baseline. you need economic growth. >> the country needs economic growth. >> and your argument is that tax law changes and reducing the tax rate will yield economic growth. what kind of economic growth, if your budget was pushed all the way through congress, would you anticipate this yield being? >> so we use the cbo baseline, our budget is based on the cbo baseline. and this is the current law baseline. the official cbo baseline assumes in that baseline a $4.4 trillion tax increase starts in january. meaning all the tax cuts go away, and a massive tax increase happens in january. and cbo thinks that will slow down the economy, down to about 1.1% growth. we have to use that measurement of growth in measuring our budget. even though we repealed that tax increase. but we still live by that. our budget numbers are all official cbo baseline. but we think it's worth going through the exercise of since we're not putting the policies in this budget that cbo says will hurt the economy, what would the budget look like if we actually reflected a better

economy because we don't have those tax increases in our budget? and so we consulted experts from columbia, from harvard, from all around as to what is a good rule of thumb as to what kind of growth would be achieved if we had fundamental tax reform, if we had deficit and debt reduction, which takes pressure off interest rates, and so we ran three scenarios. we called them alternative growth scenario, of different versions of between .5 to 1% additional growth a year. what would the budget look like if that happened? it's more or less a thought exercise. and what that shows you is you would dramatically balance the budget a lot faster than what the conventional cbo baseline says. but our budget is measured using the cbo baseline, which, as i said, assumes slow growth because of tax increases, and then it assumes slower growth in the out years because of an explosion of debt. well, we pay the debt off, we don't have a tax increases, but nevertheless, we use the measurement that assumes those things, take those assumptions out and what we're trying to show is, you'll get faster economic growth.

and with faster economic growth, people going from unemployment to actually collecting a paycheck and paying taxes, you get more revenues into the government, you can balance the budget faster. so the point i'm trying to make is, we need a combination of economic growth policies and spending cuts and entitlement reforms to get debt down to get this country back on track. we can get to balance, we can pay off the debt a lot faster if we grow the economy and get our spending and debt under control. what. >> do you anticipate is that range of that faster growth? >> well, it's not my anticipation. it's just there are lots of economists who think a rule of thumb is somewhere between.5 and 1% of additional growth. the has set/hour back study, mancue has done a lot of work on this stuff. we cite a change that show .5 and 1% of growth can be achieved if congress enacts the right kind of policies. >> to romney advisers. >> which ones? >> let's go to the audience.

we have mikes anywhere or just standing up? okay. we have some in the front, please. that's fine. >> okay, sure. >> hi. justin schaeffer with republican main street. good morning, congressman. >> morning. >> i was watching the house floor yesterday, and you heard the buzz words, end medicare as we know it, vice versa. and how do we educate the public that the real drivers of the debt are not foreign aid, waste, but the big three entitlements? how do we extend that dialogue? >> if you watch, i have this chart that cbo puts out that shows how three programs, medicare, medicaid and social security eventually just consume 100% of revenues. you throw interest on top, which you have to pay interest, they consume 100% of revenues by 2025. and it's not an insidious plan by one party over the other. it's just demographics and health inflation. it's both parties made a lot of promises to people that the government can't keep. a gao says it's about $100

trillion worth of promises being made that the government is shy of covering. and so the sooner we acknowledge that, the better off we're all going to be. the more we can convert these empty promises into, you know, made promises instead of broken promises, that's what we're proposing. the two words you hear are balance and end medicare as we know it. well, politicfact.org said the end medicare as you know it charge was the lie of the year of 2000. why is that? because what we're saying is, preserve the current medicare system as it's known today for current seniors and people nearing retirement. and then for people who are younger, 54 and below, convert to a system of premium support, much like what the ba row thomas and barow fisk commission recommended. ron and i ng alice rivlin and pete domenici have been saying, a list of guaranteed coverage options, guaranteed, you can't be denied. and there is a competitive bidding system that makes sure that your benefit keeps up with the price of the insurance.

and then -- and you also have the choice of traditional medicare, fee for service alongside that. and then medicare subsidizes your premium based on who you are. if you're a low income person, 100% subsidy, total out of pocket coverage. sicker, more subsidy. a wealthy person gets lower subsidy, because we think we should means test the program doing it this way, using choice and competition, having premium support with competitive bidding guarantees affordability and solvency to the medicare program. and allows us to cash flow the current commitment to current seniors. we think it's smart, we think it's important to do this way. and it's gradual so you don't end up with a debt crisis where you have severe disruptions in people's lives, because medicare is the biggest driver of our debt. if you solve the medicare puzzle, meaning save and strengthen the program, you dramatically improve your chances of averting a debt crisis. now on balance. people say you need a balanced approach. here's the problem. spending is the problem. our government spending as a percentage of our economy is at about 24% right now.

it's historically been at 20. it's going to 40% and then goes to 80% over the course of the century. by the time my kids are my age, the size of our government goes from 20 to 40% of the economy. our revenues, if they even try to keep up with that, will crash this economy. so the spending is the problem. and if we simply try to chase this higher spending line with higher revenues, you'll end up shutting down the american dream, the american economy, and is you will consign the next generation to a clearly infearer standard of living. this is why we say we've got to keep our mind on economic growth. and if we just keep raising tax rates and keep narrowing the base, we're going to hurt job creators, hurt small businesses and we're going to hurt the economy, which will actually suffer revenues. so let's focus on maximizing economic growth, getting more revenues in the federal government. an economic competitiveness and let's have a tax code that's simpler and fair. we think that's a smarter way to go, because the best way to get out of this mess we are in is

economic growth, spending cuts and entitlement reforms. that to me is balanced. because if we define balance as just keep rates and don't deal with the drivers of our debt these entitlements will never balance the budget, we'll never get the debt under control, and we'll ruin the economy in the meantime. >> another one. somewhere up front. yep. >> good morning. my name is i'm with the coalition on human needs. chairman ryan, your budget adds an additional $265,000 annually in tax cuts for the very wealthiest, while at the same time, slashing domestic human needs programs and entitlements, like tanf. how is this not a huge redistribution of wealth upwards? quite a bit. i heard $150,000, 350,000, 260,

i've not heard that one before. what i'm trying to say is clear out the tax shelters which are uniquely and disproportionately used by higher income tax payers so more income is subject to taxation so we can lower rates for economic growth and job creation. i don't see the tax code as a tool that ought to be used of social engineering and picking winners and losers in washington based on what special interest has the most clout. i see the tax code as being a system that should be progressive. we have a two-tier system, we're talking about 10 and 25%, but maximizing economic growth. getting businesses primed to hire people. the best welfare program is a job at the end of the day. now, with respect to welfare, tan i have grows continually under this budget, but tanf used to be called afdc, cash welfare reformed in 1996. the kinds recriticisms you heard then are precisely what we're hearing now. and we believe the welfare

reform in 1996 was successful. it helped reduce poverty and help people get back oppose the lives of self-sufficiency. our approach to these issues is get back to a life of upper mobility and opportunity. is to have a safety net there for people who truly cannot help themselves. and is there for people down on their luck to help them get back on their feet. this is why we proposed job training programs to scholarships so people can easily acquire the skills they need to get better careers. and the problem is, all the other welfare programs that have been around were not reformed in that way in 1996. so we're proposing another round of welfare reform with the idea toward replicating those successful reforms that were done in '96. let states customize benefits to the unique needs of their populations. we did a great job in wisconsin. led by tommy thompson to get this going. we think we should reform the other welfare programs along the same way, because the approach i would argue, there are two ways of looking at this.

at the safety net. number one, is our objective to treat the systems of poverty, to make it easier to tolerate and cope with and live with, or is our objective to look at the root causes of poverty to try and erat indicated it? and what we're trying to do is end a cycle of poverty by going at the root causes of poverty. and what we have learned is throwing more money at these programs without reforming them doesn't actually succeed to getting people on the lives of upward mobility and independence. so we want to reform these programs so that people actually get on their feet, on to self-sufficiency, and you can't do that if you don't have a growing economy there offering jobs and opportunities for them to enter into. >> we've got time tore just one more. one right here. >> chairman ryan, good morning. david french. with ens resources. how does your budget treat the

issue of infrastructure in america and specifically what do you perceive to be the end game for the reauthorization this week? >> that's a good question. well, in about three hours, we'll have a vote -- three or four hours, on a partial extension. i want to get to a longer-term bill. infrastructure bill. the problem we have is the law. the actual highway trust fund goes insolvent in 2013. so our budget reflects the law. i wanted to make sure our budget reflected a new consensus on how to move forward with the law, but that hasn't been reached yet. so our budget reflects the law, which is trust fund exhaustion in 2013. nobody wants to see that happen. nobody wants to see this massive drop-off in funds. so we did two things in addition to just reflecting the law. we have a new form of revenue stream coming into the highway trust fund from oil and gas exploration, revenues from that. now, that stream of revenues takes a while to kick in. once it kicks in, i think it's going to be far more than the

estimates show. and will show a new stream of revenues coming into the highway trust fund. the other thing we did, and john and mitogeke er. we created a reserve fund in the budget, which allows us to change the aggregates, once a bipartisan infrastructure bill is agreed to. so that our budget can adjust to that new agreement. the key is this. the way the highway bill was writtenpat, it based its obligation limits on projections of gas tax revenues. well, gas tax revenues came in under those projections, and if you have a trust fund, a trust fund works like this. revenues come in, and you can spend up to those revenues. well, that's how we think trust funds should work. so what ended up happening was, over the last number of years, about $35 billion was rated out of the general fund, bonds, treasury borrowing, to go into the highway trust fund. we can't keep doing that. if you want to have a real trust fund, you ought to operate it like a real trust fund. what we're saying is, if we want to not have this cliff of

dropping obligations of contract authority, you've got to come up with offsets to pay for smoothing that line out. and that's what the reserve fund is there for, to accommodate a compromise that comes with a pay for to keep the highway trust fund whole, insolvent, and not have a cliff of obligation limits, which could really just disrupt our infrastructure. >> i'm told i'm wrong, that there is time for just one more. let's go this way. >> hi. sorry. congressman ryan, jeff rossum, think progress. going off the woman's question up here, citizens for tax justice ran the numbers on your income tax cuts. and even accounting for removing all the deductions, the health care exclusion for employers and removing the alternative minimum tax, your marginal rate reduction still provide millionaires with anracut of ab

according to their estimations. on top of that, the -- it was the cbpp. they concluded that 62% of your spending cuts come from, you know, support programs for the poor. medicaid, food stamps, et cetera. so you're not only balancing the budget on the backs of the poor, you are cutting programs for the poor to pay for tax cuts for the rich so i'm wondering >> i'm familiar with those think tanks and it wouldn't be a surprise to you i've always taken issue with their aspect, with their analysis. i will put it to you this way. when we think of millionaires in the tax code, we often think of aaron rodgers and prince fielder, you know, or a movie star. i'll go back to the issue. it's mostly small businesses, successful small businesses. 65% of our net new jobs in america don't come from the big corporations in america. they come from successful small businesses. half of the people in this

country work for these successful small businesses. where i come from, it's the business out in the industrial park in the side of your town that has 50 to 250 employees. the job shops, the manufacturers. those are the people who are struggling right now to create jobs. and their tax rate is subject to go up to as high as 44.8% in january. when most of our national competitors, china, india, engla england, ireland, canada, are lowering their tax rates on their businesses. so we're looking at raising our tax rate on these businesses to as high as 45%, when the international average is about 25%. and i would also argue, it's not a fair system. because no two businesses are the same with respect to their taxes, even if it they have the same amount of income. ge, a corporation, which is different than a sub s, had a lot of tax liability -- had a lot of income, but no tax liability. legally. but u.p.s., another really big,

successful business in this country, i think paid a 34% effective tax rate, while their competitor, a german company, paid 24%. we're saying let's equalize it. let's make sure that everybody pays the same tax rate based upon the amount of money and income they make, whether they're a business or an individual. we think that's fair, we think that's simple, but better for jobs. with respect to these programs you mentioned, they're growing at unsustainable rates. food stamps are quadrupled over the last ten years, and that's in excess of accounting for the recession. we have to remember that if we just keep these programs on this unsustainable path, then they will crash. then we'll have a debt crisis. then we will not be able to actually service these people, because under a debt crisis, you're cutting indiscriminately across the board in a very, very ugly way, because you have to cut current people on these programs. that's what they're doing in greece. that's the disruption that's occurring in people's lives. so what we're saying is, let's get ahead of this problem, let's

preempt a debt crisis and let's get these programs working better so that they're growing in a more sustainable rate, but more importantly, let's not buy into this notion that ideas -- the best ones come from bureaucracies in washington. you know, our states have a better idea in how to help people. you know, subsidiary -- the idea that government close to the government governs best. i really believe we should give more power and authority to the state to customize benefits. i live inways, in janesville, it's different than new york city. why should they have the same one-size-fits-all rules that tells people in my state how to fix these programs and help people like they are in new york city, because they're different problems? so what we're trying to say is, let's get the -- let's replicate those successes of the 1996 welfare reform, let's empower local communities to actually help people. and at the end of the day, if we keep growing government and spending and borrowing in debt so much, you end up crowding out

those social intermediary institutions. you crowd out civil society. you displace those key common bonds of communities working for the common good, like churches and charities and civic organizations. if you're taxing people so much, if your debt is getting so high, you're going to make it much more harder for civil society to operate and help people who need it. and that's why those are the principles we use in applying this. and if we think we can just simply keep taxing people much higher rates, taxing job creators at much meier rates, much higher rates than our foreign competitors and keep spending like we are, we are going to wind up with a debt pe hurt the first and worst in a debt crisis are people who need government the most. the poor, the elderly, the sick. and we want to prevent that from happening. >> thanks for joining us. >> thank you. appreciate it.

house budget committee chairman ryan said yesterday he really misspoke when he said military officials were not honest about the budget. he said on sunday morning news shoes that he was clumsy in how he made his point and he called the head of the joint chiefs to apologize. the top democrat, chris van hollen, also spoke at the national journal event. he said a big deficit deal with tax code reform would probably not be possible before the next president takes office. his comments are about 45 minutes. thank you. our next guest is the ranking member of the house budget committee, representative chris van hollen. representative van hollen, just a reminder, will offer a few brief remarks and then sit down for an interview and then take questions from the audience. representative van hollen was elected to congress in 2002, rising to become one of the youngest members of the

democratic leadership in 2008. in addition to representing the eighth district of maryland and serving in house leadership, representative van hollen was elected by his colleagues in 2010 to serve as the top democrat on the house budget committee. in 2011, he was also appointed to the 12-member bipartisan committee on deficit reduction. i'm pleased to welcome representative van hollen. >> thank you very much. i thank everybody for joining us today. and i want to thank the national journal for bringing us all together. you pickedel cexactly the right time to be talking about this issue, since we debated the budgets on the floor yesterday, and, of course, we have the votes today. i also want to take a moment to thank paul ryan, because as chairman of the budget committee, i think he's conducted the proceedings in the committee and on the floor with civility and with professionalism. so i'm grateful to him for that,

because we do have very deep differences in approach. but i think it's important that we make those differences known in a civil way. and i think on our committee, we have accomplished that objective. and let me begin by talking about some of the reasons we have deep differences over the republican budget and then talk a little bit about the democratic alternative. we're here at a very important time in our country. i think we all know that. because of the extraordinary actions that were taken over the last four years, as well as the tenacity of the american people and the tenacity of small businesses, we've gone from an economy that was in total collapse to onehat is slowly recovering. still fragile, but headed in the right direction. and we certainly don't want to do anything now to mess that up.

and in our view, we certainly don't want to return to some of the economic t us into the mess to begin with. and we are concerned that the republican budget does that, that it di that it disrupts the fragile recovery, and undercuts investments that are going to be important for the long-term economic strength of the united states of america. just to give you a couple of examples, in the area of transportation, which is an area we're debating on the hill right now in addition to the budget, the republican budget proposes to cut transportation funding by 46%. next year. that's what's in their budget right now. we have 17% unemployment in the construction industry. we have lots of roads and

bridges and transitways that need to be modernized. it seems to be a no-brainer that we would make those important investments. not just now, but also have a long-term transportation plan. that kind of plan is proposed in the president's budget. it's proposed in the democratic budget. but it's not part of the republican budget. and that's just one example of the kind of investments that we should be making. and as a result of some of the cuts that the republican budget proposes in the area of transportation and other things in the near-term, many independent analysts, including some you're going to hear from on your next panel, have estimated that the republican proposal will lose up to 2 million jobs over the next two years. if you combine the kind of cuts and investments i'm talking about, along with the elimination of some of the enhanced earned income tax credit and child tax credit,

that would be less spending power from many people who are the lower end of the income scale, who spend more of the dollars they have, and that spending is important during a time of economic recovery. they would cut a lot of that. and that's one of the reasons you find that these analysts have made those projections. so rather than taking measures that could slow down and jeopardize this fragile recovery, we believe we need to focus on jobs and getting the economy moving as we put into place a long-term deficit plan. and they're clearly resslinal b estimates that one-third -- one-third of the current deficit, the deficit for fiscal year 2012, is tu due to the fact that the economy is at underemployment. if we're at full employment, the deficit would be a full

one-third lower than it is today. so that's why it's so important to focus on that component. now, for our long-term growth, and economic soundness, we need to put in place today a credible plan to reduce the deficits and the debt. and the question is not whether we need to do that. there's agreement on that. the question is how. the question is what choices we make in that process. and there are very big differences. if you look at the approach taken by every bipartisan group that has explored this challenge, you will find they took a balanced approach. meaning they recognized that we need to reduce our deficit through a combination of cuts and spending. but also through revenue. and the democratic alternative, which i'll just talk about briefly again in a minute, does

that. it takes that balanced approach. whereas the republican plan doesn't. there are no new revenues in the republican plan. now, maybe that's not surprising. given the fact that the overwhelming majority, it's 98%, of house republicans have signed this pledge saying that they will not close one single tax loophole. won't eliminate a single tax subsidy for the purpose of deficit reduction. you'll hear a lot of talk from them about tax reform. the difference is, the bipartisan groups that looked at tax reform said let's do tax reform in a way that can broaden the base and reduce the rates. but let's use a significant amount of revenue generated in the process to help reduce the deficit. whereas the republican position is not one penny from eliminating a tax preference can go to deficit reduction. and is when you take that

position, when you take one side of the budget equation off the table, it means you've got to deal with the deficit at the expense of everyone and everything else. and that's what the republican budget does. that's why it ends up slashing medicaid by over $800 billion. so that by the year 2022, that's cut by a third. and medicaid, just to remind everybody, two-thirds of that money goes to help support nursing homes and disabled individuals. that's why the republican approach cuts the medicare guarantee. and we can have a discussion about exactly how that works, but the reality is that seniors on medicare would be getting the equivalent of a voucher, and the -- that voucher would decline in value relative to the

rising costs of health care. so their purchasing power declines significantly, and all the risks of rising health care costs is put on to seniors under that plan. they also dramatically cut our investments in higher education, they cut deeply into the food and nutrition programs. a whole set of cuts that we believe will make it harder for us to accomplish our goal for the united states of america to accomplish the goal of outeducating and outcompeting and outbuilding the rest of the world, which we have to do in this very competitive international economy. that's why we take a balanced approach. we make some tough cuts. we adopt all of the cuts that were made as part of the budget control act. we appropriate additional cuts in the area of mandatory spending. but we also propose additional

revenue. we propose additional revenue from having the tax rates on the very high income earners go back to where they were during the clinton administration. we have revenue from closing a lot of the corporate tax preferences. and all told, like the president's budget, we have about $1.5 trillion in revenue as part of our budget. in fact, our budget adopts pretty much the framework of the president's approach. not every detail, not every recommendation. but the overall framework the president took in his budget. and because we have a revenue component, it means we don't have to decimate important investments in our future. investments in education. investments in infrastructure, transportation. investments in scientific research. some of the things