a over $1 trillion debt to infrastructure. all of us feel it every day. workers trying to get to work stuck in traffic, businesses trying to get products overseas in an efficient manner to export and support with paying jobs. infrastructure is critical to all of this and we're not where we need to be. the president is very big on infrastructure in the budget to repair roads, bridges, freight and our rail system. it's a long-term plan. it's six years up from four years last year. we've been solving infrastructure in a few-month patches. that is no way to plan infrastructure. a allows 8 it allows $80 billion which allows us to spend. importantly, it's fully paid for through business tax reforms, specifically the one-time money

that's overseas, bringing that money back and raising taxes on that money to pay for the plan. so the bottom line is is infrastructure is traditionally a bipartisan issue. everyone agrees our infrastructure is outdated and needs to be modernized. it also supports good supporting middle-class jobs right away and it sets us up for competitiveness in this global marketplace. with that i'll hand it back to josh. >> thank you, guys. we'll open it up for questions. who wants to be first? mr. kunan. >> jeff, i wanted to follow up on the infrastructure and corporate tax reform component. do you believe that without a full corporate tax reform you can still do a one off of 14% on

accumulated foreign earnings or can that only occur in the context of a broader corporate tax overhaul? and also, yesterday the ways and means chairman paul ryan said that corporate tax reform has occurred in the context of small business tax reform as well, which would mean somehow dealing with individual income tax reform. do you see those as inevitable? >> we believe it complements business tax reform which involves lowering the domestic rate statutory rate, from 38%, which is the highest in the world to 28%, 25% for manufacturing. setting up an international system that is a hybrid system where you have minimum tax of 19% and then bringing back the money that's overseas at this 14% that you mentioned. that is very different than a

repatriation holiday which we believe is bad policy. you're right that a lot of businesses are small businesses. the president's plan does a lot for small businesses. it simplifies how small businesses file their taxes, which is just tax accounting which is basically their account. it also enables us to write off investments in the first year of up to a million dollars. that will really help simplify small business filings and lower rates for many small businesses. so we believe in doing business with tax reform across the board. >> doing the 14% at the same time, making sure we do good for the middle class. the infrastructure is good for the middle class, so that's important with any tax reform we do making sure we benefit the middle class. >> 14% couldn't occur absent

broader -- >> it's part of a more comprehensive approach to fix what is clearly a broken business tax system and at the same time we want to make sure that we're doing things that are good for the middle class. >> i know that josh described kind of the negotiation, and i'm interested in what the president said. i'm not going to accept sequestration going forward and i'm not going to accept a budget between national security and economic security. i wonder if those are both kind of bright lines you're going to insist on in a budget document that might actually pass. >> you're asking if there are additional ones beyond the ones the president mentioned today? >> beyond those two aspects.

>> we just got our budget proposal today. republicans have had the virtue for some reason to declare a budget dead on arrival before having seen it. i don't think i'm going to put myself in the same position. the president has indicated that he is willing to consider good ideas from either side of the aisle from wherever they originate, particularly if they're going to benefit middle class families. i mean i think that's part of why you've seen the president identifiably close to areas as essentially dealbreakers for him, because continuing to leave the sequester in place does have a negative impact on our ability to support middle class families, and it certainly has an impact on keeping our military men and women safe. we've seen just about every military leader who has spoken about this leader raise this same concern. the good news in all of this, i

think, is that the concerns the president has raised along these lines are consistent with concerns that at least some republicans on capitol hill have raised. we know there are republicans concerned about the sequester, both the impact it's having on the economy and on national security, for example. so despite the president being pretty declaritive on those two elements i don't think it will rule out us finding common ground for the best impact of national security and middle class. >> i think there is recognition that discretionary spending is not the important issue from a fiscal perspective. in fact, our discretionary spending is at -- is near its lowest level as a share of our economy as it's ever been. and i also think it's important to remember that national security is dependent on more than just the department of defense budget. in fact in the non-defense

category is all of the commitments we've made to our veterans. it includes the homeland security budget, which obviously is a critical part of protecting our country. it's why it's critical that we get a full-year bill for 2015 right now. i think we have to see this in addition to the investment that jeff and steve talked about as this connection between the defense and the non-defense part of the budget. you really can't -- as the president said today, you cannot break that link. >> jim? >> mr. donovan you said the budget would be good for social security. i haven't had a chance to read the budget this morning. can you tell us exactly how this project would strengthen the social security? >> well, broadly speaking the long-term deficit is significantly helped by this budget. just to be clear and cbo put out these numbers last week under current law, we would see

both deficits grow above 4% of gdp and the debt grow over 80% of gdp. what this budget does is to reverse that course. it keeps deficits under 3% of gdp every year of the budget window, and, critically it starts to bend that curve on debt so it stabilizes and then begins to reduce debt as a share of gdp. specifically on social security trust fund. one of the fundamental problems we're facing is that the number of workers that we have relative to the number of retirees that are supported by social security has been shrinking. and so comprehensive immigration reform is actually one of the most critical things that we can do to shore up the long-term solvency of social security and as a result, to improve our

deficit challenges in the long run. in fact, you might have seen last week that just from the executive actions that the president took late last year, there is a positive impact on the social security trust fund because of additional payments that come into that. and so comprehensive immigration reform on a much larger scale would improve that. cbo's numbers are that comprehensive immigration reform, and that's what we reflect in our budget in the first decade, is about $160 billion of deficit reduction. in the second decade it's almost $700 billion of deficit reduction. it grows over time as more workers come into the country pay taxes and pay into the social security trust fund. >> kristin? >> a couple questions -- thank you very much. is there anything in this budget that specifically discourages tax inversions, first. secondly, if you are serious about finding common ground with republicans, why not include a

plan in this budget for entitlement reform? i know that that was a big part of the 2011 budget discussions. and then i just want to get your thoughts on the sequester. you've been talking about the fact all day that the deficit has been reduced by two-thirds you said. so did the sequester ultimately work? >> do you want to do the inversion first? >> sure. and i would also be happy to speak on the entitlement part too. in terms of inversion the budget defeats the proposal the president made last year and ultimately called on congress to pass that would set a threshold that as long as a majority you owned is held by majority stockholdersstock stockholders stockholders, it would take away the ability to find a smaller foreign company, acquire them and shift over to them. the entire business tax reform agenda, though is also about making it more attractive to

invest in america and close a number of other loopholes that companies use that complement what they've done on inversion. so all of this, as the secretary said when he announced what he was doing administratively on inversion, that helped but it couldn't do as much as what you could do legislatively. so that proposal repeats itself here. just to take the first crack at entitlements, then the others could build on it. this is a budget that could include $400 billion of savings from reforming our health system. those reforms to our health system are very much in the spirit of what we've done to date, which is about how to make the health system more effective and efficient. when do you that, it brings down costs, it saves money for the budget, it saves money for seniors and it slows the cost growth in health care. that's part of an overall fiscal approach, though that includes reforming the tax system and reforming immigration system. so it follows in the same path the president has in previous

budgets of balanced deficit reduction coming from the spending side, coming from the revenue side and sufficient to get the debt on the declining share of the economy, which is what an economist would think is important. >> just two quick points i would make. one, there has been a lot of focus, rightly so on our short run deficits and how much they've come down. this has been the fastest period of deficit reduction since after world war ii. but we've also seen substantial improvements in our long run deficits, and the single biggest driver of that has been the slower growth in health care costs. just to take one example if you look at cbo's numbers our spending on medicare and medicaid in the year 2020 is now expected to be almost $200 billion lower just in that one year than it was when the president came into office. so what jason is talking about on entitlement reform is incredibly important but building on that as well, we

have a new proposal in the budget this year which would adopt bipartisan legislation on what's called the sgr. we would adopt that, paid for because everything in the budget is fully paid for and we would add some additional reforms to that legislation that build on what secretary of hhs has done on delivery system reform. so we can keep driving those costs lower. even more important than social security or other entitlement issues, this issue of health care costs is a single most important place where we can really bend the cost curb in the long run on entitlement. >> then there was the question about the sequester. >> let me just say first off, you just look at the deficit reduction to date. more of it this past year was because of the tax field that restored clinton era rates on high-income households and the affordable health care act. a combination of those, then,

from the sequester. second of all, the most important test of your fiscal policy, as shawn says is where you are over the median or long run. and there those steps dwarf the impact of the sequester in terms of changing our medium and long run debt and deficit trajectory. >> we have detailed charts in the budget we could provide to you that show precisely what role is played, but again, to jason's point, it is dwarfed in the long run by these others. also the fundamental point that it's not going to where our challenges are in the long term on the fiscal side. discretionary spending, once again, is at a very low level relative to gdp, and in fact over our budget window it continues to grow smaller as a share of gdp because it is not growing as fast as gdp. so it is not the fiscal challenge we focus on. if anything, the reverse.

if we want to grow our economy we need to make the investment that jeff and steve talked about. >> roberta? kuwait for acan you can you wait for a mic, please? >> how did you choose the 14% level on tax of bringing back overseas profits? and would there be a limit on what companies could do with those ex patepatriated funds? >> that 14% is about 40% of the 35%. accordingly, it will be on call on all dollars overseas, so this is not voluntary, it's mandatory. and the dollars come back to the u.s. hopefully to be invested in good u.s. jobs and manufacturing facilities but there would be a specific requirement on those dollars. the requirement is that they all take 14%.

>> kevin? >> josh, thanks. i want to ask a couple questions. first, the debt. for all the high fiving and balloon releasing about the deficit, which is impressive, the debt is a ticking time bomb. how aggressive is your policy toward reducing the debt? >> so as i said earlier, on our current course debt would grow as a share of the economy from about 75% now to about 81% by 2025. what we do in our budget is bring that down substantially so that debt as a share of the economy shrinks from about 75% of gdp down to 73% of gdp by the end of the window, so by 2025. and i think perhaps even more importantly, the key things that

we're doing unlike sequestration, the key things that we're doing for our long term fiscal future grow in importance as you get beyond 10 years. so the tax changes we're talking about, for example, on at that particular time -- capital gains, they're scheduled so that the scale of revenue they bring in grows over time. immigration reform is something where the impact would grow substantially over time, and many of the things we talked about before on health care costs, delivery system reform and others the benefits would compound over time as you bring the growth and health care costs down below the growth of gdp. so all of those are the most important things that you can do in the long run to bring down our debt. at the same time what we should recognize is that we owe a debt to our seniors who have paid into social security and other

benefits. what we can't do is make reforms that break that promise to them and recognize that we have a demographic bubble that we are dealing with through roughly the mid 2030s. and if we can get through that period with debt stabilized and on a declining path as our budget does, we put the nation in a much better position as the number of workers grows, particularly if we can pass immigration reform. >> a very quick follow. i want to ask about military spending in general fighting the wars on terror and everything that is still happening. it is very real. does this budget address, in your estimation everything that needs to be addressed or is there more that you can do to make sure the american people are safe? >> well, first of all we have to recognize that the country has made real progress. the president talked about, in the state of the union address, that when he came into office, we had 180,000 troops overseas in iraq and afghanistan.

we're down now to 15000 and on a downward trajectory there. so we've had real benefits in terms of the lives of our brave service people who are serving overseas. at the same time there are real fiscal benefits from that. we're spending 130 billion less this year just on emergency military costs than we were when the president came into office. and because of his stewardship of our national security those costs continue to decline by another more than 10 billion in our budget proposal. at the same time, the budget recognized that in our base investments in the dod budget, not our emergency costs but our base budget there are places we need to invest. and that means investing in our service people, it means investing in making sure our technology stays ahead of other countries, whether that's in space or other research and development, so there are a number of places where we recognize, and that's why you see a $37 billion increase in

2016 for the defense budget that really focuses on where those needs are and keeping americans safe. >> all right. jim? let's get a mic down here. >> thank you, josh. cecilia, i want to ask you, if i could, about the $1 billion being sent to central american countries to address the issue that happened last summer with the immigrants coming across the border. when there the biggest problem that people who are not in the government talk about is government corruption. what is the united states going to do to protect that billion dollars to make sure it doesn't end up in swiss bank accounts and instead actually helps the people there? >> i'll tackle this a little bit, but with a reminder that i'm a domestic policy adviser, so i will also turn to my

colleagues. the focus of the people in central america is to promote safety as well as development. when we hear the vice president talk about it he talks in very strong terms and makes a comparison to what we did in columbia which required enormous investment of resources as well as political capital by the columbians and partnership with the united states. we're talking about building the same kind of partnership with the central american countries to make sure they're advancing economically but that they're also making the advances that are needed with respect to safety and security. you'll recall that the reason for -- one of the stated reasons for the crisis and arrival of accompaniment of minors had to do with folks' fear in particular of fear of violence affecting young people. so we're dedicating resources to a panoplea of things, with the goal being the united states be a good partner to these societies and help strengthen them so they're able to deal with these problems in country rather than confront the kind of

crisis that we had here. and i think it's a broader illustration of a notion that we have to approach these issues as a hemisphere, and the united states has to be thinking about this and thinking about situations like the situation we experienced last summer. from a much broader perspective that was not just a migration situation, it was a migration situation which resulted from a much larger phenomenon that we have a role to play in making sure that we mitigate. >> just to add a little bit on her point, plan columbia has been remarkably successful at going at the exact same issues you talked about. so as a piece that cecilia talked about this comprehensive approach, a piece of funding we would dedicate is on government reforms and would be directly targeted at making sure you build the government institutions and also attack the kind of corruption you're talking about. another thing i would mention on

this, this is something the president and vice president really have been focusing on for some time, and we've already taken a number of steps where the three countries in particular that we're focused on have already agreed to a number of things to strengthen, whether it's the rule of law or to stop corruption within their systems. we can get you more specifics on those, but there are steps that have already been committed in advance of us making this commitment. i think it's also important to recognize that this is one of many opportunities that the president's efforts on cuba have begun to open up in the hemisphere. we have a moment of opportunity to move forward together with countries across the hemisphere so that we're much more likely now, as cecilia said, to get other countries investing in the three countries themselves but other countries as well that would support our efforts. >> can you give us some motives

about the increased violence and is the increase of cyber security driven by tech by china and asia? >> you said on the asia pacific rebalance? >> yeah. >> i think probably, given we don't have a national security staff here is maybe if we could follow up with you specifically. there are a number of places where we are increasing investments to focus on the asia pacific rebalance, but i'm not sure we have the expertise -- the right expertise here to get into detail on those. >> we do have a range of investments around cyber security, well over $10 billion of investment that is going

toward cyber security. that includes both research and development investments that are part of a broader, significant expansion of r & d, as well as specific investment at the department of homeland security, ato and b, actually which is responsible for setting policy on many of these areas and also in our national security agencies more broadly. so it is a specific area and you'll see called out in the budget presentation today many more details on exactly where those are focused. >> and i'll remind folks that the president has sent to the hill legislation on data breach and on information sharing and encourages those pieces of legislation to do it forward as fast as possible in a bipartisan way. the president will also be hosting a summit on cyber security on the west coast at stanford university on the 13th of this month, so ten days or

so. >> jonathan? >> three questions. hi. a number of proposals have been in this budget for some time. they were not passed by a congress that has democratic control in the senate. what can you do in the coming year to bring republicans to the table, and what makes you think that these plans actually have life, you know with the new republican congress? >> i'll take the first crack at this, and shawn may have some other ideas on this, too. i think that the first thing that comes to mind is just the fact that they didn't have it the first time doesn't mean they aren't good ideas. i think the reason they're included in the budget once again is because they are good ideas and we're going to continue to advocate to members of congress and both parties that they should consider them and actually include them in

legislation. the second thing is we would also acknowledge that this is going to be a compromise, right? we've got republicans in charge of the congress, we've got a democrat who is sitting in the white house, so anything that emerges from these proposals and discussions about the budget will require an effort to try to find some common ground. and maybe there will be an opportunity to include some things in this budget that republicans haven't previously supported in exchange for some things, some new ideas that they may have. the third thing is, and this i think, is a good segue to shawn, is that there are a pretty substantial number of things that are included in this budget that have been previously supported by republicans. and i think it is a good indication that by focusing on what we think the core goals should be in terms of protecting the country and investing in middle class families, that there should be some reasonable common ground that we can find. that's why the president so

strongly advocates ensuring that we don't let things like immigration be a dealbreaker over others. there are things that do have common ground. i'm not saying it's going to be easy, but it's certainly an opportunity worth pursuing. shawn, do you want to just do two or three and throw in some of the best ideas included in this budget that have been supported bipartisanly? >> there are a number of things. the financial fee is a good example, but also the linkage between international tax reform and infrastructure which were included in the camp plan. and many of the proposals, whether it's around child care or a number of the other things that cecilia focused on free community college, have been ideas that not only have had republican support in the past

but actually legislative proposals that we've seen with bipartisan support. that doesn't mean there has been support for every one of these ideas, i think josh is exactly right. but we will see, i think, a significant opportunity to get some of these -- to advance some of these ideas going forward. the other thing i would just point out, which i think you've got lots of good examples from the budget last year, whether it's on minimum wage or others it isn't just about what the federal government does, it's also about what mayors and governors and other local officials do and i think there is a real opportunity in many of these ideas to build momentum and support in a way that congress may not lead on them, but they may end up following because of the work that happens in other parts of the country. >> i think there is, at a strategic level, realignment. you used the example of infrastructure and tax reform.

everybody agrees we have to fix the infrastructure. everybody agrees that the current tax system doesn't work, that our statutory rate at 35% is the highest in the world that our international system is dysfunctional. and then everybody agrees top line -- not everyone, but both republican leaders and democratic leaders, including the president most importantly, agree on the basic framework for the approach. so there is a lot in the detail but the strategic alignment is real and significant. and then you can be more granular and look at something like expanding the eitc, which both the president proposed in his budget and paul ryan propose proposes proposes. so i think you have strategic alignment in some very important areas, and then you have specific alignment around proposals that both republican leadership and the president agree upon, so we're hopeful we can get some of this stuff done.

>> over here. connie? >> cecilia the 529 tuition plan, how safe is that? is there any chance that could be rolled back and we would lose our investment? >> we've already backed away from the original 529 proposal. it was also a very, very small part of the restructuring of the various offerings with respect to savings for college education. so the point here is that this administration continues to be committed to making sure that we're making resources available to make college more affordable so the budget includes things like making sure that programs are permanently protected from inflation. we have the community college proposal, but we also have a consolidation of the various tax credits and other sort of structures that exist now, and the idea being that we learned that a significant number of folks who participate in one program ended up not participating in the one that would have benefited them more because there are so many different options and it can be

confusing. so the goal here is to consolidate in such a way that more middle class families and families working to get to the middle class get the support they need to pay for college and to repay student loans. >> the administration has no plans or proposals in the 529 system. >> to put a number on this what we're proposing in the budget is a nearly $50 billion increase in tax benefits toward paying for college. so on a net basis what you'll see is that the president's proposal dramatically improves college affordability through the tax system compared to what we currently have. >> john l.? >> two questions one for josh and i think one for jason. josh, what do you think the effect of this budget will be

for democrats heading into the 2016 election, both at the presidential level and the congressional level? is there anything here they're not going to like? and the thing that john mentioned a minute ago, it's my understanding the loophole could be closed at trurthe treasury or irs level. is that the case, and if so why not just close it? >> i must confess this is the first time i've thought about the budget in that context. my suspicion is that everybody who looks at this will think there is at least one element in the hundreds of pages they're presented with where they'll think to themselves, gee i might have done it a little bit differently. i suspect that's true about a vast majority of democrats, those that are in office and those contemplating running for a different one. but at the same time i also think what is caudified in the

series of volumes presented today is a pretty cogent vision for how to move the country forward. by focusing on middle class economics, we can build the kind of country that's in the best interest of middle class families but also in the best interest of the stability of our country. there is an opportunity for us to use this new foundation that we have laid after recovering from the crisis of the last six years to really build this country in the direction of making it more fair, more free and creating more opportunity for everybody who lives here. i think that really is the core of the president's vision, and i think that reflects a vision that i think the vast majority of democrats out there can agree with. the truth is i think there are a lot of reasons that republicans can find to agree with that as well. the question is will they put politics aside and actually work to find common ground with this administration to do that or

will they not, which has been consistent with their pattern in the last six years, but hope to spring eternal around here. >> in answer to your second question, treasury and irs are responsible for administering the tax system so you should ask them that question in terms of specific regulation. in terms of our budget proposal, we're asking congress to change the law so that income that is essentially like any other form of income but earned in certain activities gets taxed as such and that's a common sense idea. >> in this budget and has been in past budgets and the treasury department and irs were able to make policy to do that. i guess the question is why not? >> you should ask the treasury and irs what their authority and plans are in this area. they're responsible for implementing the tax laws that congress passes.

>> thank you. >> steve with the washington editorial board. >> hi, steve. >> instead of relying on infrastructure, why not just raise the gas tax? >> i think the president has not proposed and has no plans to propose increasing the gas tax. the plan that we described here using dollars from overseas, bringing them back to the u.s. and raising money in order to fund a long-term six-year reauthorization at a level that's close to 40% higher than current spending, we think is the right plan. it's got a lot of traction. that said, the president is open to other proposals and would consider other proposals that congress contemplates. >> bill? >> >> >> hi. i was interested in what the pay

for is for the two free years of community college, if you might? and also jeff just kind of following up on that question, how real is this infrastructure plan, and aren't you, in effect, raising taxes on american businesses which seems to be a non-starter with this republican congress. and secondly expecting them to believe that once you raise taxes once, it's just a one year only, and it won't become a permanent thing. >> so i'll start. the revenue raises we described in the course of the tax reforms we laid out a couple weeks ago are more than enough to cover the community college program as well as the other elements of the budget that i described. >> repeat the first part of your question. >> the state wants to bring the money back from american corporations. how real is that to expect this congress to basically raise taxes on american businesses or ask them to pay a tax they're

not paying now, and then secondly, to believe that this is a one time only tax? >> it's part of, as i mentioned earlier, a comprehensive approach to business tax reform. a very important component of that is to make sure this is also good for middle class families infrastructure investment being central to that. the long-term plan here is revenue in traveling. so no additional money from corporate or business taxes. that said, there is this one-time opportunity because of the $2 trillion that are overseas that would be taxed here at a much lower rate, 14%. and that raises the money to do the six-year reauthorization at a much liarhigher level than our current stint. this one opportunity to tax the $2 trillion which has not been taxed, which is overseas at 14%. >> could i just add one thing? i think there's been some

confusion about the relationship between this proposal and something that would be kmeetly completely different in many ways opposite of this proposal. the proposal the president is making would be mandatory on all overseas earnings as opposed to an election that could be made. as a result it raises money $270 billion over 10 years, as opposed to a repatriation holiday would lose money. and then the third which gets to your question, this is part of a plan to reform the tax system. so on a going-forward basis you would have a 19% minimum tax on all the earnings of foreign subsidiaries of u.s. corporations. because it's part of a plan that deals with the earnings that have been incurred in the past and the earnings in the future it becomes a stable system as opposed to a one-time measure that then raises the question about how you're going to deal with it again in the future.

>> just on the politics, the other thing that occurs to me is that when the president was running for this office in 2007 and 2008, he was strongly advocating raising taxes on the wealthiest americans, which everybody was against, but he did actually succeed getting a recan majority and house representative to eventually vote for a tax increase on the wealthiest americans. just because they're against it now doesn't mean they'll be be against it against it in the end. >> the vision the president has in providing these minimum taxations as described and bringing the money back from overseas with the one-time toll charge using that money all four components are the same as german camp's plan last year in the house ways and means plan. >> major?

>> three quick items. how do you achieve your mandatory savings that you're projecting over 10 years? what is the baseline va number this year, and how do you expect va numbers to increase going forward, and what's your source of the aberrations fund? >> on the mandatory side we discussed a little bit earlier there is about $400 billion in savings on medicare and medicaid. in addition to that -- those are not the only mandatory savings in the budget, i want to be clear. there is program integrity savings that we achieve for example, at the irs. because we're underinvesting in irs capacity, we're actually losing out on tax collections to the tune of tens of billions of dollars, so it's about $60 billion of mandatory savings we get if we invested more in collection enforcement at irs.

that's one example. crop insurance is another area where we think we can improve the system, encourage farmers to actually be planting more lower the excess profits of insurance companies. there's a range of -- my point is there are a range of other mandatory savers in this not just on the health side. but on the health side, there is a range of them. jason has i think, pretty great expertise here that include reforms on the provider side that accelerate the kind of savings measures that we've seen in areas where we think there are not current incentives to save, and that's things like home health care aids and a range of other payment arrangements we have with providers. there are also some -- about 20% of the savings which focus on

ensuring that particularly the highest income beneficiaries are paying their fair share. there are also then, things like controlling drug costs, other things that right now are leading to -- even though health care costs are growing much more slowly than they have historically, we fill out areas where costs are growing quickly like particularly some of these designer new prescription drugs that we think could be brought under the umbrella of cost savings proposals that have worked in other areas of medicare and medicaid. >> if you have your budget page 115 has a list of total things in the budget.

oto, as i mentioned earlier, is down about 130 billion since the president came into office. it declined another 11 billion under our proposal. and on va, i don't have the precise number in front of me, but it is a substantial increase for veterans health care i think in the range of 7%, but let me get you a specific number. >> leslie? >> josh you mentioned that you were excited about the budget in the 2016 context. i want to ask you about this because isn't this something you're hoping the republicans will seize on the middle class? and if i could ask you to expand a little bit about the savings of crop insurance? because it's not playing well in

kansas. >> i interpret the 2016 -- i guess the other -- one reason is we'll have a fiscal year 2017 budget that will be added in early 2016, too. i guess that's one reason. the second reason is we certainly do hope that democrats republicans will see some of the ideas in this budget. maybe i should have thought of that who in a 2016 context but hadn't because our principal goals here are on partisanship and getting action from capitol hill on this, not just a talking point. >> to go back to josh's earlier point, if you look at the broad scope of proposals that we have in the budget and recognize the fact that we have roughly 100 different cuts, consolidations, reforms to two significant

programs i'm sure that there will be places in the country, and as josh said, things that democrats and republicans alike will find that they may not totally agree with, but we have in past years, proposed reforms to crop insurance as well. specifically here what you find is there are places where, for example, by the way that we structure these insurance programs, we actually encourage farmers not to plant on their land, for example. we also have other places where we encourage or we subsidize farmers in farming techniques that actually are less sustainable for the land that they're working, and so we think that these are smart reforms that both maintain the basic protection of farmers for real emergencies that happen but don't actually encourage them

not to plant when they could or encourage them to follow practices that are actually not good for the very land that they depend on. >> julie? >> thanks. i wanted to ask about this debt again. i know you said there are some mandatory savings in this that would help with the sustainability of social security and medicare in the long run. you started out by saying that now with economic growth and things starting to move again, this budget was an opportunity for the president to really say what he thought should happen. and i wonder why a lot of people are saying this is a missed opportunity. you didn't choose to, rather than shave a little bit off of very fast projected growth entitlement over the last decade, he didn't choose to really tackle them. is it just too politically difficult to do that? >> so let me just disagree with

the fundamental premise. when the president came into office, he recognized what i think a broad group on a bipartisan basis recognized as the single most important contributor to the long-run growth in the cost of our entitlements, which was the spiraling cost of health care. and, in fact, what we've achieved since he came into office in part because of the recession we inherited, but also because of structural reforms in our system have now substantially lowered the long-term costs of the title. i'll go back to the point i made. just in the year 2020, you're talking almost $200 billion in savings in medicare and medicaid. if you look at the projections in the budget this year long run, you see substantially lower costs far out into the future for the programs than we had when the president came into office. and the fact that we're adopting not just the 400 billion in medicare and medicaid savings that we discussed in the budget,

we're also adopting a bipartisan proposal on the documents on fgr reform which adopts additional range of reforms which goes beyond precision medicine and a whole range of other areas. i think we have a very strong argument that the president has been focused on since the beginning on the key drivers of our long-term entitlement. and he continues to be focused with some real momentum behind us in lower health care costs. i also think, and this has been, i think, lost a little bit in the sort of political back and forth around immigration. in addition to health care costs, the single most important thing we can pay attention to is that we have a demographic imbalance in our country. we have a growing number of retirees for the number of workers that we have in the country, and therefore,

immigration reform is fundamentally something that alters the balance on our entitlements in a way that very few other things do, because it grows the number of workers we have per and that's why the contributions to the solvency of the social security trust fund on medicare and medicaid, all of those are enormous outyear benefits that should not be ignored in this debate. >> can i add a tiny bit economically, in 2008, the transition with larry summers, tim geithner, christy roamer peter orszag, the whole original economic team, was trying to figure out what the right fiscal goal was going to be. and economically the decision was the right fiscal goal was to make sure the debt was falling as a share of the economy, which would require the deficit being below about 3% of gdp. that's a goal we achieved in 2014. that's a goal we need to take additional steps on taxes, on health care, and on immigration, in order to make sure we

continue to meet that goal over the next decade and beyond. but it's one that's very consistent with what economics would tell you you need to do to be in a sustainable and strong position to grow economically. >> let me just add to that that the 3% target was also the one advocated by the minor deities that served on the simpson-bowles commission. it's worth pointing out while it certainly included the wisdom of the obama economic team it also included the stamp of approval from that bipartisan commission. two other points that are also relevant to this. the first is that the president's also been clear about the fact that his approach to dealing with our debt and deficit is that we're not going to ask the elderly and working families to bear the brunt of balancing our deficits and getting improving our fiscal situation. that there are a variety of steps we can take that reflect a balanced approach. and that's one that the president's committed to. the last thing is that, i'm going to sort of speak like an

economist, so correct me if i'm wrong, one of the most important things we can do to deal with our debt and deficits is to ensure we have a strong, dimonic, growing economy. and we're not going to have a strong dynamic, growing economy if we're going to chip away at the kind of investments that we know are critical to the success of middle-class families. so making the kind of investments that we know are going to be good for a dynamic growing economy are going to be good for debt and deficit reduction down the line. did i get that right? >> absolutely. >> do i at least get a pass? >> yes. >> okay, dave. >> thanks josh. and forgive me if this was already asked and answered. but the budget proposes to cut the veterans choice card program and take some of that money and move it elsewhere in the v.a. system. can you explain that? is the choice card program not as needed as it was just last year? >> there is not a proposal to cut it. i think that's a mischaracterization.

as we were looking at the projections for the v.a. going forward, recognize that this choice program is a brand-new program. for those not involved in the details, the choice program was set up by legislation that gave certain veterans, who either had been waiting a certain period of time, or lived a geographic distance farther away from v.a. facilities the ability to get a vet van's choice card and seek medical care outside the v.a. system. as we were putting together projections for the budget, you can imagine that it's quite uncertain how many veterans will ultimately exercise that choice and use that program. so what we've done in the budget is propose flexibility that would allow the v.a.

to draw from some of the $10 billion that was set aside for that program. if needed, if it is not fully utilized, and in case for example, more veterans than we expect seek health care within the v.a. system. and so what we were trying to deal with is to give some flexibility in those resources to deal with some of the uncertainty that we have given that this is a new program. and we're not sure how many veterans would choose either to remain within the v.a. system, or to seek health care using their choice cards. and that was the idea. it was not a cut in that sense. >> okay. this gentleman over here. >> on the original point of this being a document from which negotiations can take place, on the matter of financing of infrastructure is the mandatory refire kwnt one of those potential negotiating points? as you know there is a bipartisan bill that's coming to the in congress that may not include that aspect of it.

>> as jason said earlier and he should feel free to act here, we are not supporting of a voluntary repatriation holiday. that's bad policy, costs a lot of money. what the president is proposing is to reform what is a broken system and to fund infrastructure with the one-time revenue. >> just to be specific about that, what the voluntary repatriation does is actually encourage profits to be held overseas going forward. and therefore it ends up being scored as costing a lot of money rather than actually saving money. >> alexis let me give you the last one. the president's getting ready to do his event. over in the east room. >> two quick ones. one for you josh and one for shaun. josh since we have you here today could you describe the president's thinking about arming ukraine?

and shaun, for you republicans are very interested in an old idea of dynamic scoring and i wanted to ask you what kind of challenges that presents to the administration going forward as republicans create their budget proposals and try to calculate the dynamic elements of their features of their budget. >> well, alexis i think i read the same story that you did which may be prompting your question. there are a lot of people who, apparently through one way or another are making their views known on this policy area. i can tell you that the president's view continues to be that this administration needs to -- be continually assessing what our strategy is to further isolate the putin regime in russia. to convince them to re-evaluate their strategy in ukraine. the strategy that we have implemented so far has succeeded in uniting the international community around this principle of respecting the territorial

integrity and sovereignty of other countries. it has also succeeded in enforcing a sanctions regime against the russian economy that has succeeded in devaluing their currency. causing many independent debt evaluators to downgrade the credit worthiness of russian securities. it has caused longer-term projections about their economy to be revised downward and in to negative territory. and so just about any measure that you consider, the russian economy has taken a big hit because of its strategic decisions that president putin has made. as it relates to ukraine. so that pressure is only continuing to intensify and it has served to isolate them. but it has not,s awe've acknowledged, caused him at this point to live up to the kind of diplomatic commitments that he's previously made to de-escalate the situation in ukraine.

so for that reason we're continually assessing what sort of options are available. but certainly don't have anything new to announce at this point. and there are of course, a wide variety of opinions about this. but when we have anything to announce on this, we'll let you know. >> just on dynamic scoring, to be clear the current cbo practice, which we support, is to do a range of what we would call supplementary analyses. and that includes using some of these dynamic models to look at what the potential range of effects could be on macro economic factors. so that policymakers can understand and think about those. the fundamental problem of taking what are right now kind of speculative and

broad-ranging analyses that are not used for budget scoring is that the range of uncertainty in doing these is vast. from the point of, you know, certain kinds of tax changes might actually grow the economy, they might actually in rink them. and so the problem is and this has been the longtime practice of cbo directors for decades is highly speculative and uncertain kinds of effects like that to take them in as scorable savings savings or costs in these -- on any significant bill. really, degrades the ability of policymakers to understand and to do accurate budget. and this is not something that in the past has been partisan. there's been agreement that looking at this information is helpful, but to actually use it for scoring is highly

problematic in terms of being able to really get to precise understanding of what budgeting looks like going forward. >> all right. thanks everybody for sitting through all of these. if you have additional questions, folks from the omb will be available to answer your questions. thank you. and we heard testimony from white house budget director shaun donovan yesterday. this morning he returns to capitol hill to appear before the senate budget committee on the president's newly released 2016 budget request. the administration calling the nearly $4 trillion proposal a blueprint to protect national and economic security. senator mike enzi is the chair of the committee. senator bernie sanders is ranking member. this should get under way in just a moment.

good morning, i'll call this hearing to order. today we have the testimony from omb director shaun donovan of the president's budget plan for the upcoming 2016 fiscal year. when it comes to the budget, we all know that we've lived for too many years with too many blown deadlines failed missions heightened crisis and last-second deals. together, both parties, both chambers, and both ends of pennsylvania avenue have allowed this way of doing business to become the new normal for how we operate. it's long past time to restore regular order to our budget process, and that begins with following the budget time line laid out in the law. yesterday after six years the president's budget was released on time.

my congratulations to mr. donovan, who headed up that effort. i appreciate the work you and your team did to make that happen. being on time is a first small step toward restoring regular order on the budget and it can help our constituents understand a little better what's happening in washington. however, our constituents also understand these truths. i know it from traveling to wyoming and visiting with people and visiting with people around the country. they think we spend too much. they think we tax too much. they think we regulate too. . that we borrow too much. and their biggest worry is that we owe too much. every year since the president took office, he has proposed the same approach to the fiscal challenge facing our government, he wants to spend more, he wants to tax more, he wants to regulate more, he wants to borrow more, and he wants to owe more and more and more and more. his plans always end up with the americans holding the tab, stuck

with the deficits and debt as far as the eye can see. and it's been -- i don't like that word deficit. it gets confused with debt. deficit is our overspending. i promised at our first hearing that i'd follow the numbers, look at the president's budget and here's what those numbers show. first the tax man cometh. under the president's proposal, taxes head higher. a total of $2.1 trillion higher. this boost comes on top of the $1.7 trillion in taxes he's already imposed during his presidency, and i can tell you that nothing good for individuals ever comes from $3.8 trillion in additional taxes. next spending explodes. the president wants to add $259 billion of new spending in the next fiscal year. and $2.4 trillion over the next ten years. that's a 65% increase. let's see, $2.1 trillion in

higher taxes. $2.4 trillion in higher spending. that's still overspending. the president hides what he's doing when he talks about reducing the deficit. it sounds like the debt will go down. no, the deficit is the overspending that we do. did you ever hear of someone being able to buy something with the interest they saved? so the interest payments skyrocket, annual interest costs would nearly triple from $229 billion today to $785 billion in 2025. and i think that's at a pretty conservative interest rate. interest remains the fastest growing item in the budget but provides little in the way of benefit for our constituents. ever hear of anybody being able to spend the interest that they have to pay? at the end of this plan, annual interest costs would be larger than the president's proposed spending for national defense medicaid, or the combined total

of all nondefense agency spending. finally, the president's plan adds $8.5 trillion to the debt. over the next ten years, accumulative overspending would amount to $5.7 trillion in new debt, with the federal debt climbing to $26.3 trillion in 2025. based on projected population figures, this would mean every man, woman and child in america would owe almost $76,000 in payments on president obama's debt. that's compared to $56,000 per person today. that's $20,000 per person more that everybody in america is going to owe. i mean, the child that's born today gets figured into that same -- that same cost. that same debt. altogether these were not the numbers i was looking for. i meant it when i said last week that we must confront spending. bring the debt to an end, and ultimately balance the budget. the president's proposal fails

on all three elements of the mission. i'll listen to the administration make its case on why it's best to ignore balancing the budget. but with 24 states already agreeing that the solution is to gather together to write a balanced budget requirement into our constitution, and with more states thinking about it this is a mission we don't dare dodge. yes, 24 states have already passed a constitutional convention to balance the budget. more than 10 others are in

figures released friday demonstrate firmly that in the united states, more federal spending, more federal overspending, called deficits, more interest costs, and more debt, do not yield a robust economy. our economy still bobs in the back water of too slow growth while jobless rate edges down. and equity markets head up. the number of people who are underemployed, and have abandoned looking for work continues to be too high. as senator sanders says, we have a deficit of employment. wages are stagnant household wealth has collapsed. too many worry the american dream is no longer theirs and won't be theirs for their children and grandchildren. failure of our economy to recover is the president's record over the last six years. he's left too many americans behind. but in looking ahead families and individuals need a federal government with a fiscal plan that helps create the climate for good jobs and good wages. americans need to have

confidence that there's work to be had jobs to be found, and paychecks to be earned. most importantly, they need to know that a strong and successful future is theirs, again, all around the country. it's not too late for the president to join news making the future brighter by submitting a new plan that doesn't mortgage our future to pay for the present. if the president changes course, we can work together to ensure that americans have the strongest possible economy, so competition to hire employees drives up wages and benefits. so we have a solid economy. and an economy in government. i said the people don't understand the gdp. they do understand spending more than we take in. we maxed out our credit cards, we don't have a mortgage payment, maybe we should have a mortgage payment where we monthly pay down some of our debt and then use the interest we save to pay down even more. that's how people buy houses. i looked at the numbers on that.

there's no possibility of that at the present time. we keep coming up with brilliant ideas for new ways to spend to fill in gaps in gifts that we haven't been giving. we don't really take a look at what we already have and need to weed out things that don't wrk. we pretend everything we do is perfection. and with guilty conscience we try to do more. instead we should be doing better. we have over 250 programs that have been authorized. of those, 150 of them are no longer in authorization. but we continue to spend the money on them even though we don't look at them to see what they do and how they operate, and what they should be doing and if they even ought to exist anymore. that means we've exceeded the time that we guaranteed we'd pay for them. last year we had to vote on 1100 billion dollars in spending. i prefer to say 1100 billion, i think it's more honest than $1.1

trillion. we spent $468 billion more than the $1100 billion. if you overspend what you can control by almost 50%, aren't we buying like it was a department store sale? colleagues, that's the sort of change that americans really believe in. senator sanders? >> mr. chairman, thank you very much. the good news is that our country has made substantial economic progress in the last six years since president bush left office. instead of losing 800,000 jobs a month, as we were during the final months of the bush administration, we are now creating some 250,000 jobs a month and are seeing steady job growth over the last 58 months. instead of having a record-breaking $1.4 trillion deficit, as we did when president bush left office in january, 2009, the federal deficit has been cut by more than two-thirds.

six years ago, the world's financial system was on the verge of collapse. today, that is certainly not the case. while we can be proud of what we have accomplished in the last six years, one would be very wrong not to appreciate that there is also a lot of very bad news in our economy, especially for working families. most significantly the simple truth is that the 40-year decline of the american middle class continues. real unemployment is not 5.6% it is 11.2%, if one includes people who have given up looking for work, or people who are working part-time when they want to work full-time. we do not talk about this issue, but youth unemployment today is close to 17% and african-american youth unemployment is over 30%. real medium family income has declined by nearly $5,000 since

1999. incredibly, and i ask my colleagues to listen to this despite huge increases in productivity the median male worker, that man right in the middle of the economy now earns $783 less than he did 42 years ago. after adjusting for inflation. the median female worker now makes $1300 less than she did in 2007. shamefully we continue to have by far the highest rate of childhood poverty of any major country on earth. in the midst of this tragic decline of america's middle class, there is another reality. and this is the main point i want to make this morning. and that is that the wealthiest people, and the largest corporations, are doing phenomenally well. the result, united states today has more income and wealth inequality than at any time since the great depression.

today, incredibly, the top 1% own almost as much wealth as the bottom 90%. let me repeat that. because i think what senator enzi was talking about has got to be put into the broad context. and that is the top one tenth of one percent today own almost as much wealth as the bottom 90%. today, one family, the walton family of walmart owns more wealth than the bottom 40% of the american people, some 120 million americans. in terms of income, what we have seen in recent years is that virtually all new income is going to the top 1%. last year the 25 top hedge fund managers earned more income than 425,000 public school teachers. and that gap between the very very rich, and everyone else, grows wider. the fact of the matter is that

over the past 40 years we have witnessed an enormous transfer of wealth from the middle class to the top 1%. in other words, we are witnessing the robin hood principle in reverse. we are taking from working people, the poor and giving to the very, very wealthy. from 1985 to 2013 the share of the nation's wealth going to the middle class has gone down from 36% to less than 23%. if the middle class had simply maintained the same share of our nation's wealth as it did 30 years ago, it would have 10.7 trillion dollars more. in accumulative wealth than it does today. while the middle class continues to shrink while millions of americans are working longer hours for low wages while young people cannot afford to go to college, while children in america go hungry we have seen since 2009 that the top 1% has experienced an 11.5 trillion

dollar increase in wealth. mr. chairman what we are talking about is not just a moral issue it is an economic issue. 70% of our economy is based on consumer spending and when working people do not have disposable income, when they're not out buying goods and products, we are not creating the jobs that we need. the debate that we are having this morning will have a profound impact on the lives of the american people. many of my republican friends are in favor of cutting social security, cutting medicare cutting medicaid, cutting nutrition programs for kids while providing huge tax breaks for millionaires and billionaires. that is their idea of moving the economy forward. in my view on the other hand if we are serious about rebuilding the disappearing middle class reducing income and wealth inequality and

strengthening social security, medicare and medicaid we need a budget that creates millions of jobs, raise wages, makes college affordable and demands that the wealthiest people start paying their fair share. in all of these matters the president's budget begins to move us in the right direction. at a time when almost all of the income gains go to a top 1% and when corporate profits are at an all-time high the president's effort to end egregious loopholes while providing tax breaks for working families is exactly the right thing to do. at a time when real unemployment is over 11% the idea of increasing substantially investment in our infrastructure, and creating hundreds thof thousands of jobs is the right thing to do. at a time when 20% of our kids are living in poverty the president's budget triples the child care tax credit to $3,000 per child, and makes an additional billion dollars

investment in head start exactly the right thing to do. at a time when more americans are unable to go to college the president proposes the first two years of community college to be free. that is exactly the right thing to do. let me conclude mr. chairman, by saying this, if we are serious about figuring out how we're going to pay for what this country needs, we might want to take a hard look at why major corporation after major corporation in some years pays absolutely zero in taxes. from 2008 to 2013 general electric made nearly $34 billion in profit in the united states, not only did it pay nothing in federal income taxes it received a tax break much nearly -- tax rebate of nearly $3 billion. and the list goes on and on and on. there's a lot to be done. our job is to protect the middle class. let's get to work doing that. >> thank you, senator sanders.

our witness this morning is shaun donovan the 40th director of the office of management and budget. prior to taking the role as head of omb director donovan served as president obama's first secretary of housing and urban development. director donovan has a long public service career, both in federal, and local roles, including commissioner of the new york city department of housing preservation and development, and as acting federal housing administration commissioner during the transition between president clinton and president bush. his private sector experience includes work at the community preservation corporation in new york city, and as a visiting scholar at new york university. director donovan holds both bachelor's and master's degrees in public administration and architecture from harvard. director donovan, as the architect of the administration's budget, we look forward to what you have to say. for the information of colleagues, director donovan will take about seven minutes

for his opening testimony. director, please begin. >> chairman enzi, ranking member sanders, members of the committee, thank you for welcoming me here today to present the president's 2016 budget. to echo your comments, mr. chairman when i met with so many of you over the summer, one of the key themes everyone echoed was that we needed to get our budget process back into regular order. and i truly hope that this on-time budget that i'm presenting today is the first step toward that regular order. the budget comes on the heels of a break flu year for america. and builds on our fiscal and economic progress. including the fastest job growth since the 1990s, and the fastest sustained period of deficit reduction in 60 years. the budget is a blueprint for the president's vision for middle-class economics in the 21st century. this means helping working families by making their

paychecks go further, preparing americans to earn higher wages, and making america the place where businesses decide to innovate, grow and create good, high-paying jobs. the budget shows that we don't have to choose between investing in the middle class and being fiscally responsible. first, because we cannot afford a return to mindless austerity, the budget proposes to end sequestration, fully reversing it for domestic priorities in 2016 matched by equal dollar increases for defense. by replacing sequestration with a combination of smart spending cuts, program integrity measures, and commonsense loophole closures, the budget makes room for investments in our economy, and our national security. for example on the domestic side where sequestration would cut r&d to its lowest level since 2002 adjusted for inflation, the budget supports cutting-edge research like precision medicine efforts to combat antibiotic resistance, and the brain initiative which is helping to revolutionize our

understanding of the human brain. likewise, rather than cutting inflation adjusted national security funding to the lowest level since 2006, the budget makes responsible investments to protect our national security restoring readiness, and the investment in modernization needed to ensure america's continued technological edge. i want to emphasize that every investment in the budget, including both the discretionary investments made possible by reversing sequestration, and mandatory and tax changes are more than paid for through spending or tax reforms. for example the budget would provide new and expanded tax credits for middle class families and would more than pay for these investments by reforming capital gains taxation and making it more costly for the biggest financial firms to finance their activities with excessive borrowing. it also uses one-time revenues from pro-growth business tax reform to pay for an ambitious six dr. year surface transportation proposal that would give states and localities the certainty they need to

invest in infrastructure that will spur inanother vags and accelerate job growth. meanwhile, the budget also achieves $1.8 trillion in deficit reduction primarily by focusing on the key drivers of our budget challenges. health care cost growth. building on the historically slow rates of health care cost growth in recent years that have already significantly improved our fiscal outlook, the budget includes roughly $400 billion in health savings, which grow significantly over time. raising about $1 trillion in the second decade. the budget also raises about $640 billion in net revenue for deficit reduction from curbing inefficient high income tax expenditures. this year's budget again reflects the president's support for commonsense comprehensive immigration reform along the lines of the bipartisan senate passed bill. immigration reform would reduce deficits by almost $1 trillion over two decades, while

strengthening social security, and growing the economy. as a result of these measures, the budget maintains deficits well below the 40-year historical average during every year of the budget window. it meets the key test of fiscal sustainability, putting debt as a share of the economy on a downward path, showing investments in accelerating growth and a strong middle class are compatible with strengthening the nation's finances. and to ensure that our country remains strong and prosperous both now and in the future it makes smart investments to give every american the chance to contribute to and share in the benefits of growth. i look forward to working with congress and this committee in the coming months. thank you and i'd be glad to take your questions. >> wow. you didn't even come close to seven minutes. [ inaudible ] we do appreciate that. now we'll turn to questions

last week when cbo director elmendorf testified, he did a good job of simply answering the questions asked by senators so that members on both sides had more questions that they could ask and get answers. i hope you'll follow that model this morning director, so that we can all have as much asked and answered as possible. i'll alternate recognition between republican and democratic senators following seniority for those who were here when the hearing was gavelled to order. after that i'll recognize members based on order of arrival. if you're not here when your name is called i'll skip you and pencil you in at the end of the question list to be recognized after everyone who was in attendance has the opportunity to ask director donovan questions. with that, director i'll begin with my first question. you testified that stabilizing the debt as a share of the economy and putting it on a declining path is a key test of fiscal sustainability. but debt still goes up every year in the president's budget and dollar terms and chose

little movement as a share of the economy. and again, that's gdp and i don't think people understand gdp. they do understand that we spend more than we take in. and even though we're getting record revenue, why is it a sufficient goal to merely tread water on debt as a share of gdp? >> first of all, senator, i think if any family would look at it their finances are based on what they earn. -- >> all right, thank you. apologize. i think like any family in america, the key way they think about their finances is based on what they earn. and so gdp is really the measure of what this country earns. it's the size of our economy, and most economists on both sides of the aisle really think of looking at these numbers as a share of gdp, as the correct measures. the other point i would make is that as director elmendorf no doubt testified under current

projections, under current law, over the next ten years debt as a share of gdp would grow substantially. in our baseline we show it growing to almost 81% of gdp. and so with this $1.8 trillion of deficit reduction that our budget would achieve we actually help to not just stabilize, but also begin to bring down the debt by the end of the window. and that is a substantial difference from our current path. >> in looking at it the president's budget never reaches balance. at its low point in 2017 the overspending is $463 billion. and that grows steadily from there, reaching $687 billion in 2025. to secure the middle class and any hope for future generations we need to pay down the debt, and that's not possible with overspending this large. can we pay down the public debt?

that is have the dollar amount of debt outstanding be less than the amount in a year earlier without balancing the budget? >> again, senator, the key metric for fiscal sustainability that is not only the measure that we use in the administration, but that is, i think, widely accepted, is that deficits below 3% of gdp are critical for long-term sustainability. that's a measure that we met for the first time this year, after record reductions in our deficits. over a two-thirds reduction since the president came in to will keep us in every year of the budget window below the 40 year average for deficits that this country has faced. we think that key test of sustainability. >> okay. most people that i deal with think that if you spend more than you take in that you made a mistake. but the analytical perspective's

volume of the budget documents has an interesting table on page 32 entitled trends in federal debt held by the public. that table shows interest costs as a percent of total outlays will increase steadily under the president's budget. can this trend continue forever without compromising our ability to provide government services? >> i think what the long-term fiscal outlook chapter shows in addition to what i've already said, is that we would stabilize the debt as a share of the economy, not just over the ten-year window but over the 25-year window, as well. and as i think we all recognize, what we are facing in this country is a real demographic challenge with the aging of the baby boom. the key thing that we need to do to ensure that we long run fiscal sustainability is focus on health care costs. we've seen the lowest growth in health care costs in 50 years.

over the last few years, we have many, many measures, including over $400 billion in savings for medicare and medicaid proposed in the budget, that increase over time. and, we need to recognize that we need to grow our workforce, and our economy, and immigration reform is perhaps the single most important thing we can do there. and that will add to the sustainability of social security over time. and so we think we're attacking through this budget the key drivers of long-term deficit and debt. >> my time is almost expired. i heard your comment about health care costs going down. last year i had the head start folks come to me and complain that their budget was being cut $7.3% instead of $3.2%. i checked on it and found they were keeping most of the money in washington instead of where the kids were and it got reversed and they got all of their money. what they found was their health care costs have gone up so much

they still can't add the kids back into the program. so we've got a lot of things we need to work on. my time has expired. senator sanders. >> thank you, mr. chairman. mr. donovan in case you haven't been made aware we have a philosophical divide on this committee of some degree. many of my republican colleagues believe that what is best for the country in the future is basically to cut cut, cut cut, cut, social security medicaid nutrition, et cetera, et cetera. others of us don't think that is what is best for working families in this country. so i want to mention something to you. my staff did some research and what we found is that it turns out that major profitable corporation after major profitable corporation not only paid zero in a given year in federal taxes but in fact got rebates from the irs. just some examples. from 2008 to 2013 general electric made nearly $34 billion in profits in the u.s. and what was its tax break?

what was its tax burden? zero. in fact it received a tax refund of nearly $3 billion. verizon from that same period of time made up of $42 billion in u.s., it received tax refunds of $732 million. they didn't pay any taxes. they actually got rebates. now i think the president's budget begins to address some of these issues. can you talk to us in your view, about whether or not it is appropriate that one large major profitable corporation after another pays zero in federal income taxes? >> well, senator, i think we could all agree on a bipartisan basis that our current corporate tax code is more complicated than it needs to be. that it has a broad range of wloop loopholes that create not just unfairness across companies, but also, frankly make our economy less efficient and hold back economic growth.

so we do support, and the budget lays this out, reform of our business tax system that would not only make it more fair, but in the long run, would increase economic growth. and we would do that by closing a broad range of loopholes and actually lowering the basic rate from 35% down to 28%. we think a particularly important piece of this is around international tax reform, the president's spoken out very clearly that the trend of inversions of companies you know, buying small companies overseas, and putting a domicile, relocating there, is a serious problem. this budget would not only close those loopholes, to try to stop to the maximum extent possible companies moving overseas, it also creates more broadly an international tax system which would really make it more fair and level the playing field, bringing jobs back to the u.s. >> thank you.

mr. donovan there will be i suspect, a major debate coming forward on social security. i happen to believe not only that we should not cut social security, but we should expand benefits. i suspect my republican colleagues disagree. but first order of business done by the house republicans was to pass a rule which could result in a 20% reduction in benefits for people who receive disability benefits, laying the groundwork for either cuts in disability benefits, or, in fact, the social security for older people. your budget did not do that. you did what has been done 11 times in the past what we call readjust. social security has enough money to pay all benefits for the next 18 years. you simply took money from one account and into the other. why did you do that? >> well as you said, senator, this small reallocation of

social security taxes is the simplest, most direct way to ensure that on a combined basis both social security trust funds are -- have reserves available through 2033. and this is a step that's been taken on a bipartisan basis under democrats and republicans it's actually been done both ways from disability to the other trust fund and back to social security, and so we think this is the most simple and critical way. and remember, these are benefits that have been earned by folks paying in over time. we should not put them at risk of getting a 19% cut in their benefits after they paid in to this system over their working years. >> okay. mr. chairman my time is almost up, i'll yield the floor. >> senator grassley? >> i think the president's budget is an ideological statement.

based on the faith of government making decisions as opposed to individuals making decision ss i think it's based on the proposition that 535 people here in congress are a heck of a lot smarter than 137 million taxpayers and that gets to the issue of increases taxes or not. quite frankly i think the dynamics of the american economy is going to advance the economy much faster if you have 137 million taxpayers decide whether to spend or save and how to spend it and how to save it as opposed to those of us here in the congress of the united states and the president of the united states making that decision. and it's not a question of big government small government, it's a question of where -- what does the most to expand and grow our economy, because what this country needs is not more tax rates, or more taxes.

we need more taxpayers. and that's going to happen by the capital investment that individuals make. not what the government makes. is going to really grow the economy. we have a 50-year average that has said that if you have one dollar tax increase, it gives license to congress to spend $1.13. that's not going to do anything about the deficit. a license to spend more money brings us further into the hole. you can't raise taxes high enough to satisfy the appetite of congress or any president not just this president to spend money. if a tax increase would go to the bottom line, reduce the deficit, that would be one thing. i think we might look favorable upon that. but that's not going to happen and i think you see that deficits matter. the president's budget speaks to deficits mattering. they have consequences. because the president's own

budget shows that the cost of interest is going to go up from a little less than $300 billion a year to $800 billion a year. so, we have a spending problem, not a taxing problem. and i don't see in this budget and i suppose i could say this even about republican budgets, that there doesn't seem to be a shame in increasing deficits in this case, under this budget, by $8 trillion over a ten-year period of time. so this gets me to what the president has said publicly about the middle class and my question will go to this. the president seems to believe that we need the deficit spend today and for the next ten years in order to, in his words, invest in initiatives to help the middle class. however, cbo has analyzed in great detail the long-term consequences of deficit spending. they found that in future years a growing portion of people's savings will go towards buying

government debt remember than towards investing and productive capital goods. that crowding out of investment would reduce the size of the nation's productive capital, resources, that produce economic benefits over time. the smaller capital stock would result in lower wages and incomes, making future generations worse off. now that's not my finding, that's cbo's finding. so, two questions that you can answer at the same time. does the president think the nonpartisan congressional budget office is incorrect in stating that future generations will be worse off by taking no action to reduce deficits and debt, and to follow up to that wouldn't reducing the debt burden of future generations be more prudent than ten more years of deficit spending and growing debt? that's the only question i'll ask. >> senator we do take the spending and deficits and debt

seriously. that's why we have taken action over the full six years of this president's time in office, and achieved the fastest deficit reduction since immediately after world war ii. and brought deficits down below our 40-year average. in addition we make further changes in this budget both on the spending side, and in other areas, that would reduce our debt by $1. 8 trillion. our deficits by $1.8 trillion over those ten years. and so we do take that seriously. but we also take seriously that this country needs to invest in the things that are going to grow our middle class. we cut taxes for 44 million families by an average of $600. through this budget. and we do ask that where we have places in our tax code that are not only unfair but actually discourage economic growth that we make changes to our tax code,

as well. whether it's returning to the capital gains rate of 28% that was effective when president reagan was in office. or to get rid of inefficiencies like the so-called capital gains stepped-up basis where we're actually encouraging families, the wealthiest families, to hold assets in unproductive ways, and when an average american would have to pay tax on that because they couldn't hold it until their death, we're allowing the wealthiest families to basically hold those assets and never be taxed for capital gains. and so we do believe that we need to focus on our deficits and debt. we do in this budget. we continue to make strong progress like we have over the last few years. but we also recognize that we have to invest in our future, as well. >> thank you, mr. chairman. >> senator widen isn't here. senator stabenow. >> thank you mr. chairman. and welcome, director donovan. >> thank you. >> i have been on this committee for awhile and when i think

about since 2009, you guys inherited a very big hole. and been stepping forward out of that hole for the last six years. and i want to congratulate you. i remember when we were on this committee talking about simpson-bowles commission the bipartisan commission that said we needed to cut $4 trillion in order to be able to get a handle on and stabilize the debt as a share of the economy, and we're step by step by step we're now at $3.3 trillion of the $4. i would suggest that's pretty good. and the fact that we are now looking at less than two-thirds of the annual deficit of what you inherited in 2009, less than two-thirds, less than two-thirds, i would suggest that's pretty good, too. $1 $11.2 million jobs. i'd like very much to have more. nearly 3 million last year, but

i couldn't agree with you more that the only way that works is to stop talking about trickle-down economics and talk about and actually do something, that makes sure the next steps are laser focused on middle class. so before i ask my question though, i also want to say that we talk a lot about debt and about how we should never spend more than we have. i would just suggest i have a mortgage. when something's important we spend more than we have. we have a mortgage for our house. we have a car payment. and as somebody who makes a lot of automobiles i would welcome more people doing that. we put our kids through college. unfortunately too much debt on college. many, many colleagues here, on the other side of the aisle felt going to war twice, not paying for it was a priority. so the issue really is how do we manage our debt and move forward and not have it overwhelm us. but we certainly set priorities

for when we -- for our families choose to take on debt. so it is a question of how we manage that. i would like to move to the topic of health care and first of all congratulate you on adding dollars for medical research and the brain initiative. one of the ways that we can bring down costs that will save millions of lives is to focus on brain research. one out of five medicare dollars is spent on alzheimer's. one out of five. one out of five. and so i'm very encouraged and believe we should even be doing more in that area. and i want to talk about health care as part of bringing down cost. latest cbo projections so that more americans are finding full-time work getting health care coverage, we know that future americans are going to bankruptcy because of medical bills. good thing. tax credits that we passed are helping people afford coverage. people who already have

insurance are actually getting what they're paying for now. and, can't get dropped. can get coverage even if they have a pre-existing condition. but we are seeing an ongoing debate, and very soon we'll see even more of that here in the senate. to reverse that, stripping insurance coverage from working americans that will increase the debt, the house has voted over 50 times to repeal health reform. the supreme court's considering whether or not to have the process that would put more millions of people into health care without health care. so, could you talk about how the health care law has helped to drive down medicare spending? as well as the health care costs for americans? >> senator, i appreciate you focusing on this because it really is the single most important focus for if we want to talk about long-run deficits. but also, a critical thing for

middle class families is affordable health care. and the affordable care act is working. we have now more than 10 million less fewer uninsured americans. and more broadly, millions and millions of americans who had health care before -- health care insurance, but have actually seen, whether it's keeping their kids on their plans, not being kicked out because of pre-existing conditions, and a broad range of things, so we really have made progress. on the fiscal side what we've seen is the lowest health care cost growth in 50 years. and that has already improved our long-run fiscal picture dramatically. just take cbo's numbers where they say just from improvements we've seen over the last few years, we're going to spend $190 billion less on medicare and medicaid in the year 2020. thanks to the lower growth in health care costs that we've already seen. i think we can work to the on a

bipartisan basis to build on that. we have $400 billion in medicare and medicaid savings built in to our budget. and for the first time, we're including a permanent sgr, or doc fix proposal in our bill, fully paid for. it builds on bipartisan legislation, and it adds provisions that would go even further in terms of what we call delivery system reform. making sure that we pay doctors and hospitals based on the quality of care that they're providing, not just the quantity of care that they're providing. so i think this is an area where we've made a great deal of progress. more people are covered. they're getting better coverage. and, in fact we can build on that through this budget and work that we can do on a bipartisan basis this year. >> thank you. >> senator sessions? >> thank you, mr. chairman. appreciate your leadership and look forward to working with you. i agree that senator sanders that the middle class is really

hurting. working americans today are not doing well. since 2000 the 2007 median income in america is down $4,000 income for a family. this is catastrophic. this is absolutely one of the most dangerous trends we've seen in some time. and it's accelerated over the last decade. it's accelerated under your president's, our president's watch, mr. donovan. the problem is your policy. tax more spend more, borrow more regulate more, obamacare more, an immigration policy that dominates the market with workers from abroad, when we don't have enough jobs for american workers, pulling down wages of americans. that's what caused this problem. in my opinion. and that's where we disagree senator sanders. we got a problem, but your ideas will not work they will never

work. now, mr. >> reckless spending endang rs the future of the public. we remain on an unsustainable debt course. let me ask you, does your budget spend more or less than the, that we agree to with president obama in the budget control act of 2011? >> our budget overall reduces spending relative to current law. >> i just asked a simple question. you work with the taxpayers, mr. donovan. i'm asking you on their behalf a simple question. does your budget spend more money next year than the current law of the budget control act allows? >> overall, our budget reduces

spend ing spending compared to current law. >> overall, your budget spends $74 billion more nec year than allowed by current law. isn't that true? is. >> i think what you're focused on, snarpt is diskrer nar spending and i think there is broad agreement that -- >> that's what the budget control act -- >> sequestration is hurting our military readiness. staff testified to that this past week and it is hurting our able the tyty to invest in the things. >> you work with people shlg mr. donovan. i asked you do you propose spending -- than was agreed to in the budget control act. yes or no. >> i believe i've answered it. >> no you haven't. >> reverse sequestration and our

budget fully pays for those increased investments on the discretionary side with mandatory spending reductions and cutting spending, wasteful spending. >> one of the ways you fix a budget problem is when you agree to a spending limit, you stick to it so i'm going to ask you one more time. see if we can get this straight. american people need to know. you propose to spend more next year than the budget control act would allow? >> we proposed to lift the sequestration caps which have been harmful to our military readiness, economic growth. we more than fully pay for those with reductions in spending on the mandatory side and reducing wasteful spending. >> so you intend to spend more than we agreed to. will you say ta? >> our budget proposes zplsh why won't you say that? what is it about this that allows you to continue in that way? >> senator, i think there is broad bipartisan agreement that

discretionary spending is not driving our deficits and in fact, our discretionary spending even with the increases -- >> but you won't give the american people for whom you work a simple answer. >> it remains at the lowest level -- >> time's running out. one more question. under your statement that you gave us earlier you said that the immigration policies of this president would make social security more sustainable over time. now, isn't it true that everybody in social security does not pay in enough money to justify the withdrawals that they will take over their lifetime and by adding millions of more people unlawfully here to the social security role, will that not make social security less sustainable over time than it is today?

yes or no. >> just yesterday the actuary for the social security administration confirmed that the president's executive actions that he took late last year would improve the prospects. >> what period of time? >> over the -- >> over the life of the individual? you're not counting the times that these individuals would be drawing their benefits, mr. donovan. you're counting a short-term window in which they would pay in, creating a short-term surplus of money or additional flow of money but you're not counting when they draw out. it's going make the social security hold deeper. it's going make it harder for us to save social security and medicare and you know it. and you're suggesting to the american people directly, directly different than that. it's wrong. >> senator, you don't need to take my word for it. the actuary -- >> senator's time has expired.

>> along with cbo suggests the action by the president will reduce. >> senator whitehouse. >> thank you very much, chairman. >> good to have you here. could you please tell us a little bit about the part of your budget document that is called federal budget exposure to climate risk? and what you see and anticipate in terms of costs of taxpayers will bear from our failure to address a climate change problem? >> what we've done for the very first time is to very specifically quantify as much possible what we have seen over a number of years and what we expect to see going forward in terms of what we expect to see. we tried to focus on programs

like disaster assistance. fema, flood insurance property insurance is another area where we've seen substantially increased edd claims as a result of more extreme weather and i think the basic analysis is that it is foolish for us not to act and both take further steps to reduce climate change reduce greenhouse gas emissions but also to prepare our communities for the more extreme weather we're seeing. not only will those save lives, but dollars as well. fema shows that where we invest in protecting our communities, we get a 4-1 return in future savings. climate changes, focusing on

climate change is a wise fiscal policy, as well as for other reasons. >> turning to health care i think most people agree that health care cost is really what's driving our long-term debt and deficits. do you agree? >> it's a measure of what's driving them yes. >> health care system in the united states that is gro tes kly expensive per capita compared to any other nation. do you have expectations to what the increases announced in medicare particularly for the amount of the payments in medicare that would be taken off of wasteful and expensive fee for service payments and on to more efficient equalquality based payments will result dm. >> we have not included in the budget specific savings that

come out of the delivery system reform improvements. secretary burrwell announced. significant additional savings literally hundreds of billions if not trillions of dollars of long run savings that could have come out of those delivery system reforms unfortunately, it's just too early at this point to reliablely include those, so we've included over $400 million of savings that is quantifyiable quantifiable. if we keep pushing on reform, the bipartisan sgr the dot fix we've included we have lots of potential to dramatically increase savings and lower cost growth in the future. >> and finally, with respect to the plan that the budget announces to go after offshore parking of funds by corporations to avoid american taxation, so

call repatriation, your program appears to have three elements to it. one, it's mandatory. two, it's, there's a 14% opportunity to repate rate the money and future efforts to park revenues offshores to avoid taxation will be faced with a 19% tax. can you explain why those are important policy considerations when we go about dealing with repatriation? >> absolutely. first of all, you're right. unlike the voluntary tax holiday that some have proposed which we oppose we are proposing a mandatory toll charge of 14% on the are roughly $2 trillion of earnings that are overseas and have not been taxed. when you do it as a voluntary measure, you encourage the

future offshoring of profits and in fact, cbo would likely support that with a substantial cost, not revenue. our plan on the other hand raises enough money to fund a six-year reauthorization of the highway trust fund at 40% higher levels than we're currently funding, so it's a significant opportunity to invest in the middle class and infrastructure. second -- zpl my time is expired, i'm afreud, so i will leave the witness hanging. if there's anything else you'd like to add by way of response. >> i think it's critical that we have a policy that fixes this system going forward as well. creates a level playing field and encourages american companies to locate here and to bring jobs back here as well in our system would do that. >> thank you. >> thank you, mr. chairman and mr. donovan for being here today. i want to go back to initiative the chairman raised with you, which is the question of