework for reforms, but that can only be the beginning of the process. never intended to be the end of the process. as you know, the way the balance of powers are written in the constitution, congress has the power of the pen and has to write the laws of the land.

and again, finally, it's just obvious to say this, and this is the challenge we face, you cannot do these things without finding bipartisan agreement. we did some -- i know we were disappointed by the outcome, but we did very important foundation laying over the summer. those negotiations with the house republican leadership and democratic leadership. and we did some important foundation lay manage the super committee dialogue and we'll build on that going forward to figure out how to find a way to come closer together. >> maybe we need to see some of those proposals because it seemed like my colleagues on the other side of the aisle hadn't seen some of the proposals that had been put forward. one by the administration and maybe the proposals that the republican leadership might have been considering. >> again, you've got to start by exchanging ideas and start by debating the fundment principles. once you have an agreement under a broader framework, it's easier

to move forward. we're not really debating whether it exists, we're debating whether we like our plans or not. you guys like our plans. we like our plans at the moment. we have to figure out how to make them overlap a little bit. >> thank you very m. >> mr. riddle. >> mr. secretary, thanks. good to see you again. >> good to see you. >> i'm sure this isn't always the funnest part of your job. >> i know it doesn't look like it but i enjoy these discussions. these are debates about fundamental things. as i said, you like your plans, we like ours. we have to figure out how to do something together. >> i completely agree with you. let me tell you, i ran for the seat after spending five years in the private sector running my own company. >> what were you thinking was the question i wanted to ask you. >> i'll answer that question for you and then i'll talk. i ran because i'm afraid for my grandchildren. as straightforward and simple as that.

i'm there for them because we have a problem. if we cannot somehow, administration and the congress, republicans and democrats finally recognize that we have a major problem and admit it, to be honest with the american people, we cannot solve this problem. >> i think we both agree on that. >> completely agree with you on that. >> i want to ask my republican colleagues and democratic colleagues, i would plead with them on behalf of my grandchildren to stop demonizing every good idea and still debate it on its merits and come up with a solution. and i'm willing to do that. i'm willing to work with you to do that. we need solutions. here are some concerns i have. last week mr. bernanke said the best approach would be to put in a long-term strategy. i understand -- >> i understand going beyond ten-year window is difficult. i'm concerned on two things. >> he meant ten years i think. he would be thrilled with ten years. >> he probably would be thrilled

with ten years. we haven't got a strategy to address key drivers i'm concerned about. one is the cost of medicare. we came up with an idea. it got pretty badly demonized last year. they'll use it as television commercials i'm sure. it was an idea that warranted debate. the other one is interest payments. i'm going to talk to you about interest. i think interest is critical. you have $5 trillion of interpret interest over the next decade, then it triples from 6% of out lays to over 16% of outlays. could i have figure three brought up while we're talking oovps. based on the projection, if we look at the trend lines here, it's going to go to 25 or 30 or 40% given that the estimates you use for interest rates stay pretty much the same. i want to know what your feelings are about confidence regarding interest rates if the trend line there continues

beyond 2022. >> excellent question. this is a very important point. you're using the nominal deficit number. what matters for confidence and credibility and interest rates and growth is whether your debt burden is if the economy stabilizes at a moderate level. if you were to do that chart as a percentage of gdp which is one of your colleagues did, you'll see deficits come down to a level that stops the debt from growing. that's the test you need. if we were able to achieve that, you could be very, very confident and we would not face a rise in interest rates in the later years that would damage economic growth. >> okay. so you're pretty comfortable with interest rate projections that you have in your budget? >> absolutely i am. they assume -- they have to assume that congress would enact proposals to bring the deficits down that far. >> and the last four years of your budget, we have an increasing -- although not a percent of gdp, but increasing dollar value of debt each year. >> true.

but that's true -- again, this is very important. we're a $14 trillion economy. we'll grow in nominal terms by 5% a year. you have to measure the debt as a share of the economy. it's not helpful to look at it economically financially -- >> bring up chart 5.1 from analytical perspectives then. >> it shows you that it stabilizes as a share of the economy in the second half of the decade. now, as i acknowledged, that's not enough. v, because if you just did that and went home, then 20, 30 years out it would start to grow again and that's a problem. >> it's a major problem, especially when you pile on 16% of out lays on top of medicare, this becomes just -- here we go. this becomes crisis problems. and although i realize your concern with the ten-year window. my youngest grandson is six. i'm concerned beyond 2012 -- >> i'm here for the same reason, of course. i totally agree with you.

i am not minimizing the long-term problems. i know them better than almost anybody. all i'm saying to you is that we budget in ten-year windows. that's our obligation. and we are proposed a balanced package to meet that simple test like simpson-bowles did in that context. >> i wish the president accepted simpson-bowles, but he didn't. it was his own commission. we hear often simpson-bowles commission being brought up. it was his own commission and he didn't accept it. i yield back. i'm out of time. >> mr. honda now. >> thank you, mr. chairman and welcome. on the simpson-bowles, i think one of the principles they laid out when we talk about the medicare, medicaid, social security, the principle they laid out for us was -- do not address that on the backs of the vulnerable. that's a principle the president has been looking at and watching it. that's the point i think of

disagreement we have here it seems to me. >> could i say something on simpson-bowles in that context? a few differences on simpson-bowles. it cuts much deeper on defense than we do. your side would be comfortable with. it has a social security package that it was disproportion nally weighted to benefit us which created concerns. those are important differences. we're very close in broad strategy to simpson-bowles. on the tax side we're very close, we go deeper on discretionary funding on nondefense discretionary than simpson-bowles proposed, and a pretty substantial medicare and medicaid savings pretty substantial relative to what they proposed. we're very close on broad strategy with those two exceptions. the pros pose alsz we made last april and september, we show you how close we've come to that basic context. where you guys are apart from

simpson-bowles is on two things. one is you have much higher defense levels than they do, much higher, and you have much lower revenues. and that's the difference. but if we could use that as a foundation for negotiating something, which again we tried over the summer several times, then we'd be in a very good position. >> thank you. my friend, perhaps if we had something in writing we could probably work with. there was another comment earlier regarding small businesses. i think you were attempting to define what small businesses were and also trying to indicate where the 2% would be falling. could you do that, take some time in describing that? >> based on the evidence we all used by the independent arbiters, allowing the bush tax cuts on the top 2% to expire as scheduled would affect 2% to 3% of small businesses.

>> would you describe that? what kind of business? >> using the definition where we all adopted to use, that would include businesses that are neither small nor of moderate income, nor your typical main street hardware store because in that definition, any individual partner in a law firm or in a hechblg fund or private equity fund or lobbyist is treated as an individual small business. yes, if that individual person makes more than $250,000, we are proposing to raise their effective tax rate. we do that because we're comfortable given the experience in the 90 z that they can handle it. that was a great period for job creation and investment and productivity growth. we also know if we don't ask them to bear that larger burden, then somebody else is going to have to do it. we don't think that would be fair or good for economic growth. >> so that population in the small businesses does not even come close to looking like mom

and pop businesses? >> a tiny fraction of the businesses affected by this would meet that definition of a mom and pop store. to meet the definition, they have to employ people and earn after expenses more than $250 a year. i know people don't think that's a lot of money. you have to look at the effective tax rate, a modest increase in the effective tax rate, restore it basically to where it was in the second half of the '90s which was a, frankly small businesses would love to have the economy they had in that period of time. >> so i think that for the purposes of those who are watching this, that the folks understand the distinction between what you're talking about, small business that i guess would be under the -- what is it s corporations?

>> businesses with -- formed s partnerships and pass-through income. >> verses the small businesses we usually go to and trade on the corner or with our family businesses or family restaurants? >> those may be structured that way, too. but the point is, you have to have income after expenses more than that threshold, and most of those 2% of businesses get caught by that, about 50%, maybe slightly higher make more than a million dollars in income after expenses. >> thank you very much. i appreciate that. >> mr. flores? >> thank you, secretary guider in for joining us today. i want to continue the line of discussion that my colleague reid ribl started. the reason i'm here, also, is i came from a perfectly good job in the private sector, and things were happening here that i thought were going to damage the future of my family. my granddaughter's picture is on

the back of my voting card. that reminds me why i'm here and that every decision i make, not only affects next year, the next five years, the next ten years, but affects her when she's 75. so let's put figure 12 up for a minute if we can. now, it's 2065. figure 12. the next one. there we go. i know you think that these projections are no good. if you wanted to, we could go to figure three, either one directionally both say the same thing. do you think the direction is wrong? >> as i said, even if we stabilize it for the next ten years, it starts to grow against, absolutely. >> even what omb says is after 2022 we've got a problem. >> absolutely. >> i'm not saying -- i want to make it clear. i'm in violent agreement with you. that does not mean -- just the fact that it only starts to grow in the second and third decade doesn't mean we should wait until then. i totally agree with you.

>> that's where i'm going. why would a budget be prepared that would kick the can down the road? let's assume it's 2065 and your granddaughter has just been appointed by the new republican president to be secretary of the treasury. how are you going to tell her to finance this? >> i hope for her sake she's not. >> she saw the light. >> i think it's worth reminding everybody that we fought a very tough fight, not just to extend health care to tens of millions of americans but to lock in reforms that on cbo's measure we would take a trillion dollars out of those long-term forecasts in the second decade. then proposing another 370 on top of that. that would grow over time, too. we're making a difference on that, on that process. >> okay. >> if we can find a way to go beyond that, we'd be happy to do that. our problem is that the way

you've laid out to do that in our judgment would shift too much of the burden to a middle income retiree. i'm trying to say it in the most gentle way. >> let's rephrase it then. you've got a clean sheet of paper. let's say you can't blame anything on me because i've only been here 13 months. how would you fix this? these are your projections. >> very good question. what i would do is i'd lock in a sustainable lock income for the next decade and do that as quickly as we can. and then i would take the experience we'll have at that point, and what we're doing to help encourage people to use health care more efficiently. the debate we're having -- chairman ryan deserves enormous credit for this. the debate we're having is what model of how we provide health care to people is best likely to improve how that is used and provided so people use less of the stuff that has less value. that's what we're debating. >> figure three, please.

forget that one for now. let me go to a different question. what percentage of the total tax load should the top 2% pay? what is under the president's definition of fairness? >> in our judgment they should pay more than they pay now. >> okay. how much more? >> by the amount we laid out. >> so what percentage of total tax revenues is that? >> i'm not sure i can do it that way. i'll say it this way. we're proposing to put over a tn-year period of time a top $1.2 trillion dollars -- >> i was able to read that. >> i'll be happy to -- i think the basic division we have, and this is a rich debate we've had. our judgment is a system where we have progressive taxation, we think it's fair to have a modest increase in the effective tax rate for the top 2%.

the reason we say this, if we don't do that, where are we going to find the savings? we have to ask middle class americans to pay more taxes which i don't think you want to support, or you have to, as i said, cut defense, cut medicare -- >> i'll tell you what my proposal would be, let's grow the economy. let's make the federal government small and make the private sector large. even secretary bernanke -- excuse me -- chairman bernanke when he was here just last week said if you have to choose to allocated resources between a big government selection or private sector solution, the private sector is going to get it right. that's the reason i would make the choice every day between a keystone and a solyndra. my time has expired. thank you. >> mr. ryan. >> there we go. thank you, mr. chairman. it's interesting and thank you very much, you're doing a great job, i'm enjoying just watching.

i was going to yield my time to a republican. it's much more entertaining you'll take it? not that republican. it's interesting our friends are saying on the other side simpson-bowles, simpson-bowles. we had a vote in this committee and there were members of this committee who were on simpson-bowles who voted against it. we had a vote in this committee that talked about just the structure, not even necessarily the details of simpson-bowles. a lot of republicans voted against. you could not get one republican on the other side to raise their hand and say, yes, i would be for some tax increase on the wealthiest 2%, 1%, .5 of 1%. you couldn't get one to raise their hand. >> in thousands. in the is that the you got some. >> exactly. that's the holdup. that's where the compromise would come in. we're saying -- >> would you yield, mr. ryan? >> happy to yield. >> house democrats voted against simpson-bowles as well. the speaker of the house opposed

simpson leader. the leader, and put out alternatives in place of it. >> i agree with you, mr. chairman i. i'm not the one sitting here blaming the administration for not adopting simpson-bowles. i voted for the amendment in committee, it was me and heath shuler, we were the only two. i remember exactly. the point is there's accusations made against the administration when there were members of this committee that voted against simpson-bowles and turn around and blame the administration for not adopting simpson-bowles. the reason is we can't get a republican to say they would raise taxes on warren buffett. that's the bottom line. that's what this all comes down to. it's interesting, we have this debate every time we have a major cabinet officials, we get all this nostalgia for ronald reagan. i had to do homework here. tax equity and fiscal responsibility act of 1982, tax increase by ronald reagan. highway revenue act of 1982, tax increase by ronald reagan.

social security administration of 1983, tax increase by ronald reagan. deficit reduction act of 1984, tax increase by ronald reagan. consolidated omnibus budget wreck sill act of 1985, tax increase by ronald reagan. omnibus reconciliation act of 1985, tax increase. super fund amendments, tax increase. cr in '87, tax increase. omnibus budget reconciliation of 1987 tax increase. continuing resolution 1988, tax increase by ronald reagan which we now look back and say that was a fairly responsible thing to do. to think of this man who is -- they put the candles up and burn the incense and have the big picture of ronald reagan. to think of him running in a republican primary today he would be behind ron paul. he'd probably be out of the race right now. we've got to think about this when we're talking about how we're all going to sit down and figure this out.

i think everybody is willing to make tough decisions. i think anybody that's been watching this recognized that the speaker and the president had some semblance of a deal that couldn't get past an ideology. nobody here wants to sit here and say we need to raise taxes. if we can at least ask warren buffett so we can invest in infrastructure, people grants, the things to lead to long-term investments. i have one or two questions very briefly. when you say the tax rate may go up on someone who makes over $250,000. is it for every dollar they make after $250,000 or for the entire thing? >> it's for the margin, above that rate. >> your first $250,000 would be taxed at the current rate. >> yes. >> everything after your first $250,000 would be taxed at the higher rate? >> that's right. called a change in the marginal tax rate. >> change in the marginal tax rate. >> so what does that mean for someone who makes $250,000 a

year? say they make $300 or $350 a year, what would it mean as far as an increase goes? >> it's a very, very small increase. >> hundreds of dollars? thousands of dollars? >> i can't do the math in my head, could be a thousand. but it's modest. you're make telling point well. >> so someone who made $350,000 next year in 2013 or 2014, would pay an additional say $50 to $1,000 depending how much they made more than $250,000, they would pay an extra $500,000. as our country, as we see from all these charts, we're all worried about our kids and grandkids and nieces and nephews. we're all concerned. we all have pictures in our office. no one has the high ground on that. it's how do we fix it? we're saying that asking these folks to maybe pitch in an extra $50 or $1,000 when they make $30 or $400 a year is a small price

to pay. >> mr. mull van any. >> i'd like to yield 15 seconds to my colleague from texas, mr. flores. >> i do want to follow you up on your offer. would you send me a followup of what percent the top 2% would pay? >> absolutely. >> i yield back. >> secretary geithner, always good to see you. i want to ask you about something i don't believe you've been asked about. i want to talk about a global minimum tax, a concept raised just recently for -- i believe the first time was earlier this week when jean sperling, director of the white house economic council said, we need a global minimum tax so that people have the assurance that nobody is escaping doing their fair share as part of a race to the bottom. and then yesterday i believe in milwaukee the president said something similar, but not exactly the same when he said that from now on every multi national company should have to pay a basic minimum tax and

every penny should go toward lowering taxes towards companies that hire in united states of america. this is a concept that is new to me. i'm curious as to whether or not you can shed any light as to what they're talking about, what you're seeking to accomplish, how it would work. just generally what is this global minimum tax we're starting to hear about? >> not as new as you think. when chairman kemp laid out his proposals for corporate tax reform last fall, i think, he proposed a global minimum tax to try to achieve the same objective, to make sure people can't take advantage of tax savings to shift income and investment and avoid paying their fair share. it's a principle many countries have embraced, and i think chairman kemp recognized in that context the challenges in trying to design it set it at a level that is skon sis tent with the other job jekives we have which is to try to make sure american companies are competitive and improving in investments in united states. we're going to outline to the congress in the next couple

weeks a broad framework for comprehensive corporate tax reform. and in that context we'll give you a broader rationale for what we think the right balance is. >> let me tell you what concerns me, because i went to -- there was a reference in one of the publications that i read this week to an american built to last which is a document that the president put out right around the time of the state of the union. one section actually speaks to the same topic and calls upon us to remove tax incentives to locate overseas through an international minimum tax and says the president is proposing to eliminate tax incentives to ship jobs offshore by ensuring companies pay a minimum tax for overseas profits, preventing other companies from attracting american business through unusually low tax rates. how would you propose to do that? >> you're giving us more credit than we der v. chairman kemp proposed a similar strategy. >> right now i'm asking how

would you propose? weeks.ll give you more detail in what you want to do is look at the overall mix in the reduction of the overall corporate tax rate broadening the base and other types of safeguards and reforms. but our common challenge is, and we have the same challenge. this is an american challenge, not a democrat or republican challenge. we have a tax system now which at the margin encourages people to shift investment income to lower tax jurisdictions, and we'd like to have a tax system that improves the incentives for investing in the united states. it's a hard thing to do, particularly if you try to do it in a way that's fiscally responsible. that's why we're about a broad rate lowering, base broadening tax reform with safeguards that prevents people from shifting investment overseas. >> you're not the first member of the administration to say those words in e