those individuals because one of two things happens. it is either harmful to the individual or the states. if we have an economic downturn or a change in the way the care is provided. without the flexibility to respond to that, that the beneficiaries, that is where the cuts will go in terms of meeting the numbers. either that will happen or it will go on to the state's balance sheet and we believe that is not a good approach to doing this. as you know we are working with states on waivers innovative approaches but believe that is a an approach and the reason we don't like that approach because of the damage it can do to beneficiaries as well as states. >> i appreciate that and my time is running out. and i'll raise two issues and do most of it by way of written follow-up. and one is children's hospitals and we have three hospitals children's hold in pittsburgh

and children's hospital in philadelphia and saint john's, and i was hoping for a commit beyond the $100 million and i think we are getting great results and i will submit a question on that and now that i'm out of time as well as the treatment of foster care for giving foster parents a specialized training they need to take care of kids that have particular challenges but i'll do that by way of a written question. but thank for your testimony and for being here and for your service. >> thank you, senator. >> thank you mr. chairman and thank you madam secretary for your service. i would like to in a very short period of time see if we can cover four topics. new jersey and protection and number three autism coverage and number four the midnight rule. so let me first of all, before we go to that, i want to

highlight key components of the president's budget proposeal that i believe are critical and important for the -- in my view the most important part of the population and that is the children and these are the home visiting program or the chip program and he calls for a voluntarily home based program and is helpful for pregnant mothers and babies and extension of the c.h.i.p. program and i strongly support these programs and i hope the committee works to extend them as soon as possible and i look forward to working with you on that. on the medicaid enrollment program, there is a serious issue in new jersey on an estimated 44,000 medicaid applications backlogged and still waiting to be processed. now i believe you were in new

jersey recently and you may have heard about this issue first-hand and because of the backlog people in the state are unsure of their coverage or foregoing care. and it seems fundamentally wrong if people are eligible that they are prevented from getting the health care while their eligibility is being determined. so when i've asked this question before i was told that cms was considering measures to address it and both carrots and sticks approaches. has the cms taken any administrative action to push states to clear the backlogs and what about measures to require states with provisional coverage until the application is completed which is what a judge in california ordered to be done. >> senator, i'll have to go back and check because my knowledge of the number -- my understanding is we're at a much lower space from the 200 -- that

the 44,000 is something i want to check on is my understanding is with regard to the 2014 backlog, that we are almost through that backlog. and so i want to come back on that specific issue because it relates to the second part of the question and that the work-around we've done with the state of new jersey in using the federal market place to process things and it is a flat file and the technology we're using to do that, that we are through that and very close to full automation on the front end for 15 so i want to make sure. >> i hope that is the case. but that is not my understanding. >> that is why i want to make sure. >> so there are different entities on the ground. okay. new jersey is the home to leading researchers who work every day to advance innovative therapies to combat disease and illness. and in order to guarantee that progress that often provides for both cost-savings and life

life-enhancing drugs we need intellectual drugs and i have difficulty in how the administration calls for a reduction in the patent protection for complex biologics from 12 years to seven and when your fellow cabinet member ambassadors tell me they are fighting robustly to keep the 12 year patent exclusivity on biotics on free trade and how does he do that if we are seeking to undermine that and so have you been engaged with the trade department on this particular question? >> yes. and my understanding that it is not yet settled with regard to where we will be on tpp. >> i understand that. but the question is if you come here and say we should reduce it from 12 to seven and he is negotiating to say it should stay at 12, isn't that

developmental in functioning. >> the administration's admission is we believe that we should go to seven. >> well that is something we would have a real problem with. >> and finally autism coverage when you were in your confirmation hearing we talked about this. i would like to know i'm hearing from families who come to realize that their plans lack or restrict benefits which is not what the law calls for. i want to know whether hhs is doing everything to ensure all autism services including applied behavior analysis are in all qualified health plans. i hear from families that is not the case. and secondly on the two midnight rule i want to say this is something that congress voted to delay for -- for a period of time as a result of last year's sgr bill. i don't get a sense that much has been done with cms and the hospitals, physicians and

medicare recovery contractors once the delay is lifted in terms of dealing this question. maybe you can inform the commity, with -- comitiy. >> with regard to the two midnight rule the problems around that rule, that is something we would like to have a conversation with, as you stated it is statutory in terms of what we are doing. we would like to have the conversation to move forward in a way that reflected medical judgment. did you want to -- the autism issue i wanted to touch on briefly. what cms has done is move to have definitions that will make it clearer and help and i hope you know the states are implementing the quality health benefits and the step we believe we could take and did take is try to get clearer definitions with regard to the issues in

autism. >> and the two midnight rule i just point out, the extension that the congress passed ends at the end of next month. so unless we figure that out, we'll have a problem again. >> thank you, mr. chairman. >> senator portman -- or let me see? is that right? >> yes. >> thank you mr. chairman. i appreciate it and madam secretary thank you for being here because my colleague just talked about the two midnight rule i have to say i share his concern over. i've spent time with rural hospitals back home and spent time in urban hospitals and they don't get it. and it penalizes our beneficiaries and we have to come up with a way to address hospital in-patient and observation stays and you are creating by these rules you are incentivizing behavior that will cost us more in the end. so i hope you work with us on that. one thing i want to talk about

is substance abuse and medicare advantage and the budget. with regard to medicare advantage, i have a strong concern about the way in which there is a buy as and the current way we're evaluating the program. and a back ground on this. yesterday i sent a letter to cms which is copied to you as well. senator nelson and i on this committee, co-authored it and we got 40 members to sign up and 21 members of this committee on a bipartisan basis and made a point that medicare advantage is working. in ohio 20% of the seniors on it are seniors so-called special needs cases and our satisfaction rate is 85%. so people like this program. it provides them a comprehensive health care program integrated care disease management that everybody talks about and this has been shown to lower cost and improve patient care.

so medicare advantage is something that is working, in my state. and seniors like it. and yet cms has this way that they are evaluating the various health care programs that has a buy as -- a bias with regard to the medicare advantage plan because we take care of duelithibles and low-income seniors. cms has claimed they are taking steps to this problem through plans that demonstrate this bias and i want to bring this to your attention and what plans you have in releasing the results of that analysis so it is transparent and bringing a solution to this problem. >> we believe the medicare advantage is working and the changes put in over the period of time as you are reflecting, whether it is the fact that 99% of beneficiaries have access or the percentage of four star plans has gone up to 67% or that

we see an increase with people and so we agree that the program is working. >> let me say, if you get a rating with too few stars, the plan goes out of service. that happened in ohio. a plan was run out of business so it is important we get the evaluation right. >> it is important to get the evaluation right. we appreciate the congress's support to do studies on the question of socioeconomic impact on these measures. we are working through that through our analysis we've been given and there are two places that is focused. one is medicare advantage and the other is readmission. we can't wait on the analysis so we are continuing through the regulatory process to look at the issues you've raised with regard to how does the population you served impact these ratings. >> with regard to substance abuse, thank you for your willingness to put in at budget a comprehensive look at what is a growing problem in my state

and around the country, which is opiate addiction prescription drugs, now more heroin number one cause of death in ohio today is heroin overdose and now surpassed traffic accidents. the strategy has to include prevention and treatment and a recovery and newing some new innovative medical interventions to deal with treatment and recovery so i thank you for that. senator white house and i would like to work with you and like your help on that and get co-sponsors and get this to the floor and it is a problem that has been swept under the rug and it is time to get it underway. >> i recognize your leadership as part of our thought that this is a place where there is bipartisan energy to do this, not just with congress but with governors as well so i look forward to you on the outlined

areas that you have that are the right strategic approach. >> and there is best practices and research in the best role to play. and finally with the little time left, but the obvious problem in our budget is healthcare. and when i left omb and when you left omb, you had the same reaction, people what is the problem with the budget? is it the tax system, the wars overseas or is it health care? health care is driving the long-term projections that are unsustainable and i would say what i said before in your nominations hearings and so forth, we are looking for help. congress is hesitant to take on some of the issues because they are controversial and politically difficult. and i look at your budget and you've taken health care costs over the next ten years from increasing 105%, so more than a doubling, down to 99% and you are taking credit for that.

and i look at the changes and frankly a lot of them are not sustainable because they are cutting providers in a way that has not benefited in the past and cut providers and the question is how and when do we get serious about this? and if we don't, how can we deal with this historic level of debt that we have and the percent of economy, the budget goes to levels we haven't seen since world war ii. >> with regard to the issue i believe we have put out proposals that are a way of dealing with it in specific terms and whether it is a proposal of medicare advantage and different rules or colleagues that have raised on this side, some colleagues raised other concerns with our proposals so we are putting things together that is a balances approach. >> my time is expired and we have others who want to talk but let me make the obvious point

which is we are still seeing under your budget a doubling of health care costs. and by the way, driven by a lot of things and one is obama care. significant increases in health care costs, by 62% based on cvo. so these are issues we are making worse not better. >> i do think it is important to point out for medicare on per capita basis it is almost left. >> and why do you think this is? i'm sorry, mr. chairman one more question. >> i believe that we have a baby boom generation coming through. the number of people going to be on medicare, it is going to be larger. and as a nation, we're going to have to make a decision about how we feel about that during the time in which that group of people has to pass through. and i think we're just going to have to make a decision about what are we willing to do and how are we willing to think

about that in terms of the choices that we make and those come in the form of those people and the commitments that we've made that i think both sides of the aisle we believe we should make good on. >> i'm out of time. but let me make the point, congressional budget office and not republicans saying this, the driver of medicare, is medicare party, it is not the obama care model and if you look at the analysis, obama care is responsible for 52% of the growth and spending and aging the population being the reason is only 21%. so we have to get serious at looking at what is working when millin tavern said the average costs are 40% less than the original estimates and the analysis by the committee for forward budget knows party is the reason we've seen this cost

of medicare. my time is done so i look forward to working with you. >> senator ize man. >> thank you, senator. you were doing great so i don't mind you taking time. >> and i would put an asterisk in there. that long-term reform is a key to getting the macro gone. and the longer we wait, the more the debt. i want to take my five minutes to talk about my ten minutes i took of your time last year. i had the benefit of being on the health and finance committee and your confirmation to hold your foot to the fire and i spent all 10 minutes to talk about a 16-year effort and i want to thank you for doing everything you said you would do last year and in this year's budget submitted by the president and it is a budget at

$21 million for fy 15 and 16. we thank you very much for that. >> thank you senator. >> now back to the subject at hand. as chairman of the veterans committee, i had a town hall meeting at the v.a. yesterday, there were four of us the ranking member and the chair and the house of the senate and we spent four hours with the v.a. and we were nationally televised, and 300,000 employees and the veterans healthcare. we found out yesterday morning just as we were walking into the meeting that the president's budget would por tend that the veterans appropriations approved last year might be moved in the veterans choice wasn't as great as it was purported to be. and that boernled me a -- boernled me a lot because we spent a lot of time debating because veterans a chance to go

to a medicare approved physician and get the treatment they needed. we've only had one month where the bill has been in effect, the month of december where we have the numbers and in the month of december, of the 8.5 million veterans who received veterans choice cards 150,000 inquired about an appointment. that is not enough evidence to tell you if it is overutilized or under utilized but i want to make sure the administration doesn't assume for some misguided reasons that veterans choice is not as what it was expected to be when we passed it last year. it is our one chance to see that we keep the promise to our veterans we keep the veterans health services from becoming such a huge organization that totally mismanaged and under managed and mr. mcdonald is serving without pay and doing everything you would ask a public servant to do but if the administration is considering proposing cuts in veterans

choice and the two-year woepd that we appropriated last year, we're going to have some serious problems. >> so in terms of the v.a. budget and those v.a. issues, i would let sect mcdonald speak with them n. regard to our interaction with v.a. we continue to work on the areas and issues where we can. one of the most important issues for us is the mental health space. and the other place that is important and it gets to the care issue, is the coordinator for electronic medical records because that is important to get the veterans the information they need and where they need it and i hear the point and i will make sure i share it with secretary mcdonald and others in the administration. >> and we are excited that the president signed the clay hunt suicide prevention bill yesterday, the single biggest problem the v.a. is facing and the they are trying to get their

arms around it and stay to the course. >> and that is where we interact with our substance abuse and mental health issues and supporting the v.a. and the veterans in trying to work through those issues and making sure they have the care and prevention and treatment they need. >> one last question, mr. chairman if i can. in your proposal you talk about adopting the by camera agreement last year and sustaining the growth rate is that correct? >> we said we support this effort moving forward and in the budget. we propose not letting the cuts occur and we are hopeful that this can be bipartisan this year. >> and if i read the budget right, you know the cost of replacing the sgr of $44 billion and the estimate was $177 billion, what is the difference? >> there are two parts. when we assume not doing the cuts, we build that into the baseline so it is paid for that

way. and there are reforms proposed in the legislation you are referring to has costs and that 44 is the number you are seeing in terms of the improvements and some of those have costs. but in terms of the over all, which is the bigger part which is the cliff that is in the baseline. >> thank you for your service and your time. >> thank you. >> thank you. secretary burwell a couple of quick questions here. we have nine indian tribes in my state of south dakota and so we have thousands of indians that need the medicare. and unfortunately we are finding it difficult to get timely response to our inquiries. a recent example comes to mind is the response i received last week from the ihs to a letter we mailed 11 months ago. and additionally my staff was

recently prohibited from visiting an ihs facility without clearance which took weeks to obtain from headquarters, which i believe is another example of lack of transparency and responsiveness. and i'm wondering if you could speak as to why the regional office has been instructed should not engage or providing basic information to my staff or why they have been unable to visit without approval by headquarters. >> these are things i don't know about. i loo look at them and get back to you. in the budget there are a number of proposals with regard to ihs that are important and i apologize that i don't know each of the tribes and whether they fall under direct support or not but there are proposals for the tribes that are extremely important to make sure we provide appropriate care so i want to look into these issues.

i know you're leadership on these issues and i hope we can work together because i think there are important things to do in regard to responsibility of care and not cannibalizing. the care of one or two youth. i won't go into it. i'm sure you are familiar with it. >> and i want to make sure that these inquiries get responded to in a more timely way. >> i will follow up on both of those things. >> and from ihs, what we hear from providers who participate is there is a frustration with the time and significant cost it takes to provide claims and my group works with tribal representatives to discuss ways to improve the claims administration process. as a result, that meeting, we have a commitment from the stake holders to continue to discuss this issue in follow-up

meetings. but one suggestion was to use electronic mechanisms to exchange information in the processes in the claims and payment process. so in the prc program claims are still being mailed in paper form back and forth. and it seems that the focus to move providers and payers to electronic health records should include the ihs in their relationship with private providers. is that something you agree with. and using a paper claim process seems to be very antiquated and inefficient and ought to change and would you work with us and other stakeholders to change or incorporate electronic records. >> yes. and i would like to hear what you are hearing. when i met with the secretary of the tribal committee about these issues, one of the things they said as we push for electronic

ability in the tribe, they question the timetable. it will help the issue in terms of the claims processing. they have expressed concerns but this is a place of let's see what we can do to move the ball forward including assisting them in moving toward the electronic records because it will help to the other issue and this comes to predictability in funding and gets to the budget in terms of payment of claims. >> final point. the world of tele-health, has grown by leaps and bounds but it seems like the regulatory regime that governors that, particularly use to payment and tele-health has not kept pace and so the question is what can hhs do to evaluate the current regulatory environment and make changes to catch up and keep up? and we've seen a lot of high on

earring work done in my state with the use of tele-medicine but it is very very hard to deal with all of the payment issues and some of the bureaucratic regulatory issues that seem outdates relative to the technology that i think can be incredibly effective in meeting health care needs in real areas. >> so one, i continue to work on these issues. have made some progress but you are right this is an area where we can continue to make progress. i think we can make this delivery assistance reform. and i think the other thing is how we have the conversation with those who are not as supportive of changes in this space in terms of using tele-health care. so those are the two things. sitting within delivery system reform where this sits is important and the second is how to work together for those who oppose greater speed with regard to moving it forward.

>> all right. my time is up. thank you madam secretary. >> thank you, madam, secretary. great to see you. thank you for your service in so many different roles for our country. sorry, i couldn't be here we've been bouncing back and forth all day in three different very important hearings. and there is a steep cliff and i understand from the president's budget he asks for a multi-year solution to provide stable and more predictable funding for the centers and can you talk about the failure to fund this cliff and ask if we can count on the administration's commitment and your commitment to work with us to make sure health care centers receive sufficient funding to continue their investment in care and service to meet the needs of our communities.

>> with regard to the budget we address the cliff and believes there are greater needs and our budget funds 75 new health centers and that are rural and often around the country and we want to address the funding rift for those health care centers and i've traveled around the country and seen those serviced by those centers and it is important to millions who are receiving this care at these centers so a cliff would mean a dramatic change for them. >> thanks very much. from our earlier conversations -- past conversations you know i'm a big supporter of your ongoing efforts to move our health care system from volume based toward valued base care. your announcement last week with pushing forward with nearly all

medicare into the value based by 2018 is a solidifying opportunity. and dell roy is beside you and we are happy that we have received a state model payment so we can provide -- and even my state is worrying about transitioning to value based payment models but they are actively working together with state officials and taxpayers to figure out how to make this shift. here is my question. would you discuss the outcare outcomes and the cost savings that may have been realized in the last few years due to value based medical reimbursements an the demonstration of new payment arrangements in various states? >> with regard to value based statements we are moving forward and there are providers that are

receiving the benefits and rewards of those and also those providers who are in the bottom part of what they are doing that are receiving in terms of the payment cut and so we're starting to see that. with regard to some of the models we are using, the alternative payment models, we are seeing how accountable care organizations are working and we're already seeing the financial savings in that. and up into the hundreds of millions of dollars in terms of what we think we can do there. one of the things we want to do is continue and something our budget talks about making sure we have the flexibility that we go and learn the things they believe will be the right incentives. we discussed this with senator kabtwell, to make sure we have the right incentives to keep people moving on that path and they are moving but there are concerns that get raised. >> thank you. another issue that tom coburn and i have a former colleague

from hoek have talked to you and predecessors have talked about ad nauseam is improper payments and it has been the highest and remains there. and dr. coburn and i and the bush and the obama administration focus on this and saw the number being driven down which is good. it is over $100 billion a year as you know government-wide. this is the last round we've seen some reduction in payments but not in medicare. in fact we saw a bump up in medicare and it concerns me. and i know if you could just talk about that. are you concerned about what you can do -- your department to help reverse that and get it heading back down? >> there are a number of things we can do. in medicare with parts a, b, c

and d, we see some of it continuing on the right path and some that are not. there are some medicare continuing downward trend on the issues of doing better on the program. i think in our budget we propose funding that is important to continue with the efforts and work through efforts and we've talked a little bit here today about some of the rules and the regulations that are statutorilly on hold for reasons that people have raised issues with but we need to work through the concerns to continue on the path in terms of making sure we are recovering those in proper payments. we have seen some record returns around specifically fraud and an 8-1 record near in terms of what we are getting in. and we don't want to be in a pay and chase mode but a more preventative mode. the budget focuses on this specific lilg in terms --

specifically in terms of the funding we are asking for. >> and we want to be hopeful and so thank you. and thank you for your service. >> and i think senator watt has an additional question if you don't mind. >> thank you, senator isakson. it has been a long morning and you've been very patient. madam secretary, senator collins and i on both sides have taken a special interest in alzheimer's. and as you know, alzheimer's is hitting millions of american families like a wrecking ball. and what we see is families being in agony because they can't even pay for the kind of care that they want their loved one to have. and my question is i think it is understood that the fight against alzheimer's now has scores of private entities

companies, researchers and others, and there are some public institutions obviously involved as well and your department has a couple of pieces to the puzzle. the research area is one. certainly we've been talking about chronic deas and how -- disease and how to come up with a coordinated system of caring for those with chronic disease of which alzheimer's is right up at the top. but there is one question that i get asked all of the time and it really is what i wanted to touch on today and maybe we'll begin to have this discussion. but whose job in your view is it to try to put together a game plan to beat alzheimer's? we've got this array of private and public parties people working very hard and mean well, is there any discussion that you know of that even focuses on who

might be or the group of people who would be tasked with coming up with a plan to beat this horrible scourge that is taking such a toll on our families? >> with regard to the question of beating it and i think you know in this budget become $3.2 billion committed to the issue and we are a payer and the largest portion is what we pay in medicare in terms of paying for the care you mention. we are the researchers in terms of we add to the research and we have increases that you see in that in nih. and i think the question of beating it beating it is we need to make progress on the research and understanding the science so we can work to that. we need to make sure that we are helping families afford the care that they are doing and then the third element actually is about how people actually go through this process and whether you are the individual who is suffering

or the care giver and that is in the administration for community living. so this question of beating it has research pay for care and how you handle it. and one of the things that i think is important is that administration for community living and i shouldn't mention there are other elements of hsa have small bits and i think we can focus is on the white house conference on aging and that can give us an opportunity to bring together some of the pieces and with the budget you see the energy leading up into the increase in nih. >> let's do this. i know this question caught you cold. that question caught you cold. but it seems to me this is something that needs to be put that way. what plan do you put in plan in

terms of a way of trying to beat it. and i want to talk about foster care. the big foster care program, i guess it is called title 4-e and doesn't kick in until a child is removed from the home and you are taking about -- talking about approaches to come up for kids that are candidates for foster care and you've been patient and if you could give me an answer of how this might work for an individual kid. we have a real kid and we want to get them preventative services, so how do you do it? >> what would happen at point where the child is near removal, they would end up being removed. to get in and support the state and provide services. if the existing parents could get some support, maybe that is

respite care because the child has issues or other services that the child needs but in the system too often the question is can we find the underlying causes. we want to use the flexibility that the funding can be used to address the causes that could keep the child safely in the existing setting. we always want to do it in a way way but we need a flexibility to do that in terms of our funding can be used. >> senator you need a wrap. >> thank you. i want to thank you for all of the questions today and it has been a good hearing and a long one. any questions should be submitted no later than wednesday, february 11th. and this hearing is adjourned.

earlier today the senate armed services committee held a hearing for ashton carter to be the next defense sect. can you see had a -- you can see that hearing tonight at 8:00

p.m. eastern on cspan. wednesday fcc chairman tom wheeler announced that he'll propose that the internet be regulated like a public utility, banning providers for paying for priority over competitors. next senators markie booker and franklin announce it. this briefing is 15 minutes. thank you all so much for joining us here this afternoon. and thanks to my fellow senate net issons, senators booker and franken and sanders. we thank them for the leadership on the issue of a free and open internet that has been crucial to getting us to this very

important moment. the fcc heard from four million constituents companies and entrepreneurs on how best to protect the world's greatest platforms on communications and commerce. today i say to chairman wheeler and the fcc, you are on the right side of history. you are responding to those calls by proposing clear and decisive action to protect the internet as we know it. these rules are the declaration of independence for the internet. today is internet independence and freedom day, for our economy and the freedom of expression of our ideas depend upon the internet. it is as important as keeping our air and water clean and our roads and highways safe. by applying title two to broadband, the fcc is ensuring

there will be no internet fast and slow lanes created by the big broadband parents. that internet will be available for all americans, including rural residents seniors and those that are deaf and blind and disabled. that consumer privacy is protected and that we expand consumer choice and promote dor winnie an paranoia induce inging on the internet. >> i'm for that. >> this shows how far we've come since the internet access was put on the books. it is like the phone service was decades ago. it is essential for every day living and working. consumers and businesses cannot operate without this vital connection to each other and to the world around them.

these draft rules make clear that the core values of our communication laws will apply to all of the ways we communicate, regardless of the way we communicate. unfortunately, there are some who say these values are no longer relevant. that these are old rules meant for old 1930s technology. that could not be further from the truth. the original purposes of the 134 communications act to encourage the deployment of communications services, to all corners of the country, and prohibit the phone company from denying service to any american apply just as much today as they did decades ago. after congress passed the original communications constitution in 1934, we recognize over time that we had to change the rules. because they had become havens

for monopoly phone companies. we sought to break down the monopolies and to introduce competition into the communications market place. the time had arrived to move from analog to digital. the time had come to move from black rotary dial phones to iphones. and so in 1996, we added new amendments to our existing communications bill of rights. we passed a law that encouraged competition and promoted consumer choice and requires privacy be protected and in short that americans with disabilities could fully participate in our society. in 2015, in our interconnected world, these principals are more important than ever before and more relevant than ever before. americans expect these values and deserve every time they pick up their phone or launch their web browser that they are being protected.

these protections work. consider that in 2013 62% of all venture capital funds invested in the united states of america went toward internet specific and software companies. it is working. it is a capitalistic dream come true for nower company -- newer companies, start ups such as et ceteray, dual up,en vio and they need strong internet protections and thousands of companies like them need the protection. so and so today by bottling and blocking the fcc is applying principals to the broadband world and exercising the next step in the broad band world. and at the same time they are

changing what was meant for a monopoly time. so i say to the critics do you want to return to the broadband behemoths and allow them to control the bands we allow them to community or do you want an open market where the best ideas strive and thrive and today the fcc made the right choice. there are still likely details that need to be worked out with the fcc's proposal and i look forward to working over the next few weeks to get this right before the fcc votes on february 26th. but today is a historic day. today is internet freedom day and today is a day where anyone who counts on the internet wants

to connect, and it is a major day for internet. and i know senator booker has to run. and i want to recognize our senator from new jersey senator booker. >> thank you very much. i first of all want to thank senator ed markey for his leadership and senator sanders and franken have been the most serious steadfast soldiers in the fight to preserve net neutrality. and as the senator said, today is an extraordinary day for net neutrality and for democracy and for more than that this is an affirmation by the fcc to preserve net neutrality with global implications and this decision is critical for the economy to flourish and for unimagined economic opportunity

of the feature to take-- future to plaque take place and it is ideal for our country, that everyone's voice matters that we can have equal access whether you are marginalized or a minority or small in economic power, that you too can participate on a fair open playing field where powerful economic forces cannot choke your voice or further marginalize your opinions where people who are innovators, folks that want to stand up against conventional wisdom and people against the grain with unpopular ideas and that everyone in this incredible space can be treated in a neutral way. this is a fundamental idea in our democracy worthy of preserving net neutrality must continue. i want to say also that this is a wonderful day but it is not

the end. it is not the end. there are going to be forces, powerful forces that will continue to assault the ideal of net neutrality. it is take a lot more fighting. those millions of americans who allow their voices to be heard, that influenced the fcc's decision, we cannot rest we cannot relax. the fight for net neutrality goes on. there is more work to do. but at that is definitely a good day. >> thank you. >> senator bernie sanders from vermont. >> thank you, senator markey. i want to congratulate senator franken and senator booker for their great work on this issue. today clearly is a major victory for consumers and entrepreneurs, but it is also a major victory for democracy. when almost 4 million people demand that the fcc to the right thing, that says that this is an

issue of deep concern to the american people. i'll tell you something personally that blew me away. a number of months ago on our website, we reached out to people and we said if you are interested in communicating to the fcc your feelings about net neutrality, write to us and we'll send it to the fcc. we had close to 50,000 americans from vermont and all over this country writing long, detailed thoughtful statements about why they believe there should not be discrimination in the internet and support of net neutrality. so i applaud mr. chairman wheeler for listening to the american people. but this is about senator markey and senator booker have already said, this is about saying to a small business in rural vermont that you are going to be able to utilize the internet in the same way as walmart. it says to a guy in rural america who's working on a blog

that you can use the internet the same way that "the new york times" can i don't say that internet. that we're not going to have discrimination on what is clearly one of the most important economic engines of the 21st century. so i am proud of the work that the american people have done. we have a lot more work in front of us. let's continue to go forward together. thank you. >> and batting cleanup, al franken from minnesota. >> thank you senator markey. thank you, senator sanders, for your leadership senator booker as well and others. so many others who fought for this great day. this is preserving net neutrality. that's what just happened. we dodged a bullet in terms of the time frame of what the internet has been. all this innovation that has

happened on the internet is because of net neutrality. that has been the architecture of the internet from the very beginning, and this is preserving this. thank you, chairman wheeler, for outlining what you did today. this is -- there's been talk about the 4 million comments. there was a sampling of those comments. more than 99% of those comments were for this, for preserving net neutrality. and this will, i'm sure, be attacked and there may be lawsuits, but just remember that the d.c. circuit court basically pointed the way here to title ii. so this is a great day for -- i

did a press conference with a number of small businesses that rely on net neutrality in minnesota. businesses that were tripling their workforce and substantial workforce. one had 200 to 300 employees. their business is dead if there's no net neutrality. and this -- so this is about our economic future. the internet is about our economy, it's about prosperity and it's also about democracy and about freedom of expression. this is the first amendment issue of our time. i have said that before and i'll say it again. this is a very, very good day. thank you. >> questions? yes, sir. >> senator markey, i'm with cq.

you mentioned rural consumers and competition. those are two of the big issues the fcc said rural consumers aren't get adequately and a lot of people in cities are paying too much. how does this help with that? >> well, it further ensures that competition, the introduction of new ideas, new products, new services is going to continue. the more that that happens, the more that the old architecture is threatened with new ways of developing services in the same way that younger people today are watching television shows and movies on their mobile devices. that's changing the whole architecture of the traditional video media, and the same thing is going to be true here. so we've changed everything over

the last 20 years and it's going to continue. people are now walking around with devices in their pockets that allow them to call from here to california without even thinking about it. but 30 years ago when people maid long made a long distance call, they said, run, grandma's on the phone, it's long distance. so all that has been changed in the blink of an eye once we introduced competition and the same thing is going to be true here as well. yes. >> senator booker mentioned the powerful forces that he said may be opposed to this. i'm from philadelphia. comcast is a big company there. there are certainly many others. >> is it? >> i'm sure you're aware. obviously there are many others who are going to weigh in on this. can you describe what you expect from people who oppose this and what folks like you in favor of this intend to do in response? >> well as i said this way of

proceeding was pointed to by the d.c. district court. so i think what i imagine is they're going -- they have deep pockets, obviously and they're going to go to court on this. but this seems to be very consistent with what the appellate courts have said. >> thank you, senators. even if this does go to court, it's certainly likely to get tied up for a number of years. there's been some effort here on capitol hill to write some legislation. why not work with that to with a couple of years of uncertainty while it works its way throughs courts even if it does come out favorably for you in the end. >> well, these rules are the right rules. these are the rules for the 21st century. we understand that there are people who object to that. these are the correct rules.

we expect as senator franken said, for some to disagree and to take it to court. but we are not thinking about just the next year, we're thinking about the rest of this century. and so we want to make sure that the right rules are put on the books and that they are maintained and defended. questions? thank you all so much. >> and centuries beyond. the year 2525. on the next "washington journal" national journal technology correspondent brendan sasso on proposed net neutrality regulations of internet service providers. and the c-span bus tour of historically black colleges and universities is in hampton, virginia. we'll talk to hampton university

president william harvey. "washington journal" begins at 7:00 a.m. eastern time. call in with your questions and comments and send in your thoughts through facebook and twitter. the c-span cities tour takes book tv and american history on the road to u.s. cities to learn about their history and literary life. this weekend we have a trip to corpus christi texas. >> we are in the daniel killgore reading room in corpus christi. dr. hector p. garcia papers are the flagship collection we have here at a&m corpus. he made it his life to help local and beyond mexican americans learn to be more civically active and to get the benefits that they had coming to them as veterans which were sometimes very difficult for

them to obtain. these three items here represent the case of private felix longoria which was an incident that occurred early in the history of the gi forum. private longoria served the united states in world war ii and was killed by a japanese sniper toward the end of the war. his widow arranged to have his funeral conducted by the only funeral home in her hometown of three rivers, texas which is near corpus christi. they were willing to conduct the funeral, but they were not willing to allow his body to remain in their funeral home overnight for fear of offending the white citizens of the area. she appealed to dr. garcia and he conducted a letter-writing campaign to people with positions of influence. a response came from lyndon johnson who had recently been elected senator. he states his belief that it is

wrong for a soldier, a fallen soldier to be discriminated against after death. he offered burial in the arlington national cemetery and that is where private longoria was laid to rest. >> walltch all of our events from corpus christi saturday on c-span and sunday afternoon at 2:00 on c-span 3. coming up tonight on c-span 3, omb director shaun donovan testifies about the 2016 budget. then brook aster's grandson discusses financial exploitation of senior citizens. after that four senators hold a briefing on new net neutrality regulations. and later, idaho governor butch otter delivers the state of the state address. white house budget director shaun donovan was on capitol

hill again wednesday to defend the president's 2016 budget request. the nearly $4 trillion proposal was released monday. his testimony before the house budget committee is almost three hours. this hearing will come to order. i want to welcome all to the budget hearing of the president's fiscal year 2016 budget. as we begin we've been directed by the department of justice that it is most appropriate to swear in each witness, to please take no offense, mr. director,

but as we discussed if you would please stand and raise your right hand. you solemnly swear, affirm that the testimony you are about to give will be the truth the whole truth and nothing but the truth? let the record reflect that the witness answered in the affirmative. thank you. good morning, all. i want to thank everybody for being here and being on time. as we discussed in last week' hearing with the congressional budget office director there's no question that our nation is on a fiscal and economic path that is unsustainable. our national debt has topped $18 trillion and continues to grow ever larger. our vital programs that folks rely on are heading toward insolvency and our economy isn't growing nearly as fast as it should be. if we maintain this status quo we'll have a future of less opportunity and less security for the american people. so it's clear. it's clear that we need to move in a different direction and that requires new ideas that can actually deliver real, positive results. unfortunately, what the president has proposed in his

budget fails on so many levels to solve the challenges that we face. director donovan, i want to thank you for being here today. i look forward to your testimony and explanation of the president's reasoning behind his budget proposal. but to be honest with you, my colleagues and ion this committee have very serious concerns with what the president has put forward. a lot of what we have in the president's budget is just more of the same policies that have been tried over the past few years and have led us to the current state of high and soon to be rising again deficits and an underperforming economy. the president is proposing $2.1 trillion in tax increases and $2.4 trillion in spending increases. he's suggesting that washington ought to take more from american families and job creators in order to spend more here in washington. that's a formula that hasn't worked in the past and is not likely to work starting now. every dollar that's taken from americans in taxes and every dollar borrowed is a dollar that can't be spent on paying for your child's education, on

buying a car, on paying your rent, on paying your mortgage or buying a house. all things that american people want to do we would suggest are made more difficult because of the president's budget. now, despite the president's massive tax increases his budget never, ever, ever comes to balance. the president is saying we should keep spending more money that we don't have and leave the serious problem of our growing debt to someone else or to some other day. $8.5 trillion will be added to the debt over the next ten years and the president seems content to do little about it. even more disturbing is the fact that the president is once again just ignoring the challenges in our retirement programs and leaving current and future generations to fend for themselves when these programs eventually collapse. isn't that just doing nothing and breaking the promise to today's seniors and tomorrow's retirees. in order to increase spending across the board, the president's budget would unravel bipartisan agreements that have secured a modicum of spending restraint in recent years.

we can all agree that there are smarter ways to control spending and get our fiscal house in order. that the president is not proposing a smarter way to restore fiscal responsibility, he's simply abandoning the effort. at the end of the day a proposal that never balances and ignores key drivers of the nation's debt is not a serious plan. to make matters worse the president's proposal is filled with a trillion dollars in budget gimmicks like phony war savings and several unpaid for extensions of current law, including the doc fix and stimulus credits. the american people are looking for credible solutions, not misleading assumptions and questionable accounting. hard-working taxpayers deserve nothing less. they deserve our very best. starting with his state of the union address, the president has sought to repackage his old ideas under a new slogan, middle class economics. unfortunately, it's the middle class that's being harmed by these policies with wages stagnating, businesses facing barriers to growth and opportunity and more tax dollars being taken out of the pockets

of americans and wasted away here in washington. director donovan i want to thank you again for joining us today. it's clear that we have significant differences of opinion, but i look forward to hearing your testimony and i hope and pray that we will be able to work together to find honest solutions to the remarkable challenges that we face. i'm pleased to yield to the ranking member mr. van hollen, for his open statement. >> thank you, mr. chairman. i want to join the chairman in welcoming you here director donovan. thank you for your service to the country. and i'm pleased we're here to address the president's fiscal year 2016 budget. unfortunately here in congress we haven't completed action on the fiscal year 2015 budget process. in fact just a few weeks from now, the short-term funding for the department of homeland security will run out and as we gather here, republicans in congress have threatened to end the funding for the department

of homeland security because of disagreements with the president's immigration reform policy. so i would urge our republican colleagues to pass your own immigration reform bill here in congress and not threaten the funding of the department of homeland security, especially when we've seen increased terrorist threats in europe and elsewhere around the globe. the chairman also mentioned the issue of budget balance. i would just remind my colleagues who were returning and the new colleagues who joined us that last year's republican budget only came into balance because it kept the revenues and savings from the affordable care act and yet just yesterday for the 56th time i believe, in the house they voted to repeal the affordable care act. you can't have it both ways. that is truly phony accounting to say you've got a balanced budget and then rely on revenues from the affordable care act. so the good news is that we're actually meeting at a time the economy is much improved. we saw from the december jobs

report growing jobs. in fact jobs grew last year at the fastest pace since 1999. deficits have been cut by two-thirds in terms of the share of the economy. the stock market has doubled. it's all very good news. and much of it would not have been possible without the tough decisions the president made right after he was first sworn in to stop the economic freefall and to put the economy on a path to recovery. it is certainly a good thing the president ignored the advice of many here in congress who proposed a european style austerity program simply to totally gut federal investments. the reality is that since 2010 more jobs have been created in the united states than in europe, japan and all the advanced economies combined. while there's been a lot of good news there is one stubborn challenge that remains. and i want to put up a chart here. this is a chart that goes from

1950s to the present. and the top line the dark blue line is worker productivity and the bottom line is worker compensation for most workers. and what you see is that from 1950 to the late 1970s, workers' productivity was matched by gains for the average working family. but starting in the late 1970s, you had this great separation. american workers working harder than ever but not seeing the real gains in their paychecks. so where did all those gains go? can we go to the next slide. most of those gains have gone to folks not just at the top but the very, very top. the top 1%. now addressing this issue, it's not just a question of economic fairness. the fundamental issue here is one of economic growth and a pro-growth strategy is one that promotes more broadly shared prosperity, giving hard-working americans a larger share of the economic pie can make the entire pie grow faster and that is the focus of the president's budget.

it's a budget that boosts the take-home pay of middle class families and those working to join the middle class. its reforms include tax cuts for families, significant tax cuts to cover the cost of child care and college. it supports increased retirement savings by working families and increases the child tax credit. the president also understands that raising pay requires strategic investments to sharpen our competitive edge in the 21st century. it helps accomplish that by investing in education from early education through k through 12 through college by making a $478 billion investment in modernizing our infrastructure, by closing a lot of the tax breaks that drive companies overseas, and it does that while reducing the baseline savings by $2 trillion over the ten-year period and stabilizing

the debt to economy ratio. so that's a pro-growth strategy that lifts the paycheck of -- paychecks of all americans. we know the trickle down economics failed we know the idea of providing tax rate cuts to folks at the top failed. it did succeed in raising incomes of folks at the top and increasing the deficit. let's have a budget that helps 100% of americans and helps the economy grow even faster. that's what the president's budget does, and it's great to have you here, director donovan. >> given the time constraints, i ask that members insert their written statement into the record and i'll hold the record open for seven days in order to accommodate those members who may have prepared statements that they'd like to insert. mr. donovan i want to thank you again for your time today. the committee has received your written statement and it will be made part of the formal hearing record. you have five minutes to deliver your oral remarks and you may begin when ready. >> thank you chairman price, ranking member van hollen,

members of the committee. thank you all for welcoming me here today to present the president's 2016 budget. in my first few months i've heard from so many of you on both sides of the aisle the need to get back to regular order on our budget process and i hope that this on-time budget that i'm presenting today is the first step in helping us do that. the budget comes on the heels of a break-through year for america and builds on our economic and fiscal 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 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 common sense 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 nearly 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 needed technological edge. i want to emphasize that every investment in the budget, including both discretionary investments made possible by reversing sequestration and mandatory and tax changes are more than paid for through spending and 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-year surface transportation proposal that will give states and localities the certainty they need to invest in infrastructure that will spur innovation and accelerate job growth. meanwhile the budget also achieves $1.8 trillion in deficit reduction not including reductions to oco primarily by

focusing on the key challenges. health care cost growth and inadequate levels in the face of an aging population. building on the historically slow rates in years that have significantly improved our fiscal out look the budget includes roughly $400 billion in health savings which grows 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. and this year's budget again reflects the president's support for common sense 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 a key test of fiscal

sustainability, putting debt as a share of the economy on a downward path showing that investments in accelerating growth and a strong middle class are compatible with strengthening the nation's finances. 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 and to share in the benefits of growth. i look forward to working with congress and this committee in the coming months. thank you. i look forward to taking your questions. >> thank you mr. donovan. sometimes it's difficult to find the consistency within the statements that are made and the actual budget and i want to go through a couple items. the first that i'll just point out is that the mindless austerity that you refer to and the president refers to is actually the president's idea of the sequester when it came up in 2011. so it might be a little better to put that in a different

phrase. i do want to however, turn to the issue of this dollar for dollar point that you've made and the president made. the president stated this past monday that he would match -- quote, match the investments that were made domestically dollar for dollar with increases in our defense funding. as you just stated in your opening statement and in your prepared remarks this budget ebds sequestration, fully reversing it matched by equal dollar increases for defense. if you dig through the budget to your tables and the table that i'm referring to is on page 132-s-10 that show the discretionary cap changes over the budget window, you show in your rhetorical gains for defense that are early that are taken back in the out years. after 2021 you propose reductions in defense and nondefense categories. interestingly, however the

reductions for defense are almost $100 billion larger than the nondefense reductions. as you can see on the slide. and over the entire budget window, you proposed an increase for defense above the caps of $9 billion but an increase for nondefense of $102 billion. so, mr. donovan, i would ask you how do you account for this mismatch in the president's words and his action as demonstrated in the budget? >> congressman what we've done is to look at the six years replainingre remaining of sequestration and in each of those years to add back dollar for dollar relative to the baseline which is obviously based on current expected law. so the critical point that we are making is that we ought to be particularly given that discretionary spending is now near its lowest level as a share of our economy as it's been in

50 years we ought to be looking to do more on the discretionary side and we do add back dollar for dollar relative to the current baseline and then to offset that with the smart fiscal choice of finding both mandatory savings and new revenues that can more than offset those discretionary increases. and so what we're really talking about is relative to current law, ending sequestration and adding back over the remaining six years dollar for dollar. >> i appreciate that. but the budget is a ten-year window. we look at ten-year numbers. cbo looks at ten-year numbers. omb looks at ten-year numbers. i would point out just tangentially that the defense budget is at its lowest point in 50 years as well. so this discretionary side is getting pinched on all sides. and i just think it's important -- isn't it disingenuous for the president and for you to say that these

dollar for dollar matches are in place without completing the sentence, which is oh, by the way, at the end of the budget window they're not? in fact we spend a whole lot more money for nondefense than for defense? >> one of the things that we made clear in the budget, we've worked very very closely with the department of defense and the joint chiefs to make these additions. i think we've done them really focused in a strategic way in the key areas that allow us to keep our technological advantages over our adversaries while also looking for smart savings. we are also working with them, and we expect to present a plan to congress in the next few months to look at what we do about overseas contingency operations and trying to make sure that enduring costs are added into the base budget as well. so i think this is an area where we can certainly have conversations going forward about whether the far out years of the budget need to be adjusted.

as you know, the military really plans through their fit op through a five-year period and that's the key focus in this budget. >> let me just urge you to add that clause, that at the end of the budget window, they're not dollar for dollar. folks back home say they can't understand why we're spending the kind of money that we're spending on things like the epa and nlrb which are job killers in my district and in our state when we're not funding the important areas of defense. it's a very dangerous world as you well know only demonstrated every single day. i want to switch to the issue of social security disability. as you know the social security disability fund is going in insolvent next year. there's a proposal to reallocate payroll taxes to address the looming insolvency of the disability fund. what impact does that transfer have on the social security retirement trust fund? >> well, on a combined basis, the two trust funds would be --

their reserves would remain in place until 2033. so it is a very very small impact. in fact i would point out that this kind of reallocation has been done many many times under both parties and, frankly, has been done in both directions. it's a simple step that we can take, a small reallocation, that would ensure that folks who have paid into the disability trust fund earned those benefits, that those benefits wouldn't be cut next year by 19%. >> let me -- and that's the point, that they would be cut by 19%. but let me -- let me just call your attention to a question that one of my colleagues, congresswoman black asked last week of the cbo director doug elmandorf. she asked if moving moneys from one fund to the other wasn't

robbing peter to pay paul. and he said you're not going to accomplish that by moving money around between them, unquote. do you agree with the director's assessment? >> first of all, i would say that we should not pit the recipients of disability insurance against others who rely on social security because -- >> isn't that what you're doing? >> -- because they really are the same people. because you may be disabled before you reach retirement age and then benefit from social security later. second of all the impact is very, very small. what we're talking about is moving the exhaustion of reserves in the retirement trust fund from 2034 to 2033. we do much more in our budget to strengthen the social security trust fund beyond those -- that time than that very small reallocation, again, which has been done under both parties many, many times in both directions. >> let me talk about what this administration has done to

social security. i want to draw your attention to this slide. this is -- when the president came into office -- when the president came into office, social security trust fund was slated to run -- become insaul insolvent in 28 years. in six short years it's down to 19 years. so this is what the administration has done in just a few short years. so we would suggest to you that taking money from the social security trust fund and moving it to the disability trust fund is not sound economics especially at this time given what we see on that slide. let me move quickly in my final couple of minutes to the issue of interest on the debt. we all know that you can't have national security without economic security. one of the most corrosive effects that can be had on economic security is debt. $18 trillion plus in debt.

and the interest that's paid on that debt, as you'll see here, continues to increase. do you know the federal government's interest outlays for fiscal year 2014? >> i don't have that number in front of me. >> about $229 billion. and at the end of the 2025 year -- at the ending of this budget that the president is proposing, do you know what the interest outlays would be? >> again i don't have that in front of me. >> $785 billion. so nearly a three and a half times increase in the interest on the debt. i would just draw your attention to the lower left corner and the source for this is your organization, the office of management of budget. this is in 2025 where the interest payment on the debt would be $785 billion. taking that those numbers are actually -- are correct is the interest at that time more than what we would be paying on defense under your budget? >> i think the important thing about what our budget does is to

reduce those interest payments in fact, by $72 billion in the last year of the window by a total of $260 billion over the full window and that's on top of the substantial reductions that we've seen in our deficits in the out years through the steps that we've already taken. in fact based on cbo's numbers just for the lower rising costs of health care, we're saving almost $190 billion in the year 2020 alone just over the last few years. >> my time is running out. that kind of comment about saving to my folks back home looks like bankruptcy. going from $229 billion in paying interest on the debt this year to $785 billion at the end of the ten-year window can in no stretch of the imagination be called decreasing the payment for interest on the debt. so we believe that you've got -- we must as a nation get a handle on the increasing debt. otherwise we're going to lose our national security through losing our economic security.

>> thank you mr. chairman. again, thank you, director donovan, for your testimony. at the beginning of his questions, the chairman mentioned that sequestration, that setup was the president's idea. having been very involved in those discussions i recall very vividly that the president had proposed that we actually pay for some of the increased defense and security spending by closing some special interest tax breaks like the tax break for corporate jets and hedge fund owners and those kind of things. so i have a very different recollection. but i am heartened to hear the chairman say that he supports the idea of restoring in equal parts funds to nondefense discretionary and discretionary. he criticizes some of the out year trends. the suggestion is that the idea is that we should be restoring year by year defense and nondefense compared to what we are. as you indicated and testified

and what the documents make clear is that for the upcoming fiscal year, 2016, you provide approximately $37 billion to defense and to nondefense is that correct? >> that's correct. >> all right. so i hope actually that's the basis for some agreement going forward. that's exactly what the president is proposing and we can discuss how we arrange it in years six through ten compared to what's in the president's budget. i want to talk a little bit about the revenues in the president's budget. you know the chairman used a figure for revenues that included revenues generated from immigration reform, including about $456 billion generated from additional economic activity by moving the underground economy into the sunshine. and i think mr. director you've incorporated the benefits of immigration reform, including that revenue, in the budget, is that right? >> that's correct. in fact we've used cbo's numbers on that.

they total about $160 billion of deficit reduction in the first decade, but critically and this goes to our long run fiscal picture, those grow dramatically in the out years. about $700 billion in deficit reduction that comes from immigration reform. and importantly, given the demographic challenge we're facing, just frankly more and more retirees per worker that we have in this country through the mid-2030s, immigration reform is one of the most important things we can do to strengthen our social security system as well. number of the just monday this week it showed the actions he took would strengthen social security. >> i'm glad you raised that because i was going to mention that in the context of the chairman's comments about social security that the actuaries have said one thing to do to strengthen social security is to adopt that in the president's budget. let's talk about some of the other revenues generated because

i think this committee needs to dig into this issue. this is an interesting slide. what this shows is how cbo, the congressional budget office, categorizes different areas of spending. so you can see those blue bars are spending. this was annual spending. annual spending 2015. you've got the amount we spent on social security as a country, the next bar shows medicare and medicaid, next on defense next on nondefense. you can see that red bar dwarfs the others. that's what cbo calculates we spend through the tax code by providing tax breaks and credits and that kind of thing for different purposes. now, a number of these are for very good purposes right? we want to encourage savings so we let people put aside money in tax preferred savings accounts. some of them i would argue are totally unnecessary counter productive and inefficient.

and what the president is proposing to do in this budget as the director said was -- is look at some of those tax expenditures. and again i want to emphasize, the tax expenditure director donovan, if the government gives you $100, isn't that pretty much the same as if we say you owe $100 less in taxes from an economic perspective? >> i think that's a good argument. >> all right. so that's why they're called tax expenditures by the economists and by folks at cbo. now, one of the things that's interesting, if you go to the next chart is show how some of these are distributed. and again, this is what the congressional budget office found, that if you look at all those tax expenditures the value of those tax breaks, that 17% of the value of those tax breaks go to the folks at the top 1% of the income scale. and part of the reason for that is that we actually give preferential tax treatment to unearned income versus earned income. in other words the tax code is

stacked against people who earn their income through hard work and in favor of people who make money off of money. and so the president's budget here says let's try and rebalance that so we're rewarding hard work through the tax code. so, mr. donovan if you could talk about the middle class tax cuts here and how they are in fact paid for by, for example, taking capital gains back to the rate it was when ronald reagan was president after the 1986 tax reform. so first some of the tax benefits to middle class families and then very briefly how you deal with those by actually adjusting the tax code to reward hard work going forward. >> what the budget proposes overall is a set of middle class tax breaks that would provide about 44 million families an average of $600 a year.

it does that through really targeting the most important things to help families get ahead and grow their wages from expanding to $3000 the child care tax credit. a close to $50 billion increase in targeted tax cuts for paying for college that would not only strengthen them but simplify and streamline as well, making those tax cuts more understandable and more accessible. as well as critical investments in helping people save for retirement. the way those tax cuts are fully paid for is through, as you said, mr. ranking member increasing the capital gains rate to the rate it was under president reagan, 28%, but also critically what it would do is treat capital gains fairly among our highest income and lower income folks. and what that is is through

stepped-up basis. right now hundreds of billions of dollars of capital gains are escaping taxation each year because families are wealthy enough to hold those assets and pass them on to their children, whereas many lower income folks middle class folks, are forced to sell those assets to support their family. if they do they are taxed at their original basis under capital gains. but if you can pass it on to your heirs they're taxed at the market value as they're passed on, so hundreds of billions of dollars escapes. we're concerned about that not just on a fairness bounds but also because it encourages people to hold assets out of the economy. they could be putting them to productive use. instead they are holding them in passive ways that are not producing the economic growth and investment and job growth that we would want. the last way it's paid for is through a fee on the very largest financial institutions, about 100 of the largest financial institutions to discourage them taking risky

bets with the money that they have invested there, and that's really the package that we would use to fully pay for those middle class tax cuts. >> thank you mr. director. i think that's an important conversation for us to have as a committee, because one of the reasons you see those tax expenditures skewed in the way this chart shows with 17% of those tax expenditure benefits going to the top 1% is because of these features in the current tax code that tax unearned income at better rates than earned income income earned through hard work. and so when i hear our republican colleagues say, oh, this is just redistributing income from folks at the top to folks in the middle, the reality is the current tax code because it gives preferential treatment to unearned income, actually is providing an income tax break redistributing income from the middle, those who are working up the income ladder.

we never hear anything from our republican colleagues about that. they have a tax plan that cuts the tax rates for millionaires by a third which redistributes income from the middle up. apparently no problem with that. what we're talking about is adjusting the tax code that unfairly taxes hard work as less preferred rates than capital gains unearned income and money made off of money. so it's important to keep in mind when we discuss revenues generated that we are talking about these tax expenditures on which we spend more each year according to the congressional budget office, than social security medicare defense or nondefense as separate categories. we look forward to that conversation. >> gentleman yield. the gentleman would concede that the middle class is the beneficiary through mortgage deductions employer sponsored health care. >> absolutely. as i indicated in my statement, there are a lot of good things

in there including preferential treatment for savings and mortgage interest. but the preferential treatment of money made off of money compared to money made from hard work is what the president is getting at in this budget. >> thank you. the gentleman yields back. mr. okita for five minutes. >> thank you, mr. chairman. thank you, mr. don van, for being here today and thank you for following the law and getting the budget in on time. let me thank you for your leadership there. switching gears a little bit from the tax front in reading your budget and hearing your testimony today, there's talk of debt stabilization. if we put up the first slide here on deficits, you'll see that the deficits continue to go up. of course deficits -- the debt being a cumulative of all the country's deficits. so here's your budget. the deficits continue to go up. and let me read you something as you're looking at that chart. the fact that we are here today

to debate raising america's debt limit is a sign of leadership failure. it is a sign that the u.s. government can't pay its own bills. it is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government's reckless fiscal policies, increasing america's debt weakens us domestically internationally. leadership means that, quote the buck stops here unquote. instead washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. america has a debt problem and a failure of leadership. americans deserve better. now, folks on this committee might think i'm quoting myself but i'm actually quoting our president when he was a senator march 20th 2006. mr. donovan does the president view our $18 trillion national debt, the cumulative effect of all these deficits including the ten you posted here, as a problem or not? >> congressman, first i think

it's important to recognize that the deficit has come down faster under this president than at any time since the end of world war ii. >> you see the bars, sir? >> well, just measuring our deficits in nominal dollars -- the way an american family would measure their debt is to say how does it compare to what i earn. and not just us a broad range of economists. >> they would say debt is bad. we want as less of it as possible. >> so looking at it relative to the size of our economy, which is the way cbo and a broad range of economists on both sides of the -- both political parties look at it the key measure is can we bring our deficits down as a share of the economy. we've done that. the budget man maintains the deficits under 3% of gdp and reduces the deficit by a cumulative $1.8 trillion over

the 10-year window. >> regarding our gdp, did you know mr. elmandorf have downgraded our growth down to 2.3% gdp? the family budget, so to speak, isn't growing as fast as it used to. i think we have to take that into account. let me switch gears and go back to some of the tax discussion that we've already had. if we go to the second chart here, the president's increasing taxes. yeah, there we go. we see the average of the last 50-year average for revenue here in this country. and we see what the president would like to do taking our revenue percentage as a percent of the gdp up to 19.7%. with annual deficits, as i just showed before, hovering in the half trillion dollar range, does that not indicate that we have a spending problem and not a

revenue problem, even with right, increasing revenue rates as a percent of gdp in this budget. as i showed before, your budget still never balances. so why do we need to be collecting more when clearly we have a spending problem? >> so, first of all our budget is -- does reduce spending. it achieves $400 billion of reductions in medicare and medicaid spending and in many other places. there are about a hundred different cuts and consolidations of programs, both on the discretionary and the mandatory side. not only on the health side but it also includes crop insurance it includes a range of program integrity measures, it includes real property savings. and so we do -- >> but you're raising taxes in the static world to increase revenue and you still never balance. why raise revenue? >> these revenues -- >> why raise taxes?

>> these revenues are consistent at the end of the window at 19.7% with the level of revenues that we had in the late 1990s a period of very strong economic growth and when we balanced our budget. >> you think we had strong economic growth because we raised taxes in the 1990s? >> it certainly was consistent with a period of very high economic growth. what i would say, though, is the key issue and it was raised earlier is that we are facing an unprecedented demographic challenge going forward. we have more workers and that's why we need to make sure we have revenues to keep those benefits for those who have earned them. >> mr. yarmouth from kentucky. >> thank you mr. chairman. it's good to see you, director donovan. i have to comment on a comment that the chairman made in his opening statement and i heard the same comment from speaker boehner within the last couple of days and i'm sure that we will hear it again and again because it's obviously in the republican talking points. but the comment was the budget contains policies that have

failed over the last few years. now, that seems like an alice in wonderland kind of statement to me because on the one hand if your definition of failure is 58 consecutive months of job growth, 11 million jobs, all of the gains in the stock market, the reducing the deficit by 65%, if that's your definition of failure, then i'd love to see how they would characterize the bush years. but even more absurd about the statement is when i look at these policies reflected in your budget or contained in your budget, i'm asking myself and i would ask you to comment, which one of those has been in place over the last few years to have failed? it seems to me that i don't recall expanded child -- early childhood education, expansion of the earned income tax credit, again, changes in the tax system, have any of these policies been in place over the last few years? >> i guess congressman one

area where i would say we did make some progress and that our budget does reflect on a bipartisan basis is the murray-ryan agreement that reversed some of the sequestration spending. so for the last two years one of the reasons that our economic growth has started to pick up is that we moved away from the austerity of sequestration and, frankly, from the kind of manufactured crises of government shutdowns and others. many economists have shown that there are hundreds of thousands of jobs that have been created by moving away from sequestration. so what the budget is really trying to do is take an example where i think we have on a bipartisan basis been able to make progress. follow that model of saying let's do dollar for dollar increases on the discretionary side, defense/nondefense, and then pay for it which is good fiscally, right to pay for it with long-term savings from mandatory programs and from

revenues. and that really -- if i can go to one area where there has been progress and that we try to build on on a bipartisan basis is let's take that model that has been successful with murray-ryan and started progress and build on that going forward. >> my comment was really based on the fact that they're accusing these -- saying this budget is just a rehash of policies that have been in place when in fact most of the proposals in this budget have not been in place. might be even higher growth. your last comment before i started questioning related to demographics and their impact on growth and so forth. as a matter of fact, when dr. elmandorf was here he said the most significant factor in the reduction in potential growth in gdp was the demographic trending. and so the move to immigration reform is something that if were in place i would assume would cause cbo anyway to increase their estimate of job growth --

i mean of gdp growth? >> absolutely. they show significant growth not only in the number of workers, which really goes directly to the demographic challenge that we have, but also increases in productivity for our economy as well. and so there are lots of ways that it's pro growth. actually cbo itself, we use their numbers in the budget. they last week did an analysis of the president's executive actions, which obviously because they only focus on a smaller group of folks in terms of visas and other things and many who are already here have a smaller effect, but still cbo said that $7.5 billion of savings over ten years would come out of the president's executive actions and that reversing them would raise the deficit by $7.5 billion. >> one quick question about tax policy. mr. van hallen was talking to you about the capital gains tax.

you moved it to 28% on defensiveividend income. isn't one of the benefits of raising the taxes on dividends, when we cut the tax down to 15% several years ago companies were paying out massive dividends and some doing bonus dividends because the tax rate was so low, so a higher tax rate conversely should keep money at work in the economy. would you say that's true? >> that's exactly right. that's what we tried to do and this is broadly speaking is to think about the tax code in ways that can encourage growth. and i talked earlier about the stepped-up basis on capital gains and the way that the current law actually discourages productive investments. we also do this with international tax reform for example, where money is parked overseas and we're encouraging it to come back, readjusting our international tax rates to bring money back --

>> the time has expired. >> mr. chairman, thank you. director, good to see you again. i'm just thinking of a comment members on both sides of the aisle have said over the years i've been here. where we decide to spend our money really shows where our priorities are. i think that's a fair statement. i guess you do too? >> i would. >> so let's bring up the first chart just very briefly. it was brought up before. i think

funded. the president's priorities are all too

squeal. >> what we see here is more spending and more taxation. $95 billion is proposed for taxation on the american public through their taxation in this area. at the same time, we're just beginning to see some relief, $550 a year people are seeing savings by going to the pump. you want to do the opposite and put more burden on the american public. if you can bring up the next chart, family budget versus the federal budget, if they found that one, you're all about increasing revenue to the federal government. that's where the federal government is growing over a period of time. but you're willing to take it away on the taxes in the family budget. and the family budget is hurting. it is not as rosy as you paint. let's take a look at food stamps. are you aware that more than 46 million americans receive food stamps in the country right now. are you aware of that? >> i am. >> that's more than when the

recession started. are you aware of that? >> i think there was an enormous increase when it actually started. >> but it's more than when it started. and are you aware that food stamps are twice as high that's $80 million as when it started in '07. that's pl$38 billion. we're still at twice the level from what e whenen it started. let's take a look at poverty to see whether things are as rosy as the administration points. are you aware that unicef found that just last year in the richest nation in the world, the u.s., found that one in three children live in poverty today? are you aware of that? >> i'm aware that we're pursuing a lot of policies. >> but that's where we are still half a dozen years -- that's where we are still with this administration. not quite as rosy as you paint it.

are you aware that it grew by 1.7 million while in the same time period, if you looked around the world, 18 other countries were able to reduce their childhood poverty level. our level goes up. are you aware of that? >> congressman, i'm glad that we agree that we're making progress on poverty and raising people's wages is an area that we should work on. >> reclaiming my time. but it hasn't been done over the last six years. unemployment, you talk about things being good. just yesterday, the 5.6 unemployment rate is as he calls it, the big lie. and that gallop pegs the real unemployment rate at 7.1% and under-employment rate at 15.1%. are you aware he says that the economy is not producing enough jobs to replenish the middle class, which is why we see this chart and why we see food stamp

charts go up and why unicef and others say we have a problem with poverty in this country. >> congressman, the hidden up employment rate is dropping faster than the regular unemployment rate. and, in fact, we've made much more progress. >> the gentleman's time is expired. >> thank you. two jersey guys in a row. that's good. that's progress. [ laughter ] >> however, the last jersey guy talked about a myth. i've got to address that before i make my remarks, mr. chairman. and that is when you compare the family budget to the federal budget, there are some similarities. and a tremendous amount of differences in the obligations of the family budget and obligations on the federal level which we over the years, voted for. that doesn't hold up. the second myth is what the chairman talked about. and that is he said takes this

budget, the secretary is here to talk about it and the director is here to talk about it this budget takes more from job creators. let me tell you something about who the job creators are. they right-hand turn necessarily in plush offices at the top of buildings. they're the workers of this country. they're the middle class. when we had the problem in 2008 capital was not being invested into this budget. into the economy. and that's why the federal government had to come up with some stimulus as they've done in 98% of all the recessions we've had in the 20th century. don't rewrite history. tell us what the facts are. the third thing is about if you took a chronological map of this country's economy over the past 50 years you would see

taxes shifting -- shifting -- from assets to individual incomes. and you want to talk about redistribution of wealth? look at what we tax also also sets and look at what we charge tax incomes over those 40 and 50 years. in fact one may make an argument that we had reverse distribution. we had reverse socialism in this country. when we take from those people who are the earners out there and who create the jobs because the demand and give it to those people who think they deserve it because they live on the top floor. they're the three myths. i don't have time for anymore right now. i'll go to others after. i've said many times before mr. director health care reform is entitlement reform. it begins the process of entitlement reform. when we see how much projected over the years by all experts how this is going to cut

expenditures or reduce those expenditures in the increased cost of health care. not only did it reduce costs for medicare, but it also reduced costs for beneficiaries. through the aca we found significant savings for medicare without cutting benefits by creating innovateive payment and delivery models. those are expanding right now. away from fee-for-service and talking about results-or yented. in fact, the opposition, our opponents talk pded about doing that and changing the health departmentcare system in this country. i support that. provideing health care more efficiently and curbing medicare fraud. of course, if you have enough people to check the fraud, it's a good thing, like in the irs. of course, if it doesn't happen, it doesn't happen.

mr. donovan, do you think slowing the rate of growth in health department health spending can be attributed to health care reform? >> i think there's growing agreement that a portion of the slowing of health care cost growths that we're seeing is due to structural reforms in our health care system including those introduced by the affordable care act. and, in fact this is the single most-important factor as we look long term to our deficits in debt to make progress on. as i think i said earlier, cbo today projects that spending for medicaid and medicare in 2020 is going to be about $190 billion less just through improvements we've seen after the affordable care act was passed. and the budget contains some very important bipartisan efforts that we can do to accelerate this.

one is a permanent payment fix in our budget. and, including in that additional reforms that would accelerate what you're talking about. >> in conclusion, mr. director i hope we see the day in the near future that more folks from the other side will at least say there's some positive things happening in the economy. just recognize it. >> gentleman's time is expired. >> thank you very much, mr. chairman. and just to the statement from the gentle man of new jersey that you have two people speaking from new jersey in a row, i think there ought to be a law against that. [ laughter ] >> a law against what? >> a law against two people from new jersey spooeking one after another. there may be a law about it. >> there's more people on the panel. you're deceiving. >> thank you, director. thank you for being here. you know to mr. garrett's point of one of the things that i

think the american people don't quite relate to when the president is speaking and even respectfully to your opening statement is the fact that i don't think the american people think that the situation is that great. i think the polls show -- but more importantly than polls is in our districts. i think people are, frankly, concerned. they're concerned about how their families are doing and how their income has not been rising. so i think the credibility gap that exists between what is sometimes said by the president as to the simpluation, the country and reality frankly is rather large. now, a couple things that i've heard today. that -- and this is -- these are things that, by the way, when i go home, people, frankly, are in awe. they their jaw drops. when they hear that if government takes less of their money that