grows, and u.s. 170 years ago and 70% of the people were working in rural areas and today it's 2% of the population is working on that way. that phenomenon is now doing by many countries and that's why millions of people every year, many millions are getting out of poverty because they are getting in the new societies and moving to urban societies, et cetera. mexico grow from 33 to 82, 6.2% every year because we moved from a rural and auto consumption and agricultural society to an urban and industrial society. that's what they do in china. china is growing because of that. they are moving from rural areas and agricultural production, auto consumption to new societies and each society has different paradigms. this society has very different paradigms and the whole thing that this new society is very

very -- how can i say, generous. very generous because it is sustained in the welfare of the people. in the past you need to have as much to have land and slaves the better. today, as you have more customers and more markets and bigger economies it is better. you need that. the other people get on welfare because they will be a stronger country when you have participation. >> and where do you see that debate going on in latin america now? >> my concern is latin america the leader doesn't understand what is happening and they don't have a direction. it's everywhere. if you look the books of let's say, alvin toffer has 45 years and the ideas of all these concepts has more than 40 years and the only country that is moving in this direction is china and there is still so much

confusion in so many countries and they love to find this in some of them. i think the big challenge is cultural and the lack of leadership. who knows where to go? >> right. and in particular, a final question for you on this. in particular, do you have that view of brazil, as well where you've just been through elections and a big debate about the various aspecs of the economic model? >> no. it was not a big debate of the economic model and the economic model is the same in brazil and brazil has been a country that for many years with the governments, dictators and they have very clear the paper of private investment and entrepreneurs and they support always the development of businessmen and that's why the best, best business community in latin america is brazilian. it doesn't matter if it's cardozo, it doesn't matter the

dictator. maybe the only scene, and i will say that i am not sure that it is a good idea is that they are very protective of the economy. they close too much the economy and they are more than 200 million people and they close the market and you need to produce things there or you pay 35% taxes. i think that should be a little easy, but it has been done by one government to be very protectionist for the industrial and the production nationally. >> saud if we come to you, your view of the challenge that carlos has laid out for us the debate over the direction that essentially a civilization should take is fairly pronounced in some parts of the world that you operate in. i mean, how is it affecting the way that you and your company make investment decisions, think about customers and look at opportunities? >> well, for us i think we look

at markets the first thing we look at is the demographic in terms of the younger population and how quickly the population is growing. i think urban rule is very important for us and we look at those sorts of numbers and the barrier to entry and there is an opportunity we go in, but i'll give you some examples. for example, afghanistan has a population of 30 million. its population is set to grow by 2016. it will be the 16th largest country in the world. pakistan's population is 180 million and set to grow to 400 million people by the year 2050. and even if you have a bad government and high unemployment the economy still continues to grow and what's allowed people like us and carlos and others to go in is technology. we didn't have satellite televisions before. we didn't have the ability to compete with state broadcasters and we're going into these marks. i mean, we -- we're a small company and we're fairly quick

to make decisions and sometimes we may not make the right decisions, but we go in and we take huge amounts of risk. for example, we launched our iraqi channel to the 31st of august of this year. now weeks before we weren't even sure if baghdad would stay in the hands of the iraqi government. we had 40 people on the ground in iraq but we took a chance and, you know, for the benefit of hindsight it was the right decision. so we're not your typical company with -- you know, we're not that risk averse so to speak and we've taken huge amounts of risk. our business is all about risk and high growth and along the way we'll lose a business or two because of war and competition because someone will get blown up, but longer term if we have a diverse portfolio of assets and countries, i think we'll be okay. at least that's the formula, but you are taking up with investments like that and we

recognize you have a high appetite for risk than most company, but you are taking a very long-term view of how the politics will play out in that region. >> i think bigger picture, i think we'll be okay. i think we have a lot of challenges whether it's isis in iraq or the taliban in afghanistan, and the regime in iran, for example where we have the channel that goes in by satellite and if you go into afghanistan people talk about the good old days of the '70s. literacy was at 8% and the gdp per capita even relative to the rest of the world was very low, but you fast forward to 2014 literacy is under 40% and the economy is a lot stronger. so despite 30 years of conflict the country has actually progressed. so if you take a step back and if we look forward to say 2050 or 2100 you know the entire region will improve. i mean what we're seeing today is the upheaval whether it's

isis or various other movements i think ultimately we'll put the region in a better place in a decade or two obviously we will. >> continue to elaborate and explain and i've never heard it quite described like that before. >> i think what's happening is a lot of these country, the populations were pretty much paralyzed. they couldn't think. they couldn't read. they couldn't write. they couldn't express themselves and they weren't participating in business or civil society and so forth and you're beginning to see that. of course, we tend to go to the extremes and i think that -- what's interesting is people are at least questioning things and let's not get too relaxed. there say danger of the region becoming radicalized, but longer term it will come back to the middle. these are natural reactions that we're seeing for people looking for answers.

>> before we go to questions. >> just one thing. one thing very important to point out. afghanistan was under the taliban rule for five years right? it's the first place that this type of regime took over. today the taliban's approval rating is less than 10%. afghans don't want the taliban. yes, they have managed to challenge the international forces and the afghan forces but it's not that the people want them. it's very different to some other parts of the middle east. >> and before we go to questions in the audience, i just want to ask both of you about the opportunities and challenges in africa because all of the trends we've talked about are playing out in africa whether it's radicalization and whether it's the lack of leadership or the civilizational transformation that, carlos you talked about. let's start with you. what is your view of africa? >> we like africa, in particular north africa and ethiopia.

if you look at algeria for example, some of its gdp is 250 billion. it has over $200 billion in its reserves and the country has no debt. a population of 40 million people and the second largest arab country and obviously it's been a very controlled economy, but it's beginning to open up. it has enormous opportunity and very literate population, multilingual sophisticated in their own way and to a large extent, battered and bruised because of the civil war that they experienced but there's an enormous opportunity for people like us to go into that market. >> carlos, your view of africa? >> i think you need to be to look at it with a global vision and you cannot put a label and say africa is like this. they are many countries, different sizes, different levels of development and south africa is different from central

africa and north africa is also a different stage, but you cannot say africa, but it's clear for me that the society, the civilization moved from the original agricultural societies of 10,000 years to the development and the paradigms are different. in africa they are in a different stage. they are countries that are still with a lot of normalities and a lot of people moving around and there are other countries that developed agricultural and very rural and there are other countries that are in the industrial society. you need to make the difference about that and i think that all the countries the good thing is to come to this new society and moving from one stage to the other, you have a lot of important opportunities and mainly to have a better health, a better education that this

made for the development of africa, we need to improve with the support of outside the health of the fall of africa with the malaria and malaria has been better than other aides and we need them to have more help and get down the child mortality and education. and education. i think what should be done there is a modern education using technology and not -- you cannot do the classic education. we need to move to something more modern and cheaper and more cost efficient and develop jobs. the movement from a rural area and from the urban society is a great generator of economic activity and unemployment and improving the development of the country and that's what should be there in the general terms. like what has been done in all

the world. >> we probably have our first question in the audience. we do on the left. >> on the left. >> i was on the board here. i was encouraged to hear mr. mosini say that you think in ten years the middle east will be better because people have, there's better education and more communication and interaction and people don't want the taliban for instance in afghanistan, but how do people get to have what they want in a part of the world where they don't have much to say about who rules them. a decade it could be decades but in some ways i think some populations need to go through that in order for them to see how full it would be to go with

the system to go with one created by isis. by the way we're experiencing different forms of extremism right across the region. turkey is not the turkey of ten years ago. and so i think these are growing pains for the region. i don't want to make light of the problem that we have today in the region but i just want to take a step back and look into the region in the next you know, 40 50 years but i think that education is very important, but the other thing is that the region this is one of the challenges that we have in the countries we operate in and we have 100 million viewers across ten countries is that not many people in the region take responsibility for their own issues and with responsibility i think that people will become and act more responsibly in terms of choosing the people

that would lead them. another question? one up there. there's one over here, as well. >> mary peters on the trustee board here at rand. i would like to ask you mr. slim if you could talk about the shale oil explosion here in the united states especially eagleford down in the coastal area of texas and into mexico and what effect that might have on the mexican economy. >> thank you. we talked about the last question and a big problem that are in the countries areec treatmentist and active extremist and exclusive of other ideas and other thinkers and i think it is very important that you were telling opportunities and we need to educate more the people and trying to change the culture like i was telling before, the culture of the

people that are still living in fan attism and extremism and radical thinking. about the oil and gas the shale, i think for the u.s. it is very very important because you are importing, like, 9 million barrels a day and that's $1 billion a day and you were dependent about the oil, et cetera and now with this development and all of the technology and all of the technology that you are developing and the cost is going down and down and down, and i think it is very important not only for u.s. but for europe also that is very dependent of this product and i think the development of the shale gas in u.s. is going very strong it will be very important because in getting down prices of everything and we'll take out the dependence of u.s. from outside oil and the big trade

deficit that it produced the $1 billion a day, but also we'll get down the energy and the energy of the united states and we'll make more competitive the country to produce some other products and manufacturers that should be done and i think that the thing that will come is that we will integrate north america and maybe including central america and this energy program of changing and the use of energetics that will make our costs be down so much that including mexico that has with local energy with the cost of gas and the labor, we'll compete strongly against china with better conditions and the american companies, instead of buying there can buy and produce with our country. we will be competing within the country with the shale anywhere.

i'm talking now about mexico. i think it's a revolution, an energy revolution because also the gas is cleaner. when the gas will be available you will have more and it will be gas stayings and not with gasoline and the use of gas will be, i don't know but electric cars are very important, but you produce the electricity from somewhere and it comes by thermal production that is using oil and other combustibles and at least gas but when you begin to use gas in the trucks and everything it will be cleaner for the atmosphere and for the carbon and contamination and cleaner for the industries and cheaper and i think it is very important and the most important thing that i have seen in the last year for u.s. and for all north america including mexico, canada and central america.

and i think that something in a few years it's three, four or five years and before 2020 the u.s. will be not dependent. already authorizing to export oil and the national export and that's yet prices are going down and now you can pay instead of paying $4 or more for a gallon under $3 that is money that's also going to the pockets of the people and let them use this money for other purposes as much as you are a very high energy consumer you can use a cheaper energy doing here and not so contaminant is a big, big revolutionary change, i think. >>. >> i wanted to ask assad a question related to oil. so the big revolution that carlos just talked about is also changing the way that the middle

east figures in the strategic picture and does that in any way effect the dynamic that is playing on the ground at least over the next decade or so? >> sure. just look at iran, for example for them to will bahhance their books and oil prices need to be above $120. so the more the price is under pressure, the more that, you know, that -- let's assume they care about their economy and the iraqis and how that impacts what they do, of course. i think everything has an impact within the region and the outside deals with that region and everything has consequences. back here on your right. >> excuse me, about the oil. can i say something? >> of course.

in '86, the oil went to $6 and in '81 it was 40 and at the end of the '90s it was $15 and $17 and it went to the crazy price of $150 a few years ago and volatility is also terrible because it is a very painful for many countries and there is a transfer of wealth going from one place to another and the middle east countries have a lot of money and they are doing a change to many forms like noriega also has done this and they can support that. and they're moving to high education or technology and trying to change the formula but the price to get more stable and not too high in the future and for the u.s. especially, and understanding this change. >> we have a question back here.

>> good afternoon, sherry christy. i would like to address with the panel another precious commodity and i think we have the oil, gas and energy fossil fuel alternative under cover and i'm very happy that we're all witnessing the united states becoming independent with water is the most precious commodity and it is only 1% of our planet and we're not having it renewed. so how do you see this entering into our countries that have the emerged market and their infrastructure has not yet caught up with how we all need to live and eat in our land, as well. >> maybe he would like our answer and this 1% is too much. 1% is a lot and as much as you

can manage the water and it was available, and nobody cared. what we need to do is take care of water and recyclable and renewable and you see water can be treated. and what we need to do is to manage the water efficiently and then the problem of water will be the viscosity and you can take water from the sea and recycle the water that you're using from the river and everywhere and it is a problem of management from the water and say the water will be a private issue in some other country, it is already in some cities and you have the same network that you have an electricity or in telecommunications and it's the

same thing. it is the same service of fixed lines and electricity and you will have a -- that is renewable and recyclable and the best business on electricity and the only thing that you need to manage it and you won't have a problem of viscosity if you manage the water in the right way, i think water is a lot of water around including the sea. >> >> saud, anything from you on that. >> carlos is right. water needs to be better managed and it's important to educate the public in our neck of the woods and they're not particularly responsible and we actually do a lot of public service announcements in some of the countries we operate in terms of conserving water and the other thing that's very important is many people don't realize and the disputes we see in the region is over water. you have afghanistan, pakistan central asia and afghanistan

and, you know these need to be you know, we still don't have deals with some of these countries and we need to actually, maybe the international community needs to step in and ensure that we have different arrangements with different countries. >> i believe in the gross subsidies. i think for the people that you need to give the first 30 meters, and near free, but after that you need to charge. i think the reason will be that you don't take care of the water in your house and you pay $3 for the meter and the cost is $1 and the water that you are taking out of your shower or any place, go to some place and get clean again and they will sell it to you again and they will sell for $3 and they will cold front $1 to make a treatment that will make it work. it is like telling to our customers don't call by phone

because you will use my electricity. no if you use water the good way it will be the best business that you can do. >> question over here. >>. >> because it's recyclable. >> hector ruiz, i'm a trustee, and mr. mosini, i find it interesting that the approval rating of the taliban in afghanistan is the same as congress in the united states. >> and they're still around. >> a question. you seem to have quite a success in some very difficult places. my question is actually quite simple, but it's how do you deal with corruption which is known to be quite a challenge in those parts of the world especially in these emerging countries? how do you deal with that piece? >>. >> in afghanistan, when we have a news channel this is one of

our obsessions to deal with corruption and in a place like afghanistan where we have seen so many challenges with the state, the judiciary has been very weak and corrupt. it's quite interesting that people actually rely on the media to do anything that entails corruption. if a person finds an individual that takes money and records the conversation or tapes it he doesn't go to the prosecution. he comes to the media. so the media then does an expose and quite often during karzai's tenure in afghanistan there was no reaction from the state at all and it gave people enough satisfaction that it was on television at least that that individual was embarrassed or humiliated and to this day, people still come to the media. so i think the media can play a very important role in terms of allowing people. if nothing more upon it's an outlet. people let off steam and i think the media has a huge

responsibility in dealing with corruption and corruption is the cancer. i mean if you look at afghanistan, the taliban, they were in some parts of the country because of how inept and corrupt the state is. >> we have a question over here. >> hi. crystal wong prgs graduate student. my question is somewhat tied to the last one. china's first ten years of opening up in reform has been driven largely by special economic zones that attract investors to these areas. my question is then what are your views of these charter cities and economic zones? paul romer is a huge champion of breaking free entire cities that have a different set of tax rules and special reforms that can create a safer environment for investors. have you encountered this in any of your business and what are your views on it? >> do you want to take that? >> i don't know who had the

question, but what is happening in china is maybe 78 or 1980 they begin to move from a rural and agricultural society and very poor society to a modern society is jumping a lot of that and that's why they have so much. when they say no they are not growing because it is 7% today and 7% in absolute terms is 16% ten years ago. that's a lot in the amount and china is moving from a very rural and agricultural society to a very modern with technology development is maybe the only country that is moving like this because, let's say, russia, has still a primitive mentality i think, and it's thinking in power, in territory and in territory, power and primary

commodities, oil and gas and all of the primary commodities and china's thinking in markets and that's why they are leaders in the market and that's why they are the big exporters in the factory of the world and they are thinking in technology development and they are moving ahead and they are with another mentality and to change these things in the country is very, very difficult and they have the five-year plan and they're looking at a 50-year program and look at what will happen in 20 years, but moving and changing so much will bring always problems and those are the problems that some cities will have and you have in china places like shanghai very developed and very advanced or hong kong now with these political problems and you have the others and the big problem, not the big problem, but the big thing and the good thing is that the paradigms of the new civilization are democracy,

rurality, diversity freedom competition competition, more participation of the civil society and in the past, the state where the civil societiy is more important and they're asking for places and spaces. the private investment is looking, and that's a big change that is happening and they will have some programs, that's why they are a little -- how you can say? they can be very democratic and very open like they need to have the rules and they happen to move ahead and as much as china -- because china is a country taking more people out of poverty every year. maybe 20 30 million people every year and they are educating them. they are getting to urban areas and they're having also the problem with these big cities and the development because they are moving very fast, moving a

country of 30 million every year and that's the big thing that there are not many countries with 30 million and that means that in five years they move 150 million people and the numbers are fantastic and that's, i think, one of the reasons of this, but let me go back. the corruption is the worst problem of the new society everywhere in the world. i think that should be an attack, and i see two ways to do that. first, the cultural change is very important, but secondly, when they pay so low salaries because they say the president cannot win more than $5,000 a month. that's crazy. and the minister of that, 5,000, that's craze pep they need to have better salaries and not to live in pune itty and place. better salaries and a better salary retire when they go out of the job, to have also an

income and impunity is very important and the corruption is a big problem everywhere in the societies, i think. >> just very quickly to tack on to the question and go to saud so the chinese experiment with special economic zones and special cities where you don't change what happens in the country, but you try to change a little bit in one place so that people can come in and feel safer there. >> that model has also been tried in the middle east. your company is headquartered in dubai which has a special economic zone and it has been tried elsewhere. what's your experience of that? >> in dubai is very good. we are in a city that is tax-free and you have to provide those sorts of services if you want to attract companies and it's good to see different parts of the middle east compete. abu dhabi is competing for business and so is qatar and of course, other countries in the

region, as well. >> we as business people favor it. we like it. >> we've got a question up here in the front. >> sure. >> yes, mr. slim, i know you've done wonderful philanthropic things in your country, but i wonder how you feel about what is happening in mexico at the moment and whether mexico can ever extricate the way that the drug cartels, business police are all seem to be according to what we hear, tied together. do you feel optimistic about the future? where is mexico going? >> i think it is terrible what is happening very very terrible. the crime is taking institutions and territories. we are seeing that people is involved. we have 2500 municipalities, many of them are very small and

they have a police of 30 people, 100 people and the crime take the police under their control and our big problem is that u.s. send the arms and we are fighting against the drugs with u.s. agreements and the u.s. sends with the arms. >> first, we have to finish with the arms coming from the u.s. and they have the after-market follow-up with the arms to know where they are going and who have them, but we are fighting with arms and selling from here. that's a big problem. the second problem is that the things are so bad. so bad because for many years with the merida plan that was signed by the last president calderon with president obama, it was an agreement to fight the drug organizations and, well it was many people were dead and

many people disappeared and it was terrible but now i think things are all so bad that we need to make a very deep solution to move out of the politics, and to take out this police that the municipality police and the state police instead of having this small place like a sheriff with 80 people or 90 people without threatening it and without robbing the very poor municipality or country and i don't know how you call them, we need to change to make deep changes and the things were so bad and it was so public and it needs to changed and what is that? the police cannot be in the hands of a small community because the crime control them. not by money only they kill

them or get involved and they need a stronger police or talk in the u.s. in a way to follow up the arms. it is full of arms and because you stay here with the drug and the money and we stay with the arms and the violence. that's not a fair game and that's not reasonable. we need to work together to fight the crime and to fight the drugs and to fight all of this, and locally, we need to make in our country and i think that is what will be more stronger now that this problem to fight with the crime and to fight the crime that this involves in politics and the people that are being in government are involved and they need to be removed and to go by the law and i think that will be important and also we are

looking that you are making legal the drugs. that also doesn't make sense. the legality of the marijuana and they are killing people because of the marijuana in mexico. >> next question back here on the panel, left. >> hi, rob cox from reuters. actually following up on the question about mexico, i spent a lot of time talking to smart and highly paid investors in private equity hedge fund, whatever, around the world and they look at latin america now and they go, not so much but mexico. we really like mexico. we love the new government and the reforms happening in the oil sector in particular. where are you putting your money? i would be curious to know -- >> i'm putting my money in my country. >> where are you investing? >> in my country and in latin america. >> that's it? >> that's it.

>> there is something very important, like the developed countries doesn't find how to move to this new society. you have a stagnation everywhere from japan europe, united states, that's a problem from china. china has a good model to know what to do and to come to a industrial society but which is the kind of society that we will have worldwide in 50 years? there is a confusion about where to move. they are not moving on that and the good thing of our countries, mexico, latin america and the emerging countries is that we have a lot of investments to do and usually we don't have the resources to finance that jobs and now with so much money and so low cost and so long term, the financial resources that used to be the big obstacle for our developments is available.

that's what we need in our countries is to develop this projects of energy now like we were talking with the changing the laws and all of the -- the projects that we have a delay of them that the developed countries already organized should be done by us and also this will move with the new cities and the new way of work. i think i have said that people will work less days. i say three days 75 years and have 12 days free and that will create new business and new activities and a lot of entertainment and education or trying to do a better job and we'll take out the bankrupt governments that retire people at 60 years or 65 or sometimes i think 20 years after working in some areas. so i think that our countries are a big opportunity for

investment for everyone. >> in the middle? >> i was born and raised in south africa and so the idea of going into business in southern africa really appealed to me once, but i looked at what my parents' friends in business in southern africa had to deal with and i don't want to have to deal with all that nonsense. anyone who applies for rights to mine has to basically tolerate exproep ration. >> and they place a critical article in the newspaper and immediately they lose the advertisers because they threatened the support unless they withdrew from the newspaper. what lessons have you learned -- how does one go about being a

billionaire in russia and the billionaire in china and the risks are so huge you can lose the government's, you know, the next day. in south africa they like to tell business people you operate because of our magnanimity and the implication is we can change our minds tomorrow. what lessons have you learned for how to tough it out or how to protect yourselves against those risks? >> >>. >> carlos, do you want to take that? >>. [ speaking spanish ] [ speaking spanish ]

[ speaking spanish ] [ speaking spanish ]

[ speaking spanish ] [ speaking spanish ] [ speaking spanish ] >> could you give us a bit of a summary in english. >> ah! excuse me. excuse me. >> oh, my goodness.

>> if you are -- if you are -- you need to look if you are going to -- first i say that we are not doing business in some of these countries that you were telling, but anyway if you are involved in some kind of economic activity where you don't need the decision of any officials for the customers to buy your products or for you to sell them you don't have a problem. let's say the decision to buy a -- to go to a movie or to see one film or the other by containing in the tv or pay tv you don't need to ask them for that that, that means you don't need to go to the officials or border for selling your products or for selling your services. >> saud, you're in africa. is that the -- we have to deal

with that in all these countries. first and foremost if it's easy we're not going to be there because a company much bigger than us will be there. so the more difficult that market there is the better opportunity for us. we like obstacles and as soon as people talk about the challenges about getting into the country we get very excited and once we're in we have to deal with things like corruption. for us being a media company to an extent we're immune from it because the very people who highlight corruption, but i mean for us, i mean if this -- we stand for eradicating corruption where we have to pay people off, we will quit that market. we have to be careful and we can't take on every corrupt individual. our people have been threatened so we are very careful and selective in how we challenge these individuals. i wish i could say that you

know, we take up every single, krukt individual and we're working on a story on a major identity and we're gathering the filings and we're nervous about the prospect, but we have to go through with it. >> we have time for a couple of more questions at the most. do we have any more in the audience? >> in the front over here. >> brandon barney. most of the opportunities are a result of the population growth. what do countries where the population not growing at the same rate have to do to match their economic growth? what can we learn from them, i guess? >> well, in our case we grow up for 80 years. we are 120. ?

in in some years, 30 years, or 40 years, now we have to grow and it is not only depending on the demographics. it depends on the population has a better income and that's what i was telling that was very people that people have income and to have income they need to have good education and good health and good education to be a better offer and then to create investments and a great economic activity to generate jobs. as much as they have jobs and the better jobs are very important and that's why the distribution of income is very important and that's why the welfare of the people is better for the society because you will have a bigger market and a big economy and the more dynamic company is you don't have to support the demand and by taking

back some tax checks like was done by president bush or now with the gasoline that i was telling by other mean in our country we have so low income with the economic activity to keep the jobs and to have people have the money to get involved in the different goods and services. and when you are very small you need to integrate and you have a common market and a bigger market and the companies have a bigger market to serve. >> saud, any thoughts on that. >> i agree with carlos. the population growth is very important and some of the markets we're in, the growth has now, in term of the population growth and it's peaked, but there's significant potential for their gdps to double in the next decade.

and if they're off a low base it's a much better educated population than it has the prospect of growing very very quickly. >> so it has to be a combination of both. >> one last question from the audience. >> yes, we do have one there. >> hi. my name is carlos gutierrez and i'm from mexico and a ph student from rand. one question i'm very interested in the relationship between mexico and the u.s. and as a business person, what are the two or three most important challenges that you see in the economic bilateral agenda between these countries? thank you. >> well, first immigration. i think it should be legalized in some way that things work in a legal way, no? because they say there are 10 million people without documents

or something like that. i think that's a very important issue. the other is the possibility to move from each country to the other by that reason and i think the energy is another think the other way to connect is really -- in process soming to integrate network to united states to get connected to make bigger the market and the offer and demand. that will be very important for both countries to make this integration. i think that more production of goods for united states that united states can invest more in other countries to own the factories and the outgoing is very strong, not only for u.s. brands and companies but also international brands that are

also doing there. to have more -- trade is big but i think one can be still being developed and that we can have more investments in mexico that create this economic activity i was telling you that generate the jobs that will improve the revenues of the people and to make this 120 million mexican market stronger. stronger. we can grow 5% to 6% a year. we have now like purchasing power can be 14000 per capita. it can double in 50 years. you can talk about $35,000 per capita, that this is already very important. and i say that in the way to create more middle classes, a wider, bigger middle class and ascending, a middle class growing up. that's something we did for 50

years in the past and we need to do it again. how can we do that moving from industrial society to service society and creating economic activity that service society requires. >> thank you. so this has been a very interesting discussion to me. thank you so much for your insights. the general jengenerational shifts that are going on in markets and places that you see like iraq an afghanistan, to the possibility that the turmoil in the middle east and the radical -- rise of radicalism will actually over the long term produce some positive benefits. it's been quite a discussion. thank you to both our panelists.

the road to the white house winds through new hampshire this week with several potential republican candidates taking part in a politics and eggs breakfast. tonight at 8:00 we'll feature a pair of appearances. first it is south carolina republican senator lindsey graham. and a bit after 9:00 former texas governor rick perry. he attended an event earlier today. here's a brief look at some of his comments. >> isis filled the void of a failed policy in iraq and syria. in american tanks with american weapons, isis began taking cities that just a few years ago had been freed by the blood of american soldiers. in these highly orchestrated videos, we are seeing broadcast

to the world -- beheadings. we're seeing a young jordanian pilot burned alive. these people have filled mass graves with muslims and christians alike. they've terrorized women. they have declared a caliphate over an area as large as the united kingdom in that part of the world. and let's be clear about who isis is. what they represent. they are a religious movement that seeks to take the world back to the 7th century. their aims are apocalyptic. to cleanse the world, not just of christians and jews, but of muslims who don't agree with their extreme ideology. and it is their stated vow to kill as many americans as they

can. and it is time that the american people heard the truth. the president declared in his state of the union address that the advance of isis had been stopped. that is simply not true. he says isis is not a religious movement. again, he's simply wrong. to deny the fundamental religious nature of the threat and down play the seriousness of it is naive, it's dangerous and it's misguided. this week, c-span's in new hampshire for road to the white house coverage of several potential republican presidential candidates. tonight at 8:00 on c-span we'll be in manchester for politics and eggs event with south carolina senator lindsey graham who spent two days in the granite state this week. friday night beginning at 7:45, live on c-span we'll take you

to a house party in dover, new hampshire with former florida governor jeb bush. on saturday just after noon live on c-span, wisconsin governor scott walker at a republican party grassroots workshop in concord. and sunday night at 9:35 on c-span senator ted cruz at the annual lincoln-reagan dinner. road road to the white house 2016. on c-span. here are some of our featured programs for this weekend on the c-span networks. saturday starting at 1:00 p.m. eastern, c-span2's book tv is live from the university of arizona for the tucson festival of books featuring discussions on race and politics the civil war, and by "the nation" magazine writers with call-ins throughout the day with authors. sunday at 1:00 we continue our live coverage of the festival with panels on the obama administration, the future of politics, and the issue of concussions in football. and saturday morning at 9:00 eastern, on american history tv

on c-span3 we're live from longwood university in farmville, virginia for the 16th annual civil war seminar with historians and authors talking about the closing weeks of the civil war in 1865. sunday morning the a 9:00, we continue our live coverage of the seminar with remarks on the surrender of the confederacy and the immigration of confederates to brazil. find our completion television schedule at c-span.org and let us know what you think about the programs you're watching. call us at 02202-626.-3400. join the c-span conversation. like us on facebook. follow us on twitter. treasury secretary jack lew appeared before the house ways and means committee last month to discuss the president's 2016 budget request. republican paul ryan of wisconsin chairs the ways and means committee and michigan's sandra levin is the ranking

member. this is just shy of three hours. the committee will come to order. the hearing will come to order. this is not the agriculture hearing. welcome to the ways and means committee on president obama's bug proposal with our united states treasury secretary who's sitting far away down there. secretary lew. our hearing room is under construction so this is temporary quarters for us. we're not necessarily used to

the room. before we get started i want -- please be advised that members may submit written questions to the treasury secretary to be answered later in writing. those questions and your answers will be made part of the formal record. we also understand that secretary lew has a hard stop at 1:00 so i'm going to run this tight so we can get to as many people as possible but wherever we cut off we will start with that member in the queue when we pick up with the next hearing just to make sure just to try and play it fair like that. mr. secretary, i want to say something. we got your budget yesterday. i've got to say as a form other budget chairman i'm a little miffed. four years in a row, which was when i was chair of the budget committee -- four years in a row you're late with your budget. the minute i leave you produce it on time. what gives? in all seriousness the one positive thing i'd like to say is it is a budget finally on

time. those of us in the , that clock means a lot. it sets the tempo for congress. it means a lot of things so congratulations on finally giving us a budget on time. that said, the irony wasn't lost on me that the administration submitted their budget on ground hog day because it is the same thing every year even a little worse. you've raised taxes by $1.7 trillion over the past six years. now you want to raise them again by $2.1 trillion. you want to tax savings and investment in small businesses. sooner or later you're going to start looking for money in the couch cushions. i just want to take an opportunity here to make something really clear. we're not going to raise taxes on the american people. they're working harder and harder to get ahead and they're falling behind. wages are stagnating. they deserve a break, not

another tax increase. the last thing this economy needs is another whopping tax increase. the kicker is even with all of these tax increases you don't even balance the budget. not even in ten years. because you don't get spend under control. so i'm disappointed in this proposal. but as far as i'm concerned i'd rather spend time not focusing on our differences. let's instead try and find some time and a way to see if there is some common ground. i think there may be some opportunities to do that. first thing that comes to my mind is trade. we all agree that trade is good for america. because more trade means higher pay. so our top priority is to put in place trade promotion authority, to get the best trade deals possible, we have to be in the best position possible and that's what tpa helps us do. i'll be interested to hear how the administration is helps us get tpa across the finish line. next we've got to fix this broken tax code. we want to fix it for are everybody. but with this administration in the past we haven't had very

high hopes. but you've gradually grudgingly taken a few steps in my opinion, in the right direction, though in my opinion also you need to move if a little further. for years you talked about fixing the tax code for corporations but not for families and small businesses. more recently after this committee's constant insistence that tax reform cannot give an unfair advantage to big public companies over closely held family-owned businesses the administration is now finally talking about helping small businesses as well. even though your specific proposals have been far from adequate, at least it is a step in the right direction. now the administration's taking a few more baby steps in the right direction by proposing a few ways to simplify the tax code for middle class families. so it's progress. not a lot, but we'll take it. so i'd be interested to hear what you had to say about tax reform. if we can find common ground we need to explore it. but i'll tell you right now what the president is proposing for

small businesses organized as pass-throughs, sole proprietor ships, partnerships, s corporations, it just doesn't go far enough. it doesn't cut it. small businesses they are the engine of our economy and this committee is not going to do just anything. this committee is not going to leave them behind. this committee has to make sure that they are part of a solution. the tax code has to work for everybody. especially families and small businesses. we need to make it simpler. we need to make it fairer and we need to make it flatter. we need to make it more globally competitive. we need to create more jobs. that's the way to create jobs and build a healthy economy. so we want to work with this administration, we want to explore common ground. we've got two big opportunities here potentially. on tax and on trade. so we'd like to get this done. let's see if we can find a way to work together. with that i'd like to yield to the distinguished ranking member, mr. levin. >> thank you very much mr. chairman. welcome, mr. secretary.

as the chairman said you're further away. we'll try to make this more personal though. i wanted to start on a personal note to recognize the fact that someone who has served as our staff director on health sabil bjorkland. this is her last hearing. are you here? thank you for all of your work. again, welcome, mr. secretary. this administration first presented a budget to congress six years ago. back then in the months of february and march of 2009 just weeks after president obama took office, the economy lost more than 1.5 million jobs. the most in any two-month period

since world war ii. today the economy is experienced significant growth with 58 consecutive months of private sector job gains. over the past four years, the u.s. has put more people back to work than europe japan, and all of the world's major advanced economies combined. that's hardly a "stagnant economy." republicans try to minimize that dramatic turnaround. but it is instructive to revisit what their party's presidential nominate in 2012 promised to achieve by the end of his first term in office. mitt romney said, and i quote, "i can tell you that over a period of four years by virtue of the policies that we put in place, we'd get the unemployment rate down to 6% and perhaps a

little lower." today, nearly two years after that deadline, the unemployment rate has dropped to 5.6%. the ongoing challenge that we confront, a challenge that has persisted for the last three decades dating back to the reagan years is how to ensure that middle class families are not left out of the growth of our economy. it is now being experienced and will be experienced in the future. the president's budget takes direct aim at that challenge. it includes proposals to support working families by making child care more accessible, guaranteeing paid sick leave, and making permanent extensions of vital provisions including the eitc, the child tax credit, and the american opportunity tax credit. it combines changes in the

international tax structure and provisions for the long-term needs of our nation's infrastructure. it closes tax loopholes that predominantly benefit a select few. these proposals are not envy economics. they are everyone economics. they're not the economics of envy. they are the economics of working for all, not just the very wealthy. through a fiscally responsible replacement for the sequester, the president's budget would allow us to invest in education medical research, and other domestic priorities, as well as provide the resources social security medicare and the irs need to serve the american people. and would provide for the ever-changing needs of our military as it confronts new challenges. i hope the republicans give these and other proposals

presented within the president's budget, mr. chairman, the full and serious consideration that they deserve. one of the many outstanding issues in the trade pacific negotiations, currency manipulation is mainly in the purview of treasury. over the past decade, currency manipulation by foreign governments has resulted in an increase in unfairly traded imports into the u.s. it has made it more difficult for u.s. exporters to compete in foreign markets. it has cost us millions of middle class jobs. tpp includes a number of former currency manipulators such as japan and other countries are discussing tpp who have been in the past manipulating their currencies, including china korea and taiwan. each of these countries is party to the imf which already prohibits currency manipulation

and has developed guidelines to define when it occurs. the problem is that the imf lacks any enforcement provision. that's why i propose taking the existing imf guidelines and building on them so they can be addressed through tpp. i've heard concerns that the u.s. monetary policy might be at risk if we put such a provision in the tpp. the imf guidelines clearly spell out that u.s. monetary policy, including quantitative easing is not currency manipulation. the first factor is protracted large-scale interventions in currency markets, and the u.s. has not engaged in that. the second factor is having an excessive amount of foreign exchange reserves. i could go through each factor. but suffice it to say that the imf has explicitly supported each round of u.s. quantitative easement since the great

recession. u.s. monetary policy would not be put at risk by addressing currency through tpp. i look forward to discussing with my colleagues mr. chairman, in a bipartisan and bi-camera basis and with the administration how to include a strong enforceable currency manipulation provision, as well as tackling the other major outstanding issues in tpp that i outlined late last month in a document that i called "a path toward an effective tpp agreement." thank you, mr. secretary for your dedication and your service to our nation for many years, going back to the days when you were still much younger, working for tip o'neill. and i'm very happy to welcome you back before this committee. >> thank you mr. levin. secretary lew, thank you for your time today. your entire written testimony will be included in the record. if you could try to summarize it

in five minutes so we could -- because we know you have a hard stop. try to summarize it in five minutes so we can get to our questioning we'd appreciate it. the time is yours. >> thank you very much, chairman ryan ranking member levin, members of the committee. it is good to be with you here this morning to discuss the president's budget. mr. chairman i think -- i know this is the first time i've appeared since you've taken over the gavel of this committee. i congratulate you and look forward to working together in a bipartisan basis to get things done. a year ago president obama said the 2014 would be a breakthrough year for our economy. the evidence is now clear that over the past 12 months america's made great strides. we're seeing real progress in job creation economic growth family wealth, energy independence, manufacturing, exports, retirement accounts, the stock market health care costs, graduation rates and the deficit. the fact is our businesses created nearly 3 million jobs last year. the most jobs in any year since the late 1990s. this capped off roughly five

years of job growth, the longest stretch of jobs growth in our nation's history and the creation of 1 1 million new jobs. in addition, the unemployment rate dropped to its lowest rate in 6 1/2 years and our economy continued to expand with healthy growth in the second third and fourth quarters of 2014 and forecast projecting above-trend growth in 2015. from a global perspective we continue to outperform our trading partners many of which are still trying to climb out of the vast hole created by the global economic crisis. at the same time, with the affordable care act in place, about 10 million americans now know the financial security of health insurance and health care prices rose at their lowest rates in decades. the automobile industry continued its rebound in 2014 even as we marked the official end to the auto industry rescue and american taxpayers recovered more money than we invested. finally, thanks to the administration's all of the above energy strategy we moved closer to energy independence than we have been in decades and gas prices fell providing a shot

in the arm for families and small businesses. today our nation has turned the corner on a number of fronts. as we know, this resurgence has not reached every american. for too many hard working men and women in this country, it still is too hard to get ahead and earn enough to raise a family. afford child care. pay for college. buy a home. and secure retirement. the president's budget meets these challenges by offering real solutions to grow the economy, strengthen the middle class and make paychecks go farther. this budget is built around the basic idea that hard work should pay off. it's practical, not partisan, and it lays out clear steps to rein in spending and eliminate waste ifle tax breaks so we can reduce taxes for working families, as well as many businesses and manufacturers. what's more this budget replaces across-the-board cuts from sequestration and makes sensible investments to increase our economy's competitiveness. not long ago some predicted that the president's policies would explode our deficits.

a little history though makes clear the opposite is true. in the 1990s when i was budget director i oversaw three budget surpluses in a row. we were on a to pay down our national debt. but when this administration took office in 2009 there was a very different reality. after years of run-away spending including tax cuts for the most well off and two wars that were not paid for, then the financial crisis our deficits reached a post-world war ii high. the president moved to right our nation's fiscal ship. with his balanced economic approach, the agreements forged with congress and a growing economy, the deficit has fallen by almost three-quarters. the swiftest downward arc since the period of demobilization following world war ii. the deficit is projected to clee klein even further in the next fiscal year. today we are putting forward a plan to lower our did he ever sits to 2.5% of gdp over the ten-year budget window. our nation's improved financial footing has occurred even as congress was able to undo a

portion of jesssequestration in recent years and replace with more affordable savings. noing has been to address these dangerous cuts in 2016. vital funding for our national defense, key priorities like education and research will be severely cut back. the president's budget provides a path to eliminate sequestration while achieving the president's long standing commitment to a responsible and balanced fiscal approach. in other words, it charts a specific way forward to not only keep our fiscal house in order but to also create room for pro-growth economic policies which are needed to keep our nation stronger in the future. one pro-growth strategy is tax reform to restore basic fairness and efficiency to our system. by scrapping loopholes and tax breaks that reduce taxes for the most fortunate americans but do not help our economy, we can provide critical tax relief for the middle class and those struggling to join the middle class. our economy should work for everyone and everyone should shoulder their fair share to maintain our nation's fiscal health.

this budget also places a serious focus on achieving bipartisan business tax reform so that america is the best place in the world for businesses to locate, grow and create the kind of good, high-paying jobs that support middle class families. this plan shows how members of both parties can reach a common ground and realize the shared objectives of simplifying the system removing wasteful tax preferences and distortions, and lowering tax rates so that we no longer have a system in which some businesses pay nothing while others pay the highest rates in the developed world. it's time to stop rewarding corporations and industries that have the best lobbyists and most creative accountants and start strengthening businesses that build, hire and invest here in the united states. it is also time to make inversions, a loophole that allows u.s. companies to lower their taxes after they buy foreign businesses, a thing of the past. this budget does that. a more fair and efficient tax system will help create good, middle class jobs and grow our economy. we know that with business tax

reform, there will be one-time transition revenues. the president wants to use some of these one-time revenues to make long overdue repairs to our nation's roads, bridges ports and airports. the need to rebuild our infrastructure is irrefutable. that's why this budget tackles our infrastructure challenges by creating an extended period of sustained funding for a six-year surface transportation bill and starting an innovative new bond program that will ignite more public/private partnerships in cities and states across the country. of course, keeping our comeback on track building on the momentum we've made and making it possible for every american to get ahead is going to require straeblgs strategies that are both bold and effective. that's what this budget is about. it proposes a series of targeted investments that have been proven to make a difference. investing in education by expanding student loans strengthening tax incentives and making community college free for those who earn it. it invests in america's workers by starting apprenticeship grants enhancing job training programs and boosting the earned income tax credit. it invests in working families

by increasing the child care tax credit providing tax relief for families where both parents are holding down jobs and allowing more working americans to earn paid leave. it invests in retirement security by making it easier for employees to automatically save for the future and businesses to provide 401(k)s to their employees. and invest in innovation by starting cutting-edge medical research initiatives and bringing broadband access to more communities. in concert with these pro-growth strategies, this budget calls on congress to send measures to the president's desk that will help our economy now and far into the future. this includes raising the minimum wage, fixing our broken immigration system and passing trade promotion authority. the strategies i've described are part of the president's plan to help improve the lives of millions of hard working americans while meeting our responsibilities to future generations. the task before us now is to put political brinksmanship aside and find areas of compromise and common ground. i'm certain that we can get there done. i look forward to working with

each and every member of this committee so we can deliver for the american people, and i look forward to answering your questions today. thank you very much. >> thank you secretary. there's basically four areas i wanted to get into. i just added one to it from your testimony. the sequester. as the author of the last agreement, bipartisan agreement to provide sequester relief, i think it the formula we reached in that bipartisan budget agreement in the last session it was the right precedent. so what was that precedent? it was we understand that the mandatory side of the ledger book, the auto pilot spending is what is really not under control, it is the source of our debt crisis coming in the future, and needs to be reformed. so what patty murray and i sat down to do was to find an excessive amount of savings on the mandatory side of the ledger book to pay for some sequester relief and to fix the caps for the various concerns that i think on both sides of the aisle

people have. but the precedent was, you had more spending reductions through entitlement mandatory reforms resulting in net deficit reduction which also got us some sequester relief. so we all know it is a show-stopper to say let's raise taxes to pay for some sequester relief. the president was set which is we need to do mandatory reforms so that we can do two things. relief from the sequester smarter spending cuts in other areas of government and contribute on the net to some deficit reduction. so i would just argue strongly, woo he got a good formula in place, we have a good precedence, it has bipartisan origins, let's try to stick with that formula. >> mr. chairman, if i might i think the agreement you and sfloert senator murray reached was important and it is one of the reasons we've been operating in a more normal way these last two years and one of the reasons the budget could be on time this year. i think working together is important. we onbviously present our view of

the best way to do it in our budget. >> my whole point is let's stick with the formula we have because it woshgdz beforerked before. i think it is the best way to go forward. second, i want to ask you about pass-throughs. i'm glad you said business reform instead of corporate which is a good step in the right direction. mind you -- i know you know this -- 80% of american businesses aren't corporations. they're pass-throughs. they file their taxes as individuals, sole pro pry poreshipspore proprietorships, sub-s. unlike big public companies with a lot of cash on their balance sheets the ability to borrow at historically low interest rates, the close dodd-frank closely held businesses have found it really hard to obtain credit these days as banks have restricted lending. so why have a cash flow issue. they need cash flow from the current operations just to make payroll, just to keep people working. but our current broken code makes it harder for them to do

that. your budget takes some baby steps in the right direction. i know section 179. i think there is some common ground there on expanding that. we'll mark this up tomorrow. but other proposals like expanded cash accounting. are only right now helping small c corporations and don't do much for the vast majority of small businesses organized as pass-throughs. will you work with us to explore more areas in trying to help these closely held family businesses we think ever as pass-throughs to help figure out their expensing issues. because from this post dodd-frank world, they have even tighter credit. >> mr. chairman, i believe that our proposals reflect our commitment to making tax reform work for small businesses. we have called it business tax reform on purpose because we think of it as both corporate and small business tax reform. we've put into our plan a number of things to simplify taxes for small businesses, to make it possible to take deductions more

easily and more quickly. and to lower the tax burden for many small businesses. a lot of different kinds of companies organize as pass-throughs. some of them are mom and pop businesses. some of them are very large companies that look more like corporations. we look forward to working on a bipartisan basis to see what we can do to help real small businesses get the kind of relief they need. >> big or small. that's where most of the jobs come from. all i'm saying is i don't think there is enough in this proposal to do justice to what needs to be done so let's keep working on that. transition. i want to just get you down on the record on this idea of tax reform financing highways. your point just to be clear, is not to support a one-time repatriation holiday such as we did i think 2004-2005, but only as a means to permanent transition to i think you call it a hybrid system. only under that kind of scenario

do you see tax reform as part of the solution to the highway trust fund issues. is that correct? >> mr. chairman we've pointed out many times that we think that the one-time repatriation holiday created a kind of perverse incentive. it created incentive for companies to keep their income overseas until the next repatriation holiday. we think that the right answer is to have real tax reform to change the structure so that companies bring their income home. frankly, so they invest their income wherever it is most economically efficient. the idea of tax reform is to have the efficiency and economics of a business determine where you invest, not the tax code which is skewing decisions in a way that's inefficient. we believe that what we propose in terms of the international hybrid system will create that. we think that the toll charge that we've put in is the right way to have a transition and we do believe that the one-time revenue from the toll charge can fund the highway -- the infrastructure program in a very effective way. when you talk to business leaders in this country, three

things that i hear most often are, one we need to reform our tax code. two, we need to build our infrastructure so that our economy can grow. three, we need to do immigration reform. we can take care of 2 of 3 at the same time here. >> so i would take issue with probably the rate and the style of hybrid that you're doing but putting that point aside it's a move in a constructive way. we have these obviously -- see it differently but it is for a permanent conversion to a permanent new system. >> right. >> last question i want to ask, eitc. i think the data is pretty clear that the eitc is effective. it is effective at moving people from poverty into the workforce. it's effective at lowering barriers that are in front of a person who wants to get into the workforce. but it's also a program that is known to have a high degree of fraud. it's known to have a high improper payment rate. a lot of people say, well, just give the irs more agents and

they can fix that. i think that's an insufficient answer. will you work with us to try and figure out how we can clean up the management and structure of the eitc so that we can get at this exceptionally high improper payment rate, and are there ideas you have about how it could be restructured and reformed so that it truly goes to those who are really, truly supposed to get it and no the to others? >> mr. chairman i totally agree with you on the importance of the eitc as a bridge to work and to get families back to work in a way that makes good sense. it's been a bipartisan commitment from its inception and i look forward to working with you to strengthen the eitc. i also agree that compliance needs to be improved. we do have resource constraints. i don't think they can be dismissed. the underfunding of the irs does make it very challenging in many areas to put the resources that are needed into compliance. so i hope we can work together to make sure the irs gets the resources that it needs.

every year the irs recovers or prevents about 2 billion mr. in improper eitc claims. between $3 billion and $4 billion in total revenue through eitc related compliance activities. we need to do better. we look forward to doing better. but it is related to the resources available. we hope there are the resources to do it properly. >> my point for asking though is, i think many of us agree that there are other populations that this reform could be applied to. say childless adults. let's see if we can make the reforms pay for these improvements. so if we can contain it within itself, i think that would be an enormous step in the right direction and that, too, could perhaps lead to a bipartisan common ground success. >> we very much look forward to work together on the childless adult provisions. it is something that i think would fill an enormously important gap in the current system. i don't know whether the cost would be covered by it but i'd be happy to look at it and work with you. >> thank you. mr. levin's recognized. >> thank you. mr. chairman, you and i have had

a few discussions about these issues. and all of us want to do more of that. so if i might, i want to ask a broader question of the secretary briefly. but let me just mention about pass pass-throughs. i think it is one of the major challenges to tax reform, as you indicated. i think it has to be looked at comprehensively. we're going to mark up 179 and other bills tomorrow and i think it's a mistake to take that outside of tax reform unpaid for, permanent. mr. secretary, you've expressed your view on this before. do you want to just comment briefly on that approach? >> congressman we have consistently opposed taking these items one by one and making them permanent in an unpaid for way, even provisions that we approve of and that are part of our plan. i think that section 179 should

be addressed and expanded. i think if we can have real progress on business tax reform that would be a way to get it done and takes the issue off the table for the future and removes the uncertainty that goes with short-term extensions which is where we end up if we don't have business tax reform. >> thank you. mr. chairman, also in terms of international taxation secretary has mentioned how i think totally unsuccessful the repatriation was before and what the administration has come up with kind of a hybrid system. i think we need to get away from the labels and look at how it might work. let me just say briefly as we continue dialogue. i think we need to look at eitc in terms of its implementation. i think irs help is not the only factor but i think, as the secretary said, cutting

revenue's appropriations for the irs is not the way to go. you can't get tax enforcement when you cut down the irs appropriation. mr. secretary, if you would i have almost three minutes. would you use them -- you talked about in your statement about middle class economics. just tell us if you would, briefly, sum it up -- what is the vision of this administration when it presents its budget? >> congressman, i appreciate the question. we put a lot of thought into how to design a budget that would address the challenge of making sure that our economy works for middle class families for families that are trying to break into the middle class. we've identified what we think the real obstacles and burdens are. it includes education opportunities. it includes child care burdens. it includes the challenge of

saving for retirement. we've put in place a series of provisions that we think will make a real difference to make it possible for middle class families to get ahead. we have an economy that on the whole is growing at a much better rate than most of the rest of the developed world but we're seeing within the united states that it is not an economy where there's broad opportunity as there should be. i think that the provisions in this budget provide a first step to solving that. some of the characterizations of this budget have i think been a bit off. it's not about being against one group and for another group. it is about making the system work for everyone. and the truth is we have distortions in our tax system that allow those with the most wealth and the most income to avoid paying taxes on the same basis that all of us pay taxes on. let me use an example of stepped-up basis and compare it to the way we pay taxes on irass

and 401(k)s. for anyone who needs to use the assets that they build up for their retirement you pay income tax on that kwh you take it out in your retirement. if you never need to get access to your savings to your accumulated earnings, you can pass it on tax-free. that's not right. our system ought to treat all earnings in a similar way and that's what our proposal does. it's not against anyone. it is for everyone. >> thank you. thank you, mr. chairman. >> mr. johnson. >> thank you, mr. chairman. welcome, mr. secretary. as you know, you're also serving as the managing trustee for social security and i'd like to, if we can get a quote up on the screen, direct you to it. however, this is what obama had to say when he was first elected. "what we have done is kicked

this can down the road. we are now at the end of the road and not a position to kick itny further. we have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's." that's president obama in january 2009. you know, we have to signal seriousness and my question to you is do you agree with what the president said then? yes or no. a. >> you know congressman, i think that if you look at the condition of the social security trust fund it's in stronger shape now, a strong economy helps drive that. and i think the president has many times said that we need to deal with a long-term problems in a bipartisan way. but we do have a little bit more time to do that. what we've proposed is a budget that will build a foundation that will actually help social security. even our immigration policy, for example, would have the effect of lengthening the life of the social security trust fund.

so we think we have improved the conditions of social security -- >> well i'm going to have to disagree with you because the shortfalls doubles from $5.3 trillion to $10.6 trillion while you guys have been in office. that means social security can't pay the promises it has made. my next question just for the record, do you agree that social security finances have continued to deteriorate since obama took office? just yes or no. >> well congressman, i think if you look at what's happened in these years, as we all knew, the baby boom was going to hit retirement age and the baby boom retirement is under way. i think if you look at trends in social security financing one has to take account of the fact that it was an entirely predictable turn that the reserves would start getting used to pay benefits. >> then why didn't you make a real plan to fix it? would you agree that the disability program is in

trouble? yes or no. >> congressman disability is a bit of a separate issue from the old age fund. i would just say as someone who's involved in the 1983 social security reforms we did a lot to fix social security's foreseeable shortfall. the problem is that money was spent along the way because we ran deficits for other purposes. so i don't think it is a question of what happened in the window of time of this administration. it's actually what happened before. the disability fund is approaching its exhaustion date. we have proposed a number of reforms in disability. i think that there is a broad view that there's going to need to be some reallocation of trust fund -- taxes between the trust funds to deal with this issue in the intermediate term. >> well, let's talk about reallocation. you used that word. re-allocation is actually about taking money that would have gone to retirement and given it to the disability program. is that true or false? >> reallocation would move revenues from one part of the -- one trust fund to another.

>> sounds like we're continuing to kick a can down the road. we've got to work today to strengthen and preserve social security. mr. secretary, will the president actually follow through on the words he said back in 2009 and actually do something on his watch? >> well congressman, i think that if you look at the history of the last several years the president has been prepared on a number of occasions to have the conversations that have to happen on a bipartisan basis to deal with social security in the long term. they did not reach the kind of end that led to an agreement. i think right now we're looking at an economy that would benefit greatly from us working on the things where we can reach bipartisan agreement and we do have a bit more time to deal with the long-term issues. i'm not going to say they don't need to be addressed but they need to be addressed in an environment where there is a bipartisan atmosphere that's conducive to it. let's make some progress on the things that the president has talked about. >> will the president actually do something on his watch to fix the system?

>> i think if we do immigration reform, that would be a big step. we look forward to working together on that. >> you know americans depend on social security and they're paying hundreds, if not thousands of dollars a year into social security. and want and need and deserve better. mr. chairman, thank you for holding this hearing. i look forward to working with you on this. >> thank you. mr. rangel is recognized. >> thank you. i understand mr. johnson say the president can do something by himself on his watch because i'm going to advocate that he be more aggressive in that area. having said that though welcome. it is so difficult for me to look at you mr. secretary and not think of you as the kid that used to work for tip o'neill. but you certainly make those of us that serve the government proud of your service. i don't see how -- i'm so pleased to hear that the chairman and you and most all of us agree that there is a possibility that in the area of trade and the area of tax policy

that there is a possibility that we can find some area that we can agree with. now both of these issues, as important as they are to the country, we need to get votes for these things, and it's difficult for some of us to go into the community and say we prefer tax reform or we prefer trade. what people really want to talk about, how does this affect my future? what does it mean to me, what disposable income will i have, will i have pension benefits, will i have something to send my kids to school, can i pay for my house, can i pay rent. we always allocate jobs for trade and certainly we can negotiate the trade -- the tax bill so that we could be fair as relates to what used to be called the middle class. but i don't see the jobs in this bill and it's probably difficult to pinpoint exactly who the winners and losers would be in a

trade bill. it probably will improve the ability of all of the countries involved to improve their economy, but to find out where are these jobs going to be? because if we can do this, mr. secretary, we get rid of all of this republican and democrat and free trade business, people want to know if it's good for the country, how it's going to be good for me. it seems to me that if we do have a good trade bill, that we will need infrastructure in order to support that trade bill. i don't see how anybody regardless of their party can go to our mayors and our governors and not say that infrastructure's a part of trade. the other thing is also education. whatever benefits we get, we have to have a workforce prepared to meet the new economic challenges, if not for the current workforce, for those that will be coming into being.

now i wish the administration would be able -- and republicans as well -- to try to give some of us a package so we're not talking in theory but we are talking about jobs. and if the republican majority could see its way clear in the congress to attach education, job training, infrastructure to a trade package i can assure you that trade would mean a heck of a lot more to our constituents than just something that foreigners are dealing with our president. if we can get that concept that the president accepts it and it's a part of the trade agreement, then of course i don't see any objection of giving the president the authority to negotiate a trade agreement. that those things are going to be in it. but i find it very difficult for us to say we're giving the president the authority to negotiate and when the

negotiations are complete, all we have is up or down and no input. so i don't know how much time you have to respond but whatever it is i do believe that trade and tax reform can bring us together for the country, for our party, and certainly to improve the image of our congress. >> congressman rangel, the basic reason that we support trade promotion authority and good treaties is because we think it grows the u.s. economy and it grows the middle class jobs in this country. you look at the growth in the future, the growth is in emerging economies, it is in the pacific, it is in areas where other countries are gring to be exporting into those markets. we need to be exporting into those markets, too. tpp was designed to be an agreement that would drive standards up. united states is already more open than most other countries. we already have higher labor standards and environmental standards and other important

safeguards. by having an agreement where we make our high standards a mutually agreed set of high standards, and by having a world in which we have access to the growing markets, i think it will grow the u.s. employment base and create opportunities for middle class families to have a better future. none of this is a given. it requires negotiating hard. trade promotion authority is actually something that puts guidelines on the administration to help drive things in the right direction and in the areas that i've just described it presumably will address those issues. it is our job then to come back with an agreement that delivers. and we're not going to bring back an agreement that we can't defend as growing the economy and middle class jobs. i think that's the real reason to pursue them. >> thank you. >> mr. brady. >> thank you, mr. chairman. welcome, mr. secretary. next month supreme court is scheduled to hear arguments in whether or not the irs oversteps its authority when the agency issued regulations extending affordable care act premium

assistance tax credit subsidies that covers purchased through the federal exchanges. court's expected to announce its decision some time before the end of june. can you tell me at the treasury department or the irs is doing anything to prepare for the possibility that the court might rule against the irs? >> congressman let me start by saying that the affordable care act is working and the tax credits are working. millions of americans now have access to affordable health care coverage. >> but the court will not be ruling on that as expect of the aca. specifically the irs ruling. >> we believe that we have -- our lawyers have made the arguments, the justice department has made arguments that we think are compelling to the court and we look forward to a positive ruling. but the thing that we just have to recognize -- >> but mr. secretary, i don't want to interrupt but i want to make sure we understand. i'm not asking for a prediction on the court ruling but in the possibility that the court will rule for the plaintiffs, what

planning is treasury department or the irs doing to deal with that type of ruling? >> congressman, there is no question but that an adverse ruling would strip millions of americans of health care coverage due to the loss of the tax credit. >> so you would be based on that, starting the work now to prepare for that ruling. correct? >> congressman, what i'm saying is that the premium tax credits are an essential part of the affordable care act, that if they were removed there would be serious disruption in health insurance markets in many states. >> and to enensure that there is not serious disruption, is irs or treasury planning now to deal with the ruling of the other direction. >> what we're doing is we're continuing to implement the law. the law as it was written which was to make sure that all of american people had access to this. >> let me ask as treasury secretary today, are you, in

effect guaranteeing that the supreme court will rule for the irs in this case? >> what i'm doing and what we across the administration are doing is implementing the law as it was written to provide health insurance to millions of people. >> i get the impression you're very confident. in effect are you guaranteeing that they are going to rule for the irs and therefore you have to do no planning -- >> i leave to the justice department to make or legal cases in court. they have made i think a compelling case. >> but you certainly would not guarantee that today. >> i'm sorry, i would not guarantee -- >> you certainly would not guarantee the supreme court ruling for the irs. >> i would never presume to speak for the supreme court. >> and i agree. because there is a possibility they may rule for the plaintiffs. i guess my question to you is that, should that occur republicans are already working to develop a thoughtful plan

that -- and thorough plan to offer these millions of americans choices to have affordable high-quality health care. we are doing that work ahead of time. is treasury or the irs doing the same type of work? >> congressman this issue as you know, is currently before the court. i can't comment on the pending litigation. >> i'm not asking you about the litigation. >> we're confident in our interpretation -- >> mr. lew, i'm asking you about the planning. you can't guarantee the outcome, so the possibility it might rule otherwise. are you planning for that? >> we are confident that our interpretation that americans in every state are eligible for premium tax credits will stand and i've indicated that bsh. >> surebut a moment ago you admitted you couldn't guarantee the outcome. let me ask this. as republicans work toward a thoughtful thorough plan to

address that ruling, will the white house work with us in that eventuality or will you refuse to work with republicans in dealing with that ruling and the millions of americans that could be affected? >> congressman, the oral argument hasn't taken place. the ruling is months away. i've indicated that if there were a ruling that took away the premium tax credit from a significant number of people it would be very disruptive. >> and in that case will you work with republicans in crafting a solution for those americans so they can have high-quality affordable health care. this is simple. will you work with us or refuse to work with us? >> i think it is a mistake to think there is a simple solution. >> i'm not suggesting a simple solution. >> affordable care act is designed to be based on premium health care available to all americans. >> will you work with us or refuse to work with us? >> i'm indicating o you are view that it would be a serious

disruption. we obviously will willlook at what proposals are made but i'm not going to prejudge what the court does. >> thank you. dr. mcdermott. >> thank you mr. chairman. mr. lew i applaud the president's efforts to support the middle class. all through this bill, whether you're talking about sick leave or social security, or medicare or student debt the president has made proposals. what my colleague from texas is posing is that if your next-door neighbor takes a bulldozer and knocks down your house. do you have a plan to rebuild your house? and it is about as unreasonable a posit of an idea i've ever heard. the republicans in 5 1/2 years have not proposed any alternative to the aca. in fact this afternoon at 1:30

they're going to bring a bill out on the floor to repeal it for the 55th time. now it seems unreasonable to put -- to waste your time planning for something. if they have something they want to bring forward, they can lay it on the table in the ways and means committee or in the energy and commerce committee or somewhere else. they have never put anything on the table. now i want to talk a little bit about the proposal of the president to close the loophole that gingrich put in the subchapter-s collection of social security taxes. could you explain to me? my understanding is that if you have an s chapter -- chapter-s corporation, you don't have to pay your employment taxes. so you don't pay for medicare. you don't pay for social security. now when you get old you get 65, are you eligible then to go

in and get social security and get medicare under a program to which you haven't paid one single dime? >> congressman, first if i can respond on the point you made about the bulldozer. i've tried to indicate that the degree of disruption would be enormous. i also think it is important for us to recognize that what we want -- what we should be working together on is how to make it more affordable and more possible for americans to get healthcare. and we've always been open to working on that. i think the american people are tired of the debate about repealing the affordable care act. and they want to hear more about how to make it work. >> i agree. >> and on the question about eligibility for medicare there obviously is a significant issue. you know, the proposal that we have in our budget would tax all

earnings of profession service sub chapter s corporations as labor earnings. the taxpayers would get social security and medicare based on what they paid in. so we think that would address the underlying issue. >> so those people are not now eligible for receiving benefits if they don't pay in. >> i believe they are -- they pay in. but they don't pay in as much as they would. >> the question here is not whether they are eligible for benefits but whether they are paying in on a fair basis. >> i think it raises $74 billion for the trust fund. >> i think the big issue is whether or not they are making the payments that are associated with the incomes that they have. >> yes. i'd like to raise a question about student debt. can you give me any reason why students can't renegotiate their

loans? if they took a loan out at 9% from a bank. why does it have to stay at 9% for the rest of their life? >> on my house i've renegotiated my loans three, four times bringing it down to a lesser rate. why can't students do that? >> well congressman, we've looked at this issue and worked with the congress to come up with proposals that could give students more flexibility in terms of how to manage their student debt. obviously the student loan programs are designed to give very favorable access to credit. but the rates are not always at a level that feel competitive with what would be available if there were a different kind of credit worthy borrower out there in the market. i think the challenge here is to work through these issues to make sure that students know all of the options that they have so repay their debt in a more

affordable way, to consolidate their loan, to go through the process of having their payments tied to their -- >> did you understand the financial system when you were 20 years old? >> well. the financial system was simpler when i was 20 years old. but probably is answer is not as much as i should have. >> thank you. >> down mr. reichert. >> secretary. welcome. i think most people are hopeful that the administration is willing to work with us on tax reform and i'm hearing you say that you are. that is good news. from mr. brady's questioning i took away from your lack of an answer to his question as to whether or not you will work with us. depending upon the supreme court's decision. that lack of a yes or no answer

indicates to me that there is an unwillingness there. and i'm hoping that that doesn't transfer over into tax reform and other issues. i want to focus on the small business pass through question. and you have made some comments that i find interesting. compared to the language in the budget. i just want to get to the bottom of it. hard-working americans deserve a tax code that works for them. not them working for the tax code. you would agree with that i'm sure. they need to have that consistency and that certainty in the tax code so they know and can plan for their businesses. which gives them the security in having that knowledge and hope for the future and their family and the success of their business. so when you say that you are willing to work with us in the

179 expensing area can -- can you explain to me why in your budget you did so little in that area for pass-through entities. why didn't you do something a little more bold to begin with if really that is the way you and the president felt about pass-throughs and small businesses. >> well congressman, i think we've done a number of things in the budgets that will help small businesses and pass throughs. >> my question is why didn't you do more. >> well we -- >> just a moment. you agreed with the chairman when you said yes we could do more and we will work with you. my question is why debateidn't you do the more part first. >> we put forward what we think is a good bank.package. if there is a desire to do more

we are open to ideas that would do more. >> i think the change herellenge is to come one ideas that would work and don't have unsuspended consequences. >> so the question i asked you are not going to answer. >> well i'll be perfectly candidated ed candid and ive said this plooift. this is a complicated -- >> can i get you do reaffirm that you will work with us. >> yeah i've said that we will work together on this. >> great. so tomorrow as mr. rangel and others referred to several bills will be marked up in s corporations and making some of those tax extenders permanent. i don't want to talk about the permanency issue. i want to talk about the policy. you said you agreed with the policy. can you give me an example of how these small business

measures and legislation town expanded? because that was your statement a little earlier. you said they should be expanded. can you give me an example of how you might expand s corporation -- >> we've taken up to $1 million, the amount that could be exp penced in a single year. for most small businesses than enormous benefit -- >> could you give me an example. >> i just gave you an example. >> further. you have already said that. >> i'm here to present our budget. you are asking me to present things we'll work on in the future. >> i thought you might have some ideas. okay. my last question would be, you know really we dominated a rules package to perform macroeconomic analysis of major legislation. does treasury is a dynamic model. >> both take -- >> does treasury videoa dynamic model. do you have one?

>> yes. >> okay. thank you. >> good, that was easy. i yield back. >> mr. lewis is recognized. >> thank you mr. chairman. thank you mr. secretary for being here today and thank you for all of your great and good work over the years. mr. secretary, i want you to make it plain and crystal clear. if the republicans today repeal the affordable care act and later the senate repeal the act the president saying he's going to veto it. maybe he's changed his mind and will not veto it. maybe just -- >> he has not changed his mind. >> okay. what would happen -- what would happen to the hundreds, thousands and million of people

who have the affordable care act now? >> well congressman lewis, because of the affordable care act we have millions of people, almost 10 million people who have health insurance coverage that they didn't have. and the challenge of providing the kind of security that a family only knows when it has health insurance has taken us decades to accomplish. we would take a step back to the time when those families do not have that kind of access to health insurance and the kind of security that flows ss from it. i think it it would be a very bad situation. it is why the president would veto a a measure that would repeal the affordable care act. >> thank you very much mr. secretary. can you explain what does the president budget do to help more americans prepare and save for their retirement? >> i'm sorry i couldn't hear your question congressman. >> what is in the budget -- can

you explain what is in the budget that would help more americans save and prepare for their retirement? >> mr. lewis one of the things we've done in our budget is create incentives for employers to cover their workers in 401(k) plans. made it easier for them by giving them tax benefits for the administrative costs of setting up a plan for matching contributions that employees make. you know, we built that an top of the proposal that we started last year. starting the my ra program where individuals will be able to start with a very safe, easy starter retirement account. we for years now had proposals to go from a system where employees opt into retirement to one where they have to opt out. we know from behavioral economics that that would work to get many, many more people covered. so i think we have a quite robust set of proposals and i think it is someth