and i'm sure he does it from a great distance, too. but i appreciate your brother's class, frankly, since he's left office as well and the manner in which he's handled himself. we saw an example of that yesterday that reflected both very well on him and former first lady bush and on the first family today, on the president and first lady obama, as well. so maybe if our committee operated a little bit more like we saw yesterday at the white house, we'd get a little bit further down the road. we've dealt with a lot of history here. i'm not exactly sure why we're always looking back because i think we're trying to score political points. i want to ask you about a couple problems we're going to be facing very quickly, the 2001 and 2003 tax cuts all expire. president saw fit to extend those two years ago. he could have ended every single one of them had he chosen to, but he must have thought at least at that point, those cuts were in the best interests of

the economy. he got a couple other things he wanted, an extension of unemployment and a payroll tax cut. but all has to questions are being revisited. i'd like very much your views on whether those tax cuts ought to be extended and then what other things within the tax code you think we ought to be doing to try and achieve the objectives you outlined in your remarks. >> i think that given the economic circumstances that we're in, i think they should be extended. the idea that a cut in taxes that took place 12 years ago is an extension of a tax cut rather than what it truly is, which on december 31st if nothing happens, a massive tax increase, something close to 3% of gdp, which would be a historic tax increase. never -- the country's never

done anything of that scale, speaks to the language of washington. i mean, it's -- i never understood why we wouldn't maybe it's because odg extension of a tax cut. but it's basically you're talking about a massive tax increase. i don't think that is the proper way to restore economic growth. and i'll just -- i think the objective ought to be if we're growing at 1.5% per year at a time where historically in this time of the cycle we should be growing at 4%, 5%, 6% and have, say, stable growth over a sustained period of time, say 3.5% instead of 1.5%, that 2% incremental growth over a ten-year period which is how you all look at your budgets, that 2% incremental growth creates a germany in the tenth year. the incremental growth creates something like $2.9 trillion of additional economic activity. and based on the tax rate, the effective tax rate in our

country today, state, local and federal, that's over a trillion dollars of revenues without raising taxes. the focus ought to be in my mind how do you create sustained economic growth and then you restore the proper balance of government. if we're always reacting, assuming we're only going to grow at 1% per year, then we're in a heap of trouble. there's no way to get out of the mess we're in where we're spending 40 cents of every dollar spent is financed in increasingly shorter durations with monetary policy that yields 0% interest rates. at some point we're not going to be slightly larger than the smallest country in europe and the focus of the world's financial institutions and investors are going to be looking at the united states. when that happens and we're not prepared because we haven't dealt with the structural challenge we face and we're not creating a high growth economy,

then the price we pay is enormous, particularly for the next generation. so i would say the place where you could get the greatest sustained growth would be an energy policy based on our own resources and based on american innovation. i would argue -- i'm a little out of step with my own party here perhaps temporarily -- i would argue for looking at immigration as an economic solution to our problems that we create -- that we identify aspirational people, allow them to come in to pursue their dreams in our own country. i think a total review of the rule-making process and the existing regulations on our country today to apply 21st century rules on top of our economy would be a burst of economic activity. and then at the state and local level, a transformation of our education system. those things aren't necessarily ideological. you can have your budget and tax fights. i'm sure they'll go on without me.

that could, i think, help create sustained economic growth. then the debate might not be about the ones we're having in washington today. it would be something different. so tax reform and those four things i brought up would create an interesting climate for us. for sustained growth. >> thank you, governor. yield back. >> your immigration views sounded good to me. >> well, they sound good to me, too. welcome governor. let me just ask you specifically whether then you support the d.r.e.a.m. act as it has been currently introduced so that young people who came here through no decision of their own as a child have a path to citizenship if they play by the rules, gone to school and ready to contribute to america. >> i haven't seen the current form of the d.r.e.a.m. act. >> it's the same version we've offered the last four sessions against republican opposition, not familiar with it? >> i don't want to insult you. but i do support -- i have read senator rubio's ideas.

>> it doesn't provide a path to citizenship. let me go to something you are familiar with, which was your testimony which i think raises the right question. why should a company pay taxes to support government subsidies for one of its competitors. mr. edwards answered that question very specifically in saying the place to start is to eliminate $100 billion on most of business subsidies every year. do you agree with him? >> yeah. i think we should go through -- this is a place where their seems to be common ground. a thoughtful review of all sorts of subsidies. >> well, i know we want to be thoughtful and want to review. you agree with him that we should eliminate $100 billion of business subsidies? >> with all due respect, i don't know -- give me the specifics. i'm happy to answer it. >> i'm relying on his specifics. i'll give you a smaller specific i think is included and that is

$4 billion every year to -- in preferential tax treatment to exxon, chevron and other big five oil companies for drilling off our coastlines. do you favor eliminating those subsidies? >> in return for lower tax rates, i think that's exactly what we ought to be doing. >> great. we have had discussions about simplifying the federal tax code. everyone is for it. but it has been simply impossible to get a description of any preferential tax provisions or loopholes that are to be closed. could you identify in addition to closing the preferential treatment for exxon any other tax loopholes or preferential tax provisions that you favor closing? >> first of all, i don't favor, just to be clear because this is a got you kind of environment it seems like. i'm not for specifically closing loopholes just for exxon. i mean, let's be clear.

i would say this ought to be industrywide in return for lower rates. i don't think -- are you targeting -- are you asking me should we target one company? >> i'm asking you if we are to lower corporate rates which is actually something that i agree with you on, whether -- and we're not going to borrow from the chinese and the saudis to do it, you've indicated you'd be willing to close the loopholes for exxon and chevron to pay for that. i'm asking you if you can identify anything else because i can't get my colleagues to do that, to identify any of the tax loopholes they would close. which other ones are you in favor of closing in order to get lower corporate tax rates and not have to borrow from the chinese? >> i would start by doing it like maybe you all could come up with an idea like the brac commission and start with all of them being eliminated and build from that basis.

>> well, i think the brac -- >> i think the general approach ought to be this crisis we face is an opportunity to recast who we are as a nation. and do we trust the american people interacting amongst themselves in ways that have historically created more prosperity than this command and control approach that we follow. >> i appreciate that. we, of course, have had some bipartisan commissions looking at our budget. senator domenici, alice rivlin, the simpson/bowles commission, every one of them has said we cannot get our budget in balance without new revenues. in many contrast, republican presidential candidates when offered the choice of $1 of new revenue for $10 of reduced spending said they wouldn't agree to a bipartisan agreement like that. would you? >> ten to one? >> yeah, this will prove i'm not running for anything. let me finish. >> i appreciate your candor.

basically we cannot close the budget gap without addressing both spending and revenue as all of those bipartisan commissions have recommended. wouldn't you agree? >> if you could bring to me a majority of people to say that we're going to have $10 of spending cuts for $1 of revenue enhancement, put me in, coach. >> problem is the ten never materializes. mr. langford. >> i've never seen a $10 -- that would be wonderful. let's see it. that would be spectacular. >> thank you. thanks all of you. it is interesting when you talk about targeted tax cuts we seem to go back to the same areas that all the problems in america seem to reside around the energy companies. when i went back to the fortune 500 list, i often hear about the top five companies, energy companies there and how much money they make. and i rarely hear anyone talk

about the top five technology companies in the list who make more than the top five energy companies. but the conversation is always about what will do we do to hit the oil companies. it begs back to the same question. it's this body trying to determine who they like and don't like today. and then to determine tax policy to determine that company makes too much money and i don't like them. that company makes just as much money but i do like them so they'll have different tax the policies. so the challenge becomes, how do we handle a tax policy that reforms the system and that cleans up all the preferences that are out there on that. mr. edwards, you've made multiple comments on this. i enjoyed hearing your comment on some of the issues of how do we start the process that you see of working through the system here that it doesn't come down to this body to determining i like you, i don't like you type politics and tax policy. >> i think the most important

tax reform we need in the united states is to lower our corporate tax rate. we now have the highest rate in the world at 40% with state taxes included. the chairman mentioned canada. canada has chopped their federal corporate tax rate to 15% now. what is astounding, if you look at the canadian 15% federal corporate tax rate and our 35% federal corporate tax rate, in both countries, the corporate tax rate raises about the same gdp revenue. what is going snaun the canadians collect just as much as we do with a rate less than half as high. what's going on is there's been a massive reduction of tax avoidance in canada. the biggest loopholes in our corporate tax code are actually not the legislated loopholes like the ones for the industry industry and the like. they're automatic loopholes. if you have a high rate, it pushes companies to really bend the law to move their profits offshore in fancy ways with fancy financial accounting. if we lowered our rate, that money would come back to the united states.

you know, you mentioned the difference between tech and energy companies. it is the tech companies that are probably the best at this automatic loophole stuff. apple and microsoft, for example, are great at legally moving their profits offshore because, of course, their profits are very mobile in the global economy. intellectual property is very mobile. so these companies move their intellectual property offshore in legal ways. we can only get that money back if we lower our corporate tax rate. i think that's the most important thing for us to do. >> let me mention a couple of things. bankruptcy we talked about, as well. i am astounded at the number of times we talk about the gm bailout as the governor mentioned here as well. that was a bankruptcy process. it was just tightly controlled by the federal government with a lot of new bankruptcy rules put into it. many of us fly delta air lines or currently american airlines who is currently going through bankruptcy. there is the perception if gm went through bankruptcy we would no longer have dealers or

manufacturing because it would all go away. when i get on an american airlines flight later this afternoon currently going through bankruptcy. this has been a constitutional responsibility of this body for a very long time. you go back to the preferences of how we pick and choose, what's our favorite group and how are we going to help them and not help another one. there wasn't a rush to help american airlines. it was just a rush to go to other groups. another one is the venture capital. there's an entrepreneur in oklahoma city who created an incredible product, has made a ton of money off of it and is spending a lot of his time now helping companies get started in technology areas. he sinks a lot of his time into that. this body seems to spend a lot of time saying we have access to a lot of money. maybe we should do the same things. this entrepreneur loves to do that kind of stuff, but it's his money so it's a different animal. how would you suppose we process through some of those areas of a startup when we move from the

difference of research to actually implementation? >> well, i mean, you know, with venture capital and angel investment, tax rates are extremely important. capital gains tax rates are, of course, important because these often wealthy people and serial entrepreneurs as they call them build up a lot of money, invest in new companies. what is their return for investing in new companies? they pump $50,000 or $100,000 into a new company, they have to patiently wait a few years to see if the company makes it into profitability. and if it does, they get a capital gain as a return. so the capital gains tax is a direct tax on them, direct disincentive for them to invest. ordinary income tax rates are very important. i think also because a lot of people in the very top income group are small business people and are angel investors. there's about 300,000 angel investors in the united states

who spend a lot of time pumping money into small startups. if you raise the tax rates, they're going to have less cash and less incentive to put their money into new startup companies. we've got to the look at tax policy to spur more financing of entrepreneurship. >> thank you. >> you bet. >> thank you, mr. chairman. thanks to the panel. governor, welcome. my family owns a company based in your state. my brother down there running it, sonny's barbecue. i hope you'll -- i think he even contributed to your campaign at one point. >> i like the barbecue, though. >> very good. i appreciate the plug. i'm kind of astounded in one way that this entire conversation, throughout this entire conversation there's always talk about cronyisms and special interests and preferences and so forth, and there's been no discussion in terms of how in approaching that about the way these preferences get into the law. i'm talking about campaign

finance system in this country. in terms of dealing with all of these things, do you believe that that has any role or that we ought to address the way we finance campaigns particularly at the congressional level where many of these preferences get put in the law because of the lobbying and the money that's in the political system? >> governor, first, yeah, first. your seniority here. i mean your status. >> age? >> no, you testified first. that's all. >> thank you. you know, in a perfect world, we could have a different financing system. i love the idea of having campaigns be funded directly rather than indirectly and have no limits and total transparency. so if people were offended by a large donor that the candidate he or she would have to accept responsibility for the message

and for the amount of money and for who gave it. that would be for me a talking about markets rather than government-controlled kind of response, that would be a better approach. but you know, magic wands don't exist. the law exists the way it is. i would suggest to you that congress ought to show more self-restraint about allowing that influence to change policy, if that's the -- if that's the view. i mean, this should not be a honey pot for people to create either a sanctuary for their own business to give them an advantage at the expense of another business or to give them a special deal that hinders our ability to recover in a more robust way. >> would you like to comment briefly on that? i'm just curious. we've got the koch brothers, why not pick on energy. they're going to spend $400 million in this election. they're not doing it, i'm sure because they just think that we

ought to let the free market take its -- work its will and that alternative energy -- i'm sure they'd want to promote that. i won't go into that. the question stands. >> i mean, corporate leaders like any americans have a fundamental right to lobby or petition congress. frankly, i don't think there's anything we can do about that. that's the fundamental right. it's always going to happen. you can pass as many laws as you want. i think campaign finance laws too often act as incumbency protection deals. you can stop spending the money out. i think having business subsidy programs, you throw fuel on the fire of the lobbying. the more business subsidies, companies like boeing get, the more they're going to lobby for more. so it is a vicious cycle, but the way to stop it i think is to cut the spending. >> congressman waxman, would you like to comment? >> the rich and powerful want to stay rich and powerful. unless the government gets involved to make things fairer

for everybody, they'll get more powerful and richer. now that we've opened the laws to unlimited and unreported contributions from corporations, i don't think the lower income people are going to benefit. it's going to be the well to do. some of these guys like the koch brothers and energy companies don't want competition from alternative energies. they want to squash competition. that's why government has to be involved. all three of us and a number of people on the committee said we ought to fund research. right now on the house floor, we're dealing with the appropriations for the energy and water bill, and we are now cutting the money for arpa-e which does cutting edge energy research by below the administration's request and nearly a third below current levels. so we're cutting back on research and we're hearing that everybody's to blame so what we need to do is to have the government do less and let the rich and power full stay rich

and powerful. >> i only have 20 seconds. governor, i applaud your comments about research and immigration reform. what would you say about from infrastructure? is that an important thing we ought to be dealing with in that same category? should we be cutting back on infrastructure spending in the country right now? >> i'm an old school guy. i think the role of government is to protect our shores, to provide security on our streets, to be the means by which we build infrastructure so that we can grow, and i would add, build capacity. this is not the role of the federal government. build capacity so that these gaps in income are dealt with in a more fundamental way which is to prepare people to be competitive in a more open system area than trying to redistribute wealth and then provide support.

so i don't know. i'm a conservative. that's kind of what -- beyond that, everything ought to be challenged. if you don't challenge it, then all these other things, those things are the things that get squeezed out. >> mr. akita. >> thank you, mr. chairman. i appreciate all the witnesses' testimony. it's been very educational as always. governor, hats off to your family, as well. i associate with tom cole of oklahoma. i was very proud to be an american last night for how your family acted, how the obama family acted. i hope every american gets to see that tape. i also don't think you're old school. i just think you believe in the plain meaning of the constitution and perhaps that it was one of the greatest documents to prove american exceptionalism. in fact, a unique document and that it's the first time those ideas ever came together in the same time and the same place. i hope we never lose sight of that. i want to focus a little bit on my colleague mr. waxman's comments which i agree with. we have some questions to answer. and that we are at a crossroads for the heart and soul of this nation.

i was intrigued by his use of the term rules of the road as if that's what one of the groups around here wants to do. and as if the other group around here simply wants to engage in anarchy. which couldn't be further from the truth. i think we all understand that there's a need for government. and a need for it to have reasonable regulations so that there's an even playing field so that there's an equal opportunity for success if not an equal outcome. perhaps that's where the difference is. on another level, i think this is really about how much control is appropriate for government to have over the individual. and i think that's where we really disagree. for this last year, i engaged my little rank and file office in a program called red tape rollback. it's just one congressman's work to try to roll back the scope

and heavy boot of this federal government. we had 71 different indiana businesses and individuals write us about 41 separate different regulations. not all of them made the paper nor should they. most were very obscure. but they prove that what this federal government and what a certain group of people here in washington, d.c. want to do, and that goes far beyond establishing the rules of the road. several farmers wrote in and said the epa is considering regulating the dust that my tractors kick up as we cultivate the fields as particulate matter. that's not establishing the rules of the road. another group of farmers wrote in and said, you know what? they want to limit the kind of

work that farm kids do. this country was built on work ethic and character and liberty, and all those qualities in past generations and in the current generation occurred through work on a farm and work in other places. the department of labor is also considering prohibiting youth soccer referees, right? i used to be a referee when i played soccer. i reffed for a while as an adult. the department of labor is considering prohibiting these kids from earning the $10 a game from refereeing these soccer -- little soccer games that happen on the weekends and after school all over this country. for some of us, that's establishing apparently the rules of the road. for others of us, that goes way beyond and is unnecessary. i don't know any other country

on the face of the earth that is so -- or more masochistic than we are when it comes to sucking or carving something out of the ground like coal or oil and considering it wealth. every other country understands this and exploits it, in the best sense of that word, to its benefit, except for a group of people here in america who can't understand that. that's beyond the rules of the road. what also is beyond the rules of the road is that we as american people are getting told what light bulbs to use, how much water can be in our toilet. that a farmer not only has to get a permit to use pesticides on his crops but has to get two or three permits from the same agency. that we have a medical device tax being proposed. there are 300 medical device companies in indiana. all of them started through

entrepreneurship. another foundation of this country. yet, we somehow think, at least a group of us think, that it's within the rules of the road to put a tax on these folks and think that they're going to keep innovating, that they're going to keep creating. that's just a couple of examples in this document, mr. chairman. i thank you for the time. i yield back and thank the witnesses again. >> thank you. mr. honda. >> thank you, mr. chairman. i want to thank the panelists for being here this morning. i'm a classroom teacher. i'm not a financial expert. but i felt we bounced all over the map when we talked about the title free enterprise and barriers to free enterprise. i heard from each one of you things i do agree with and some of you i disagree with very

strongly, but i guess what we're hearing are high points and low points of each other's parties and positions. and i think this country is looking for some balance, and so i guess i want to ask each one of you, what do you agree and what do you disagree about each other's presentation in terms of you know, looking at a balanced approach to our economy, a balanced approach to being fair to each one of our citizens in this country, and do you really think that money behind each person is the factor that gives power to the vote? i mean, it seems like when we talk about votes, we talked about money first rather than the power of each individual's singular power of their own vote. one man, one vote, regardless of their standing. where would we be today if we just -- where would we be today

in this country if each person had the same amount of votes without reference to their economic standing or the power of their pocket? and how would that affect our -- how do you think that would affect our economy in this country? >> we'd be in a heap of trouble. i mean, the empowering people to make decisions for the future of the country is the path, i agree with what you're saying, congressman completely. as it relates to money and politics, we basically have parity. both sides effectively spend about the same amount of money, if you total it all up. four years ago, i think maybe president obama and his team probably spent significantly more. this time it looks like it's about the same. >> excuse me, governor. i would just, you kn