care probably by not using as much, which is not all that different than seniors having to cut their pills in two and take less, because the choice is not to have the food and the nutrition that they need. we know that underlying this vision of a vouchered system, which there have been some bells and whistles added to it since mr. ryan initially adopted it, but it's still basically a voucher system that behind it is just the general republican disdain for the retirement security programs to go back to the era of fdr instead of the vision ever lyndon johnson who got this right in 1965, we have governor perry who when he's not having an oops moment refers to social security as a ponzi system. that's not the kind of commitment to retirement security that we need. the better approach is one that calls on those at the top of the economic ladder to accept your

responsibility for the cost of financing retirement security so that we don't continue to have tax breaks for billionaires and multi-national corporations that are not paying their fair share, but we have the revenues at the same time we try to deal with the cost issues as we did through the affordable care act that we have the revenues for a balanced approach. it is not visionary to blame seniors, to blame retirees, for the problems that we have in medicare. it is essential that we seek a balanced approach and a person who really understands that well is the gentlewoman from florida, and i would yield 2.5 minutes to her to discuss this matter further. >> thank you, mr. doggett and thank you for your eloquence. over the past several months in hearing after hearing in this committee, just as we heard last year we've heard one recurring theme from our expert witnesses that have come before us. chairman bernanke said it. director al mon dorff said it,

acting director zion's said it that the draconian reckless cuts by the majority will create an enormous head wind for our economy, yet here we are again today. this room looks the same. this budget reads the same and these arguments sound the same. i feel like it's ground hog day all over again, but bill murray is nowhere in sight and this is not comedy. in all seriousness, the harmful spending cuts incorporateded into this budget proposal go further than simply damaging a fragile recovery. these cuts pull the rug out from under our most sheer inable. senior, children and those with serious disabilities. the way to deal with rising health care costs is to give seen areas voucher to purchase private insurance and tell them thousand figure out how to keep their own health care costs down. essentially telling them they're on their own. today we will be offeri inin ii

mmdments that preserve this and on the backs of our seniors and will protect the important benefits included in the afordable care act by closing the prescription drug doughnut hole and next week democrats will unveil a plan as part of our budget alternative building on the affordable care act to allow for further medicare savings as the affordable care act already does. democrats believe we cannot solve our budget challenges simply by shifting health costs and risks on to people least able to bear them. our seniors, this abilitied individuals and poor families. in a few hours i plan to offer an amendment noould even have to offer. my amendment prevent shameless and reckless cuts to seniors in nursing homes. representing a large number of seniors in south florida, this budget would be devastating for seniors and older americans. this republican path to poverty passes like a tornado through america's nursing homes where millions of america's seniors

receive long term and end of life care. 60% are on medicaid. cuts to medicaid would have a dramatically neg tivg impact on seniors. the federal government made a compliment to each and every one of us when we got older we would not need to live in poverty nor force or kplirn to care for us. for keck bads decade we looked e and medicaid. under this plan, republicans are trying to back out of our promise to seniors. we cannot go back to the promise to our greatest generation in respect is a way forward. we will discuss today, we can and we must produce a fiscally responsible budget that doesn't place an undue burden on our t vulnerable. with that i yield to someone else who would know quitn thbi care and health care reform, my colleague from wisconsin gwen moore. >> and thank you so much, representative wasserman schultz. this is a very, very frightening

day for me, i must say, and while i respect chairman ryan so much for his sincerity about reducing long-term debt, i fear that, that his proposal, where particularly as it relates to health care, seeks to put the debt on the backs of seniors. this document here is an all-right attack on the entitlement. we have heard our chairman describe the need to end our cradle to grave welfare system and to characterize this entitlement to medicare as a welfare program is the first step in that. what this proposal would do would be to end the entitlement, make entitlement a dirty word, and end a core set of benefits for our seniors and for people

with disabilities. and would provide a voucher that would, would continue to lose its value over time. so that wealthier and healthier seniors would be protected, but that those who were low-income seniors would find themselves at risk of having very little coverage. it would protect the profit in the health care industry. it would protect stockholders, and it would heap more shift -- shift more and more and more of the costs on to seniors. this is a choice that this budget and the house republicans have made. to really, santorum said is so well last night. to care government out by its roots and throw it out, and have government have nothing to do with protecting in this case seniors. and i yield back. >> thank you.

>> thank you, ranking member and i have to say at the outset that the chairman of the committee said something not too long ago that i think seriously undermines his credibility in this entire document when he said that if he had a dollar for every political consultant that advised him not to introduce it he would pay off the deficit. i didn't realize there were that many political consultants in the world. if there were, that's a big problem we need to address. million dollars. might get closer. mr. chairman, our budget, any budget is a statement 6 our nation's values and priorities and the republican budget once again fails to meet the american standard of balance, fairness and shared responsibility. next week democrats will unveil a balanced deficit reduction plan where everyone pays their fair share and responsibility doesn't just fall on those who can least afford it. today we will offer amendments to reduce the deficits by returning to clinton era tax rates for incomes over $1

million, and by eliminating taxpayers subsidies for big oil companies making record profits. returning fairness and shared responsibility as defining values of our budget. the democratic proposals will ensure that taxes are not raised on any person who make morse than $200,000. they will ensure that middle income families do not pay a higher effective tax rate than millionaires and billionaires. our proposals seek to protect medicare and medicaid and the rest of our social safety net from the harmful cuts republicans proposed to pay for increased tax breaks for the well off and well connected. the republican budget relies on the mythology that tax kits for the wealthiest create jobs and promote economic growth. they would offer an average tax cust at least $150,000 a year for the wealthiest few. this is faith-based economics. republicans blindly believing it works, even though there is no proof, no evidence to back that up.

and yet republicans rely on this mythology to justify and inherent and balance and unfairness in these budget priorities, choosing to corner more money with the wealthy while seniors, children and the poor are played to shoulder an ever-increasing load. republicans also rely on mystery money. a magic source of revenue whose details they refuse to share that is supposedly going to make their budget revenue neutral. for all the detail they've provided in this budget, where they'll get their revenue, might as well have written their budget on a cocktail napkin. but i saved them the trouble. i did it for them. here's their plan. tax cuts for the rich, shift costs to the seniors and pray for incredible growth. i would ask it be included in the record but it would provide too much detail for the document. the president's budget and the democrat uk approach asked the wealth dwroift pay they're fair share. making tough cuts to programs we

can't afford and strengthen medicare building on ate fordable care acts policies. democrats have long been willing to make the difficult choices that a balance approached demands. our nation's values are not reflectsed in a budget that places the heaviest burden on the backs of working families but one that invests in fairness and shared responsibility. today we have a choice. to defeat this reckless republican budget and to adopt proposals that better reflect our nation's values of fairness and shared responsibility and make the investments necessary to make sure that we have a vibrant and dynamic and prosperous nation into the future. i yield back. >> thank you, mr. yarmouth, and i think you made our closing argument very well, framed the choices and made it clear that question is not whether we develop a plan to reduce the deficit subpoena the question is whether we do it in a way that's balanced and calls for shared responsibility. with that, mr. chairman, we conclude our remarks.

>> all right. thank you. well, we will now proceed with the consideration of the fiscal year current 2013 and current resolution on the budget. the staff will give an overview of the budget. this is what we call the staff walk-through portion. i want to rorgz or staff director austin smythe. our policy director jonathan berks, our budget analyst jim herz, joining us a as well and chief counsel for the purpose of sdplarning the documents considered today. the staff is available to provide factual answers to confess members may have but are not here to enter into debate. that's what the members are here for. so let me turn it over to staff. >> we can provide, go through the general outlines of the budget resolution. i think from talking to the minority staff, the thought was plab just to go to questions. we would be happy to review the

overall mark. >> in interests of time -- turn it over to questions. >> thank you, mr. chairman. and as, my colleagues, this is our opportunity to ask specific questions relates to the budget, and i'm going to start off, mr. chairman, with some and i think everyone should understand that we received a copy of this budget. 24 hours. 24 hours ago. and i know that that procedure was similar to the procedure before. i hope going forward we can change that procedure. i think every member of this committee would recognize that whether you're republican or democrat, that when you're talking about the budget of the united states of america, everyone should have more than 24 hours before they're convened in a session not only to debate it but to vote. to vote on it. anyway, i'm just, again, letting members who may not realize that we've only had 24 hours to look at this, that as a result of

that, we have obviously some questions. about what is contained in this document. so i'm going to start with some of the revenue items. in your resolution revenues are more than $200 billion below the current policy baseline. wonderal what policies you're assuming that brings about that result? >> the current policy baseline that we developed assumes the extension of '01, '03 tax relief. assumes an amt patch, and assumes extension of current state tax law. that leads to about a $4.4 trillion difference in revenues from the current law baseline. and that's what our revenue line matches. there may be some differences with respect to extension of tax relief with regard to outlays, but overall, our net revenue number relative to the -- to the

current law baseline is a $4.4 trillion reduction relative to the current law baseline, and there's no change relative to how we construct a current policy baseline. we provide the additional information that we posted on our website that shows how we crosswalked the current policy baseline. >> all right. mr. chairman, with your agreement, i freed need to purss with the understanding if the information on the website doesn't result is a satisfactory answer, to what is really a technical question that we would be provided additional -- >> there's another potential, john points out to me -- sometimes in the past the current policy baseline is dealt with the upper income level, differently. we assumed as does o & b, the permanent extension of all tax relief but will go ahead and follow-up with your staff and see if in terms of, if they have questions on the exact assumption, but we assume permanent extension of all 2001,

2003 and again on amt, the patch of the state tax relief. >> let me ask you with respect to the eitc and the refundable portions both eitc and the child tax credit, do you assume the extension of the 2001 portions of that indefinitely? >> i believe on the child cred is, yes. on eitc there are cases with respect to some of the refundable credits where the recovery act provided some additional expansions on those. we do not assume the extension ever those. just the original '01 and '03 laws. >> just to be clear, with respect to the enhancements in the child tax credit, eitc is part of the recovery act. you do not assume those? >> that's correct. >> with respect to the estate tax. do you assume repeal or do you assume an extension of the

estate tax as it was in the december 2010 -- legislation? >> it's in the 2010 legislation. that's what we assumed. >> now, with respect to the economic assumptions you use. are those -- did those track? are they consistent with cbos economic assumption? >> yeah. we used the mark -- well, we used cbo's march baseline. that baseline was constructed using their january economic assumptions. that's a what we used in our budget resolution for the chairman's mark. >> let me ask you, with respect to your revenue projections, do you use their approach to scoring, or do you use, you know, so-called dynamic scoring as part of your budget? >> we use the revenue numbers that, from the congressional budget office, joint tax, as you know, is involved in terms ever actually doing those, but we use all the numbers and our estimates are based on joint tax

committee or the congressional budget office. >> okay. now, with respect to your, your tax reform plan. the plan that would drop the top tax rate from 35% where it is today, to 25%. do you have any information, any analyses, from joint tax showing that you can do that without increasing the relative burden on middle income taxpayers, and do it in a way without making the tax code more regressive? >> the -- chairman may want to respond to this more in terms of the -- the policy assumptions in the mark and so forth. we've not gotten the specific analysis from the joint tax committee. the overall tax reform plan and the chairman's mark provides more details on the specifics assumed there, but we have not developed or asked for a specific analysis on the distribution impact, because that would depend on how various

deductions and credits and so forth were handled. >> if want me to add ton to what he just said. we received a letter from the ways and means committee and posted that on the website i believe as well. asking for the inclusion ever this policy in the budget, which is what we've done. to my knowledge, they have not run the distribution table boss they have not determined yet different break poins and expenditures, would you have to have those details to get those it kind of distribution returns. that's why we don't have them. >> well i assume, correct me if i'm wrong, as a part of your extension of current policy, that as part of the tax reform effort is well, you adhered to the position you have in the past, which is that the capital gains rate would remain at 15%. is that correct? >> i don't believe the ways and means letter specified what that rate would be. they put the income brackets, and i do not believe the ways and means specified that.

our -- the baseline we're operating off of where the net revenue change has no impact, assumes current capital gains and current dividend rates. >> but let me ask you this. as part of the, the tax reform proposal does it assume that the capital gains rate will remain at 15%? >> there could be a lot of issues that have to be revolved in terms of what happens in tax reform. the ways and mean the committee provided us with top rate of 25% on individual and top on, of 25% on corporate. there will be a whole series of issues resolved in terms ever details. they spelled out a lot of those particularly with respect to international tax issues in their, in the letter they sent to us and attachments they sent to us. again, but the budget resolution, what it does, make as series of assumptions but ultimately what guides what congress can do or binds what the ways and means committee can do is what that revenue level is.

so the overall assumption, do tax reform that holds revenues at -- policy level, which is about -- keeps about a 4.4 trillion revenue increase as schedule from current law from occurring. as to what individual tax provisions are going to be the assumptions are not that level of detail. >> i mean, the reason i ask mr. chairman, many of us have spent a lot of time looking at tax reform proposals, and the reason i asked you if you had seen a joint tax score that shows that you can reduce the top tax rate to 25% without increasing the burden on middle income americans, while holding revenues constant as you say you do, is because i've seen a lot of analysis that show you just can't. we'll talk a little about that later. let me ask you with respect to medicare function 570. i don't know if this is a

question for members of the staff or for the chairman. the proposal you have there for whether you call it voucher or premium support has a cap on the value of the support, the voucher, of .5% gdp. and so my question is, is that the enforcement mechanism? i'm assuming if the proposal is to move to a system where every senior on medicare has the equivalent of a voucher has premium support, that that is enforced by reducing the value of the voucher. >> the policy in the competiti bidding system where there would be a series of plans that would be offered as well as the traditional fee for service

opti option. we think through competition you would see lower bids coming in as a result of that process, so the way the plan, the assumption of the policy is, there would be a bidding process and you would take i think it's the lowest or second lowest bid is part of that process, as a backstop, cvo couldn't provide an estimate for us on ha.in on that but they could not provide an estima estimate. as a back stop if the bids did not come in lower, then the premium support payment would be held to gdp plus .5%. which is the same level as what the president's budget proposes for the ipap to achieve. >> i understand that and -- we'll debate this later. thank you for your answer. it reflect as fundamental difference in how we approach the risks and costs with respect to the different approaches.

with respect to -- in the mandatory -- excuse me. let me see here. if you could just -- this is the cbo paper that was delivered to the committee on the republican budget plan. it's based on assumptions provided by the chairman and the staff and it says on page 3 that medicare spending for new beneficiaries in 2023 would be set in amount that works out to 7,500 for each new 65-year-old beneficiary going into the new support program. and then in a footnote on page 8, cbo notes that this amount is $400 less in constant dollars than projected medicare spending for a 65-year-old in 2023, under current law, and $700 less than projected spending under scenario that makes more

realistic assumptions about what will happen to medicare physician payments. could you explain how you arrived at the amount that you gave to cbo? >> i may ask to get our medicare analyst here. let me make a start and see if -- on that. as i mention with respect to the system is set up to -- policy is based on competitive bidding system. it would start 10 years out, we believe that under that competitive bidding you would see lower levels than what would happen under current law from part d experience, john reminds me coming in 40% lower. so what we did was looked at that. we had no way of cbo told us they couldn't estimate to us what would happen just as the case with respect to the growth rates going forward. we looked at some other analysis done by the aei and others and in terms of what has happened in

competitive existing models and developed an estimate of 400 to $500 about what you could initially see and that was the basis for the fixed amount that would start in 2022 -- pardon me, 2023 for making the projections going forward. >> so i understand it, based on these outside analyses, you assume that you would achieve a $400 savings per beneficiary just by launching this reform effort? i'm trying to understand the basis for the number. >> sure. >> we base that on average program spending and because cbo wasn't able to give us an estimate of the competitive bidding process we look to reports and historical evidence on the reduction, competitive bidding would have on the average amount. so the part d program came in 40% under budget, we used that,

we also looked at studies that said we would save around 6%. so in the starting year we weren't able to get the bid from cbo so adjusted the payment. >> of course that savings, i assume, is then factored into all of the other projections in the out years with respect to the savings in this budget. in other words, the $400 savings built into the base year -- >> yeah. >> compounded over time. >> correct. yes. >> if you recall, the chief actuary of cms was testifying a few weeks ago as to the parents of this approach and how it would result in lower spending and more savings. so that combined with facts in evidence is what leads us to conclude given the cbo doesn't have the tool, it would lead off with savings. we believe it would be actually exceeding what we have here, but

to be conservative we did this and then obviously with the growth gdp plus.spif that is the backstop. >> right. i haven't had a chance to do the math. i don't know if you have. but if you take that $400 savings per beneficiary times the number of beneficiaries, what total reduction in medicare spending does that assume compared to what it would otherwise be? >> so you mean in the starting year? >> yes. >> well, once we move to the 2023, the only thing we have from gb, so percent of gdp. that's not something they can even provide us. they are only able to provide us medicare spending as a total percent of gdp. >> right. maybe it's -- in other words, i'm trying to understand the logic here. if i was to try and figure out what you presume the savings to

be in the whole medicare program as a result of moving here, i assume it's $400 times the medicare beneficiaries in the system or those transitioning at that time. >> it doesn't work out that way, though, because in the starting year of the program because we're grandfathering the older population the only people are 65 years old so you can't do a calculation that would account for the total medicare beneficiaries. >> right. the new people transitioning in, whatever that is, how ever would be in that times $400. >> we don'ts know the exact number, no. >> if i could now turn to some of the ten-year numbers. if you could identify the policy assumptions behind the 122 billion 10-year net reduction in medicare mandatory spending in

your budget and the dollar figures associated with those assumptions. >> we have -- there are a couple of assumptions. the first is, we have medical liability reform which produces savings in that function, there's another assumption of means testing, premiums for medicare. the same proposal is in the president's budget is also included. as you know, a budget resolution, the only thing that's binding on the committees are the actual numbers, the allocations or aggregates and so forth. but we go through the process of developing assumptions, those are two of the assumptions in terms of developing the medicare number. >> if i could go through some specifics because last year we had some of these specifics. for example, last year you indicated that as part of your proposal, that you