project future economic growth, forecast market is terrible because we don't totally understand how the economy works. so we will have another recession. i don't know where it is going -- how it is going to -- what it is going to be caused by caused by a central bank screwup or changes in energy markets or whatever but to me the upshot is we ought to be prudent with the federal budget we ought to get deficits and debt down now, while we have a chance. the economy is growing now. now is a good time to start making some of these reforms we need to make because, again, what if we get into a deep recession, what if we have another major costly war, and it is going to put the country in a terrible situation because we're going to be starting off from a very high level of debt. so we ought to be prudent, pulsemakers ought to be prudent. i don't see much of that on either side of the aisle in washington. >> yes, you, sir. >> this is directed at mark calabria, but anybody else who has anything to add can more

than welcome to add. but i'm wondering about your talk about the contingent liabilities the u.s. government has and that is increasing its deficit every year and doesn't seem to care. and for a lot of reasons the federal government seems to be -- have the markings of a subprime borrower. and the reason why -- the reason why the -- they can continue to do this is people keep on lending the money. this is all based on psychology. and because they think that because other people are going to -- the investor class thinks that because other people -- other investors are going to keep on lending the government money, that's fine so they can lend money. they can keep on going on. this strikes me as a weak psychology. i know other competitive currencies are in as bad shape as the dollar. the question is do you envision any situation where the investor class will stop just -- just stop lending money to the u.s. government at such low interest rates? >> i do think a lot of the

fundamentals are worrying about the point you raise about psychology is very valid and the thing that concerns me about that, and i think we have learned this repeatedly is that the psychology of the situation can change quite quickly. all of a sudden, great confidence and we all know that despite the fact that -- well, maybe they won't. and, again, that's only one example, we certainly are in a situation where because so much of our financial system and, again, we saw this play out in europe, so much is built on fannie, freddie debt treasury debt, if there is any problem in that sector, the financial system is going to crater. there is a deep concern there. i don't think we have addressed it in any way. i will note i think some of the attraction of these off budget sheet liabilities are so much easier for politicians to spend money that way. it never shows up on the budget. you make promises that you don't have to pay for. of course, many of the rules, for instance the accounting rules, many of the programs i mentioned, you know, as i talked

about fha and my discussion, the premiums don't even cover the administrative costs. the salaries for 3,000 some employees aren't affected in the premiums they charge. so i guess i would end with saying the problem is that the government engages in a lot of what i would call enron style accounting. it hides its liabilities off the balance sheet. and when they come back on the balance sheet, like it did for enron and with citibank, it is not pretty. >> we have time for one more quick question. yes. >> i don't know how quick this is, but any hope for a freer flow of labor from this? i didn't hear anything on immigration from any of you guys and that's one i would hope to see some movement on over the next couple of years. >> dan, do you want to -- >> can you repeat that, i'm sorry? >> flow of labor. >> do i think the prospects are good? >> yeah. >> not really. you know, i refer you to the work of alex narostra at cato.

he's written quite a lot about this. the republicans are not all that willing to embrace the idea. but it's something that we need to continue to push for. >> maybe i'll end on a more optimistic note and, again, i'll emphasize alex at cato, i direct people to his work, but i do think this is a turn where many republicans are starting to see that, you know even from a pure political calculus that being -- doesn't necessarily work. so, again i'm not optimistic in the short run, but i am optimistic in the long run. and i think the fact that most of us recognize that our parents or grandparents or immigrants contributed to this country is a message that resonates with most people, so i'll end with saying as an economist, i do think that part of this reflects the labor market at any one time. since the labor market is getting bet and people get more secure in their own jobs, they get less concerned about

competition for their jobs. >> and there you have it. let's thank everyone. [ applause ] before you go on the table on your way out, there is our new 100 policy priorities for the 114th congress. there is essays in here from everyone on the panel including alex. so i encourage you to take one on your way out. thank you, all, for coming. i appreciate it.

ahead of the president's day break, congress returns next week with a full agenda. the house is back on tuesday at 10:00 a.m. eastern for morning speeches. noon for legislative business. work next week will include the senate passed bill approving the keystone xl pipeline. yesterday, house majority leader kevin mccarthy and minority whip steny hoyer previewed next week's schedule on the house floor. here's a look at that.

>> mr. speaker on monday, no votes are expected in the house. on tuesday the house will meet at noon for morning hour and 2:00 p.m. for legislative business, votes will be postponed until 6:30. on wednesday and thursday the house will meet at 10:00 a.m. for morning hour and noon for legislative business. on friday, the house will meet at 9:00 a.m. for legislative business, last votes of the week are expected around noon. mr. speaker, the house will consider a number of suspensions next week a complete list of which will be announced by close of business tomorrow. in addition, the house will consider s-1, the senate keystone bill. after six years of waiting this bipartisan bill which will create more than 40000 jobs will finally be placed on the president's desk. i do sincerely hope he considers his long-standing veto threat and sides with the american people by signing this important jobs bill. mr. speaker, the house will also

consider two critical tax packages next week that will provide much needed certainty for americans in small businesses. hr-644, the fighting hunger and senty vac will make charitable giving provisions permanent. it will include provisions authored by paulson, shock and kelly. together, this package will make a real difference in the lives of americans by encouraging donations of property for conservation and enhancing deductions for food contributions to those in need. finally, mr. speaker, the house will consider hr-636, america's small business tax relief act, sponsored by representative pat teaberry with additional provisions authored by representative dave riker. this bill is essential to creating stability for our nation's best job creators small businesses by making increased expensing permanent and i thank the gentleman and

yield back. >> our live coverage of the u.s. house begins at 12:00 eastern on tuesday on our companion network, c-span. the senate returns live monday at 3:00 on c-span2. senators will debate the nomination of michael botticelli to be the next director of national drug control policy. confirmation votes scheduled for 5:30. later in the week, it is likely the senate will again try to move forward on department of homeland security spending. three times this week democrats blocked debate on the bill because of language that overturns president obama's executive actions on immigration. current funding for the department expires at the end of the month. the c-span cities tour takes book tv and american history tv on the road, traveling to u.s. cities to learn about their history and literary life. this weekend we partnered with time warner cable for a visit to corpus christi texas. >> we're in the daniel kilgore

reading room. the dr. hector p. garcia papers are the flagship collection. we have here. 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 during 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. >> watch all of our events from corpus christi saturday at noon eastern, on c-span2's book tv. and sunday afternoon at 2:00 on american history tv on c-span3. white house budget director shaun donovan appeared on

capitol hill, a couple of times this week, to testify on the president's 2016 budget request. here he takes questions from members of the house budget committee. this runs just under 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's 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 i on 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 opening 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 drivers of our 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 outlook 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 ends 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 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 insolvent next year. there's a proposal to reallocate payroll taxes to address the looming insolvency of the disability trust 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 elmendorf. she asked if moving monies from one fund to the other wasn't the equivalent of 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 put 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 insolvent in 28 years. in six short years it's down to 19 years. with your proposal i would suggest it is going to get shorter. 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 end 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. 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 provision 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, counterproductive 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 $3,000 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, i.r.a.s, 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. donovan, for being here today and thank you for following the law and getting the budget in on time. it goes without saying but since you mentioned it, 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 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. not just us -- >> 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 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 maintains -- >> under -- >> every year of the window. >> thank you. >> reduces the deficit by a

cumulative 1.8 trillion over the window. >> you know they have downgraded our growth, so to speak down to a percent gdp. the family budget isn't growing as fast as it used to. let me switch gears and go back to the tax discussion. we go to the second chart here, the president's increase in 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 gdp up to 19.7%. with annual deficits as i just showed before hovering in the half trillion dollar range does

that not indicate we have a spending problem not a revenue problem. 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? >> first of all, our budget is -- does reduce spending. it achieves $400 billion of reductions in medicare and medicaid 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 19.7% with th e level of revenues we had in the late 1990s. >> you think we have strong e economic growth because we ec raised taxes in the 1990s? >> it certainly was consistent of with a period of very high say, economic growth.s t what i would say -- the key issue raised earlier, we are ch facing an unprecedented. >> gentlemene time h is up. >> keep those benefits for thoseo ha who have earned them. >> thank you, mr. chairman. mr. it's good to see you, director donovan. i have to comment that the c chairman made in the opening statement and i heard the same peake comment from speaker boehner within the last couple days. i'm sure we'll hear it again andican again because it's obviously in the the republican talking points.

the comment was the budget contains policies that have failed over the last few years. that seems like an alice in ause wonderland kind of statement to me. if your definition of failure isf 58 consecutive months of job growth, 11 million jobs all of s in the the gains in the stock market, 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. when i look at these policies contained in your budget, i'm asking myself and would ask you to comment, which one of those l has been in place over the last to few years to have failed?ed i don't recall expand -- early n, childhood education, expansion of the earned income tax credit have any of these policies been in place over the last few years?c

>> i guess one area where i would say we did make some a progress and that our budget a does reflect on a bipartisan basis is the murray-ryan agreement that reversed some of reaso the sequestration spending. one of thegr reasons our economic growth has started to pick up is that we moved away from the onesfrankly, tearty of sequestration and kind of from the manufactured crises . of government shutdowns and hundreds others.usands they have shown there are hat ha hundreds of thousands of jobs created by moving away from sequestration. what the budget is trying to do is take an example where i think we have on a bipartisan basis progre been able to make progress, ying follow that model of saying let's do dollar for dollar increases on the discretionary side and then pay for it which is good fiscally right to pay for it with long-term savings

from mandatory programs and from i can revenues. if i can go to one area were ther we has been progress is let's take that model that's been ke successful with murray-ryan and started more progress and build on that going forward. rw >> my comment was really based at t on the fact that they're sing t accusing -- saying this budget a 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. your last comment before cs questioning related to demographics and their impact onof growth and so far. when dr. elmendorf was here, he h said the most significant factorant fa in the reduction in potential growth and gdp was the demographic trend. so the move to immigration reform is something that if we -- were in place i assume b

would cause cbo to increase their estimate of gdp growth. >> absolutely. they show significant growth, not only in the number of workers which really goes directly to the demographic we challenge that we have but also increases in productivity for our economy as well. so there are lots of ways that pr it's pro growth.itsel cbo itself, we use their numbers in the budget. they, last week did an analysis of the president's executive actions, which obviously -- nly because they only focus on a ler smaller group of folks in terms of visas and other things and many who are already here have acbo smaller effect, still, cbo said $7.5 billion of savings would come out of the president's executive actions. >> one quick question about tax policy. you also moved the tax rate to

28% on dividend income. you talked in your opening statement about keeping money in work. isn't that one of the benefits of raising the taxes on dividends as well? when we cut down to 15% several ni years esago, companies were paying out massive dividends, some rate doing bonus dividends because the tax rate was so low. a higher tax rate should keep hat's money at work in the economy. >> exactly right.do what we've tried to do and this is broadly speaking is to think about the tax code in ways that lked can encourage growth. i talked earlier about the stepped up basis on capital w gains and the way that the current law actually discourages productive investments. prod we also do this with international tax reform for example where money is parked overseas and we are encouraging it to come back and locate jobs in the u.s. as well. >> his time is expired.

mr. garrett is recognized for five minutes. n, >> thank tyou, chairman. before ise begin i'm thinking of a comment that members of both sides of the aisle have said he over the years. where we decide to spend our ney money really shows where our priori priorities are.think i think that's a fair statement. i guess you do too. d >> i would. >> yeah. so let's bring up first chart bri just very briefly. it was brought up before. i think this really tells us where this administration's priorities are. paying off big banks the wall street, the investors, that's where you're paying when you're paying the interest on the debt. everything else pales in comparison. medicaid medicaid, social benefits education, transportation, science, space technology pales in comparison. that's the opposite where the

republican budget has been in the past. making sure education and defense and trons portions are ioriti funded. the presidents priorities are all too clear. now, when i began reading your testimony last night, the first opening couple paragraphs paints a picture of a quite growing, expanding, rosy picture for the economy, unemployment, and energy. but i just want to run through them real quickly to see if everything is as rosy as you paint it to me. energy. we all know the price at the pump is going down, but how much of it is due to the president. all the increase in oil and natural gas product comes from where? private lands not federal lands. just the opposite. the actions by the president has shown to see a decrease in oil production by 11% on federal and

decrease of 28% natural gas production on federal lands. this is more spending and more ore ta taxation. $95 billion is proposed for taxation on the american public n 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.o fe you're all aboutdera increasing th revenue to the federal owing ov government, but you want to take it away, these taxes on the family budget. and the family budget is hurting.osy as y it's not as rosy as you paint. are you aware that more thn 46 million americans receive food eive f stamps in the country rightoo now? you aware of that? >> i am. >> that's more that when the recession started.ore tha

are you aware of that? >> i think there's an enormous increase during the recession. in >> but it's more than when it actually started. and are you aware food stamp e you costs are twice as high as it are was back in '07 before the starte recessiond started? that's $38 billion -- >> and the number of food stamps recipients has come down -- >> but we're still at twice the level when it started. total food stamp enrollment levels has never been higher.e a let's take a look at poverty to he see whetherr things are as rosy as the administration points. a report conduct the just last un year found that in the richest nation of the world one in u. three children live in poverty today. are you aware of that? poverty >> i'm aware that we're pursuingwe'r a lot -- >> but that's where we are -- s >> poverty rates. - >> that's where we- are still with this administration. are you aware that the number of

children in poverty grew under this administration since 2008 by 1.7 million. during the same time period same compared around the world, 18 other countries in the world were able to reduce their childhood poverty level. our level goes up. are you aware of that?man, >> i'm glad that we agree -- at w >>e that things are pretty bad. progres >> -- raising peoples wages is an area where we should focus. my >> you're claiming my time. la unemployment you talk about things are good.mploym just yesterday, a poll ceo said the that 5.6 unemployment rate quote, the big lie and the p gallop pegs it at 7.1% and underoyment r employment rate at 15.9%.economy we're not producing enough jobs actually to replenish the middle class which is why we see this

chart and why we seafood stamp o charts go up and why they say wery. have a problem with poverty in this cocountry. >> the hidden unemployment rate is actually dropping faster thanployment the regular unemployment rate. we've made much f more -- >> his time is expired. >> thank you. two jersey guys in a row. that's good.[ laug that's progress. the however, the last jersey guy talked about a myth. i got to address that before i make my remarks mr. chairman. that is when you compare the family budget to the federal budget, there arear some ties. similarities. and a tremendous amount of differences and obligations in the family budget and obligations on the federal levelot which weed over the years voted for. that doesn't hold up.cond m the second myth is what the chairman talked about. that is he said takes -- this et,

th budget thate the secretary's here to talk about, the director's abou here tot talk about this budget rs. takes more from job creators.le let me tell you something about who the job creators are.urn they aren't necessarily in plush offices at the top of buildings. they're the workers of this country. they're the middle class.en we when we had the problem in 2008, b capital was not being invested into this intobudget, into the economy.and that's why the federal nt had government had t to come up with as 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 idual to individual incomes.ant and you want to talk about e redistribution of wealth? look at what we tax assets and look at what we charge tax incomes over those 40 and 50 years. one may make an argument that wement t have reversed distribution. we have reversed socialism in this country.se peo when we take from those people who are the earners out there and create the jobs because of demand and give it to those rve it people who think they deserve it because they live on the top the thre floor. those are just three myths. i don't have time for anything right now. i'll go to others after.e i've said many times before, mr. director, health care reform is roces entitleds reform. when we see how much projected over the years by all experts,

how this is going to cut expenditures or reduce those expenditures and the increased costs of health care. i not only did it reduce costs forcare, bu medicare, but it also reduced costs for beneficiaries.the through the aca, we found significant savings for medicare without cutting benefits by b creating innovative payment and deliveryos models those are expanding right now. ta talkinglk about results-oriented. fact our opponents talked about doing that and changing the th health system in this country.at. i support that. providing care more efficiently and cushing medicare fraud. and if you have the people to check the fraud, it's a good idea to have enough people. check like the irs. it doesn't happen from d self-denial.oeit doe per capita health care spending donova

has hit record lows. thin do you think slowing the rate of growth in health spending can be attributed to health care reform? >>artm i think there's growing o heal agreement thatth a portion of the f th slowing of health care cost gr growth that we'reow seeing is due s to structural reforms in our health care system including those introduced by the affordable care act. this is the single most facto important factor looking long term to the deficits and debt to make progress on. cbo today projects that spending for medicaid and medicare in 2020 is going to be about $190 billion less just through just th improvements we've seen since after the affordable care act was passed. and the budget contains some bipart important bipartisan eitheriss efforts. one of those is including a ent pa

permanent paid forym sgr fix. including in that additional that reforms that would help to accelerate the reform you're talking about. >> i hope we'll see the day in the near future that more folks e see from the other side will at ositiv least say there's some positive things happening in the economy. >> time is expired.>> >> thank you very much, mr. chairman. just to the statement from the gentleman of new jersey that youersey have two people speaking from new jersey in a row.o be i think there ought to be a a law against that. >> a law against one? >> against two people from new jersey speaking one after another. there may be a law about that. >> it's even. >> thank you director. thank you for being here. you know to mr. garrett's point mr. of one of the things that i

think the american people don't quite relate to when the president is speaking and even spectf respectfully to your opening o statement is the fact that i don't think the american people at the think that the situation is that great. i think the polls show it. more importantly in our think districts, i think people p are frankly concerned. they're concerned about how th their familiesei are doing, how their income has not been rising. thi so i thinknk the credibility gap cre that exists between what is sometimes said by the president as t as to the situation in the country and reality frankly rath is -- is rather large.w, a c now, a couple things i've heard d thi today. and this is-- -- these are things wa that by the y,way, when i go home,e. people frankly are in awe. when they hear that if government takes less of their money, that that equates to

government spending is something that does not gel with real life. in other words, all these government expenditures in some of the graphs shown today are re not because we're not taking their money, so therefore that equates to government spending. where in real life does not taking somebody's money equate ife to spending? to again, the credibility gap i think, increases when statements like that are made. by the way, if that's the case i think our gdp is $17 trillion.? what we take in revenue and taxes is about roughly -- about ba $3 lltrillion? ballpark figures.in so that means we're actually spending $14 trillion. because that's money that the m government is not taking from the economy, so should we then c calleda that $14 trillion in government spending? no. that's ludicrous. l and it's ludicrous to say money

that we are not forcefully taking. peopleuse don't pay this willingly. they're forced to pay. is somehow government spending. credibility gap. when one says that going from 200 plus million dollars in interest payments to a little bit under $800 billion in interest payments and that that is spending lesson interest l payments, it doesn't pass the straight face test. and i would just respectfully th ask onein more thing in which the chairman asked a number of times a and wasn't able to quite get an answer answer. the pre when the president states that it's a one for one dollar on defense and nondefense and yet it's a one for one dollar except that later it's not a one for one dollar.that that is what creates among other things, a huge credibility gap.

for the american people.nment. loss in faith of their government. and it's a tragedy when the ican american people do not trust doral not have faith in the federal ey don't government. they don't have trust and faith n in the u.s. congress, in the administration, in our institutions. i would just throw this as a nd in wordou of caution.rd of ca it's okay to differ on policies. but what is not fine is to try to confuse by trying to hide the truth with saying it's one for one, except that later it isn't but that except for later it isn't never comes out. it's not in your written testimony. you can keep your health care if you like it.or you can keep your doctor if you ne like it. period. but that's not really what they meant. well again i just caution you to be a little bit more careful, all of us, but in this case you

and the administration to be a little bit more careful as to when you speak to the american people. when you're speaking to us, pe you're speaking to the american people. when you sayus, going from $200 billion in interest payments to $800 billion in interest n payments is a reduction of to interest payments frankly it does a huge disservice i think to the administration and to the in american people. so i'm almost out of time.isserv i would just caution you to be ast c little bit more straightforward with how you state -- >> time is expired.>>. ms. caster is recognized. >> can i respond for one thing.irman, i do think it's important given that i'm married toried a woman from new jersey. i don't want to speak to the president. but if you were to introduce a law banning two people from new jersey speaking in a row, i peopl would have to recommend that theve to president veto it.

>> showing great wiz some. >> through mr. chairman. our highways bridges, transit systems, airports and sea ports drive economic growth in america. in this global economy the countries with modern ortati transportation systems are going to compete best.ey're they'rego going to be able to innovate and grow. and if part of our strategy is to boost wages investing in in infraasstructure is one of the spartbut smartest thinks we can do. in when you look at the policy overew the past few years, it's obvious we can do better. millions and millions of americans are employed in transportation and infrastructure.tu thesere jobs often pay a higher wage. especially in my area. in my district, the median household income is $35,000 a ou hav year. so if you have a job in nstr construction oucr engineering

civil engineering or port tampa tampa bay or the international airport, you're making a higher wage. i know it's true in my my community, and i'm certain it's 's true in many of my colleagues' communities too. so i want to thank you for i don't strong six-year infrastructure proposal.latel see, lately congress has kind of been treading water. the last transportation reauthorization expired in e september. had we've had to draw general nue to revenue to p plug the holes in the highway fund. so when i hear back home from mystat community, from the state, from gr business leadersea is they want ey don greater certainty. they don't want a one-year extension extension. they want a six-year robust you f investment bill. so i want to thank youat for proposing that in the budget. can you go through and outline

the transportation infrastructure plan in the th budget, what you project for economic growth.grow andth then explain you link fundin funding for a new highway bill to business tax reform rather form than what we typically do on user pays principal for highway bills. why should we take that step?e t >> i'm so glad you asked about this because it really is one of the most important things that do we can do to grow our economy and create jobs. it's really been a bipartisan ho effort in past years, and i hope it can be again this year. we'r what we're proposing is not only a six-year extension, but at a level that would increase by 40% the investment that we're makingur inf in our infrastructure. as you rightly said, it's paid for, for more than fully paid for, th actually, through our refor comprehensive business tax reform proposal. we specifically, what we would do

is ask companies to bring money that they're holding overseas, nto th to bring it back into the country. we'd have a toll charge of 14% hose on those roughly $2 trillion of ld ove earnings that are held overseas. woul and wed would restructure going ard forward the international tax system to a 19% rate. all of this would be part of revenue neutral business tax reform. itof t follows a structure that congre congressman camp and others havethe proposed in the past. we think it has bipartisan support. because it could pay for a six-year proposal when we're been kicking the can down the road with small increments of funding many times over the last few years we think this is a t great way toak take this one-time revenue, invest it while we are working toward a longer term b solution beyond the six years ask for a funding source. >> i've got to h ask for your helpit

on one thing too when it comes to infrastructure. the port tampa bay has had a project in the army corps of for a work program for a couple of years. it's been on the work plan and it -- because the fed stepped up in previous years and said 're go okay, we're going to have the construction dollars set aside, we've been able to get a 70% match from private users.for and we were waiting for the state of florida to put up the rest of the money. but it disappeared from this i'd l budget. i'd likeive to give you this to ask. for your help to take a look.u have t you have to admit a 70% match from the locals is a great -- is a great match. they typically only say 35% nly sa match fromy local sources. in is a very important public/private partnership for rtners the largest sea port in florida our p and one of our primary economic

engines. >> happy to look at it. >> thank you. >> time is expired. mr. cole is recognized for five ch, mr minutes. >> thank you verany much,. mr. chairman. i've got three things i want to but th cover. f the first one is for the record so to speak. you were the secretary of hud oklah when tornados ravaged oklahoma in 2013. i want to personally thank you and hud for the tremendous job you did in responding and continuing to respond and helped us recover. and through you, obviously i want to thank the administration, the president. w you guys were simply magnificent to b in that.ed ought to be noted. we don't forget it in my home. thank you very much for your service. made a big difference to a lot t of p of people's lives in my district. second is really for the record. this is to focus attention on h something. i just would ask, there's been

significant bipartisan concerns nifica raisednt with respect to the arisa rule few dish yar rule. i would ask that you commit to aall i full review and economic you analysis of the impacts of that f rule to ensure that these bipartisan concerns have been ure dressed? >> absolutely.partisan and i think congressman, i don't have any specifics about release of that rule, but i think when t you do see it, you'll see we ve r have really listened to concerns -- >> i would appreciate that. i'm not asking for any early. i just want to make sure. e it's extraordinarily important as you know for a lot of folks. now, i want to move back to a to couple of items in the budget and discuss that with you.s in previous -- or in a previous t budget that the president e it's proposed, he had something so actually sort of bipartisan chain support.

changed cpi and means testing certai for certain entitlement benefits. and saves hundreds of millions of dollars. that's not in this particular bu budget as i read it is it? >> that's correct.an >>d does the fact -- i'm not trying to trap you. the then director now secretary when she was here said when it wasn't in her budget, she said etary that doesn't mean it's off the table. we might engage in some negotiation at some point. is that still the administration position that whileion it's not in your budget it's not something you would rule out in a meaningful discussion about how to find a compromise? >> as you said, i can't get into specific negotiations here. i think the -- the way that i would frame this is that when it was proposed i think the was president made clear that he was hoping to reach a broader agreement, a so-called grand bargain, and had offered what he

thought was not necessarily the was bestno policy but was doing it in the spirit of trying to get to that agreement. i would say we continue to have concerns about it.ere. those concerns have always been there, but i think it's also or fair to say as said last year yea that, you know, we are willing to enter into negotiations and look at some hard things. and we look forward to an conversations going forward. i think particularly, the things in the budget, though, are the things that we want to focus on in those negotiations.ent. building on the murray-ryan precedent. >> fair enough. i'm going to take that as a long yes. fair enough with all the qualifiers. another question just really n philosophical question, do you think the budget can ever be balanced without meaningfully addressing the entitlement spending.

we've already cut discretionary spending. agreeme bipartisan agreement to get that done since president bush was inat's pre office. causing a lot of concern around the table in a variety of areas.eps the area that keeps growing is the mandatory spending, whatever title you want to use. there is there any way to balance the budget without coming to a broade broader agreement to reign in or slow down that spending?owth. >> well, i think we were just speci talking about social security.y is n social security is not one of at the primary drivers at this point of deficit and debts. i it really is health care costs. that is the key thing along with our demographic challenges in the long-term going forward. i agree with you that we need to take those on. i would say we have and particularly in the work that we've done through the act affordable care account and elsewhere to lower health care

costs growth. the proposals we have in the very budget and a range of others t would go farther on that and comprehensive immigration reform we think are the most important things we can do on that front. >> time expired. recogn thank you. >> thank you, mr. chairman. director donovan, it's great to today. see you here today. we all get in these budget k hearings. i think sometimes the american ink people watch us and think we're talking gobble-de-gook. i think we all agree that we about care about t the middle class and still the middle class is still hurting. i think m members on both sides of the aisle believe we've got to balance the budget and reduce icit.

the deficit. the question is how do you get there. i think the president's budget good j does a good jobob of getting there.erday, i yesterday, i heard directly from the army about what sequestration would do in michigan and costing jobs. i think all of us have been hearing from our constituents across the country who are facing homelessness, they still haven't found a new job, disappearing research dwrantgrants et cetera because of the arbitrary e budget caps we've seen. of could you talk about the types of investments we'd be able to e make if the budget caps are increased and we do have a reversal of sequestration and then explain for us how we can afford to spend the additional these money in these investments and mee still meet key metrics that show as being fiscally responsible? >> maybe i would focus on one of one the areas we haven't talked

about yet. we've talked about frastruc infrastructure, investing in families. i think one of the most important, and this is certainly true as you know in michigan, manufacturing has seen a real resurgence under this president.reside and it's not just in the auto it's n industry but it's in many, many other areas.ry, but this budget is very strong on through lifting sequestration doing more to invest not just in manufacturing directly the budget contains a proposal that would allow us to fully fund the 45 manufacturing institutes that the president called for early akes on in his administration. but it also makes sure we're doing things to scale up the most innovative technology. we're actually winning the race to do advanced manufacturing, the highest technology manufacturings. we're proposing a $10 billion public private startup fund thatw us t would allow us to scale the most fr

promising inventions from our r&d and take them to scale to really create hundreds of thousands of jobs.amer we want to also make sure americans are ready for those nt of jobs. those are critical to making sure that in these more advanced manufacturing jobs folks are ready to take them. free community college obviously would help on that as well.re ma there are manyny things that buil reallydi focus on building on this resurgence in manufacturing thank we've seen these last six years. >> thank you. a and talking about that, too manynd job americans are stills struggling to find jobs that pay. what does your budget do to and address unemployment and improve wages for those that are unemployed? >> we have in the budget a rehens comprehensiveiv unemployment insurancnte i effort that would makesomebo sure that when somebody does that t fall into unemployment, that theso benefits they need are there.that but also that we would make

reforms to would encourage states to connect them to jobs as quickly as possible. we obviously think we ought to be raising the minimum wage and doing other things making sure child care is available. paid leave. we have workers, american families making terrible choices to have to give up a paycheck torrible stay home with their children with their parents, and we just don't think that those are the right choices to force middle class families to make. g >> then i'm going to give you ve to one last question because i have to do it. headlines in the detroit papers today were the budget doesn't so address the third bridge crossing again. could we ask that we do work ork with the white house and the ate appropriate agencies to look at the funding of the custom plaza govern that's so critical.upportiv the canadian government has been so very supportive. >> we've beenhem working closely

with them on that and we're optimistic that it can move forward. >> thank you. >> mr. mcclin tok from california. >> thank you mr. chairman. i was struck by the last question. talk about all the good things that government can do if it invests more money in the economy. of course, the problem with the an. analysis is government cannot put a dollar into the economy e gove until itrn first takes that same dollar out of the economy. that's the pair ra docks between the scene and the unseen. you can see the job that's created when government puts a dollar into the economy. what we don't see as clearly is the job that is lost as jo government takes that dollar out ofhe e the economy. and the problem that you've got is there's no way to spin the economy. everybody has had an up close ec and personal experience with . obama-nomics.

they know their own experience. hitt that's why you're hitting such a disconnect between all this good happy talk and the experience the that families are -- are having struggling to make ends meet so many years into this recession.it in fact, it's been's pointed out repeatedly that if the recovery under obama tracked with the economy -- economic recovery under reagan, there would be millions more americans work er today and families on average millio would be makinnsg thousands of makin dollars more than they are today. but getting back to the question for a moment how much -- how much in tax increases is -- is the administration proposing in this budget for businesses? >> first of all, just say the american people are more optimistic today than they have been since the beginning of our h financial crisis. whether you look -- >> you cannot speak for them. i cannot speak for them.

they can speak for themselves. >> consumer confidence in the range of pulls and others, they're more optimistic -- >> yet people have their own -- you are not going to change people's opinions. they are having their own experiences with this economy good or bad and i suggest that you stop digging once you're in a hole that size. my question of you is how much s how business taxes are included in this budget. >> so what our budget does on taxes, we propose a fully paid for -- >> how much? >> -- set of middle class tax cuts that is paid for in the way that i -- >> with business tax increases? >> actually, it doesn't include any business tax increases there. >> what are the taxes? i know you're planning a massive increase in capital gains taxes. >> on so those -- a >> purely -- by the way nearly

doubling the capital gains tax ing rate from the beginning of this begi administration. >> all we're doingnnad ismi proposing g to take the capital gains rate an. back to what it was under to reagan. >> are you proposing to take the income tax rate back down to where it was under reagan. >> we are proposing to a comprehensive revenue neutral business tax reform. so revenue neutral. co we'remp proposing to fully offset the tax cuts for 44 million middle class families, average $600 with the capital gains rars changes -- >> but here's the problem. m >> - in addition to that we have e about 640 billion of deficit defic reduction thatit we would do through other changes to high income areas in the tax code. >> you talk about the debt being cut by half under this administration, but that doesn't account for the fact this acount administration first f ran that debt through the roof to ou trillion dollargh levels year roo

after year. that's like a high-priced store doubling its prices and then boasting about its half off en sale. but let's get beyond that into the question of the impact that those taxes on investment have. when you tax something, you get less of it. when youwh tax investment, you get less investment at exactly the time when we need more private sector investment to create the real jobs and higher paying jobsis that the economy desperately needs. my time, mr. donovan. the other time i'd like to o address is the point raised by the ranking member when he talked about european ones tearty. those european nations that emphasize spending cuts did quite well.e spen those that emphasized tax x increases did quite poorly. that's also been the story of our country. clinton reagan and clinton cut spending as a percentage of gdp and the

economy blossomed. >> and we have cut spending this significantly in this budget. it fully pays for the discretionary increases that we propose -- t >> you've cut -- it keeps going up and up. eps >>go gentleman's time is expired. >> thank you, mr. chair. thank you mr. donovan for your hard work. their can we put up a slide on discretionary caps in the on t president's budget? there was a suggestion that the increase president's budget increases nondefense spending much higher rate than defense spending. isn't it true that it increases both at roughly exactly the same amount? >> that's exactly right.exactly and my point is the way we look t at the budget is compared to what would happen under current law and what we're proposing a dollar for dollar increases ared t compared to sequestration and 's rig what would happen in the years

after dthat. io >> in searched on active duty. i'm still in the reserves. very important to me and my constituents. is there anything in the budget an related to base closures domestically? >> so we are calling for a bipartisan effort to create another brak commission that would look at potential for saving -- for savings in the defense department budget through a process that's been used a number of times before, i think successfully to make some hard decisions about where we locate our armed forces. >> thank you. on the first day of the 114th dy congress the house passed a so on rule change that requires day, dynamic scoring.. i don't think this is a part san issue. as you know, the concept is we should take into account the

second order affects of how ld tak people do governmental changes. both democrats and republicans for example have supported the research and development tax show credit because studies show t thatinvest if you invest in r&d you generate economic activity and it its that couldel pay for the credit t itself.ule i thank that makes the rule change partisan, is they only e tax apply it to large tax nding. expenditures and ignore discretionary spending. for example, congresswoman earlier point out that if you spend on infrastructure we know that generates economic activity, creates growth. we know if we invest in education, that eventually increases america's tax base, creates opportunities generates revenues back. does it make any sense to apply dynamic scores to just one part of the budget, but not the rest of it? a very >> whether it's in

infrastructure, the investments in education that they can have eff effects on growth just as x code changes in the tax code can.d i would also say we have serious concerns about dynamic scoring cause because of the enormous uncertainty that it has. >> so at least to my last point t which is the republicans have e altered a playing field. we can't change this rule.world there is going to be dynamic mic scoring. it will be a range. but numbers do matter. so my question to you and really to any academic think tank or atte nonprofit, can we buildnt the capacity now to start doing ring o dynamicn scoring on spending? otherwise, my fear is, we're fear going to go into these budget ied bl battles within one hand tied behind our backs. republicans can say, we're going to apply dynamic scoreing. on the democratic side we know

infrastructure creates growth and opportunity.we we know investing in education is is the right thing to do and we number have no numbers to support that.gh can your agency u because you the have some of the best and do brightest, can d you start building the capacity to do that that so so we can also start generating these dynamic scoring ranges even though they may not be precise precise. >> we certainly -- and cbo has done this in the past to do advisory analyses in a dynamic way on a range of types of 1 so bills. let meta give you one example. when cbo looked at a 10% across the board tax cut, their es ran analysis ranged by 15 times and from positive to negative. literally, they said this 10% cut could grow the economy, it could shrink it and the effects nk could be 15 t times within their ould b range ofe expected. that's the problem on the

discretionary side or the tax side. the uncertainty of these effectsnty means it really isn't good ing pr scoring practice to build them . into the official score. >> i understand. the republicans can say we're repub going to have this that increases our priorities and grows economy that way. i i wanted to say the same for education and infrastructure. >>be gentlemen, our rule accommodatess both spending and d. revenue. young -- >> mr. chairman you added a comment. not with respect to some of the discretionary spending. >> thank you mr. chairman. mr. donovan good to see you again. we appreciate you are here. there's one promise i'd love to see the president make. and i'd like for him to keep s one. this one. say and he got caught saying if you liked your doctor, you can keep ook it. i'd love for him to look at the you

li american people and say if you like your money, you can keep it. andyo really do something about it. they i have a lot of constituents in tennessee. there's been a lot of talk about this budget and they really feelbasicall like it's basically immoral for look a the federal government to lookt ng at them and say we're going to force you to live below your means so you can pay your taxes ment t over here to a federal government that refuses to live within its means. so they do expect us to do something about the spending side of that column and they want to see entitlement reform. they want to see some tax they reforms. they want to have to spend less. ques do you support balancing the budget within ten years? >> we support making sure we >> meet the most important tests -- >> no, that's not the question. the question is, do you support balancing the budget within ten

years, yes or no?or >> we think the most important test for a -- >> i will take that as a no. let me ask you this. do you think president clinton sk made a mistake in working with th congressional republicans to balance the budget?nals t >> i think what we're proposing thin in this budget is that we work in a buy -- >> but you never -- >> -- to build on the recent success we have had h in murray ryan, but more than fully offset mor it as our budget does with reductions on the mandatory side and with revenues. >> okay. but it doesn't come into in balance. >>to again, the budget produces -- >> i'm going to take that as a no. let me asks -- you this. talking about that deficit. deficit of under 3% of gdp may be a substantial improve.gdp m . we will agree wit h that.we will when you look at the amount of

spending that took place early t in this administration but it inistr will still add to the national onal debt. will it not? >> our budget reduces spending l. overall. >> but it's still adding to the is sti debt. >> the debt is still growing. >> -- >> let's see. your estimate is 22 trillion by 2025. that would be the amount of debt. are you okay with that number?? do you think that's healthy for the economy and the american taxpayer? >> the key test is -- compared to current law where our debt c ando deficits would continue to grow as a share of our economy, e this budget brings them below 3% of gdp on the deficit side and y. stabilizes and reduces -- you >> are you okay with the 22 on trillion number by 2025? >> >> what i think the -- >> yes or no? we

>> are we investing in american in families, in our o economy. those are the most critical tests of a budget. - >> sir -- >> >> along with the fiscal lity sustainability. >> i appreciate that. i'll tell you, the focus of the budget should be about the focus priorities that the american ould b people set. that's what a budget should be. it is a reflection of the priorities of the entity. now, we have gone from 10.6 trillion in debt to over $18 trillion in debt. over the last six years.e are the american people are saying ully to us and right any so that we have to get this under control. you can look at what is happening with the debt, with our publicly traded debt and who owns that debt. it has become a national al security risk.so what so what my constituents want to know is how do we bring this budget into balance how do we do that without raising taxes,

how do we begin to whittle down ttle this debt and are you all willing to work with us to bringwith u those occurrences about. oc >> what this budget does is exactly what you said, we focus on the american people. re andud we reduce middle class taxes, 44 million families wouldx cut av get a tax cut averaging $600. and we invest in the things that are going -- >> would that tax cut come the about -- would that be about like what they were supposed to being less in health insurance and now they're paying more payi more in out of pocket costs and the obama care expenses continue to go up and up.rns we have serious concerns about that. >> time's expired. mr. monthly ton is recognized for five minutes. >> thank you mr. chairman. i wanted to first of all give anted you an opportunity to respond to a comment made earlier and you didn't have a chance to respond about

which is about consumer on wa confidence. th e implication was that your vision of consumer confidence was not actually the people's view of consumer confidence. >> well, if you look at many you different measures of the american people's view of the economy right now, they do see it as better than it's been since the financial crisis started, that the job picture, unemployment that we've seen substantial improvement. the thing that they want to see get better is they want their wages to fwroegrow. >> that is the key focus of middle class economics. budge that's whatt this budget focuses eir on. it helps their paychecks go farther in the short run by helping pay for child care, send their kids to college. help ansd it creates the jobs of the future and makes sure families

are ready to take those jobs. ho >> andse director, are those poli surveys of politicians of eal a surveys of real american work workers? >> those are all surveys of the american people. >> thank you very much. now, is it accurate to say that survey the debt has increased under both parties over the past 15 years? >> that's correct. >> from both parties. >> yep. >> >> so as a result, i think that over -- over this period we've terest seen interest payments increase under leadership from both sides of the aisle.you -- can you -- is that something you >> would agree with as well? >> yes. >> what effect did the unfunded war under president bush have on the budget picture that we have war

today? >> the costs particularly in cost what we call overseas contingency operations contributed to what were very, tribut very high historical deficits when the president came into office. and one of the important steps that we've made president to th talked ine the state of the union about we had 180,000 troops overseas. we're now down to 15000. the human costs of war are we obviously enormous. but on the fiscal side, what we've seen is our over seas contingency operations costs by come downabou by about $130 billion a year under this president. and what we propose is to continue that trend into next year. with the end of combat operations in afghanistan last year, we have the real have opportunity to make sure that we are reaping savings there and e and

re reinvesting it into the key defens things we need to do in the those defense department going go forward. >> thoseaw costs don't go away when the troops come home. i was at the v.a. this morning ng l in factin waiting in long lines. it's clear that these war costs are going to go on for veterans. to under thego budget that house republicans passed last year c that paid for it by doubling the doub sequester cuts to nondefense programs. if that budget were put into effect, what impact would it have for veterans programs?llent po >> i think you raise an excellent point. an let's rememberd that in that rememb nondefense all of the veterans administration costs, all of the costs of protecting our homeland in the department of homeland security, all of those are part are of the so-called nondefense part of discretionary.se" pa and this is one of the reasons this why it's so critical that we 's so maintain this linkage between

reversing sequestration on the defense side and on the nondefense side. de >> thank .you. i yield back my time. >> thank you. be pleased to know we exempted veterans from any reductions in the budget year. gentleman from south carolina, so mr. rice recognized for five minutes. >> thank you, gentlemen, for being, si here today. listening to the prior testimony, the way i understand it, we have increased -- in this budget, we have increased taxes rn and new government programs orme increased government programs that are designed to give middlened class families another $600 a a year, right? righ i've heard you say? >> those are the tax cuts proposed. we have about 100 cuts reductions in spending in programs. >> offset by other tax increases. eing vernme

>> before we make promises of new government programs, you know, we've got medicare and social security designed to fail i or be dramatically reduced in 15t years. social security disability designed -- it's going toia fail unless we do something next do s year. shouldn'tar. we make good the promises we've made before? before we make new promises now now for more government programs and more benefits and more give giveaways? shouldn't we do that? >> absolutely. that's why our budget proposes a simple reallocation of the --e di >> or the disability. but it doesn't fix social security in the long run, does it? it doesn't fix medicare in the long run, does it? >> as i've talked about earlier,er immigration reform is actually aally a very important piece of --very >> but they don't -- they don't bring them into balance. they never fix, it right?ight? yes or no. do they come into balance?uld ci >> it would significantly extend the life of the trust funds. >> thank you, sir.

the title of this budget is middle class economics. and that is an interesting title. could i see the slides, please? would you think that o -- would you agree with me that the best ay way to lift people out of poverty and expand the middle class, would that be government programs or would that be expanding the economy?porams o >> i think expanding the economy is a key goal. i i think smart, targeted investments in certain government programs can help to programs accomplish that goal. >> you know, this -- this chart is is a -- is cbo's forecast of gdp growth. an and what thedy projected two years ago was 2.9%. and as a result of the recent economic entperformance, they dropped their forecast to 2.5%. this was over the next ten years. their projection over the next ion ten years.was s. they dropped it 2.5% last year pped and 2.3% this year. we've had six years of repeated ha

tax d increases increased government programs, increased regulations under obamacare and rams dodd/frank. and this is the result of that. next slide, please.e. this is a graph of middle class income in blue, average household income. you can see it's dropped about 8.7, almost 9% since 2007.ti atme the same time a graphed against that is fuels and utility costs, more on coal, epa regulations, clean water regulations.war looks like the middle class is -- there's a little r disconnect between our rosy lass economic results and what the middle class is feeling. next slide, please.li >> this is their inform graphed against food and beverages you know, energy costs affect food s a costs. they can see it every day at theevery da grocery store.y st next slide please. he this isal their income against

health care costs.ying i hear you say the rate of bu health care costs is slowing but that's what they experience. of all of these things are from the federal reserve. now, the president loves to say he's for the middle class. he entitles his budget "middle class economics," but the fact is i don't just listen to what he says i look at what he does. and the fact is he's gutting the middle class, isn't he?ct >> i guess i'd have to disagree with you there, congressman. in fact, what we have seen is accelerating job growth over the last year. partly because we reversed the the -- at least a portion of the sequestration cuts, began to invest again in things to create middl more middle class jobs, grow wages. we've seen wages begin to increase too slowly, but i'm e glad we agree we should be raising middle class>> incomes.

the question is --he >> the policies aren't working. and let me ask you this. ar what do you think the effect is on middle class -- the middle class income's going to be adding anotherss i what $4 million undocumented workers to the workforce? how do you think that'srk going toou affect middle class wages? >> don't take my information. cbo shows that it will grow our ows economy, increase productivity. >> over a 20-year --prod >> and help reduce our deficit -- >> imgentleman's time has expired. the gentle lady from new mexico is recognized for five minutes. >> thank you, mr. chairman. thank you, mr. donovan. is r so, i'm actually going to repeat a couple of themes, because i think they bear repeating. the country's gdp is growing at countr the fastest pace in many years. the stock market is at all-time a highs. unemployment rate is lower than ghs, u it was before the financial crisis.

so we have had economic growth but the recession -- since the recession. and it's clear, i think my colleagues are agreeing it hasn't benefitted everyone equally. income inequality is increasing, wages have been stagnant for the majority of americans and many working families are still struggling. the median wealth of upper income families has grown to nearly seven times the median amilie wealths. of middle income families and 70 times that of bottom earners. the highest wealth gap on record. the top 1% of earners have accumulateded more wealth than alth the entire bottom 90% of the entire u.s. population. accounting for inflation the typical middle class household is earning less than it was before the recession. earn in fact, the middle class are earning less than they did in re 1989. i'm concerned about those povr rates and about wage rates. i'm going to tal ak to you in a ge moment about what's really occurring in many states that

are represented here in this committee, including in my state, new mexico in my home district, which is largely albuquerque. the disagreement is about about whether we've invested effectively and enough in middle class economics.high i think the budget does that y effe very cteffectively. that we have failed to invest in infrastructure. we have failed to in vest in middle class families and in ie wage earners and in workers.ers. if anybody wants to see what the sequester has done, come to albuquerque.ea and come to new mexico which arguably has one of the worst economies in the country.e we're just cutting across the board cuts, related to i think ss-the about a marriage where one spouse racks up the credit cards, divorce the other crspouse,ther and often in american culture, it's the wife who's left paying back those credit cards.g ba and i'm feeling in this environment much like that wife in that relationship, in a got severed relationship. we disagree how we got here but e

have i am agreeing we can move forward. i want to be more specific aboutnt. that. as the president's budget attempts to address this by investing in middle class priorities, including access to o high-quality education iding providing families tax relief, helping working families with child care and making natio investments in the nation's infrastructure infrastructure. those are all great and i believe they will make a difference. ev but what can you do in states me like new mexico, in states like south alabama, south carolina and west virginia that are all feeling the same thing?what spe what specific strategies in the president's budget jumpstarts these states and these economies who are still bearing the brunt biggest bruntof of the recession and not seeing that economic growth? what's in there specific for those states more than those individual investments and middle class families but help those states jump ahead because we have a double dip recession.

>> so, i think particularly in that states that are not seeing wage growth and not some of those thin same benefits that nationally the we're seeing. i think the specific focus on make how we make paychecks go farther today, minimum wage is something that the president has pushed on that more and more states have adopted. over the past year. but also ways to make sure -- e -- right now we have many families in -- >> i'm awful about reclaiming myo. time, too. we ask you a question and we don't let you answer.stion an we're all famous for that. i agree that that makes a difference. but if there aren't those t make jobs -- lets me just give you but if some really striking -- more children are hungry in new mexico than anymore other states.e hungry 22% of new mexicoens are living in poverty. 31% of children are in poverty. n only 29.6 young adults 29 to 34

have an associate's degree. there aren't jobs -- there is no job growth.ere are there is no manufacturing there is no productivity. so, you have to have a job forma a minimum wage impact.job for and i agree that it does unequivocally. i would really challenge you given the membership on this committee in particular with the states that i mentioned, that there has to be an effort focusing on wage earnings in the middle class that you are investing in those difficult states. and there has to be a very t specific strategy so we all catch up in a meaningful way. and i would really implore you and the president to look at that specifically. >> gentlaye lady's time has expired. the gentleman from south carolina, mr. sanford, is recognized. >> thank you, mr. chairman. the one thing we develop over time is the humility to be careful with our words.y i was struck by what you said to ago the chairman a few minutes ago.