of be a, you know, a setup. it must not actually be true there is a huge amount of skepticism. but there are actually things. i don't want to call them free lunches, but certain things that actually don't hurt, and actually can kind of benefit everyone. brad delong from berkeley and larry summers who everyone knows released a paper recently looking at stimulus and found that actually when you do job creation in the short-term through fiscal stimulus, you're actually increasing long-run economic growth because there are certain aspects of the recession that actually create long-run drag on economic growth. and, you know, there are a couple of things, a couple of ways that it does that. one is that it decreases private -- recessions decrease private investment. another increases poverty levels. and poverty is one of the things that is notoriously difficult to come out of, the poverty cycle. it can delay or make people

forgo education, investments in education for themselves to go to college because instead they need to work to provide for parents who are now out of work. instead people go straight from high school to straight into the job market without investing in themselves. so for a variety of reasons, we see that recessions actually have long-run scarring effects. and doing something now can actually forgo a lot of the scarring effects. you're actually getting the benefits now. you were talking about public polling. the public is unified the number one priority should be jobs. even a lot of organizations like the bipartisan policy center still agrees in the short-term we need to do some job creation and then deficit reduction in the long run. but the job creation in the short-run isn't just a sugar high. that's something that benefits us for the near term, medium term and long-term. infrastructure would be another thing. we're getting the cheapest financing right now. in 50 years, we have a huge backlog of projects. if we wait, they get much more expensive. it's much cheaper to repair a

bridge than it is to rebuild a bridge. so for all of these reasons, there are things that actually we can do now. we can create jobs. we can boost our long-run capacity. and at the same time get us back on a fiscally sustainable path that don't actually require -- and i don't want to say there is everything because it makes me sound like i'm saying, oh, yeah, tax cuts can pay for themselves too. but generally speaking, there is a lot of really good policy there's that don't have a lot of pain that we could be doing now but we really aren't. >> one quick point on the delong-summers paper. their math only works if the interest rates that we pay for public debt are very low. so if chairman ryan is right and we see a skyrocketing of interest rates next year, that immediately wipes out what they're proposing. >> sure. >> sorry.

i guess i wanted to make a math clarification. >> on the jobs point, actually, this is when you talk about public's perception of defense spending, and you talk about how the importance of defense spending is to congress, it's all about jobs. they've got guys coming into their office every day. literally, i talk to officer staffers, i had a guy come in from raytheon today that there are 3.5 jobs. 3.5. they got it down to the part-time window washer. >> one person is different in a another level. >> this is one of the reasons that i think there is just a lot of anxiety. and at a time like this when we're in an economic crunch, it becomes maybe the main reason why there is so much anxiety about taking on defense spending in congress, because there is -- the democrats kind of don't want to go there. but for both sides, for both parties, it's the jobs concern. >> and very tangible jobs, jobs you can literally say these are

the 3.5? >> yeah, it's very difficult. but i do want to point out there have been many studies that have shown that not all of those jobs are sustainable in the same way that other sectors might be. so defense spending is actually not as sustainable an investment in terms of employment as some other sectors are. i'm not choosing winners or losers. but i think an argument that industry will often make is like you say, these are really good long-standing jobs. and then you get the fights over keeping these plants open or the bases open and that kind of thing. i think that's where we're going to see a lot of difficulty in the upcoming couple of years. >> steve, can we do these two things? the recovery is still very fragile, and in my opinion, it's a little more fragile than most people think it is. but it's healing, slowly but surely. can we continue that recovery? can we continue to boost growth and find a way to assuage the fears of the deficit and the pending debt crisis moving forward? >> yes, we can.

as bernanke said a couple of days ago at the nabe conference, there are still dangers. you don't have to be a genius to figure out that maybe greece has been bailed out, but spain still poses some challenges. so you have some economic sluggishness for sure on the european continent. brazil has had to cut interest rates so that its real is more competitive. they're having problems. and the question of the soft or hard landing, however you want to define that in china is very relevant. so we're not out of the woods. indeed, if you took a look at the underlying unemployment, you find that the length of unemployment for the average person now on unemployment insurance is larger than it's ever been since we've had the program.

>> more than 40 weeks. >> more than 40 weeks. and that tells you something important, that this is still a lingering sore. how do you do it? what we said the domenici/rivlin task force said we have to have a tax holiday and try to get this economy moving beyond sluggishness. we still hold to that. then you begin to phase in deficit reduction. at the end of our plan, you're at about 62 to 65% of gdp and the imf and the world bank want you to be at 60. but this is ten years from now, 15 years from now so, all the numbers are wrong. but you try to make policy changes. i just leave you with three thoughts that i think are important. one we have a bunch of promises that we've made to americans that we can't keep. end of discussion, we can't do it under present circumstances.

and we need to think about what breaking those promises mean for the future and for investment in the future. the second thing is don't listen to people who tell you what percentage of gdp it used to be, because if they talk about the last 40 years, you've got three major conflicts in there that caused. so i would say let's go back to 1900 and the percentage of gdp of medicare was, that's correct, zero. and social security was, that's right, zero. and 85% of the people in this country lived on farms and made their money from agriculture. i think it's fair to say we've changed a little bit. and the last thing is demographics. today net of deaths, 11,000 people, are going to join medicare. that's a fact. and we're going to put another 40 million of these people into medicare. is it relevant what percentage of gdp we used to spend or used

to raise in a world that is profoundly different than just 1964, just 45 or 50 years ago. the answer is maybe, but i think there is a certain nostalgia to that that is not useful. so i think that you're going to see these guys kick the can down the road. i think they're going to do what they just did on the highway bill, which is fight about two or three months extension. and i hate to say it, but until people get everything resolved overseas, and we start paying the real interest rate on the tenure. one last thing i want to say, without trying to dominate it, the tenure was at 7.1%. that's the lowest since eisenhower. so you can borrow money at that rate. why not build things? why not do things? you're borrowing money at below inflation. >> exactly. >> they're basically paying us to spend their money. >> exactly. let's go to the audience. any questions out there for our panel? yeah. back there.

>> hi. good morning. my name is amy melnick. my question is really to laura, but really to the whole panel. why are those anecdotally your defense jobs in that district somehow more valuable or more important than research jobs or public health jobs that are also funded by the federal government? >> well, you know, i think there's a lot of things that are going on in the congressional mind. when somebody comes to your office and talks to you about this. frequently, you know, there's major -- you might have a major industrial base in your district. you might have a major military base that's been there for decades and generations of people have worked at it. and i think people think of the government, this is the irony, again, people's attitude towards government, as being a very stable employer. so if it's a military job, it's got to be a good job.

it's got to you know, have all kinds of benefits. dod have increased their number of contractors, specifically service contractors, just exponentially over the last decade. so a lot of the great military jobs are not really being performed directly by the military. they are being performed by a lot of these smaller companies that have popped up around this boom in defense spending and has proven very lucrative for a lot of entrepreneurs. so i fear that a lot of people see the government, specifically the defense department, as being a gravy train. that's not a good perception, i think, for the public to have for something like the military. and of an institution like the military. the military -- national security is not a jobs program.

it's something that we keep trying to drill into peoples' minds. its function is not to, you know, create -- it's job to to protect the country. that is supposed to be -- in the same way that congressman ryan was saying, it's strategy to drive our spending, not budgets. all right then. so you hear this a lot from sort of defending defense ministers but at the same time, they get someone going up to the hill and saying basically, you know, they are all for like, you know, tax and spend. as long as it's defense. we need to put more money into this sector in order to create x number of jobs with no strategic framework for that argument. and so that's something that i worry that is always present in our military spending because of

the sheer size of the defense department. and i think over the last decade and the explosion of defense spending that we have seen, it's gotten even worse. and i think we really need to wean america off of this idea of the defense department being a big, a big jobs creator. >> we need to go into withdrawal on gravy is what you're saying. we've got time for two more other questions out there. >> matt benjamin. steve was pointing out an ugly scenario about how these legislators need bond vigilantes to show up and interest rates to spike to get them to move and cooperate. but i have an uglier scenario. because the dollar retains or even strengthens its reserve status, doubts about the euro et cetera, the bond vigilantes never show up. gradually, higher interest

rates, bigger portion of our budgets going toward debt service, and in the long run, just a degraded standard of living. is that a scenario? >> very concerning. 20 years ago, which to me seems like yesterday, but probably most of the people in this room remember 20 years ago. say 1992. we had named the united states and we were without really equal at that time economically and militarily. we were able to support ourselves and most of the debt was held by american citizens. therefore, it revolved within the indigenous economy. now 50% of our debt is held by people who have a different view of the world perhaps than we do. a bunch of other places. so the bond vigilantes if they

don't show up, we have a cliff. i don't think mr. van hollen was wrong when he said we have a cliff. at some point, relatively soon, we will not have enough money to do the things that we are used to doing as a country. and i don't know how far away that is. i think two to three years is a little soon. my friends who are hedge fund managers in new york and most of whom have lost a lot of money this year believe it will be three or four years. at some point, we are going to run out of money and we're going to spend 100% of the revenues we anticipate on everything except defense and nondefense appropriated accounts. everything. and at that point, there's going to be a lot of pain.

because we're going to jump to big tax increases and we might jump in big spending cuts, sequester at large, and that's a form of insanity to do something like that. >> do you want to take that? >> yeah. two points. i think one is that -- i know you're looking at the long run estimates for the long-term budget outlook. we should remind ourselves that that is completely based on what national health care spending is going to be doing. basically, they say what's it been doing? and just assume that continues forward. there's a huge amount of uncertainty. imagine if we go back to the '30s and said let's try to figure out what health care is going to be like in 2012. it never would have been

possible. saying that we can get electronic files and that might be one way to cut down on costs. there were no electronic files because computers were something that the vast majority of people didn't know about. so it's very hard to -- this is why they look at ten-year windows because that is highly uncertain. on one hand, i don't think we should necessarily be saying this will definitely happen. i think that our approach should be more of let's make sure it doesn't happen and have a contingency plan and ensure against that. but at the same time, i don't think we should be saying this is definitely going to be this. so, yeah. i'll leave it there. >> fantastic. thank you all so much for joining us. thank you to our panel. you were fantastic. and have a great day, everyone. tonight on c-span3, american history tv. on leading generals from world war ii and the civil war. at 8:00 p.m. eastern, a u.s.

army film on general douglas macarthur, who lead u.s. forces in asia during world war ii. at 8:30, a look at top military leaders of the civil war. confederate general robert e. lee. and at 10:10, the world war ii army chief of staff who went onto serve as secretary of state and defense secretary. the pope has a very famous way of being determined, and that's with with the camera lingoa cardinal level post. the pope hand pick this is person. and this person decides when the pope is dead. he hits him three times in the head with a silver hammer and calls out his baptismal way. which is carried over from the romans. even today, the pope is dead until he says he's dead.

>> saturday night at 10:00 eastern. the ever changing description of death and his controversial argument that the business of organ harvesting is blurring the line. also weekend on book tv, former pennsylvania senator arlen specter on the split between old guard members of his party and those supported by the tea party. book tv. every weekend on c-span 2. tuesday is the deadline to file federal income tax returns. he testified before a house ways and means sub committee about this year's tax filing season. louisiana congressman chaired the hearing. >> a hearing on the internal revenue services fiscal year 2013 budget request and the 2012 tax filing season. hard working american taxpayers have faced incredible challenges over the last several years. many have struggled with

unemployment, sluggish economic growth, and doubts about our country's economic future because of out of control spending and looming public debt. the tax code has tripled in size since 1975 continues to burden american families and small businesses with too many taxes, too many loopholes and too many pages. it's estimated that the average taxpayer spends 21 hours and over $250 complying with tax code each year. they must keep track with an increasingly complex and difficult to understand tax code or at least hire someone else who does. the internal revenue service, of course, has the unenviable job of administering and enforcing our con tax code. as we meet today we are in the middle of the 2012 tax return filing season and millions of taxpayers and employers are willing to meet their tax filing

obligations. some have reported experiencing delays in receiving tax refunds and programming errors at irs have delayed some 6 million returns, which we will discuss at today's hearing. we'll also talk about the frustrating issue of tax fraud and improper payments. taxpayers are exasperated because, while they work so hard to comply with tax code, they see press reports of thieves robbing the treasury of billions of dollars each year. one recent press report detailed how an identity theft ring in florida committed $130 million in fraud through stolen social security numbers. on top of this fraud, tens of billions of dollars of taxpayer money is lost every year through improper payments of refundable tax credits including $17 billion a year for the earned income tax credit alone. finally we'll talk about the administration's fiscal year 2013 budget request for the irs

for fiscal year 2013 the administration has requested nearly $13 billion in appropriations for the agency, an increase of 8% from fiscal year 2012. included in this requests are over $360 million and nearly 900 new employees to implement portions of the affordable care act including the new insurance subsidy and the controversial individual mandate penalty. we look forward to discussing this and the other new initiatives that the irs plans for fiscal year 2013. with that, i would like to welcome commissioner douglas shulman here today. i look forward to a fruitful discussion of his agency, his mission and the on going tax return filing season. before i yield to the ranking member, mr. lewis, i ask unanimous consent from all members written statements be included in the record. without objection, so ordered.

i will ask unanimous consent that gao's report on the 2011 tax filing season and fiscal year 2012 budget request be included in the record. without objection, so ordered. mr. lewis? >> thank you very much, madam chair for holding this hearing on the internal revenue service. i'm pleased that we have the commissioner before us today. i have serious concern about the fact of recent budget cuts on taxpayers, tax collection and agency operation. in her most recent report to congress, the national taxpayer advocate stated that the most serious problem facing taxpayers is that the irs is not adequately funded to serve taxpayers and collect taxes. i fully agree with the statement. this year the agency budget was cut by over $300 million.

this cut harmed taxpayers in telephone service. telephone calls have increased by 34%, but the an -- over 65% of taxpayers seeking telephone sis tense are able to speak to an irs employee and must wait an average of 17 minutes. taxpayers seeking in-person assistance also have been harmed. this is clear from the very long wait time at taxpayers' assistance centers. the budget cut also harmed agency operation. the cut forced agency to lay off thousand of employees. the majority of these employees work in enforcement. if a tax and collect revenue, this reduction duds not help tax collection or reduce deficit, it make no sense. i look forward to discussing

these issues in the agency proposed budget for next year. madam chair, finally i would like to take a moment to thank floyd williams for his service and dedication to the agency and to this congress. as many of you know, floyd is the legislative affairs director of the irs. he planned to retire this summer. floyd began his government service as a congressional page under senator fulbright of arkansas many years ago. floyd, i think the senator from arkansas probably violated the child labor law. you're not that old. i have worked with floyd on this committee and i know that he will be missed. i wish him the best as he retire. thank you for your great service. and with that, madam chair, i

yield back. >> thank you, mr. lewis. i would like to welcome back the commissioner of the internal revenue service, mr. douglas h. schulman who has served as commissioner since march 2008. commissioner schulman, thank you again for your time today. the committee has received your written statement, and it will be made part of the formal hearing record. you will be recognized for five minutes for your oral remarks. you may begin when you're ready. >> thank you very much to all the members of the subcommittee forgiving me the opportunity to testify today. i want to talk about -- a little about filing season, our strategic initiatives and the president's 2013 budget which would give us much-needed increase over the 2012 enacted levels. a significant portion of the president's 2013 budget would restore congressional reductions

in irs funding made over the last two years. i want to start by saying i believe it's incumbent on all of us in the government to be as efficient as possible and to spend taxpayer dollars wisely. for the irs, that means finding savings where we can and continuing to invest in strategic priorities that allow us to improve service. from fiscal year 2009 through 2013 proposed budget, we will have achieved nearly $1 billion in budget savings and efficiencies in core irs operations. these savings and efficiencies reflect an across-the-booed commitment at the ir sfrmts to find better and more efficient ways to administer the tax season. at the same time, we collect $200 in revenue for every dollar

spent on our budget. we also collect $2.4 trillion last year. we issued $110 million refunds for $345 billion to hard working american taxpayers. our compliance activities brought in a direct revenue of $55 billion. and we blocked another $14 billion from going out the door to taxpayers trying to commit fraud on the government. in this regard, i want to point out that the administration's proposal for irs funding includes critically important enforcement initiatives that would be funded through a program integrity cap adjustment. let me just say that this proposal makes sense and is a reflection of the president and this administration's belief that irs funding actually helps reduce the deficit.

congress is literally leaving money on the table if it does not enact this proposal, which would allow for deficit-reducing initiatives in tax compliance while leaving specific funding decisions to the normal annual appropriations process. let me just talk about a couple of things that we've done over the last few years that have moved the agency forward to position it for the future and do a better job serving taxpayers and making sure they comply with the tax code. let me just start with filing season. e file continues to grow. this year we've issued about 49 million refunds for a total of $174 billion. that's about the same number as last year. and we deployed several new

large technology systems, and i'll be happy to talk about those as we get further into the filing system. in strategic areas, we've moved from a weekly batch cycle to daily processing of tax returns through cade two. cade two delivers on the promise of irs modernization going back two decades and we're very proud of this achievement. a couple years ago i told this committee we restructured our technology program, we were going to deliver our major technology initiatives and this year we have delivered those initiatives. we also had the highest score ever last year on the american customer satisfaction index rating which is the overall score we track for taxpayer satisfaction with their interactions with the irs. we scored 73 on this index, and we're very proud of this