knowing many of our parent didn't have internet neither at job nor at home, and knowing these tools were geared to a population that didn't actually have the choices other ones had. and at the end of the speech it was call to action. parents, number one, many times didn't know who their legislators were. number two, many times were asked in what form to input their nine-digit zip code. i don't know my nine-digit zip code. it was all of these obstacles for them to engage in policymaking policy.

while this was 2011, i was the school principal when the first iphone came out. i remember the frenzy at my school with parents buying cell phones. and i knew i was text messaging most of my friends. i thought, i'm seeing everybody here in this room using cell phones. why is it possible we can't do a call to action right now with a phone? teld tell me, don't use technology. poor parents don't have access to technology. that was the first thing. the second one is because i was so close to the heart of technology, i was so close to san francisco, i start seeing all of that was not true.

that was happening through cell phones and marketing low income parent. i was predicting what was happening today. the digital divide at home was 30%. today that digital divide is big at home. every group, every home have same ownership of cell phones no no. last year 53% of americans own cell phone today. 73% use a smartphone. getz guess who are -- hispanics lead the way, just 1% of all african-americans but 73% to 74% actually is used by students.

looking at that. we have the cell phones people a way to build it. i was fortunate to have this pool of talent and i was able to convince a couple of people one is here, who was one of the geniuses geniuses, go to technology, i convince him. the trends in what's happening now. we see a tremendous revolution for almost -- in every field. we believe -- friends step up,

american federation for children. we believe that by putting technology in the hands of people what actual lily -- for school choice. like the doctor said we are put together, technology and choice at the hands of people so they are able to have access to these programs. social media is incredibly powerful today. the entire senate is on twitter right? the entire senate. almost the entire house. how many people do you think follow this gentleman here? raise your hand if you think it's over 50,000 people? 80,000 people follow him. not only with auto electricitied officials but also to connect

with revolution that is needed things that all of these organizations are doing already is the way of the future. i think just like technology is revolutionizing, every industry is also going to this technology. >> i have a question first. stacy from palmetto scholars academy. i'm going to try and address your question or raise your question from a market perspective. with the skill set to run a charter is extremely difficult because most candidates come from traditional school system and they fail in a charter environment because they don't know how to be a ceo and to be accountable to a board or

parents and community leaders. so, what can the choice movement to help train successful charter principals? i will ask, how can we better market what it is that we do or what the school choice movement does that would attract the right kind of people, the right kind of entrepreneurs to go in to helping create new schools for parents. senator? >> thank you for that question. sometimes i don't think we describe charter schools correctly. i've always thought of charter schools as schools that free teachers to do what they know how to do and parents to choose the school. or let parents choose the school and give teachers and principal the freedom from government skulz, state rules, school board rules to device a program to

meet the needs of the children they serve. now, if that's what the school is, and that could be a private school or a public charter school, then i think really good principals would love to do that because they would like to have the freedom to be open 24 hours a day, if they needed to, to be open during the easter break to be open -- or to have some classes large, some classes small. i don't think it's that hard to find a good school leader for a public charter school or private school if you describe to them the opportunity to let the parents choose the school and let the principal and teachers decide how to serve those kids? what could be better to say to a parent about complaining about the school, you don't have to go here? you can go somewhere else. you have other choices.

if you really don't like the fact we insist on this homework or we start at 7:00 or we have this size school, you're welcome to transfer. that's a pretty big opportunity. i know localitiests of public school teachers who would like the idea to lead a public charter school or even a private school. >> how do you find the people who understand this or how do you market to them? >> first of all, i just to want say, thank ellen for her kind comments. there's a guy in our state named jeb bush who deserves some credit. i want to give a shout out to jeb. he's busy now but he deserves a little bit of credited. we're early in this this transformation from factory assembly line model to customization.

it's much more decentralized and really an empowerment model versus a disempowerment model. something interesting i'm starting to see even in private schools is they're starting to build coalitions. there is time when there's value in economies to scale. the challenge is, how do you get the benefit of bigness without all the negativeness. as the senator said this is a tremendous opportunity for educators to finally be freed from the bureaucracy to be innovative and creative. so-to-have the intrapractice neural opportunities. we are starting to get that opportunity for us and we are seeing a lot of wonderful talent rushing to the field. at the same time small businesses are tough to run. so, sometimes when you can form coalitionings, can you share your marketing strategy. can you chair your professional development resources. can you chair some technology. you're seeing coalition in florida. some obvious once are catholic schools working together.

we have over 300 schools in florida that are all over the place that are coming together to form partnerships to share with each other, to grab rate, to get the benefits of the economy of scale. that's one of the most exciting things for me. as public education becomes transformed, you will see us figuring out how to get the benefits of bigness and benefits of smallness at the same time. >> i would just add onto that i think beyond thinking about school leaders thinking about teachers and how we get people who have expertise in various industry. think about all the alternative paths to certification we could open up to get people who have expertise in their individual feels into the classroom. that's how you really attract people who have passion. not just for education but for the subject matter they're teaching and can really innovate in the classroom. >> one of the last questions to the panel but it's been a hot debate about regulating school choice. our previous panel talked about a little bit.

there is a lot of talk about regulating school choice. i'm not on. can you still hear me? there's a lot of talk about regulating school choice. test scores, data, all of the above. but we actually know a lot more about what makes parents make a decision about their children's school. than just test scores. so how do we market the elements that parents really do value or how do we put more emphasis on those elements that parents really do value? to help others understand the importance of their decision-making process when choosing a school for their child? >> i'm going to share a little we have with children in louisiana. something that i think we learned from parents every day about the way they connect with each other. it was just absurd how they act.

for example in louisiana we have technology, the american federation for children the scholarship program. a couple things we know number one, if you make the application process to be responsive on mobile, the parents can see it on their mobile phone. then we have school finder where parents enter their zip code. then they're able to pick, you will see parents don't make the same decisions, so some of them look actually like the school -- they look if the school has after-skal programs or they offer soccer or offer any of the other services. sometimes sort of giving them the information so they can make decisions. second, i think parents need to be met where they are. and we in all the tremendous years of text message, we know by statistics that over 90% of

different users use text message every day. minorities lead the way. and while data use e-mail they use text message, you can pass links through text message and give them access to scholarships. that's what we're doing with louisiana scholarship program where parents are able to text a kiword. 60% of the applications to -- coming through the tools for scholarship are coming through radio. over 12,000 people that applied last year over 50% applied through text message. almost 7,000 people. and most of them responded to ads in radio. we see the same trend here where you see 60% -- 65% of the people that also applied through text

message radio. i think using technology to really get to meet people, meet parents where they are. not undermining to use technology because they use it every day. how much they use coupons online but use it as equalizer of access. i see that as a tremendous opportunity to help them make decisions about their schools. >> i'd add, to, that when we think about market, it's easy to think about shortcuts and what's the quickest way to get to the end goal. i think we have to realize that like panelless before us, this really is about the long-term process of building relationships because until we have credibility to convey the message, it doesn't matter how good we are at delivering it over social media or anything else. we have to have the credibility to be heard. that means we have to go into

the community, treat them with dig nis and let them see our hearts and know our motivation in doing this is because we care about what's best for their child. >> senator? >> we're in our committee that tim and i are on we're working on tictioning no child left behind, which is about eight years overdue. ever by senate standards, this is really tardy. the first big issue is overtesting, too much testing. one of the interesting things that's coming out is the 17 federal tests that no child left behind requires like reading in math in thirdç grade, reading and math in the fourth grade that's just 17 tests that jeb bush's educational choice found in florida. you'll know more about this doug, than i will, that they're up to 200 tests being inging

administered. almost all of them came because of state requirements and local requirements. ft. myers had 183 tests other than the 17 federal tests. i think what's becoming clear is one of the reasons there are so many local and state tests is because of the high test standards. if those were moved to the states, the states were able to say for public schools if the test scores aren't up to par, this is failure, this is success, these are the consequences and these are the other things they're going to take into account. i think -- i think that would make a big difference. so what i'm getting around to saying is, i think from a marketing point of view a charter public school has to take the same test that all the other public schools take up. might as well say we take the same two tests in third grade, they each take two hours. can you see those and compare that and the results are

disaggregated. one way to persuade people that they're getting -- you know the value of what you're offering in the private school might be to say, we're not afraid to take those same tests, show you the results but we have a lot of other things we can show you as well. we don't just rely on those. those are an individual choice a private school could make. >> doug real quick 30 seconds, last thought on that topic. >> real quickly, senator i think technology will redefine this whole issue, by the way in the coming years. because we have historically not had choice in public education, we haven't built the kind of infrastructure other fields have to help people make good choices. if you're medicine have you a primary physician to help you navigate choices. if you want to sell a house, you

have a real estate agent. education, because we've never had really choice, we haven't built out the infrastructure to help people make good choices. what you'll find over the next decade, we're going to continue to work on building better infrastructure to make sure that a family has the kind of support system they need to customize the choices for their particular children. >> thank you very much. [ applause ] >> senator scott two last words? don't forget to tweet. we are almost at the end here. thank you for your attention your attentiveness and your specific questions on topics so important to our future and to the future of our most valuable asset, our students.

talents feel free to head out. don't stick around to hear the closing comments.çó i've heard me talk long enough. i would say to those folks who have come up here, especially from my home state of south carolina, let me just give a shout out to the folks who are around here. called the voters my bosses. so thank you guys for taking the time to come up and to be a part of this process. ellen and others, thank you all for this -- that was very good. that was a quick 45 minutes. i was like, wow, that's over. that was really good information. to my staff lizzy and the rest of your cohorts, thank you for doing such an amazing job and making me so incredibly proud of the team that's been a symbol certainly better than i am. so many different topics. i would say we have learned a lot about the issue of school choice today. would you agree? we really have learned a lot.

public to private charter to home school, i think today has been a great opportunity for us to hear some important stories hear some important stats that underlie the importance of this incredibly important issue. i also want to thank those who have been tweeting along the way. this is an important part of engaging people beyond the walls of the conference, of the forum. want to thank my parents, the american federation for children, the freedom foundation for educational choice as well as all of the audience members for your strong and consistent participation. remember, when parents have a choice kids have a chance. god bless you guys for coming here. enjoy the rest. day. i was going to talk about rachel

lewis. i think we've heard a lot about the importance of education. so, with that i'm going to walk over to the kids and see if i have any kids that might need to be answered and god bless you guys. enjoy the rest of your day.

if you missed any of senator scott's conference, you can watch it i don't know line at c-span.org. tomorrow the senate finance committee tackles the tax code. a pair of former senators will testify, democrat and former presidential candidate bill bradley, and oregon republican bob packwood, both served on the finance committee while in the senate. watch that live at 10 a.m. eastern tomorrow here on c-span3. also tomorrow at 10 a.m. a hearing looking at vaccinations for preventable diseases. this is in the wake of the measles outbreak in the u.s. a number of medical professionals will testify and you can watch that on your companion network c-span. on wednesday, the house homeland security committee looks at homegrown terrorists live at 10 a.m. eastern right here on c-span3.

>> tonight on "the communicators," special counsel for the fcc on chairman tom wheeler's proposal for net neutrality, including regulating the internet like utility. >> i don't know who the next fcc chairman is. the next fcc chairman may try to throw out this whole regime and do something more free market oriented or less regulatory. i don't buy the next chairman argument because you know the rules are only as good as the guy or the gal on the eighth floor enforcing them. so, we've got to do our best to set up an infrastructure that will protect consumers, that will preserve an open internet, which has been the greatest driver of economic development free speech and innovation this world has ever known. >> tonight at 8 p.m. eastern on "the communicators" on c-span2. white house budget director shaun donovan went to capitol

hill to defend the president's nearly $4 trillion 2016 budget proposal, which he says reduces spending relative to current law. those remarks came after senator jeff sessions argued repeatedly that the proposal sets spending at more than the limits of the 2011 budget deal. senator mike enzi chairs the committee while senator bernie sanders serves as ranking member. this is about two hours. good morning. i'll call this hearing to order. today we have the testimony from omb director shaun donovan of the president's budget plan for the upcoming 2016 fiscal year. when it comes to the budget, we all know we've lived for too many years with too many blown deadlines, failed submissions, heightened crisis and last-second deals.

together both parties both chambers at both ends of pennsylvania avenue have allowed this way of business to be the new normal for how we operate. it's long pass time to restore regular order to our budget process and that begins with following the budget timeline laid out in the law. yesterday after six years the president's budget was released on time. my congratulations to mr. donovan, who heeded up that effort. i appreciate the work you and your team did to make that happen. being on time is a first small step toward restoring regular order on the budget and it can help our constituents understand a little better what's happening in washington. however our constituents understand these truths, i know from traveling to wyoming and visiting with people around the country, they think we spend too much, tax too much, they think we regulate too much, borrow too much and their biggest worry is we owe too much. every year since the president took office, he's proposed the

same approach to the fiscal challenge facing our government. he wants to spend more. he wants to tax more. he wants to regulate more. he wants to borrow more and he wants us to owe more and more and more and more. his plans always end up with americans holding the tab, stuck with difeficits and debt as far as the eye can see. i don't like the word deficit. it gets confused with debt. deficit is overspending. i promised in the first hearing i would follow the numbers. here's what those numbers show. first, the tax man cometh under . a total of $2.10 trillion higher. this boost comes on top of the $1.7 trillion taxes he's already imposed during his presidency. i can tell you that nothing good for individuals ever comes from

$3.8 trillion in additional taxes. next spending explodes. the president wants to add $259 billion of new spending in the next fiscal year. and $2.4 trillion over the next ten years. that's a 65% increase. $2.1 trillion in higher taxes. $2.4 trillion in higher spending. that's still overspending. the president hides what he's doing when he talks about reducing the deficit. it sounds like the debt will go down. no, the deficit is the overspending that we do. did you ever hear of someone being able to buy something with the interest they saved? so, the interest payments skyrocket, annual interest costs would triple from $229 billion today to $785 billion in 2025.

and i think that's at a pretty conservative interest rate. interest remains the fastest growing item in the budget but provides little in the way of benefit for our constituents. ever hear of anybody being able to spend the interest that they have to pay? at the end of his plan, annual interest costs would be larger than the president's proposed spending for national defense, medicaid or the combined total where all nondefense agency spending. finally, it adds $8.5 trillion to the debt. cumulative overspending would amount to $5.7 trillion in new debt with the federal debt climbing to $26.3 trillion in 2025. based on projected population figures, this would mean every man, woman and child in america would owe almost $76,000 in payments on president obama's debt. that's compared to $56,000 per person today. that's $20,000 per person nor.

that everybody in america is going to owe. i mean, the child that's born today gets figured into that same cost that same debt. all together, these were not the numbers i was looking for. i meant it when i said last week we must confront spending. bring the debt to an end and ultimately balance the budget. i'll listen to at mrgs make its case on why it's best to balance the budget. with 24 states already agreeing the solution is to gather together to write a balanced budget requirement into our constitution and with more states thinking about it, this is a mission we don't dare duck. yes, 24 states have already passed a constitutional convention to balance the budget. more than ten others are in the process of passing that same one. 24 plus 10 is 34. that's enough to have a constitutional convention and force us to do it. we also can't fail our constituents.

our nation needs a larger and more successful middle class. not a larger, more intrusive and fiscally foolish federal government. the latest koortly quarter gdp figures released figure, and i don't think gdp really means much to the rest of the nation. what they're interested in is how much we take in, how much we spend and how much more debt that results in. the latest quarterly gdp figures demonstrate in the united states, more federal spending more federal overspending called deficits, more interest costs and more debt does not yield a robust economy. our economy still bobs in the backwater of too slow growth while jobless rate edges down. an equity markets head up. the number of people who are underemployed or abandoned looking for work continues to be too high. as senator sanders says, we have a deficit of employment. wages are stagnate, household

wealth has collapsed, and the american dream won't be theirs. failure of our economy to record is the president's record over the last six years. he's left too many americans behind. in looking ahead, they need a federal government to have a fiscal plan. americans need to have confidence that there is work to be had jobs to be found and paychecks to be earned. most importantly, they need to know that a strong and successful future is theirs again all around the country. it's not too late for the president to join us in making the future brighter by submitting a new plan that doesn't mortgage our future to pay for the present. if the president changes course we can work together to ensure that americans have the strongest possible economy. so competition to hire employees drives up wages and benefits. but we have a solid economy and an economy in government. i said people don't understand

the gdp. they do understand spending more than we take in. we maxed out our credit cards. we don't have a mortgage payment. maybe we should have a mortgage payment where we monthly pay down some of our debt and then use the interest we saved to pay down even more. that's how people buy houses. i looked at the numbers on that. there's no possibility of that at the present time. we keep coming up with brilliant ideas for new ways to spend to fill in gaps and gifts we haven't been giving. we don't really take a look at what we already have and need to weed out things that don't work. we pretend everything we do is perfection. with guilty conscience we try to do more. instead, we should be doing better. we have over 250 programs that have been authorized. of those, 150 of them are no longer in authorization. but we continue to spend the money on them even though we don't look at them to see what they do and how they operate and

what they should be doing and if they even ought to exist anymore. that means we exceeded the time we guaranteed we'd pay for them. last year we had to vote on $1100 billion in spending. i've heard $1100. i think it's more honest than $1.1 trillion. we spent $468 billion. if you overspend what you can control by almost 50%, aren't we buying like it was a department store sale? leagues, that's the sort of change americans really believe in. senator sanders. >> chairman, thank you very much. the good news is our country has made substantial economic progress in the last six years since president bush left office. instead of losing 800,000 jobs a month, as we were during the

final months of the bush administration, we are now creating some 250,000 jobs a month and are seeing steady job growth over the last 58 months. in stin of having a record-breaking $1.4 trillion deficit, as when president bush left office in january 2009 the federal deficit has been cut by more than two-thirds. six years ago the world's financial system was on the verge of collapse. today that is certainly not the case. while we can be broad of what we've accomplished in the last six years, one would be very wrong not to appreciate that there is also a lot of very bad news in our economy, especially for working families. most significantly the simple truth is the 40-year decline of the american middle class continues. real unemployment is not 5.6%. it is 11% 2% if one includes people who have given up looking

for work or people who are working part time when they want to work full time. we do not talk about this issue but youth unemployment today is close to 17% an african-american youth unemployment is over 30%. real median family income has declined by $5,000 since 1999. incredibly, and i ask my colleagues to listen to this despite huge increases in productivity the median male worker, that man right in the middle of the economy, now earns $783 less than he did 42 years ago. after justing for inflation. the median female worker now makes $1300 less than she did in 2007. shamefully we continue to have, by far the highest rate of childhood poverty of any major country on earth. in the midst of this tragic

decline of america's middle class, there is another reality. this is the main point i want to make this morning. and that is that the wealthiest people and the largest cooperations are doing phenomenally well. the result the united states today has more income in wealth inequality than at any time since the great depression. today, incredibly the top 1% own almost as much wealth as the bottom 90%. let me repeat that. because i think what senator enzi was talking about has got to be put into the broad context. and that is that the top one-tenth of 1% today almost as much wealth as the bottom 90%. today one family, the walton family of walmart owns more wealth than the bottom 40% of the american people, some 120 million americans. in terms of income what we have

seen in recent years is that virtually all new income is something to the top 1%. last year the top 25 hedge fund managers earned more income than 425,000 public school teachers. and that gap between the very, very rich and everyone else grows wider. over the past 40 years we have witnessed an enormous transfer of wealth. we are witnessing the robin hood principle in reverse. we are taking from working people and the poor and giving to the very, very wealthy. from 1985 to 2013, the share of the nation's wealth going to the middle class has gone down from 36% to less than 23%. if the middle class had simply maintained the same share of our nation's wealth as it did 30 years ago, it would $10.7

trillion more in cumulative wealth than it does today. while the middle class continues to shrink while millions of americans are working longer hours for low wages while young people cannot afford to go to college, while children in america go hungry we have seen since 2009 that the top 1% has experienced an $11.5 trillion increase in wealth. mr. chairman, what we are talking about is not just a moral issue, it's an economic issue. 70% of our economy is based on consumer spending. when working people don't have disposal income, when they're now out buying goods and products, we are not creating the jobs we need. the debate we are having this morning will have a proceed founs -- profound impact on the lives of the american people. many of my republican friends are in favor of cutting social security cutting medicare,

cutting medicated, cutting nutrition programs for kids while providing huge tax breaks when millionaires and billionaires. that is their idea of moving the economy forward. in my view on the other hand, if we are serious about rebuilding the disappearing middle class reducing income in wealth, and strengthening social security, medicare and medicaid we need a budget that creates millions of jobs raise wages makes college affordable and demands that the wealthiest people start paying their fair share. in all of these matters, the president's budget begins to move us in the right direction. at a time when almost all of the new income gains go to the top 1% and when corporate profits are at an all-time high the president's efforts to end egregious tax loopholes that benefit the wealthy corporations while providing tax breaks for working families is exactly the right thing to do. at a time when real unemployment is over 1 1%, the idea of

increasing substantially investment in our infrastructure and creating hundreds of thousands of jobs is the right thing to do. at a time when 20% of our kids are living in poverty, the president's budget triples. the child care tax credit to $3,000 per child and makes an additional $1 billion investment in headstart exactly the right thing to do. at a time when more americans ununable to go to college the president proposes the first two years of community college to be free. that is exactly the right thing to do. let me conclude mr. chairman, by saying this if we are serious about figuring out how we're going to pay for what this country needs, we might want to take a hard look at why major corporation after major corporation in some years pays absolutely zero in taxes. from 2008 to 2013 general electric made nearly $34 million

in profit in the united states. not only did it pay nothing in federal income taxes, it received a tax break of nearly -- a tax rebate of nearly $3 billion. and the list goes on and on and on. there's a lot to be done. our job is to protect the middle class. let's get to work doing that. >> thank you, senator sanders. our witness this morning is shaun donovan 40th director of the office of management and budget. prior to taking the role as head of omb director donovan served as president obama's first secretary of housing and urban development. director donovan has a long public service career, both in federal and local roles including commissioner of the new york city department of housing preservation and development and as acting federal housing administration commissioner during the transition between president clinton and president bush. his private sector experience includes work at the community preservation corporation in new york city and as a visiting

scholar at new york university. director donovan holds both bachelor's and masters degrees in public administration and architecture from harvard. director donovan, as architect of the administration's budget, we look forward to what you have to say. for the information of colleagues, direct donovan will take about seven minutes for his opening testimony. director, please begin. >> chairman enzi, ranking member sanders, members of the committee, thank you for welcoming me here today to present the president's 2016 budget. to echo your comments mr. chairman when i met with so many of you over the summer one of the key themes everyone echoed was that we needed to get our budget process back into regular order. and i truly hope that this on-time budget i'm presenting today is the first step toward that regular order.

the budget comes on the heels of a breakthrough year for america and builds on our fiscal and economic progress. including the fastest job growth since the 1990s and the fastest sustained period of deficit reduction in 60 years. the budget is a blueprint for the president's vision for middle class economics in the 21st century. this means helping working families by making their paychecks go further, preparing americans to earn higher wages, and making america the place where businesses decide to innovate, grow and create good, high-paying jobs. the budget shows 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 its lowest level since 2002, adjusted for inflation, it supports cutting edge research -- and the brain initiative, which is helping to revolutionize our understanding of the human brain. likewise, rather than cutting inflation adjusted national security funding to the lowest level since 2006 the budget makes responsible investments to protect our national security restoring readiness and the investment in modernization needed to ensure america's continued technological edge. i want to emphasize that every investment in the budget including both the discretionary investments made possible by reversing sequestration and mandatory and tax changes are more than paid for through spending or tax reforms. for example, the budget would provide new and expanded tax credits for middle class families and would more than pay

for these investments by reforming capital gains taxation and making it more costly for the biggest financial firms to finance their activities with excessive borrowing. uses one-time beverage rues from pro growth business tax reform to pay for an ambition transportation proposal that will give states and localities the business they need to accelerate job growth. meanwhile, the budget also achieves $1.8 trillion in deficit reduction. primarily by focusing on the key drivers of our budget challenges. health care cost growths and inadequate revenue levels in the face of an aging population. building on the historically slow rates of health care cost growth in recent years that have already significantly improved our fiscal outlook, the budget includes roughly $400 billion in health savings, which 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 cushing inefficient, high-income tax end pection tours. 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 dlz 1$1 trillion over two decades while strengthening social security and growing the economy. as a result of these measures, the budget maintains deficits well below the 40-year historical average during every year of the budget window. it meets the key test of fiscal sustainability, putting debt as a share of the economy on a downward path, showing that investments in accelerating growth and a strong middle class are compatible with strengthening the nation's finances. and to ensure that our country remains strong and prosperous both now and in the future, it makes smart investments to give every american the chance to contribute to and share in the benefits of growth. i look forward to working with

congress and this committee in the coming months. thank you. i'd be glad to take your questions. >> wow. you didn't even come close to seven minutes. we do appreciate that. now we'll turn to questions last week when cbo director testified, he did a good job of simply answering the questions asked by senators so that members on both sides had more questions that they could ask and get answers. i hope you'll follow that model this morning, director, so that we can all have as much asked and answered as possible. as a reminder, i'll alternate recognition between republican and democratic senators following seniority for those who were here when the hearing was gaveled to order. after that i'll recognize members based on order of aarrival. if you're not here when your name is called i'll skip you but pencil you in at the end to

everyone in attendance has an opportunity to ask director donovan a chance to ask questions. with that, director, i'll start with my first question. you testified that stabilizing the debt is a share of the economyo cf1 o economy and putting it on a fiscal sustainability. but debt still goes up every year in the president's budget in dollar terms and shows little movement as a share of the economy. again, that's gdp and i don't think people understand gdp. they do understand that we spend more than we take in. even though we're getting record revenue. so why is it a sufficient goal to merely tread water on debt as a share of gdp? >> first of all, senator, i think as any family would look at it their finances are based on what they earn. sorry. apologize. i think like any family in america, the key way they think about their finances is based on

what they earn. so gdp isciy9 really the measure of what this country earns. it is the size of our economy and most economists on both sides of the aisle really think of looking at these numbers as a share of gdp as the correct measure. the other point i would make is that as the director no doubt testified, under current projections, under current law, over the next ten years, debt as a share of gdp would grow substantially to -- in our baseline we show it growing to almost 81% of gdp. and so with this $1.8 trillion ofntfñ deficit reduction that our budget would achieve, we actually help to not just stabilize but also begin to bring down the debt by the end of the window. that is a substantial difference from our current path. >> in looking at it, the president's budget never reaches

balance. at its low point in 2017 the overspending is $463 billion. and that grows steadily from there reaching $687 billion in 2025. to secure the middle class and any hope for future generations we need to pay down the debt and that's not possible with overspending this large. can we pay down the public debt that is have the dollar amount of debt outstanding be less than the amount in the year earlier without balancing the budget? >> again, senator, the key metric for fiscal sustainability that is not only the measure that we use in the administration but that is i think widely accepted is that deficits below 3% of gdp are critical for long-term sustainability. that's the measure that we met for after record reducti5 deficits. over a two-thirds reduction since the president came into office. and, that will keep us in every

year of the budget window below the 40-year average for deficits that this country has faced. so we think we will meet that key test of sustainability. >> okay. most of the people that i deal with think that if you spend more than you take in, that you've made a mistake. but the analytical data, transand federal debt held by the public. the table shows interest costs as a percent of total outlays will increase steadily under the president's budget. canab this trend continue forever without compromising our ability to provide government services? q[y rjñ think what the long-term fiscal outlook chapter shows in addition to what i've already said is that we would stabilize the debt as a share of the economy, not just over the ten-year window, but over the 25-year window as well. as i think we all recognize,

what we are facing in this country is a real demographic challenge with the aging of the baby boom. the key thing that we need to do to ensure that we have long-run fiscal sustainability is focus on health care costs. we've seen the lowest growth in health care costs in 50 years. over the last few years we have many, many measures, including over $400 billion in savings from medicare and medicaid proposed in the budget that increase over time. and we need to recognize that we need to grow our work force and our economy and immigration reform is perhaps the single most important thing we could do there. sustainability of social security over time. so we think we're attacking through this budget the key drivers of long-term deficit and debt. >> my time is almost expired. i heard your comment about

health care costs going down. last year i had the head start folks come to me and complain that their budget was being cut 7.3% instead of 2.3%. i found out that they were keeping most of the money in washington instead of where the kids were and it got reversed and they got all of their money. what they found was their health care costs had gone up so much that they still couldn't get the kids back into the program. so we have a lot of things we need to work on. my time is expired. senator sanders. >> thank you, mr. chairman. mr. donovan, in case you haven't been made aware we have a philosophical divide on this committee to some degree. many of my republican colleagues believe that what is best for the country in the future is base toy to cut, cut cut social security, medicare, nutrition. et cetera. others of us don't believe that's best for working families in this country. my staff did some research and

we found that as it turns out, major profitable corporation after major profitable corporation, not only paid zero in a given year in federal taxes, but in fact got rebates from the irs. just some examples. from 2008 through 2013, general electric made nearly $34 billion in profits in the u.s. what was its tax burden? zero. in fact, it seefrdreceived a tax refund of nearly $3 billion. verizon in that same period of time made over $42 billion in the u.s. it received tax refunds of $732 million. in other words, they didn't pay any taxes. they actually got rerebates. now i think the president's budget begins to address some of these issues. can you talk to us in your view about whether or not it is appropriate that one large major profitable corporation after another pays zero in federal income taxes? >> well, senator i think we could all agree7 r÷ on a bipartisan

basis that our current corporate tax code is more complicated than it needs to b%çvc that it has a broad range of loopholes that create not just hrpíuunfairness across companies, but also frankly, make our economy less efficient and hold back economic growth. and so we do support and the budget lays this out reform of our business tax system that would not only make it more fair, but in the long run would increase economic growth. and we would do that by closing a broad range of loop hopes and actually lowering the basic rate from 35% down to 28%. we think a particularly important piece of this is around international tax reform. the president's spoken out very clearly that the trend of inversions of companies buying small companies overseas and

relocating there is a serious problem. this budget would not only close those loopholes to try to stop to the maximumñ9ógeb> thank you mr. donovan. there will be i suspect a major debate coming forward on social security. and i happen to believe not only that we should not cut social security but we should expand benefits. i suspect my republican colleaguesádisagree. but, the first order of business done by the house republicans was to pass a rule which could result in a 20% reduction in benefits for people who receive disability benefits laying the groundwork for either cuts into disability benefits or in fact social security for older

people. your budget did not do that. you did what has been done 11 times in the past, what we call re-adjust. social security has enough money to pay all benefits for the next 18 years. you simply took money from one account and into the n why did you do that? >> well as you said, senator, this small reallocation of social5ç0@q security taxes is the simplest, most direct way to ensure that on a combined basis both social security trust funds are -- have reserves available through 2033. and this is a step that's been taken on a bipartisan basis under democrats and republicans. it's actually been done both ways from disability to the other trust fund and back to social security. so we think this is the most simple and critical way. and remember, these are benefits that have been earned by folks paying in over time.

we should not put them at risk of getting a 19% cut in their benefits after they paid into the system over their working years. >> okay. mr. chairman, my time is almost up. i'll yield the floor. >> senator grassley? >> i think the president's budget is an ideological statement based on the faith of government making decisions as opposed to individuals making decisions. i think it's based on the proposition that 535 people here in congress are a heck of a lot smarter than 137 million taxpayers, and that gets to the issue of increasing taxes or not. quite frankly, i think the dynamics of the american economy is going to advance are the economy much faster if you have 137 million taxpayers decide whether to spend or save and how to spend it and how to save it as opposed to those of us here in the congress of the united

states and the president of the united states making that decision. and it's not a question of bighj government, small government. it's a question of what does the most to expand and grow our economy. because what. country needs is not more tax rates or more taxes. we need more taxpayers. and that's going to happen by the capital investment than individuals make, not what the government makes is going to really grow the economy. we have a 50-year average that has said that if you have $13!c÷ tax increase, it gs congress to spend $1.13. that's not going to do anything about the deficit. a license to spend more money brings us further into the hole. you can't raiseova.u(vqj high enough to satisfy the appetite of congress or any president. not just this president.

to spend money. if a tax increase would go to the bottom line, reduce the thing. i think we might look favorable upon that. . but that's not going to happen. and i think you see that deficits matter. and the president's budget speaks to deficits mattering. they have consequences because the president's own budget shows that the cost of interest is going to go up from little less than $300 billion a year to $800 billion a year. so we have a spending problem not a taxing problem. i don't see in this budget -- and i suppose i could say this even about republican budgets -- that there doesn't seem to be a shame in increasing deficits. in this case under this budget, by $8 trillion over a ten-year period of time. so this gets me to what the president has said publicly about the middle class. so my question will go to this.

the president seems to believe that we need to deficit spend today and for the next ten years in order to, in his words invest in initiatives to help the middle class. however, cbo has analyzed in great detail the long-term consequences of deficit spending. they found that in future years a growing portion of people's savings will go towsg buying government debt rather than towards investing in productive capital goods. that crowding out of investment would reduce the size of the nation's .'ióuctive capital, resources that produce economic benefits over time. the smaller capital stock would result in lower wages and incomes making future generations worse off. now that's not my finding. that's cbo's finding. so two questions that you can answer at the same time. does the president think the non-partisan congressional budget office is incorrect in stating that future generations will be worse off by taking no

action tok2 reduce deficits and debt, and follow-up to that, wouldn't reducing the debt burden of future generations be more prudent than ten more years of deficit spending and grow region debt? that's the only question51tkñ i'll ask. >> senator we do take the spending and deficits and debt seriously. that's why we have taken action over the full six years of this president's time in office and achieved the fastest deficit reduction since immediately after world war ii and brought deficits down below our 40-year average. in addition we make further changes in this budget both on the spending side and in other areas that would reduce our debt by $1.8 trillion -- our deficits by 1. trillion over those ten years. so we do take that seriously.

but we also take seriously that this country needs to invest in the things that are going to grow our middle class. we cut< taxes for 44 million families by an average of $600 through this budget, and we do ask that where we have places in our tax code that are not only unfair, but actually discourage economic growth that we make changes to our tax code as well. whether it's returning to the capital gains rate of 28% that was effective when president reagan was in office, or to get rid of inefficiencies like the so-called capital gains stepped-up basis where we are actually encouraging the wealthiest families to hold cash until their death. we're allowing the wealthiest families to basically hold those assets and never be taxed for capital gains. so we do believe that we need to focus on our deficits and debt.

we do in this budget. we continue to make strong progress like we have over the last few years. but we also recognize that we have to invest in our future as well. >> thank you mr. chairman. >> senator stabenow. >> thank you mr. chairman, and thank you director donovan. i've been on this committee for a while, and when i think about -- since 2009 you guys inherited a very big hole and been stepping forward out of that hole for the last six years. and want to congratulate you. i remember when we were on this committee talking about simpson-bowles commission, a bipartisan commission that said we needed to cut $4 trillion in order to be able to get a handle on and stabilizelayón a debt as a share of the economy. and we're step by step by step now at $3.3 trillion of the $4 trillion. i would suggest that's pretty

good. and the fact that we are now looking at less than two-thirds of the annual deficit of what you inherited in 2009, less than two-thirds. less than two-third. i would suggest that's pretty good, too. 11.2 million jobs. i'd like very much to have more. nearly 3 million last year. butrz i couldn't agree with you more that the only way that works is to stop talking about trickle-down economics and talk about -- and actually do something that makes sure the next steps are laser-focused on middle class. so before i ask my question though, i also want to say that we talk a lot about debt and about how we should never spend more than we have. i would just suggest, i have a mortgage. when something's important we spend more than we have. we have a mortgage for a house. we have a car payment and somebody who makes a lot of

automobiles, i would welcome more people doing that. we put our kids through college. unfortunately, too much debt on college. many, many colleagues here, colleagues on the other side of the aisle, felt going to war twice not paying for it was a priority. so the issue is really how do we manage our debt and move forward and not have it overwhelm us. but we certainly set priorities for when we -- for our families choose to take on debt. so it is a question of how we manage that. i would like to move to topic of health care. firsty of all, congratulate you on adding dollars for medical research and the brain initiative. one of the ways that we can bring down costs that will save millions of lives is to focus on brain research. 1 out of 5 medicare dollars is spent on alzheimer's. 1 out of 5. 1 out of 5. so i'm very encouraged and believe we should even be doing more in that area.

i want to talk about health care as part of bringing down costs. latest cbo projection saw that more americans are finding full-time work getting health care komplg. we know that fewer americans are going to bankruptcy because of medical bills. good thing. tax credits that we passed are helping people afford coverage. people who already have insurance are actually getting what they're paying for now. and can't get dropped. can get coverage even if they have a pre-existing condition. but we are seeing an ongoing debate. very soon we'll see even more of that here in the senate to reverse that stripping insurance coverage from working americans that will increase the debt. the house has voted over 50 times to repeal health reform. the supreme court is considering whether or not to have a process that would put more millions of people into health care without health care. so could you talk about how the

health care law has helped to drive down medicare spending as well as the healthql care costs for americans. >> senator, i appreciate you focusing on this because it really is the single most important focus for -- if we want to talk about long-run deficits. but also critical thing for middle class families is affordable health care. and the affordable care act is working. we have now more than 10 million less fewer uninsured americans, and more broadly, millions and millions of americans who had health care before, health care insurance but have actually seen whether it's keeping their kids on their plan, not being kicked out because of pre-existing conditions and a broad range ever things. so we really have made progress. on the fiscal side what we've seen is the lowest health care cost growth in 50 years and

that has already improved our long-run fiscal picture dramatically. just take cbo's numbers where they say just from improvements we've seen over the last few years, we're going to spend $190 billion less on medicare and medicaid in the year 2020. thanks to the lower growth in health care costs that we've already seen. i think we can work together on a bipartisan basis to build on that. we have $400 billion in medicare and medicaid savings built into our budget and for the first time we're including a permanent sgr or doc fix proposal in our bill,)z fully paid for. it builds on bipartisan legislation, and it adds provisions that would go even further in terms of what we call delivery system reform making sure that we pay doctors and hospitals based on the quality of care that they're providing, not just the quantity of care. so i think this is an area where we've made a great deal of

progress. more people are covered. they're getting better coverage. and, in fact we can build on that through this budget and work that we can do on a bibay bipartisan basis this year. >> thank you, mr. chairman. appreciate your leadership and look forward to working with you. i agree with senator sanders that the middle class is really " hurting. working americans today are not doing well. since 200072007 median income in america is down $4,000 for income for a family. this is catastrophic. this is absolutely one of the most dangerous trends we've seen in some time. and it is accelerated over the last decade. it's accelerated under your president's, our president's watch, mr. donovan. the problem is your problem -- tax more spend more borrow

more regulate more obamacare more, and an immigration policy g 7bf1 o that dominates the market with workers from abroad when we don't have enough jobs for american workers pulling down wages of americans. that's what caused this problem. in my opinion. and that's where we disagree, senator sanders. we got a problem. but your ideas will not work, they will never work. now, mr. donovan, reckless spending endangers the future of the republic. we remain on an unsustainable debt course. let me ask you this simple question. does your budget spend more or less than the -- than we agreed to with president obama in the budget control act of 2011? >> our budget overall reduces

spending relative to current law. >> tell me a question. you work for the taxpayers, mr. donovan. i'm asking you on their behalf a simple question. does your budget spendq:á7ñ more money next year than the current law of the budget control act allows? >> overall our budget reduces spending compared to current law. >> overall your budget spends $74 billion more next year than allowed by current law. isn't that true? >> i think what you're focused on senatorcx is discretionary spending. and i think that there is broad agreement that -- >> that's what the budget control act -- >> -- sequestration is hurting our military readiness, the joint cheers of of staff testified to that this past week, and it is hurting our ability to invest in -- >> i asked is you do you propose

spending more money next year on discretionary accounts than was agreed to in the budget control act? yes or no. can you not answer that question? >> i believe i've answered it, senator. >> no, you haven't answered it. >> reverse sequestration and our budget fully pays for those increased investments on the discretionary side with mandatory spending reductions and cutting spending -- wasteful spending in the tax code. >> well, one of the ways you fix a budget problem is when you agree to a spending limit, you stick to it. so i'm going to ask you one more time -- let's just see if we can get this straight. american people need to know. do you propose to spend more next year than the budget control act would allow? >> we propose to lift the sequestration caps which have been harmful to our military readiness, harmful to economic growth. we more than fully pay for those with reductions in spending on theki mandatory side and reducing

wasteful spending in the tax code. >> so you intend to spendf0?hy more than we agreed to. that's all i want you to say. will you say that? >> our budget proposes -- >> why won't you say that? what is it about this that allows you to continue in that way? >> senator, i think there is pretty broad bipartisan agreement -- >> we are -- >> -- that discretionary spending is not driving our deficits and in fact our discretionary spending even with the increases on the discretionary side we proposed in our budget remains -- >> su won't give the american people a simple answer -- >> it remains at the lowest levels. >> one more question. under your statement that you gave us earlier you said that the immigration policies of this president would make social security more sustainable over time. now isn't it true that everybody

in social security does not pay in enough money to justify the withdrawals that they will take over their lifetime. and by adding millions of more people unlawfully here to the social security rolls, will that not make social security less sustainable over time than it is today? yes or no. >> just yesterday the actuary for the social security administration confirmed that the president's executive actions that he8e took late last year would improve the prospects for social security. >> over what period of time? >> over the -- >> over the life of the individual? you're not counting the times that these individuals would be drawing their benefits, mr. donovan. you're counting a short-term window in which they would pay in creating a short-term surplus of money or additional flow of money. but you're not counting when they draw out. it's going to make thegñ social

security hole deeper. it is going to make it harder for us to save social security and medicare and you know it. and you're suggesting to the american people directly different from that and it's wrong. >> senator youoc)ij don't need to take my word for it. the actuary along with nfhñ projects that the actionings the president took will reduce deficits, not increase them.s the president took will reduce deficits, not increase them. >> senator whitehouse. >> thank you very much mr. chairman. mr. donovan could you plies tell us a little bit about the part of your budget document that's called "federal budget exposure to climate risk." and what you see and anticipate in terms of cost that the taxpayers will bear from our failure to address the climate

change problem. >> senator what we tried to do for the very first time in this budget is to very specifically quantify as much as possible what we have seen over a number of years and what we expect to see going forward in terms of direct increase costs. there are many other areas that are perhaps more speculative more indirect costs, but we tried to focus on programs like disaster assistance through fema or flood insurance crop insurance is another area where we've seen substantially increased claims as a result of more extreme weather. and i think the basic/íñ analysis is that it is footish for us not to act and both take further steps to reduce climate change reduce greenhouse gas emissions,

but also to prepare our communities for the more extreme weather that we're seeing. not only will those save lives but they will save dollars as well. fema shows that where we invest in protecting our communities we typically get a 4-1 return in terms of future savings relative to the dollars that we spend today. so climate change is a wide -- focusing on climate clang is a wise fiscal policy as well as for other reasons. >> turning to health care i think most people agree that health care cost is really what's driving our long-term debt and deficit. do you agree with that? >> it is the key measure of what's driving them, yes. >> we run a health care system in the unitedhéstates that's grotesquely expensive per capita compared to any other industrialized nation. do you have any expectations about what the increases recently announced in medicare

particularly for the amount of the payments in medicare that would be taken off of wasteful and expenseive fee for service payments and on to more e efficient quality based payments will result in. >> we have not included in the budget specific savings that come out of the delivery system reform improvements that secretary berwell announced. there is something, if you think about it this way significant potential additional savings, literally millions, trillions rf dollars of long-run savings that could have come out of those delivery system reforms. unfortunately, it is just too early at this point to be able to reliably include those in the budget. we've included over $400 billion of savings that we think is directly kwauptquantifiable. but i think you point rightly to the fact that if we keep pushing

op delivery system reform, the doshg fix: doc fix that we've included, we have lots of potential tonb dramatically increase savings and lower cost growth in the future. >> finally with respect to the plan that the budget announces to go after offshore parking of funds by corporations to avoid american taxation, so-called repatriation, your program appears to have three elements. one, it is mandatory. two, there is a 14% opportunity to repatriate the money. and future efforts to park revenues offshore to avoid taxation will be faced with a 19% tax. could you explain why those arek![lo important policy considerations when we go back dealing with repatriation. >> absolutely. first of all you're exactly right. unlike the voluntary tax holiday

that some have proposed, which we oppose we are opposing a mandatory toll charge of 14% on the roughly $2 trillion of earnings that are overseas and have not been taxed. when you do it as a voluntary measure, you encourage future offshoring of profits and in fact cbo would likely score that with a substantial)ey. cost, not revenue. raises enough money to fund a six-year reauthorization of the highway trust fund at 40% higher levels than we're currently funding. so it is a significant opportunity to vefr in theinvest in the middle class and infrastructure. >> my time has expired i'm afraid. so i'll leave the witness hanging. if there's anything you would like to add. >> i would just say, i think it is critical that we have a policy that fixes the system

going forward as well, creates a level playing field and encourages american companies to locate here and to bring jobs back here as well. our system would do that. >> thank you. >> thank you, mr. donovan for being here today. i want to go back to an issue that the chairman raised with you which is the question of whether this budget helps to reduce our national e/érdebt. i believe your answer to that question was focused on the size of the debt in relationship to the economy -- or to gdp, which i understand. i understand the argument and i understand the analysis. it's something that we've talked about a lot in budget circles over the last few years. the question i have though is, does that really justify a budget that continues to, frankly, borrow hundreds of billions of dollars every year and to spend that money in an effort to, as you indicated

stimulate the economy and invest in things that should help the taxpayers and the people of america but never balance. i think my question is this. is this possible for us, or any nation to simply spend in deficit every year perpetually borrowing money and never balancing, and to keep ourselves in a prosperous posture. can we spend ourselves perpetually into prosperity on borrowed money? >> so, senator, we've obviously talked about this issue of what the right measure is. i think a different way maybe to look at it that i think has been key for us in looking at this issue, the most important measure of a budget is whether it invests in the things that are going to grow our economy

going forward and meet our obligations to our seniors. i think we do have to recognize that we're facing right now an unprecedented demographic challenge in terms of the baby boom retiring, and i think it is particularly important when you look at in that context that over the next not just ten years, but 25 years which our budget does that the key test of sustainability is first to make sure that debt is a share of gdp is stabilized and is coming down. >> are you saying though that if we have our debt in relationship to gdp going down that we are in a sustainable budget posture? >> i think at a timeñ when we're facing unprecedented demographic challenges that that is the key fiscal test. second -- >> let me go over -- because our time is so short, i want to go over some numbers with you just to show you what i'm looking at in this budget.

usingy you are numbe inging your numbers, as we look at non-defense chrisdiscretionary spending, about 14.9% of the federal spending outlays that's projected by your budget to drop to just 10% of annual outlays by 2025. if you look at defense discretionary spending which is today about 15.7% of annual outlays, it is projected to drop to about 107.5% of total federal'y outlays in 2025. but if you look at interest expenses on our spending, which are today about 6% of total federal spending they're projected to rise -- to double. more than double. to 12.7% of federal spending in 2025. my point is, we're seeing our defense spending, our discretionary spending being skissed squeezed and we're seeing interest on the national level budget during this window and that dynamic it seems to me is one that shows the inability to

just continue to mount a national debt that will squeeze out the potential spending that you talk about that may be needed in other areas. is that not something that we must address by controlling the spending and frankly, by balancing the budget? >> well, senator, i think we agreed that it is critical that we make progress on the deficit and the debt. we've actually made substantial progress during the president's time in office. i also think it raises the issue that this is something we can't just look to the spending side for exactly the reasons you just described. we're already at discretionary spending level as a share after the economy that are as low as they've been on record. we think that's where we have to look to the revenue side as well. and i hope that we can work on a bipartisan basis to have a balanced approach to deficit reduction. since 2011 weaver've achieved 80%.

$4 out of every $5 of deficit reduction. our measure is over $4 trillion of deficit reduction thus far. $4 out of $5 has come from spending2% reduction. even even with our budget, $3 out of $5 would come from spending reductions. so we believe we need for look at both sides of this equation as well. >> i understand. my time is up. i'll just say, i'm a member of the bowles-simpson commission, as worked with the gang of six and others to try to find a solution here. when we were working on that, the national debt was $11 trillion. it's $18 trillion today. under the budget window we are talking about here, it will go to $26 trillion-plus. i just don't see how we can make the argument that as long as the economy keeps growing we're okay. i just don't see that we can avoid trying to balance our budget and control this debt. >> senator warner. >> thank you, mr. chairman.

thank you for being here. you've made a smooth transition from hud secretary to omb director. i want to actually pick up on certain things that the senator said but maybe with a slightly different tinge. first, i want to commend you for getting rid of sequestration which i've always called stupidity on steroids. because even with sequestration, remove domestic discretionary at the end of the time period is down to 10% of spend, it would be much lower than that without getting rid of sequestration. as somebody again who's still -- for a few more years can sayive abeen in business longer than politics, and investing in businesses, you invest in businesses based on their equipment, work force, infrastructure and research. and our current american business plan is a faulty one

and part of that is driven by sequestration. i commend you for getting rid of that. i would argue though -- and i do acknowledge bringing the deficit down as a share of gdp in the appropriate range. i don't believe 72% debt level at the end of ten is sustain sustainable. i know you know a few quick factoids, my colleagues might be interested in. $18 trillion, 100% basis point in interest rates takes $120 billion off the top. at the end of ten years even within this budget window -- this is where i think our colleagues on both sides may not want to be here at that point we'll be spending more on interest than we will on total defense or total domestic discretionary. and while i commend and i believe revenues have to be part of the mix, i remember spending

a very long new year's eve with great colleagues but they weren't necessarily the people i wanted to spend new year's eve with, to fight to get $600 billion in revenue so we didn't go over the proverbial fiscal cliff and go into unknown financial abyss. i might point out we fought all that for $600 billion. we have had two one-time sources of revenue that have more than topped that number. we're at $420 billion in extraordinary profits from the fed. now we can argue about fed policies being good or bad, but i don't think anybody thinks those kind of profits are going to be projected forever. while cbo and omb count the money differently, on the repayments on fannie and freddie, $220 billion at this

point, you booked as revenue. if you get rid of those $650 billion-plus of extraordinary one-time revenues our deficits are actually worse than the appearance would look at this point. now what i would differ with many of my colleagues on both sides, one i believe entitlements havev to be taken on. i think that has to be a revenue side. this is where i may not agree with all of the methodologies or all of the spending purposes but revenues have to be part of the mix. cbo has recalculated numbers. you got to have a reference point. percent of gdp is what everybody at least agrees is the common area. we got to look back at 50-year averages. 50-year averages on revenues are 17.4%. we've never balanced the budget on that. no matter what you cut with a demographic bulge you pointed out, you're going to have to get revenues up.

the only time we balanced the budget in the last 50 years when revenues under the new calculation are between 18.8 and 19.9. you at the end ten gets you about 19.3, somewhere in the mid point. so i think this is a debate that's going to continue. i think we have a little bit of breathing room because of hard actions you've taken and congress has taken. but anyone that thinks that we're going to be able to solve this problem without revenues being aekí significant portion of the mibx. because even with entitlement reform we have this demographic bulge. i'm running out of time. i wanted to make that statement. the quick point i will make you've raised repatriation as a one-time payment for infrastructure. congressman delaney and senator blunt and i are looking at that. i'2y ask you to comment on that as well as some more modest

proposals.i&r m we have a bridge act last year. do you think we need to consolidate those infrastructure financing programs we've got in a single place. >> senator graham. >> thank you, mr. chairman. i would expect when we do our budget and i know we will, that you'll probably like our budget as much as we like yours. but at the end of the day there seems to be some common ground here. the idea that skwesequestration needs to be fixed, i agree with you, mr. donovan. at the end of the sequestration as we have it today under the budget control act, what percent of gdp will be spent on defense? >> i don't have that number in front of me. if you do -- you can tell me.

>> between 2.3% and 2.7%. in terms of historical averages since world war ii what have we been spending on defense? >> significantly higher than that. >> yes. i think that's -- do you agree)écñ that the threats in the world do not justify going to 2.7%, 2.3%? >> we fully agree. this budget makes clear that sequestration is a threat top our military readiness and we ought to reverse it. >> back to senator sessions' questions. you do spend more than the budget control cap. you say you spend more -- you account for it by offsetting in mandatory, i think -- senator portman may challenge that. but there is a desire by some of us on the committee to replace sequestration. at least most of it with a revenue component and a mandatory reform component. i just want to be in the camp of saying that i'm not going to support a budget that continues to gut the military.

it's just not the military. it is the cdc, nih and a lot of other programs. so i support the idea you're trying to achieve. i just don't know if i agree with the methodology. about the workforce. how many worsers ersworkers doí?c we have per retiree today in the workforce? it's three. when i was born in '55, it was 16. unless there is a baby boom among 60 year-olds, i think we're in trouble. in 20 years it goes to two. does that make sense to you? >> absolutely. >> that we're living longer and having fewer children. a lot of western nations face in problem. is that correct? >> absolutely. >> doesn't that cry out for rational immigration reform? where do the new workers come from? >> couldn't agree with you more, senator. >> others who say on our side or any other side, that we're glutted with workers you're not looking at america the way it is.

you're obviously not running a business. because if you're in the business world you're having a hard time get ingting high-scale if you're in the manual labor world, you are having a hard time getting workers. i just reject the idea that we don't need workers. we do. we just need a rational way of choosing an economic-based immigration system rather than just chaos. when we talk about america in the future and challenges we face, probably the biggest challenge domestically is the retirement of the baby boom population. would you agree with that? >> yes i do. >> there are about 80 million of us. that's why you need immigration to replace us in the workforce. but is it fairly accurate that by 2042 if nothing changes we'll be spending all the money we collect in taxes just to pay for the medicare/social security bill? >> sounds about right. >> so just pause for a second. unless something changes, all the money we're going to collect in taxes in the future, whether

it's 17.5 or 19. -- whatever, it's going government programs. medicare and social security. there will be no money left to invest in infrastructure. there arewill be no money left to invest in the military. do you believe with me that the challenge of> i guess i would put a few caveats on yuthat. one, we need to do that in a way that keeps our promises to those who have paid into the system. >> i agree with that. we're not talking about divesting people. we're talking about long-term structural changes means testing benefits, ajusting ingadjusting date of retirement. but we also need revenue. i'm asking you and other members of the committee to find a way to structurally adjust these

entitlement programs. in terms of revenue, if you took all the money the top 1% made -- every penny of it -- would it balance the budget? >> i don't think that it would. >> the answer is no. if you took every penny out of the defense department, would it balance the budget? >> it would not. >> okay. so you're not going to cut your way into prosperity or tax your way into prosperity. you eventually have to reform entitlements to sustain an america that's not going to become greased. does that make sense? >> it does. in fact our budget has $400 million of savings in medicare and med said. and i couldn't agree with you more that immigration; perhaps the single most important thing we can do to improve the solvency of social security going forward. it saves close to $1 trillion over 20 years in terms of reducing deficits.

>> thank you, mr. chair. thank you for your presentation, mr. donovan. if we step back to the central theme of the budget you're laying out a vision in which right now under our economy we have high income inequality, high wealth inequality all new income is going to the 1% or a fraction of the 1%. and you're saying -- and correct me if tim's wrong, because i want to summarize this -- that we2y education, ranging from early childhood right on through higher education, we can invest more in infrastructure, we can invest more in r & d, and that your budget presents a way to pay for these so that you actually have a net decrease in the deficit from current law. >> that's absolutely correct.

>> well, i want to applaud you and the president for laying out a vision that changes the path our nation is on right now. imagine that you have a family, large familyá &yrodrp0 together been all the income that comes into that family goes to just one member of that family. i think the balance of the family would feel that that was not an equal opportunity arrangement. would you agree? >> i would. >> and it would be an arrangement in which well, that one member of the family would prosper greatly, but everyone else who has basic challenges and hopes and opportunities would find those doors of opportunities closing because all the revenue from that family is going to just one member. and i look at the conversation from my constituents who are seeing the incredible inflation in tuition for higher education and they are looking at that and they are saying, why is it that

our father's generation -- our father and mother's generation managed to provide lower costs higher education to us so that we might thrive, the middle class might thrive, and that we have been failing in that. you're saying we need to correct that, we need to open the doors of opportunity to higher education. >> absolutely right. in fact, the president's proposal to make two years of community college free is really based on the idea, many thought decades ago that we couldn't make high school universally available. we need to make at least two years of community college universally available and this is aãcritical step in terms of doing it if we're going to prepare or workforce for the future. >> i had a chance to give a commencement speech to three community colleges last year. i think that the working class families who are represented there, both those who were going

through college and the families who came to celebrate their graduation, would believe that that was a pretty good idea to open those doors of opportunity wider. >> absolutely. and look it has to begin as you nobel, senatorknow well, senator from the very beginning. whether it is quality pre-k programs ensuring that american families can pay for child care that's why we expand the child care credit up to $3,000 per family. so it is a broad range of investments right up through college and training4 and apprenticeships which are double under our budget, which are critical. >> let me go back to one part of the plan and my family of 100 members i was speaking of where one member of the 100 is getting all of the new revenue that the family is generating, but also that one member out of the 100 is getting fabulous tax breaks

and you are proposing that some of that wasteful spending in tax give-aways needs to be adjusted for a fundamental issue of fairness and to invest those revenues instead in a better deal for the middle class. >> that's exactly right. as our tax system stands today there is hundreds of billions of dollars each year in capital gains that avoid taxation because of this -- the current system for what we call stepped-up basis in capital gains. similarly on the capital gains rate, all we're saying is let's go back to the 28% rate that the country had underm3iúa president reagan and we think thatjúñ that will establish -- those are two steps, of many that could begin to establish more fairness in the tax code. >> thank you very much. >> senator johnson. >> thank you, mr. chairman. mr. donovan welcome. i want to spend a little bit of time, some short answers on

things i think we agree on. you talked about economic growth. that's a major xoebt ofcomponent of solving this problem, economic growth. correct? >> correct. >> from 2009 to last fiscal year we've increased revenue of the federal government by $19 billion. per year. >> i don't have that. >> went from $2.1 trillion to $3 trillion. 900 billion$900 billion. i'm just trying to point out the economic growth really provides revenue senator warner was talking about. we need to concentrate on that. to personalize this it's important for us to point out why debt is such a problem. if you're a family in debt over your head, it's kind of hard to grow your persona8j economy. isn't it? because the debt collectors are knocking on the door and anything past subsis tans

spending. >> you if you're in debt, you're -- so much of your income is being spent just servicing the debt. is that what happens with family? same thing is true on national basis. let me ask you one other thing. if you can solve a problem, is the first step to solve a problem admitting you have it then properly defining it? would you agree with that? >> i guess i would say our budget does take on the key -- >> i'm not talking about your budget. just talking about solving your problems. you got to admit you have one and properly define it. correct? let's go to the charts. i would think that we don't have just a ten-year budget window problem. we have a 30-year demographic problem. you talked about that. the baby boom generation retiring. we've made all these promises and we don't have a way to pay for them. i have to challenge senator sanders, we want to save social

security and medicare. that's our goal. we want to save it and make it sustainable for future generations. but this is a chart of the cbo's alternate fiscal scenario in terms of deficits over the next 30 years. does this look pretty accurate? about $9 trillion. you say $8 trillion the first tenyears, which is the budget window we are talking about now. then $31 trillion in the next ?ú9idecade. $87 trillion in the third decade for a whopping total of $126 trillion in deficits over the next 30 years. that's pretty accurate according to cbo's alternate fiscal scenario. correct? >> i think that's before our policy which is -- i said earlier, not just over the ten-year window but over the 25-year window, would stabilize debt as a share of gdp which is again, this doesn't measure it as a share of the economy. cbo says that the right way to measure it is as a share of the economy. >> if you look at that $126 trillion, that's comprised of

$15 trillion in deficits in social security $35rçñ trillion in deficits in the medicare program, $71 trillion is the interest on the okay? so again talking to what -- or responding to what senator graham was talking about, interest starts dwarfing all the other problems. let me go to the next chart here. i realize these are projections so we have to really kind of compare how likely is it. all i really have to go on is history. we've just taken total federal spending over the last 30 years compared to this 30-yearality alityality ality30-year alternate fiscal scenario.

alternate fiscal scenario might be understating the size of the problem. my question to you in your budget deliberations are you looking at the 30-year problem? and if you and if you are what has the president included in his budget to address the long-term unsustainability of social security and medicare because those are what drives the deficit, which produced $71 trillion of interest payments. >> so, three key things that i think we could all agree are really driving these deficits in debt over the long-term. health care costs. a lack of enough workers as we talked about earlier. relative to the number of retirees that we have and having adequate revenue and all of these key things that we attack in our budget, the impacts grow over time, so, whether it's the capital gains reforms and others that grow substantially in the second decade and beyond, immigration reform, which grows

are from $160 billion of deficit reduction in the first decade to 700 billion in the second decade and more beyond that, or many of the health care changes, the 400 billion in the first decade grows to a trillion dollars in the second decade, so, we are absolutely focused on making smart choices that would grow and impact over time with a focus on the deficit. >> you're talking about a trillion. we're looking at 126 trillion. thank you, senator. >> senator baldwin. >> mr. chairman, i would ask that i'd be allowed to offer a longer statement for the record, but i wanted to jump -- >> in writing? >> yes. >> without objection. >> the writing doesn't count against the time clock here. thank you, director donovan. i'm pleased to see that the president's overall budget focuses on an issue that every one of us cares about deeply here, which is ensuring that every american has a chance to share in the benefits of economic growth in this nation.

before i get to a couple of specific questions on areas relating to that growth, i wanted to outline two areas which i believe fall short that haven't been given much attention and i hope our committee will give it great attention as we move forward. the great lakes are 84% of north america's surface fresh water and over 20% of the world's surface fresh water. but yet for a second year in a row, the administration's recommended cutting funding for the great lakes restoration initiative, this time by $50 million. i know for myself and many of the other senators who represent the great lakes, this is really a nonstarter and we have the warning signs all around us right now, whether it's what we saw last summer in toledo, the

threat of invasive species and the great lakes are such an incredibly important asset. so, i look forward to working with the committee on that, but i feel like this is a way in which the budget has fallen short. another area that i wanted to just quickly touch on is critical access hospitals. you know, the administration has placed a priority on access to health care. that rural access is is a major challenge. many of us represent states with many areas, many rural areas and the economics of rural health care are unique. and the cuts that have been proposed for critical access hospitals i think will create real harm in our communities. now, back to some specifics on ways in which this budget can spur economic growth, we've seen

this stock market back in recent years, but wages have remained stagnant as rating number outlined in his opening remark. in many cases, fallen in adjusted dollars and while this is obviously a huge problem in the aggregate, when you listen to the stories of people trying to get ahead, it is heartbreaking. in my state, one of the key engines of economic growth, one of the key ladders to accessing the middle class is our manufacturing economy. our manufacturing sector and i was pleased to see that there is continued focus in this area in the administration's budget proposal. it was two years ago in this committee that i offered an amendment on the issue of

manufacturing institutes across the country. it was accepted on a voice vote and in our last fiscal visit 2015 funding legislation, it's now signed into law manufacturing across the country ft i was proud to support that effort. you also have an initiative called the american made scale up fund to help american made manufacturing technologies reach commercial scale production in the u.s. i would like you to talk about the seven new institutes proposed to the president's budget. what areas are you going to focus on and secondly, explain the scale up fund. how does the administration envision coming about and how do you make sure it's not duply kaitive of other programs? >> senator, thank you for asking about this. this has been a bright spot in

our recovery. more than we've seen in decades in the u.s. and specifically, thank you for recognizing the great bipartisan work that was done. we were very excited about it, to get these manufacturing institutes authorized. what this would do is provide both discretionary and mandatory funding to get up to the full 45 institutes that the president called for. initially. and those are the departments of commerce, agriculture, defense, energy, would all be engaged in institutes specifically targeted to areas they are working on, whether clean energy, new ago ary cultural advances and others. in terms of this start up fund, what it is really targeted to that we have not done in other ways, we do great basic research in this country and in fact, the budget proposes to sail up our investment in basic research. what's missing, we can, is is a

public private effort that would take the most promising technologies and get them to scale where we could really do manufacturing at a scale that would create new industries and drive large scale job growth, so the idea of this start up fund is to provide a credit subsidy to use the technical term in our budget that would allow us to raise private capital towards these promising technologies and scale them up to really put them into practice and create hundreds of thousands of jobs. >> thank you, mr. chairman. i wanted to ask you, does interest do anything for us? the interest that we pay, does it do anything productive for us? >> no. >> so, if it does nothing

productive for us, aren't you concerned when you look at the proposal when we get to 2021, which isn't too far off, we're already spending more on interest than defense and we have had the decision previously that as we look at 2025, interest payments essentially are exceeding as we look at defense and nondefense, we're in a position where that's a huge chunk of 12% that does nothing for us. of what we're spending money. >> so, i think the fundamental point you're making is that the budget needs to take steps that reduce our debt so that interest payments are lower than they would otherwise be. >> are you concerned at all when you look at the trip, over tripling of the interest of doing nothing for us over the 10-year window which goes from

over 229 billion in interest we're spending now, to $785 billion of doing nothing for the american people. no infrastructure, no education, no zee fending the nation, no. >> and that's exactly why our budget focuses on and achieves $1.8 trillion in deficit reduction and in the long run, puts debt in the economy on a stabilizes it, puts it on a declining path. >> let me just make clear so the american people watching this, hearing that you think that stabilizing in a good scenario is spending, tripling plus our interest payments over ten years, getting us in a position where we're spending more in interest than defending a nation, spending more in interest than we are on education infrastructure, protecting the environment, all the other things the federal government does.

so you and i just have a disagreement as we look at this whether this is a productive way to look at things. and i know the american people will decide that themselves on what they think about that. i wanted to ask you about the solvency we've talked about the demographic problems we have with medicare, social security and the numbers that i've gotten is we've got the demographic problem challenges we look at it as very immediate. it's more than a demographic challenge when it comes to the social security disability fund because as i understand it, the trustees have said that the fund will be exhausted in 2016, which is next year. does the president's budget do anything to address the structural issues or the fact that this disability fund is going to be exhausted next year and i'm worried because the people that really need this, if we ignore this, they will only be able to pay 1% of disability benefits.