the budget. why? what is it going to be used for? >> for a number of years now we have been putting forward proposals to try and make sure that the unemployment system is on sounder financial footing. we've put forward our ideas how to accomplish that. we think it is an important objective and we would look forward to working together in a bipartisan way to know that the unemployment system is in sound financial footing going forward. >> we'll work with you on a that and i hope we can get to some resolution. and with the remaining time i have. you won't be able to answer the question have for you. but it relates to treasury's role in developing the model with regard to our negotiations with china. this has got to be a top priority. i would be very interested in getting a full understanding of what treasuries doing with regard to that development and our negotiations with china. and likewise with india. because the president just announced with prime minister

modi that we'll resume negotiations on a high standard bilateral investment treaty. and we seem to be miles apart from india. even on basic definitions of investment. there is not much time left if you want to talk about it, but i'd like a detailed answer in writing. >> i'm happy to get back to you in more detail. but in the minute i have let's me take a quick shot. i've been deeply involved with the discussions with china through strategic and economic dialogues. it is a very important conversation because if it concludes successfully china will raise itself to standards that will help in a lot of ways in normalizing and improving trade balances. >> it empowers their reformers. >> it empowers their reformers to make the changes internally and stops them from doing things in international markets that cause unfair advantage. >> i understand the rationale. what i'd like is a detailed summary where we are with this. >> and they are just taking the very first step very shortly

putting out their first cut at what is the list of industries that would not be open to foreign investments. the negative list. that would be an important indication of the seriousness. and we look forward to seeing it and taking a step forward from there. >> i'm following this very very closely and i would like to stay in contact. >> happy to. >> i yield back. >> mr. neil. >> thank you mr. chairman. mr. secretary. word of congratulations on your eitc proposal. mr. ryan have had extensive conversations already about. this and a reminder much of the fraud determined in eitc has much to do with the lack of the professional standards for tax preparers. we've had conversations in the past with mr. camp's statute. and there seems to be consensus as well. if we we were to apply the logic of not paying things, perhaps we should just expand eitc and not have it paid for. you acknowledged the ira we were

working on last section. we almost got there. and i hope that when we consider half the people get up in america referred not in a retirement plan that we could expand more opportunity for savings. word of congratulations on the new market tax credit program and expanding that. that is an inducement to sound investment in urban areas across the country. and alan kruger was a terrific advocate along with build america bonds which worked quite well during those years. there was not an airport that was expanded for members of this committee who have one that did not use build america bonds for that very purpose. and and after pointing out there are many avenues of the agreement here and plotets that the administration deserves. given history in the massachusetts and having worked

for tip and cheering for the new england patriots i think we could also acknowledge that the proposal the administration has offered jack on graduate medical education is a huge deal for us in massachusetts. you do i think deserve some credit in the administration for lowest inflation rate as it relates to healthcare in the past 50 years. and aca has to receive some acknowledgment for that. you obviously are attempting to preserve and improve medicare for future retirees as well as those receiving it now. but i would carefully suggest that on graduate medical education that that's a huge plus for america. it helps to set us aside and with the pacific northwest has boeing and microsoft. those of us in massachusetts we have graduate medical education. and i hope the administration will treat it with the same regard they do other initiatives proposed. i think $16 billion in terms of a cut back is a bit over the top and i hope that you will have due consideration for the proposal that you are offering and to review it and really to set it aside.

it is a big economic plus for those of us in new england and give you the next 2 minutes to talk about the proposals as i've outlined them. >> congressman, let me start with the points you made about the new market tax credit and the build america bonds. we obviously agree very much that they have made a huge difference. we have a new form of build american bonds that we're proposing to take them forward to the next level and we obviously would propose continuing new markets tax credits. which i'll point out were also a bipartisan creation at the end of the clinton administration with speaker hastert. so we can do things together to create real opportunity in this country. obviously the issues regarding medicare savings are always difficult. our budget has repeated the proposals from past budgets, where we have $400 billion of savings in medicare. they're all hard. and as always we look forward to working with congress to, you know, develop a path forward. we put it in as a comprehensive

approach to deal with our fiscal challenges. and i think that, you know, would view the kind of entirety of the package as the way to see what we're putting forward. this is an issue that i know is a particular concern in boston and massachusetts and in new york. and we would look forward to continuing the conversation. >> thank you mr. secretary. thank you mr. chairman. >> thank you. >> mr. secretary, thanks for your time today. you are here commenting on the president's budget and the agency that will collect the money to enact our next budget is the internal revenue service. they are tasked with collecting over 3 trillion dollars, as you know. you made an argument that one of the things they need is more resources. and let's set that aside for a moment. the other thing they need is a reputation. they need a reputation as calling balls and strikes. they need a reputation as being

a fair agency. resources and reputation are at the foundation for any tax collection that is going to have integrity. i thought it was interesting that in your remarks and in your written testimony you didn't talk about the reputation of the internal revenue service and the damage that has happened in the past couple of years. back in the summer of 2013 when you were asked on national television -- that's my word. but you fairly dismissive and you characterized it as a phony scandal. now this committee made a referral to the attorney general last year. and i assume you have read the referral letter and the supporting documents, haven't you. >> i've seen it. >> and in light of that you couldn't characterize this as a phony scandal, would you? >> congressman, i'm happy to discuss the reputation of the

irs and these issues. i think that the irs is doing an extraordinarily effective job under very difficult circumstances, where they have been underfunded and not given the resources to do one of the most important jobs any government does, running its revenue service. i have acknowledged from the beginning that the actions that took place with regard to the issues of concern there were very bad. and they involved a small number of people at the irs. we took immediate action to discipline the people involved, to make sure that the supervisors responsible are no longer there. and we have i think if you look at the way the irs is managed under very difficult circumstances, we are with less resources processing tax returns efficiently. we are using the online tools to as much as possible fill in for where we don't have people to answer the phones. and we're processing refunds in a timely way. >> secondary, to dismiss this down to, you know, just were

some bad actors. here is my question. what have you done to prevent a louis lerner 2.0 situation? lois lerner was the person who put together a panel of three senior career employees that had to be the threshold before an audit could happen. lois lerner was then the person that went around that very safeguard that she structured. she said in an e-mail where she really was quite aggressive with one of her employees -- and this is after two times this three person panel said look, we're not going to pursue it. she writes then. i reviewed the information and thought the allegations in the documents were really damning so wondered why we hadn't done something with the org. as i've told you before, i don't think your guys get it. mr. secretary, what is it that

you have done other than calling this a phony scandal on national television, what have you done to make sure that lois lerner 2.0 is not possible? because to simply say well it is just a small group of rogue employees -- or frankly, in your other interview when you say well these are no political employees were behind this. that is just hiding behind an adjective. you know that there are only two political appointments at the internal revenue service. one is the director and one is the gc. >> congressman i think if you look at the inspector general report that came out we followed all the recommendations. we made clear the behavior at issue was unacceptable, it cannot happen again. we have a new commission, new senior officials who are very much of the ware of the fact it is their responsibility to make sure things like that don't happen. so i actually take issue with

the notion we've dismissed it. we haven't dismissed it. it is one thing to take actions and response to what happens with a small number of people in a large agency. it is another to condemn the whole agency which is what i believe many are doing and that is wrong. >> i don't think there is a condemnation of the entire agency mr. secretary. but i think when the administration essentially comes before this committee for years and says there is no problem. and then senior members of the administration are dismissive, don't you understand how that is corrosive and insidious. >> i don't believe -- >> when characterized with a phony scandal. that is dismissive. off with you. be lively. we've got this under control and we want don't want to hear anymore. there is nothing more dismissive than calling it phony. i yield back. >> thank you. mr. becerra is recognized. mr. secretary, great to have you with us, thank you. can i start again by saying thank you. you heard it already. the earned income tax credit. i think in of us see right now while the middle class and the aspiring class, those who want to get to the middle class, they as they continue to get squeezed they see everything working for

for corporate profits and wall street but haven't seen paychecks grow the way they would like. thank you for speaking to those families in the middle who have been working hard. they have been more productive than american workers in the past. they just want the see their paychecks grow. and so the earned income tax credit for those working families is going to be helpful. your proposal, the president's proposal for an expanded child credit for working family's who've got kids who aspire to see them go to college, that is going to help. and can i just applaud you and the president and the team for focusing on child care. i'm fortunate. my three daughter, two in college, one on the way. we're there. but i know there are a whole lot of families back home who are wondering how they're going to get there. they got to make sure their kids are first taken care of. so the dependent care credit for those who have kids and want good day care and good ability to take care of their kids while they are working, that is critical and thank you for the work you are doing there in that

regard. how many families does the president estimate will be helped by these credits that are going to middle class and aspiring families in america? the child tax credit? the earned income tax credit? are we talking thousands or talking -- >> millions. i don't have the exact number but many many millions. >> and i think what we're saying to those millions of the americans striving to stay in the middle class and hopefully get beyond is this is going to help you launch. because you will get good child care if two are going to work. you will have opportunity to work and support if you are not make a lot of money but still working. you're doing it the way we want people to do it. i want to touch briefly with something regard to social security because it concerns me. today there are millions of american paying to into social security. they the fica deduction that is deducted.

it is part of another acronym oasdi. old age, survivors and disability insurance. that is what social security is. it is all lumped together. if you work and you reach retirement age you get social security. if you work, become disabled on the job. you paid into social security, you get social security even though you're disabled, or your dpamfamily does. you die but you have paid into social security, your survivors get social security. it is insurance for the family. i don't think any american works and pays into social security and says ah, i only want my money to go into retirement. or i know i'm in a risky job. i only want my much to go into disability. in fact, 11 times this congress, whatever the administration has been we work to make sure we always have the money allocated for the disability side of social

security, the survivor side insurance of social security or the retirement side of social security. but all of a sudden we see a crisis being manufactured by those who say the $3 trillion social security has in its trust fund that none can be made available for americans who worked hard or became disabled for their families. eleven times congress has worked with administration has worked to make sure we always make sure the money out there in the trust fund goes out to the americans who worked and paid into the osdi fund. so i hope that we don't tell the 59 million americans who today are receiving social security, 11 million of them, disability insurance under social security, that they are in jeopardy of losing money because someone wants to manufacture a crisis and say of the $3 trillion that the trust fund has that we can't

make that available to americans because some technical glitch here in washington is preventing us from moving forward to do what we've done in the past eleven times on bipartisan basis to make sure americans get their social security. whether it's retirement social security, whether it's disability social security or whether it's because you died and now the survivors need the social security. i hope we don't play that game. and finally with the last moment i have i want to mention mr. secretary, i hope this administration as we move forward in trade that we don't leave out currency manipulation as something we attack. the last thing we need to do is send a signal that we're going to allow governments to cheat by manipulating their currency. if we're trying to get to the companies in those governments in those counts -- >> time of the gentleman has expired. >> with that i yield back. thank you, mr. chairman. >> maybe someone else's question you can get into these issues but in the issue of everyone's time. mr. buchanan. >> thank you, mr. chairman.

i want to thank the secretary for being here today. as mentioned early, the number one issue in our district and lots of florida is the idea of dysfunctionality. when we serve a lot of constituents that is the thing they are passionate about. i'm hopeful we can work together in the bipartisan basis for the importance of the american people. i am concerned with the budget where we're looking at raising taxes another $2 trillion. more debt of another 8 and a half trillion and a budget basically that never balances. we're an aspirational society. people, you know, you work hard and play by the rules, anything is possible in america. i don't want to punish one group over another group. i'll also mention that president kennedy mentioned a rising tide lifts all boats. and one of the questions i'd have for you, when you talk to various experts, they talk about if you can focus on growing the

economy, instead of 2%, 2.5. growing it 4% 5%. china is at 8% to 10%. if we can get back to what we did in the '90s, we can fix a lot of the problems. a lot of the problems we're talking about go away. why can't we be asking ourselves on any of these policies we are putting forward does that grow the economy? how would you respond? >> i think this is the right question. first on your point about working together in a bipartisan way. i couldn't agree more it would be good for the country and the american people would feel better about washington and the future of the u.s. economy if they could see us working well together. it has a lot to do with confidence. i saw it in the 1980s when we had a divided government. i saw it in the 1909s when we had a divided government. and talk about the growth in the 1990s. we're making important decisions in a bipartisan way for much of that period of time.

i think to focus on the individual items is important. but ultimately our goal has to be growth. because if it becomes a question of how do we cut our way to prosperity, there is no answer to cut our way to prosperity. there is no answer to any society. >> let me ask to be clear. you are committed and the administration is committed to working with us this year to get tax and trade ideally done. >> correct. >> okay. the second thing i wanted to mention because it was in your comments about people need to pay -- some people need too pay more their fair share. the taxes now for medium or small businesses many of them is when you add state and federal together is almost 50%. i seen it was 49.6%. lower in florida. but in california it's higher. then additional taxes on there. where is your sense of fair share. we're taking the corporate rate from 25% but yet many of these

businesses, that is the world that i've lived in. these are the folks growing the jobs. they might have a hundred jobs. but you can't take 50% of what they earn because they would have nothing left. because the balance of their money stays in to grow inventory add employees and make additional investments. so what is your sense of what's fair? >> congressman, one of the reasons we take up to a million dollars the amount that a small business can deduct in depreciation right when they make an investment is exactly to encourage the kind of behavior of having it be advantageous to invest in your business, to invest in your workers. >> but if you have got a business -- let me just say. let's take it million to the $2 million range. 150 employees. a lot of those all over florida. are you saying the government should take half of the next million? is that what you are saying. >> it is hard to respond to a hypothetical. i don't know what the effective

tax rate is. >> it's 49.6 across the country i think. >> the effective tax rate for most businesses are lower than their marginal rate. and you have to look at the entire -- >> if you look at the numbers of businesses, you are right. but there are a lot of businesses that create a lot of jobs in the country that might have 300 employee, 200 employees. i don't look at them as even a medium sized business. they are still categorized as a small business. but to take half of their money is not right. >> to the extent that companies make the choice how to organize either as a pass-through or as a c corp., you know, if it is economically advantageous to organize as a corporation that is an option available. companies that are choosing on the on the individual side obviously see benefit in being organized a as individual

company and we have to look at all the factors. >> my point is we need to work on a bipartisan basis together to address that. >> we agree that we want the burden on small businesses to be easier and lower. and we think we've put some ideas forward to advance that. and we're open to working together on this issue. >> thank you mr. doggett. >> through mr. chairman and mr. secretary. am i correct that while the administration strongly supports a one time mandatory tax of 14% on profits that corporations claimed to have earned off shore only as a part of comprehensive corporate and business tax reform, that the administration continues to strongly oppose any standalone measure similar to the voluntary repatriation that was approved back in 2004. >> we don't believe the 2004 voluntary repatriation worked. it ended up costing a lot of money. didn't increase investment and put in place incentive to store income overseas. waiting for the next tax holiday. we think we've proposed the right way to deal with this and

think we are now in conversation where we can maybe do this the right way. >> so a one time repatriation of the type some have talked about really doesn't provide a good source for transportation or anything else. it is a revenue loser, not a revenue gainer. unless you do it as you recommend as a part of comprehensive business tax reform. >> yeah i think if you have estimates that show that provision loses revenue, it is hard to call it a revenue raiser. >> exactly. and your written testimony refers to some of the manipulation that some of these multinationals have engaged in. indeed as you know there are a number of studies that have been made of that. one in tax year 2008 suggested that while five tax havens had half a percent of the world's population, that almost half of american corporate earnings claimed to have been earned off shore or claimed for those five countries.

another in 2013 suggested that somewhere between 55 and $133 billion of profits earned in the united states had been shifted abroad and that over half of these claimed offshore profits were located in six tax havens. isn't it true that a substantial amount of these alleged off shore earnings were actually earnings of operations that occurred here within the united states? >> congressman, it is hard for me to comment on individual circumstances like that. but let me take it up one level and say that globally the issue of legal tax avoidance has led to the erosion of the tax base. and it is an enormous concern. not just the united states but worldwide. it is wrong for countries to have a race for the bottom with zero or close to zero tax rates to be a magnet for these kind of activities. it is also wrong for us to have

a tax system that has a high -- the highest statutory rate in the world that drives businesses to look for these havens. we need to reform our broken system to make it work to end inversions to end the push. other countries need to change their system and raise their standards. it is hard for us to get other countries to do what they need to do if we don't do what we need to do. and i think the business tax reform discussion we have is something to empower us to in the world stage to try to get other countries to do the right thing as well. >> i hope it will if all elements are actually adopted and strong any abuse provisions are included as you suggest. now your selection of this 14% rate, i know that is considered onerous by some of those multinationals that don't believe they need to pay the treasury any more than they pay their ceo or their lobbyist to ensure the laws remain like they are and don't feel like they

have any real responsibility to pay for the cost of our national security from which they benefit so much. but it seems to me telling corporations they possess than a nickel or a dime on a dollar or profits that have really been earned in the united states is rather generous. it's better than the nickel that was done in 2004. a little higher than the 9 cents that dave camp recommended last year. but it ought not to be the opened bid. it ought to be the floor in looking at this whole issue. and of course all of these corporations if they really paid taxes abroad under your proposal, they are entitled to a credit for that. >> right. >> it is the stateless income to which you refer -- >> correct. >> -- that has been hidden from taxes everywhere that is an example of tax avoidance that we need to put a stop to and not reward. >> i totally agree we need to

make sure that we end one a toll charge that is set at a reasonable level. we've proposed 14%. i know it is a little higher than some other proposals. but i this think the credit for taxes overseas brings the rate down considerably. we've proposed a pro rata credit. it is such a reduced rate. it would be roughly 40% of the taxes paid. if you use the example of a firm with a billion dollars in accumulated earnings and it's paid $100 million in foreign tax, they would get a $40 million credit. and they would end up paying $100 million. your 10%. so even the 14 exaggerates the impact on most firms. >> thank you. >> mr. smith. >> thank you mr. chairman, thank you secretary lew, for being with us here today. let me begin with a quick question. do you believe the estate tax is double taxation? >> no. >> no? okay. back in april 2013.

you and i had a constructive and i think a thoughtful exchange on business tax reform versus comprehensive tax reform. and at the time you said we want to work together on tax reform on the individual side as well as to make it simpler. the thing i think we have universal agreement on is that it is just too complicated. end quote. in light of what you said two years ago i certainly want to raise concerns i hear regularly from constituents. about the stepped up basis and the estate tax. it is obviously no secret that we have fundamental disagreement on the level of the estate tax. i believe it is a double taxation. and you disagree with that. that's fine. a lot of us would prefer zero estate tax. and we know your administration would actually i think prefer a higher estate tax. but one thing i'm consistently finding and being told by farmers and ranchers and small business owners that while

dealing with that estate tax is challenging it isn't anywhere near the nightmare removing the allowance for stepped up basis would cause. for example when a family passing on the agriculture land that has been held for decades has to calculate capital gains the family could face multiple challenges which only begin with finding the value of land bought so long ago. determining the values of multiple tracts purchased at different times and determining whether any land was sold off prior to inheritance. so in such proposal is certainly the opposite of tax reform. in fact it only makes compliance more difficult. has anyone -- have you or anyone at the irs looked into what added compliance time and cost of this provision would be? >> congressman, i'm happy to get back to you what the estimates of compliance would be. but i think the design of the provision that we've put in our budget was really very much to make it easier for taxpayers,

not harder for taxpayers to comply with it. there is exemptions that are quite generous. there are 15 years to make the tax payments that are due so that it would not result in a forced sale. and we think that, you know, for the vast majority of assets which are subject to stepped up basis, things like stocks and bonds, those questions are a little bit simpler to answer. on real estate, obviously we currently have a system where ultimately you have to know what your basis is in real estate. i don't know why it would be more complicated in stepped up basis than it is in other contexts. but i'm happy to follow-up with you. >> the feedback i get from constituents that it would certainly add to the complexity. i'd also like to touch on another provision in the president's budget. the financial fee on certain banking institutions. has the treasury or any other department in the administration studied the effect that this proposed fee would have on the

availability and cost of credit for families and businesses in the marketplace? >> congressman, we have looked at what it would mean in terms of its percentage impact. it is obviously a fairly small fee as just in terms of the size of it on their total basis. and it is designed to have an effect to be complementary with many of the reforms that we've made that make our system safer and sounder. right now we have a system heavily weighted towards leveraged exposure. this would make it a bit more costly to have leverage. but it would not make it prohibitively costly. and we think that will lead to a safer financial system. we also think that when you look in the context overall of tax reform, there are other benefits that would go to financial firms. and net it is a fair and a good policy.

>> shifting gears just a little bit on extenders and the temporary extenders have taken place, extended roughly two years at a time unpaid for in the past. is that accurate? >> it has sometimes paid for. sometimes not. often not. >> often not. i agree with that. and would it -- could it be i think a good idea as well to extend those on a permanent basis? would that not be more intellectually honest to take a few of these and make them permanent rather than just continually extend unpaid for on a so called temporary basis. >> that is what we proposed. on somebody who's worked on tax policy various ways are 35 or 40 years it's hard to defend come and go and deadlines that past and it makes it hard for businesses to know what to expect and how to plan. you end up enacting things retroactively. it can't possibly effect

behavior a rational way do that. and that should be a basis of our bipartisan conversation. >> thank you. mr. thompson. >> mr. secretary, thank you very much for being here. i too want to add my appreciation to you and the president for submitting a budget that attempts to really focus on the middle class. while i agree with my friend from florida that businesses across this great country are very, very important. they do a great service. they provide great products. the truth of the matter is it is those consumers largely in the middle class who are the job creators in this country. if there is no middle class, then there is nobody to buy all the great things that our businesses sell and manufacture. all the business stuff just goes out the door. so it is important that we do focus on the middle class. and no more better place to do that is through investment in infrastructure. so we may disagree with how we

get there. you have taken a very important first step in recognizing the need to invest in a critical infrastructure that keeps everything going across the country. i have a couple of questions i'd like to ask but a little more specific stuff. one is on something that's come to my attention called a cash rich splitoff. and you are smiling so i'm assuming you know what it is i'm talking about. i think it came to light when yahoo was going to buy alibaba. where they take low basis asset and stock and exchange that for a line of business and cash. to avoid any gain in appreciation. and that sounds a lot like that legal tax avoidance that you were talking about or another term, a great big huge loophole. is this something that you are looking at? does that need legislation to

close that loophole? or is it something that can be done administratively. >> congressman, i obviously can't comment on a specific company may or may not do with regard to its tax planning or transactions. but under current law a company can split off component parts on a tax-free basis, as long as there is an act of business in each part. but if there is such a spinoff the firm would be liable for capital gains if the firm sold the shares involved. i'd have to know more about the transaction. i don't know off the top of my head whether there is any administrative issue here but i'm happy to follow-up. >> it is something i plan on looking into. and i'd appreciate if we could get your shop to help us better understand it and figure how we in fact close that loophole. also, i agree with my friend from massachusetts that the new market tax credit is extremely important.

and i'd like to know if you have given any thought about including the brac status as a criterion in the 2015 applications. i think it is important to recognize that brac has been responsible to a lot of areas to experience severe economic downturn. and there have been some examples of closed military bases that really added to economic growth through creative means and i think the new market tax credit would be a great place to go. so i'd like you to look at that as well. >> congressman i'm not aware of any discussion regarding brac eligibility but i'm happy to take it back and look at it. >> thank you so much. and then also lifo. and we've had this discussion before, last in, first out. the proposal in the budget is a

little disheartening. not only because it is lifo, which is very, very disruptive in general. but specifically in this proposal you have got a receipt retro ooktive provision in there if i understand it correctly. so in enacted it would go back decades and take back money that was -- that was generated through a tax policy that was on the books and legal. this would devastate not only small family businesses but the employees that they employ today. this is something -- this would shut businesses down. some of those in my district, that you are very well aware of. and is there a reason for the retro activity? i can understand a lifo forward but going back just seems terribly unfair and destructive.

>> congressman there's been a question about standards for a long time and obviously the attempt is as part of tax reform come one that better more fair efficient approach. i'm happy it look at the impact of the retro activity on the firms that you are concerned about. but the goal was to fix what is broken in our tax code. it is not obviously not to cause undue burden. >> i look forward to working with you on it. thank you. >> thank you, ms. jenkins. >> thank you mr. chairman. and mr. secretary thank you for coming over today to testify on the president's budget. i would like to draw your attention to the proposal on page 53 of the budget where the president -- >> i don't have a budget in front of me. so if you could tell me what was on page 53. >> would be happy to. the president 529 college savings account distributions. when the president proposed this tax two weeks ago i was shocked

to see him target these very popular plans. i was equally relieved when he withdrew his proposal last tuesday. but apparently he changed course too late to remove it from the budget proposal. then the next day the administration spokesman made a confusing statement that inferred that the president was only withdrawing the 529 tax provision due to political pressure and that he still stands behind the tax as good policy. so mr. secretary, can you please clarify for our committee. first, does the president still support the concept of a tax on 529 plans? and does he believe that this tax would be good policy? and second, can congress expect to see the president try to revive this 529 tax again? >> so congressman, i -- just to be clear, the white house indicated quite clearly that the president is not going to be pushing for this provision. it was obviously already in the budget. and i think the comment on

policy is not saying that it is something that we're pushing. it was causing a lot of distraction. there is an important discussion to be had here on many tax issues. some of them regarding education that would provide real opportunity for middle class families. clearly it wouldn't have gone in the budget if there wasn't a solid policy reason for it. and i think the comment was to say that it is something that really does largely benefit more affluent people. and it is something that in the context of a plan to make middle class college education affordable, there is a basis for. he is not pushing it. we are not pushing it. it was never a key part of our plan. it is not a huge dollar impact on the whole budget. and i don't think there should be any confusion on the issue. >> okay. so he still thinks it is good policy but for political reasons going withdrawal the proposal. >> there is a lot of things one

can justify on policy grounds that don't go forward. >> okay. thank you for somewhat of a clarification on that confusion. now i'd like to briefly discuss hr 529 which i introduced in a bipartisan basis with congressman ron kine from wisconsin last week. and i've been a champion of 529 plans for a very long time since i was a state treasurer back in kansas. and this is the third congress we introduced this legislation and it strengthens the plans to make them more attractive for folks across the country who simply want to save for college education. this bill makes enhancements to allow students to purchase a computer with their 529 plans. allows funds to be redeposited without penalty if a student withdraws from school for any

reason. and it removes outdated administrative paperwork requirements. so mr. secretary, which is your take on this legislation and do you agree these 529 plan improvements will help middle class folks pay their college expenses? and will the administration support the bill. >> i'm happy to look at the proposal and get back to you. obviously with 529s on the books we would look forward to making sure they work as effectively as possible. i'm not familiar with the details of the legislative proposal but would be happy to look at it and get back to you. >> i look forward to working with you. thank you i yield back. >> thank you. mr. larson. >> thank you. [ inaudible ]

-- in the spirit of last year and mr. chairman, your initiatives in determining and keeping with keeping this committee open and on pace that we continually have johnson and lewis forums where not only for the committee but invite other members of congress who would be interested and a way to restore what we all know individually is the great strength of the committee and the opportunity to work across the aisle with one another. we had several issues that were explored today in rapid order. i think first with respect to infrastructure mr. chairman we had several letters sent last year with respect to making sure that we had hearings on infrastructure and discussed the tax aspects of this as well.

separately mr. blumenauer also sent a letter. and i know that is at the core of putting people back to work in this economy. i hope we can continue down that line. maybe that can be a start of a johnston and lewis discussion and forum on infrastructure. also social security as was brought up by mr. johnson, there is a proposal out there that provides a tax cut and tax relief for seniors that is paid for. i hope all members will consider this proposal as a way in which we can solve this problem into the next century that is paid for. third, the affordable care act, you know, with respect to -- whatever is going to come on the floor tomorrow, i think it is long overdue that we recognize that a proposal put forth by the heritage foundation that adopted successfully by governor romney is something we all can work together on for the benefit of the american people. and of course with respect to

currency and trade, i know that the administration will adhere some of the concerns that were raised there. and lastly mr. lew, i believe you were asked the question earlier about dynamic scoring and didn't have opportunity fully answer the question. i wanted to provide you with a few moments if you could to expand upon your thoughts of dynamic scoring. >> thank you very much, mr. larson. the question of how we score legislation is obviously inherently a technical and complicated one. we have established practices that are meant to be as accurate as possible. and the risk of going from something that is known to be the most accurate to something that has all kinds of uncertainty and it's something we worry greatly about. because i think there is a shared concern we not blow a hole in our budget because our estimates are wrong. so there is some element i was asked if there was any dynamic scoring in the -- in tax

policy and joint tax committee scoring today. there is some. but if one goes further and uses assumptions that drive the numbers in a way that may not turn out to be correct, we'll all regret it after the bills actually get added up. i don't want there to be any misunderstanding on what our position is. we agree with current scoring rules. we have always been open to alternative measures and understanding what the up side and downside risks are. but to use those to make decisions that have real consequences is very different. >> thank you. mr. chairman, i know that mr. neil also makes the point on several different occasions as where we apply dynamic scoring to. if we're looking we're have to make sure that we're willing to apply that. it may be a very sound practice. i'm not an economist, but what do we apply it to? and i think it can be applied

equally across the board to have the same effective results. and lastly to the chairman as well, the last couple weeks have been painful with green bay and everything else like that. i wanted you to know that i took no personal -- i wanted to -- we got this poor picture that we wanted to provide you. i will give it to you, mr. chairman, it is -- >> i can't see it from here. describe it. >> it is a picture of tom brady. i think once we -- >> with objection, it shall not be included in the record. at least the seahawks now know how packer fans feel. >> we will pass this. >> his time has expired. >> it has expired. mr. shock is recognized. >> thank you, mr. secretary. thank you for being here. as you know the federal debt limit will expire on march 15th. do you know roughly what our debt limit will be on or about march 15th when our debt limit is set to expire?

>> i don't have a estimate right now. obviously we're several -- two months of data away. and i think that the challenge of funding our government is one that we fundamentally make when we make decisions on what our tax and spending policy is. >> do you know roughly -- >> when march 15th rolls around, have you and your staff begun looking at how to use extraordinary measures along that point? >> yes, but i will not be able to answer with clarity until -- >> well that is a problem are you saying you're not going to know until april or march? >> all of the public estimates shows we have some period of time. you asked me how long it goes. i don't think we have a crisis on march 15th, i can't tell you

how long it goes. it it is the longer period. >> can you get back to us on a rough estimate? >> yes, and as we always do, we will stay closely in touch with the committee as our understanding develops of what the projections look like. we think it is important for congress to have clarity on this. >> likewise. >> following up on a letter i sent to you last january that was co-signed by 17 members of the wanes and means committee, i'm still having trouble understanding why the treasury wants to regulate nonfinancial noncash value insurance. can you update members of the committee, the 176 of us here that signed that letter on the status of your agencies deliberations regarding the relationship between nonfinancial products and -- >> our goal in fadca.

and now an international goal because fadca has been adopted as pretty much an international norm is to make sure there is the kind of transparency that permits tax authorities to see i would be happy to follow up with you on specific issues in regard to the entities you named. >> okay, i look forward to that. year in and year out we come forward with a budget, and part of the frame work is the desire to make the corporate tax reform more competitive. you laid out a benchmark of 28% or 29% for manufacturing. in my district, the frustration is not just among employers with

the tax code on the complications, the complexity of the tax code, it is with individuals. if there is one message i heard from my constituents last year, it was that they, as taxpayers, were excited they would be able to do their tax return on a single piece of paper, take a standard deduction and be done. why are they not equally energized and deliberative. are they willing to make a competitive individual tax reform? >> we agree with the goal of simplifying the tax code. a number of provisions were designed to simplify provisions. there is a attention between things being simple and you don't want cliffs in the tax code.

so there are good reasons for some of the provisions not being totally simple, but the goal of simplifying as much as we can is one that we share. >> i just offer up as we both share the goal of those left out of an economic recovery, the administration and talking about the minimum wage. i point to the president's home state, we raised the minimum wage four times in the last ten years. each time the people living in poverty have gone up. the percent of people unemployed has gone up, and illinois leads the midwest. i think we need a different strategy at the federal level, and i look back to the days of jfk. and i hope that we can embrace a jfk strategy with this congress

and this president. thank you. >> thank you for being here. i appreciate your reference to congress not hollowing out the irs so we can administer programs and save taxpayer money and give them better service. i think that is something we need to focus a little attention on. i also appreciate the fact that you're here as somebody who knows what a balanced budget looks like. if memory serves, you were at omb for when you had three consecutive years of budget surpluses. you have unique authority as an administration spokesperson in being able to guide the conversations. i think you were also on the staff of speaker oneil when there was interesting policy initiatives where you played a key roll and we were able to come together, look for long-term perspective and make a difference. even bridging the cap between president reagan and speaker oneil famously working together.

i have appreciated your offering up some, i think, complex and timely series of proposals. many of which i find appeals and look forward to a deeper dive. and i appreciate the call for work on structure. i believe she investing intellectually in rebuilding america. some of the policies that have come forward to try to support that have been difficult to achieve. i was struck, i read an op-ed by my colleague from ohio that really talked about approaching this in a comprehensive fashion. something that needs to be sustainable, it needs to be adequate to cover the job. it needs to revisit the user pay principal.

something that covers sustainability. president reagan in 1982 called out a challenge to americans in his thanksgiving day address calling on congress to come back and more than double the gas taxes. we had not raised the gas tax in 23 years the president pointed out. and this was a user fee. they would be able to deal with the curerating of american structure. it is a speech i think any of us could give today only it is 22 years since we raised the gas tax instead of 23. i was cure those -- curious if and this was a user fee. they would be able to deal with the curerating of american structure.

it is a speech i think any of us could give today only it is 22 years since we raised the gas tax instead of 23. i was cure those -- curious if based on your experience, for they were able to come forward and deal with a serious problem of american infrastructure on a bipartisan basis and raise the user fee, if it is not embraced by congress and enacted into law. if you have thoughts about what we might be able to do moving forward to support the coalition that ranges from business to labor, truckers to aaa. as expressed in the washington post editorial today, amidst the falling gas prices, if there was not something that could be done for the user fee adjustment.

>> i know that you and i have discussed infrastructure for many years and you a passion for we building this country that we share. i think if you look back, we found a path way for bipartisan agreements on important issues. and it was also during the clinton administration we had the balanced budget agreement. i think that what we put forward in our plan to use the one time savings to fund infrastructure has all of the ingredients for something that could become a bipartisan agreement. we came up with an approach that we thought would provide that opportunity. if congress has other ideas, we will look at ideas to come forward. what we have to do is meet our needs and invest in infrastructure in this country. it is doing a disservice to future generations.

the way to build a better future is to think ahead and build it today. >> great, thank you. >> that is a fall back in case your -- >> thank you, the time for the gentleman has expired. we're not doing two to one. so we'll to paulson, then we'll go to mr. pascal. mr. paulson is recognized. no, he is not, mr. markson is recognized. >> thank you, mr. chairman. secretary, i would like to discuss a couple issues with you every time i go back home and the town hall meeting. in the projection of budget and economic outlook 2014 through 2024, it appears that we'll end up in 2014 with about a $492

billion deficit. and then about 469, a little less than that in 2016. but in 2020 to 2024 we will be back to trillion dollar deficits. this is very upsating to all of us on this panel. does this budget that the president has prepared and and presented to us change the trajectory of that debt? does it change the trajectory of the size of government? does it do anything to return us to a balanced budget or does it end up in ten years being back at a trillion dollars a year? >> congressman, if you look the deficit as a percentage of our economy, as a per sen tang of gdp, we are in the mid twos. obviously our economy is growing and 2.5% of a larger number is a larger number. i believe we're looking at the deficit as a percentage of gdp.

>> so the goal of the administration and the treasury >> congressman, if you look the deficit as a percentage of our economy, as a per sen tang of gdp, we are in the mid twos. obviously our economy is growing and 2.5% of a larger number is a larger number. i believe we're looking at the deficit as a percentage of gdp. >> so the goal of the administration and the treasury is to not balance the budget, or diminish the debt that we already have, but to maintain a percentage of gdp? >> i think our goal is to grow the economy and find the right policies between fiscal policies and give us the ability to have a fiscal future. the real answer is a growing economy.

i believe we have presented a plan, a framework, for doing that. i think when we hit what is called primary balance where the only deficit is related to services past debt, it happened in this period, and then there is still a need to focus on the future. i'm not saying this is the end of the discussion on fiscal policy. if you look over the last few years. we have done a tremendous amount to reduce the deficit. it is a fraction. >> define primary balance for the people out there listening. >> the question is what is driving what every deficit you have. if the only deficit is interest on past debt, that is different than building up expenses by buying or paying for new things. we hit that point in this window where the only debts are

attributable to services prior debts. that is not the same as balance. i would not suggest it is balanced, but it is used as a test of fiscal capability. >> the other thing i want to discuss with you, as you know i'm from texas. we in texas and the entire west believe the oil and gas industry was one of the most critical things that took us out of this last recession, provided good jobs, and now we open this budget up and find out that the oil and gas industry, which admittedly had set backs in the last two months will have a $95 billion additional tax bill in this budget. can you give me an explanation for why the administration would feel like that would be a great reward for this industry for

it's performance in this economy? and how it could possibly handle that kind of additional tax burden in the current scenario? >> the energy revolution has done a tremendous amount to drive our economy forward. and it is -- energy prices go up and down, and there will be natural tendencies for the industry to grow, in some periods more than in others. we don't believe the tax code should be driving activity in a way in a makes investment. we don't think it is necessary for there to be profitable businesses in the energy area. this is a moment are lower energy prices are creating special pressures that we're sensitive to with a regional impact. overtime we have seen that the market forces, and letting them work, is better than a tax code. >> did you mean -- you don't think there taught to be profitable businesses in this area. >> no, i said i don't think we need the current tax

provisions -- >> if i miss spoke, let me correct that. i was speaking to the tax provisions, not to -- we support -- >> it didn't come out the right way. >> we support a strong and thriving energy industry. we wish for them to be profitable. >> we always have to watch something and make sure we can clarify. i want to come back to two years ago when you were before this committee and we were talking about budget and balance and a couple things that were said in here, talking about balancing the budget. we see we're going to increase our spending by 2.4 trillion in the next ten years, add 8.5 trillion in debt to our current debt. i know you can't tell us what that might look like here, but i

am interested to see what that will turn out to be, and then we will increase federal spending by $240 billion in just this next year. so when you talk about in your both written and verbal comments, you talk about it being a balanced fiscal approach. in my life and my parents teaching me what is a balanced fiscal approach is not to have a lot of debt. and i look for what we're leaving for the future of our children. so i'm very concerned about us not getting to -- and that was a big part of our conversation two years ago. that is the president's budget did not come to a balance, and you mentioned about growing the economy. if we see that the debt that we owe, and there is an increase in interest rates, we will not be able to sustain no matter how much debt we have or grow. i want to also ask about the economy and increasing job creation. i want to do like paul harvey says, the rest of the story. i want to read to you a clip out

of market watch published from january the 9th. they said the u.s. added 252,000 jobs, and the unemployment rate fell to 5.6%. but the hourly rate wages declined. so when we talk about the unemployment rate, that is really not the true number we should be looking at. they ent it by saying the labor force participate rate dropped to 62.7% matching the post recession rate and the lowest level since 1978. when we talk about having a good economy and as you report, i think we have to be very careful about how we news numbers. these policies set forward do not show us we're having an increase in the middle class value of their live by having decreased wages. a third of the country january the 9th. they said the u.s. added 252,000 jobs, and the unemployment rate fell to 5.6%. but the hourly rate wages

declined. so when we talk about the unemployment rate, that is really not the true number we should be looking at. they ent it by saying the labor force participate rate dropped to 62.7% matching the post recession rate and the lowest level since 1978. when we talk about having a good economy and as you report, i think we have to be very careful about how we news numbers. these policies set forward do not show us we're having an increase in the middle class value of their live by having decreased wages. a third of the country potentially not in the work forest, and there are policies set by this administration that do ask this. and i think we have to be

careful as you chronicle what the truth is. now my final question here, and i snow i'm not leaving you a lot of time, and it's what i hear in the frustration by people back in my district. as you know, we add an opportunity to work across the aisle. i myself worked on the tax breaks, the complicated tax code having to do with education taxes. 15 different education tax breaks in the code. 90 pages for the irs in the instructions. we put out a plan that passed in the house and did not move forward in the senate, and in the very little time i'm leaving you to respond, will you assure us that the president will work

with us in this area. education is becoming much more expensive and we would love to have a conversation for him to consider the proposals that we think are very good, common sense, and allow the middle class to help them in educating their children. >> i'm not sure how to address those issues in 30 seconds. we have tried to be prudent in our assumptions. we're assuming that between 2020 and 2025 interest rates will be roughly 3 hnt 4%. they're now much lower than that. we built into our forecast the assumption that interest rates will go up over this period of time. the challenge of paying down our debt is one that is going to take a long time. it is -- as long as we're maintaining the current deficit

projections and can invest in a growing economy, we feel like we have the best chance of the future. and the chairman is telling me that i'm out of time. >> could he just acknowledge that he will work with us on this? i would appreciate that. >> we have a robust set of proposals we hope that you will work with us and we will work with you. >> thank you, secretary for your service. as you know the budget talks about a lot of investments. it is proposals. investments like the child care tax credit. improvements in our education and tax incentives. so you propose paying for these by closing fax loopholes that will bircht more wealthy americans who have been doing pretty well for themselves. now just during this current

recovery, not just during this current recovery, but over the past 40 years while the average american's wages have been stagnant, think of where it would have been if we didn't have a stimulus package or the aca as an example. my friends on the other side, and i'm not being a wise guy, despite their recent newfound commitment to the problem of income inequality, have predictably tried class war fair again. our chairman said this sunday on "meet the press" regards the

administration's budget what i think the president is trying to do here is to again exploit envy economics. this top down redistribution doesn't work. we have been doing it for six years. it may make for good politics but it doesn't make for good economic growth. now, secretary, the clinton administration back in the early '90s, remember that big fight over the tax increase in we had big fights over that policy. taxes on the wealthy were increased. meanwhile at the beginning of the bush administration we tried trickle down to huge tax cuts for the folks at the very top of the income spectrum. can you compare the economic growth in the performance of our

country in those time periods following the implementation of the respective tax policies, and what i'm specifically talking about is the gdp between 1993 and 2002 in which was average was 3.68%. >> the longest period of uninterrupted growth in american history. >> thank you, and in 2003 and 2007 that was 7.9%. >> congressman, i think we have seen through experiments testing these policy theories. we saw in the 1990s that the tax policies were in place with the charges that it would destroy the economy had the opposite effect. we saw the economy boom. in early 2001 and 2014 we saw huge tax cuts that were promised to have the benefit of driving economic growth. we ended up on the edge of an economic disaster with those tax

policies in place. >> and the party of austerity did not pay for any think. in january 2013, we went back to the tax rates and our economy is growing now. >> do you believe the administration's policies in the last six years have exacerbated income inequality in this country, or would income inequality be worse if it were not for the policies like the affordable care act and the recovery act and the stimulus package, et cetera? >> i think the problems of income inequality have been developing for decades. if you look at the actions taken since 2009. if our economy was still in recession, it would be way worse for working people. we have a recovery that created ten million jobs.

we've seen the tax code revised. so some of the inequity has been fixed. we have seen benefits extended. so i think we have taken important steps and with that said we have a very deep, under lying set of challenges. that is why we won't solve all of the problems, we will put things in the right direction and i think it is an important time to take these steps. >> thank you mr. chairman and mr. secretary for being here. to open up, i want to recognize the work that we have done together in regards to revitalizing the american innovation act that was signed in law at the end of the year. we worked to get that done, and i did that working with the other side and with you in the white house. there is millions of hard working family that's will benefit from that legislation. i offer my line of questioning along that vain.

and i think that my colleague from california, mr. becerra articulated something i have trouble with. when he talks about the social security disability trust fund, saying we're trying to create a crisis to split americans apart, i find that offensive. i also find his comments to be representative of the old guard. the old school mentality. that there is $3 trillion of social security money that is supposedly the federal governments to bail out a failing disability trust fund. i think that is wrong. you're taking from social security retirees. the money in the trust fund is to go to them. i think we both agree reading your budget, as you said in your budget, the administration will oppose any measures that weaken

the social security system. how does taken social security retiree money strengthen the trust fund, does that not weaken it? >> over the years there has been transfers -- >> over the years is old school. there is a new generation of leaders that say we cannot do old school. you have taken from the trust funds and put them in a position where they're on the past to bankruptcy. we need to do better than that. i will give ewe the benefit of the doubt. when i read your budget and you're talking about reforms and getting the disability community backseat to work. get the benefits that the disability trustfund is designed to get to, i think there is a sincerity.

>> if i could just answer your question, there are no policies that could take effect fast enough to deal with the disability insurance short fall other than a transfer. >> i appreciate that. so you're putting on the table, if i'm hearing you correctly, there is other pots of money other than security retiree money that is available through an interfund transfer that could be used to -- >> you have the only survivor in disability trust funds -- >> so the white house is not aware of any other funds out there that could be tapped into? >> if you're just going to reallocate the tax rate, that is where the allocation -- >> i understand that is the tax roll rate. >> i think there are in ideas the budget. i do believe that we have to

look at the short term needs of the disability trust fund and have a short term solution that could cause the problem that is much larger. >> i appreciate getting the disabled community a chance to get back in the workforce. is that fair to say? >> yes, but we also have to accept that there is a large number of people who are disabled who are not able to work. and we have to have a system there for those people. >> i think we can agree that for the trust fund, that's what the intention is. and i agree with that sentiment. so we talk about getting the disabled community in an position to harmonize goals and get back to work. i'm interested where you say that driving innovation and outcomes, on that worse force

development component, getting people from the disability trust fund, what would you propose as the evidence and evaluation criteria we could use to achieve what is a mutual goal of working together? >> i think we need to have the system set up. we also need a system. i can't do -- >> >> i would be interesting in your cry ear ya and judging that type of reform. >> thank you, mr. davis. i applaud the president's

budget and his sporting working families through the earned income tax create. when i cochaired with representative black, the experts agreed strong evidence of encouraging work and alleviating poverty. the goal was to address the limited utility for childless workers of noncustodial parents. these programs helped chicagoans, illinoisans, and more. as well as by investing in promised zones and critical infrastructure elements. a small investment of sequester cuts that experts think will strengthen us through hundreds and thousands of jobs. republicans have insisted on

funding by about a billion dollars in the last few years. these funds are needed to ensure that tax cheaters pay their fair share. i am seriously concerned about protecting and strengthening the middle class. but i am also concerned about a category of individuals called the working poor.

individuals whose economic votes are generally stuck at the bottom. can you tell us what this budget will do to help lift those individuals out of poverty and into the coveted middle class that we all value so greatly? >> congressman, we entirely share the goal of making sure that the ideal of the middle class remains available to all and becomes available to all. it is a combination of things. starting with the minimum wage is very important. but making sure that families have access to things like the child credit, to the earned income tax credit is equally important, and making sure that there is access to education so

that young people grow up with the tools to have the kind of opportunity that can get them the kind of middle class jobs in the future. so i don't think there is one simple solution. we put together a variety of proposals that together we think will make a big difference. we proposed a way to pay for it in a way that is incident with a responsible fiscal policy and we think the time is now for debate on these issues. >> i seriously agree with much of what i'm finding in this budget. again, i commend you and your colleagues. >> mr. kelly? >> thank you, mr. chairman. secretary, thanks for being here. what i want to address are aspects of the budget, but let's talk about a budget in general. you have done a lot of budgets. i understand that in the private sector we have to put budgets together every year, but there is a lot of weight to make sure they balance. to cover what our intended discussions are. have you ever discussed with the

president the growing deficit? >> first of all, the president is deeply involved in the development of the budget and all budgets. i think that is appropriate, it is his policy. he has, i think, over the years shown a determination to fix a broken fiscal path. we have an enormous amount of progress we've made and more progress in the ten-year window of this budget. >> but in your position, the deficit, which you talked about how we have been about to cut the deficit, this year the president has a four trillion -- and revenue somewhere around $3 trillion. listen, it's like somebody that makes $30,000 a year spending $40,000. and they say you told me last year to spend more than you were bringing in and it would be all

right. the annual deficit is adding to our long term debt that is unsustainable. you can't look at this and think of this as a real budget. this is a christmas wish list that noble can possibly fill. >> i don't agree. >> i'm not going to debate whether you agree or not. there is no way that anybody can sit back and say that deficit spending year after year after year makes sense. there's just no way you can defend that. nobody that ever took an economy course or economics course would say yeah, spend money you don't have and somewhere it will be all right. do you know by 2025, just the interest on our debt will be 785 billion. billion with a b.

no up with will look at this model and say "makes sense to me." we talk about how well we're doing? we're the wealthiest person in the sick ward. i'm talking collectively, globally, and says you know what? we're on the right path. the only difference is the number of zeros on deficit spending that make us unsustainable. my question is when you talk to the president, and nobody would present this budget with a strait pace and say this is the path forward, it can't be done. >> i think if you look at the improvement in our fiscal position in the last six years -- >> compared to the rest of the world. >> no, compared to ourselves. no, it's not. >> order, order -- i would like to have order. >> let him answer the question. >> we continue to have this ring

around the rosy conversation that things will get better if we just spend more money. we're just there is no logic. >> i'm happy to try to often an answer. >> i would appreciate it. >> you have one minute and 16 seconds to do it. >> having presented three balanced budgets, with surpluses, i will not take second seat to anyone for cares about fiscal policy. if you look at where our budget and policy was, it was in terrible shape and now it's in healthy shape. i think that we have to hook at what we do to build a foundation for economic growth. >> i just want to point something out. excuse me. when the president took office, household incomes, we should

stop using the term middle class because it is reflecting a higher and lower class. middle income families are making $2,380 less when the drop started. it is a drop of 4.4%. the hispanics, the blacks, they have faired far worse. black households median income has plunged 11%. hispanic households are up 4.5%. for those households with three or more children they fell to 9.2%. we keep talking about helping the middle class, it is middle income people, we cannot continue to drive this debt higher and think there is a rosy picture at the end. i appreciate your service, but we have to get this fixed. >> thank you. mr. renacci.

>> as someone in the middle class, i was going to work toward upward mobility and i started my own company at a very young anyone. one thing i could tell you back then that was very important. what was very important is that i realize if you work hard and do the right thing, you can achieve the american dream. but i also realized that the government would get in your way. i look back at the days when tip oneil and the president were working together to get things accomplished. i hope at some time we can do that. i want to look at that 24-year-old some day and say you can do the same thing.

there are some things in the budget that i'm glad to see there, but we talk so much about middle class economics, and the president uses that to talk about his approach to tax policy changes. his idea is that the proposal would benefit hard working middle class americans. the idea behind this i believe is a good one. as the committee has addressed a few weeks ago, many middle class americans are still struggling. too many continue to find their paychecks are shrinking. i was surprised by a study on the president's proposal published by the tax policy center. i ask that the study titled distribution effect -- the middle of the urners with a household income of about 60,000 would face a federal tax

increase of about $7. and the middle earners would see almost no effect. considering the results of this study, can you explain the policies aimed at the middle class. >> i think that over time they have done a lot of good work. i think the anal cyst is just not based on the best data availability. i think they're looking at a few provisions like the financial services fee, and stepped up bases incorrectly in terms of traces how it will flow through to families that are middle class families. i think technically it is not

correct, and we have data that shows it is not correct. >> so you're disagreeing? >> i disagree with the analysis here. we have policies that have demonstrable benefit to families, that is when it reflects what you're trying to accomplish. i don't think that it will flow down and hurt families like it suggests. >> as a result, they have announced that they would borrow and take on more debt to finance the acquisitions. chaquita had to close down their nard headquarters and eliminate hundreds of jobs. this is because of an ill conceived conversion, and now this budget doubles down with more inversion proposals that will just make the u.s. companies less competitive and more attractive targets to foreign companies and competitors. is this what you intended to happen, and did you consider

these success stories? >> i think the real answer is tax reform. we are diving companies to do things that may be legal, but are wrong. we made clear at the time that we did not have administrative capacity to completely address the issue. it would require tax reform and antiinversion provisions. we look forward to pleasuring tax reform. >> i appreciate that, are you saying the antiinversion rules are not working? >> no, i think the anti-inversion rules are working, partly doing what they do, they don't completely solve the problem. >> thank you, mr. meehan.

>> thank you, i also want to express my appreciation for the attention to grate medical education. it is not just what they do, but the idea of being able to train the next generation of medical professionals. we're talking about the cost of education here, and it is just mind boggling to think of people graduates $300,000 and $400,000 in debt. you talk about the increasing ability of people to pay for education, and finding ways to redistribute dollars to do this. nonprofit institutions, for the most part, tax incentives. so with such a critical role, why is it that you are doing to hold down the increasing cost of education?

>> congressman, most of that is not in my per view, but i do have a deep interest in this and i have worked across the administration. there are things we're doing to make it clear to families and students what the cost of education will be, what the choices are, what the track record of schools is. and the kind of education that is likely to lead to the kind of options that we all want for our children to have. i think it is very important that we not just deal with the student loan piece of it, but we deal with the structure of how it is marketed and made available. students should see what their choices are and see the benefits of different options, and they should understand the cost of getting deep in debt. we have too many studenting

enrolling students and not even keeping them to finish their degree -- >> but we have a great deal of schools that are stretching families that appreciate the difficulty of what you identify in a market based economy in which people are trying to get the best education they can for their children. and that is pretax income. those very same institutions, you're talking about the responsibility on the parents and the families to be looking at these and making decisions. i'm asking about the opportunities that you're putting, factors that influence education. the cost for a private university has more than doubled since the '70s when i went there for public universities it has tripled.

at the same time, the amount of staffing has grown. exponentially. and in '75 there was 446,000 professors and 268,000 administrators. there was 675,000 process fors and 750,000 administrators of various types. we have on a a dramatic explosion in this educational complex in which the bureaucracy has become a food frenzy. and the american families are paying for it. the very same people who you're looking at right now about making those investments. many times they're the ones dipping into their retirements. so what are we doing with the leverage we have to begin to compel the institutions that already benefit as nonprofit institutions that if you want to have the benefit of government subsidized tuition and other

kinds of things, you must demonstrate capacity. you're doing it in health care. why aren't you doing it in education? >> congressman, by starting with transparency and empowering families and individuals to make decisions, that puts pressure on the university system to take that seriously. i agree that costs have been rising too rapidly. i know it is not an easy thing to address because there is an irreducible minimum for the number of people it takes. and even with the move toward high technology, ultimately contact with teachers still matters. universities have become more complicated places, they have a apply cased variety of things they do.

it is not my area of current expertise. the department of education is looking hard at those issues and i'm sure they would be happy to follow up. >> thank you, mr. smith. >> thank you, mr. chairman. mr. secretary, as i'm here listening to your presentation and the questions i'm reminds of a congressman from missouri. of a speech he game in 18 99. he said i come from a state that grows corn, cotton, and democrats. you do not convince or satisfy me. i'm from the show me state and you have to show me. i'm asking in this budget that you presented to us, how the policies in this budget helps

rule america. when you look at the statistics of rural america that are less than 97.9% have not rebounced rebounded from the recession. and you're seeing that 60% of rural counties have decreased in population in the last year. what policies in your budget helps america rebound? >> aggravated assault policy is agriculture policy is not primarily my responsibility, but our department of agriculture has been working with congress to put in place programs that we think are very beneficial to rural america. we know the efforts that the efforts that the department of agriculture has made to bring investment to rural america have been very successful. i've collaborated with the department on some of their business efforts. i think if you look at the economic performance of rural

areas, they've done considerably better than your description. again, it's not my core area. but i would be happy to follow up with you. and look at the data you're looking at and the data i've seen. because it is, for a lot of rural communities, a better period than you've just described. >> i would like to talk about that, but let's talk about a policy, it is something that is extremely detrimental to the farmers and small business owners at least in my congressional district. if you look at the boot hill of missouri, those seven counties have some of the best farmland in the country. those seven counties produce more than a third of agriculture production for our state. the average per acre of a farm there is roughly 8,000. the average family farm is 441 acres.

do you realize that under the that you're proposing that every one of those average family farms would be devastated by your proposal of the estate tax that would almost count towards 57% of their inheritance. 80% of farmers value is in their farmland and equipment. they don't have a lot of liquid assets. if they have a 57% tax increase, they're going to have to sell their farm. which is eliminating a small business, which is destroying heritage. would you explain that to me? >> as we have looked at the estate tax, we have agreed to have high thresholds so real family farms would be large many would be exempt. >> so the average family farm, i said is 441 acres.

437 times $8,000 would go over your exemption. so i'm saying that an average family farm does not even qualify underneath your proposal right now. >> i think that the goal of our estate tax are to make sure that we don't have large appreciation of assets that essentially go untaxed for all time. >> so they need to pay taxes double and triple and basically -- >> no, not double and triple. >> this is why the statistic i said earlier, about 60% of counties in rural america are decreasing in population. because they experience a tax code that promotes them to sell their family farms, to move to the cities, and i believe that this is so unfortunate and these policies have to be stopped. and this is a war on rural america and it's a war on the middle class. >> i'd be happy to follow up with you, congressman, look at

some of the numbers you've described and numbers we've -- >> i would love that. >> i actually don't think the impact is as broad as you've described. but i'm happy to follow up. >> oh, let's get together. thank you, secretary. >> thank you. mr. holding? >> thank you, mr. chairman. mr. secretary america's great country because of our people. our people are aspirational and entrepreneurial and intuitive. and i'm sure we could agree on that. >> i think we can. but when the american people will see a budget which proposes more than $2 trillion in spending, more than $2 trillion in additional tax more than $8 trillion in additional debt, a budget that never balances. and at the end of the day, you end up with bigger government and bigger debt. i don't think the intuition of the american people says that that's a success. and i don't care they look upon

it as, you know, this is the way forward to ensuring that america is the greatest nation for our next generation. i believe i'm the last person. i'm going to follow up on a couple of other members' queries. first, following up on the doctor's question to you about theft of intellectual property in china. i know you've been involved and taken interest in this. and you've raised it with the chinese. obviously strong intellectual property rights, incredibly important or the our economy. it's perhaps one of our largest and most productive assets as americans. if you could just take a brief moment and talk about what the administration is doing to address theft of our intellectual property by the chinese. because i was in china recently. and i can tell you i was unimpressed with their efforts to prevent theft of intellectual property. >> congressman, i've raised this

issue at the highest levels of the chinese government. i think they understand that they need to take more action in this area. they have certainly indicated that they understand it's an issue. you know, the reality is, they for a long time denied that they had a problem. and, you know now they have a system that is starting to deal with it. we have to be relentless in pushing our view forward on this. we have to make clear if china wants to be the world leader that it aspires to be, it has to play by the basic rules that the rest of the world plays by. and it's not limited to intellectual property. i make the case to china on currency. i make the case to china on market access. i make the case to china on competitiveness. i think it's in our interests for there to be a healthy china and it's in china's interest to be a healthy united states. but it has to be on fair terms. it can't be.

>> right. >> and that's the question on the bit came up. one of the places to pursue the issues is in the context of the bit discussion. because if they can't get to meet the world standard, they can't get a bit. >> all right. and you would also agree that, you know the united states our intellectual property laws are probably the gold standard around the world. and that's why innovation is such an important part of our economy. >> absolutely. >> innovate here. >> if i could interrupt, congressman, if you want your economy to do well in the future, you need to encourage innovation. and you can't do that unless you respect intellectual property rights. >> right. so you would also agree that in the current tpp negotiations, and as we consider tpa that we should be very mindful of addressing intellectual property protections when we negotiate with other countries and don't dumb down our own standards here in the united states to meet standards of countries where innovation and advancement and things like biologics are

nowhere in comparison to the standards and the innovation that we have in this country, correct? >> congressman, i think that we have to pursue a high standards discussion in a number of areas, intellectual property is one. but worker standards is another, environmental standards is another. and i heard a number of questions earlier about currency. and we take the issues of currency very, very seriously. we do it in the g-7 and the g-20 and our bilateral discussions, and we look forward to working with congress to figure out how to talk about it in the context -- >> good. a few other quick hits. congressman smith of nebraska asked you if you thought that inheritance tax was a double taxation, and you said you didn't think it was. so i assumed that you agree with me that it's actually a triple taxation. would i be correct in that assumption? >> no, sir. >> okay. >> for the record, i'm going to send to you a follow-up question or two on faca, with the rates

going through the roof. really the highest levels we've ever seen. i believe it's abhorrent that the american government is pursuing regulations rent the american regulations and policies that would encourage americans to renounce their citizenship. i'll submit a follow-up question. >> thank you. >> thank you. >> chairman you run a tight ship. >> we really try. 12:57. anybody want to talk for a few minutes? no, i'm just kidding. yes, eat lunch. thank you, secretary lew, for appearing with us today. i want members to be advised that they may submit written questions to be answered later in writing and that will also be reflective and included in the record for the hearing. we ran a tight ship. and the hearing is adjourned.

this week c-span is in new hampshire for road to the white house coverage for several potential republican presidential candidates. tonight beginning at 7:45 live we'll take you to a house party in dover, new hampshire with former florida governor jeb bush. on saturday just before noon, live on c-span, wisconsin governor scott walker at a republican party grass roots workshop in concord. and sunday night at 9:35 on c-span, senator ted cruz at annual lincoln/reagan dinner. road to the white house 2016 on c-span. here are some featured programs for this weekend on the c-span

networks. saturday starting at 1 p.m. weern book tv is live from the university of arizona for the tucson festival of books. by the nation magazine writers with call-ins throughout the day with authors. and 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 conclusions in football. and saturday morning at 9 a.m. eastern on american history tv on c-span3 we're live from longwood university in farmville, virginia, for the 16th annual civil war seminar where historians and author ares talking about the closing weeks of the civil war in 1865. sunday morning at 9 a.m. we continue our live coverage of the seminar with remarks on the surrender of the confederacy and immigration of confederates to brazil. find our complete television schedule at c-span.org and let us know what you think about the programs you're watching. call us at 202-626-3400 e-mail us at comments@c-span.org or

send us a tweet at cc-span #comments. "like" us on facebook, follow us on twitter. politico hosted states annual in washington, d.c., a series of interviews with various governors. you'll hear from bill has lamb and rick scott. this is about an hour and ten minutes. >> thank you. >> thank you marty. thank you, second or third time bearing the elements to be here again. it's a really exciting lineup. we're lucky to start with governor haslam who -- >> how did i get that? record lows and you come in early. you won re-election with 70% of the vote. congratulations on the second

term. as was just said, former mayor of knoxville. won election in 2010. since you took office, you've done a lot. you've reformed tennessee civil service in the first term, stripped back teacher, and expand the charter schools. now you have four more years. we'll talk about some of your on again da for that. you earned a reputation in ten fen as an earnest, no drama guy someone who doesn't throw a lot of red meat, is practical. a lot of governors who i talked to about you in the past have described you as a workhorse, not a show horse. someone who is eager to talk to both sides about policy ideas and actually wants to talk about policy. has made you very popular in tennessee. so much so that no real democrat even really ran against you last time. all those things made you, to some, a surprising pick to be the republican governor's

association chair. it's typically a job where you throw a lot of red meat. you know you -- you're an attack dog. >> right. >> that's just not your style. >> it's not. i think in politics, you start to get in trouble when you're not who you are. that's not who i am. not why i ran for office. but i still think our -- r.j. has a role to play in republican governors and like me and a lot of other people. >> absolutely. i want to talk about that, and i want to start on the policy front and the state solutions. you just called a special session at the start of your new term to expand medicaid. you spent months negotiating with the federal government. you got buy-in from the hospitals, from the chamber, from a whole host of different groups. and then it got killed. >> quickly. >> quickly. it died a quick death in a special committee. i want to talk what the future

is there. but i also want to get your read -- i mean, big picture because we're talking to a lot of governors today. it's the national governor's association weekend here. matt meade in wyoming tried to dot same thing. >> similar. >> rick scott, our next speaker, said he wanted to expand medicaid. got nowhere. kind of dead on arrival in the state legislature. john kasich in ohio had to go around his legislature to do it. so we've seen a lot of republican governors say, let's do this, let's make this happen let's get people coverage and then their republican -- their own party's legislature blocks it. it's not unique to tennessee. what do you think is going on there? what's driving that? >> i think from my standpoint -- i'm not a fan of the affordable care act either but not for the reasons most people start with. the thing i think they messed up with is this there were two huge issues around health care in our country. number one is access, no matter what part of your -- if someone's primary method of health care is going to the emergency room, it's not good for them, it's not smart

costwise, okay? so access is an issue and everybody should say that. but the second thing is cost. and my issue with the affordable care act, and if you look at how they did it they didn't really attack the cost side in ways that they could. everything from, you know medicare being able to negotiate for pharmacy benefits and you can keep on going down the line for things they could have done at the time. so the issue is this, if you're going to attack a problem, you should be really upset when people take the easy apple but don't go get the hard one. the easy apple was, let's cover more people. that's hard for people to argue against politically. so you get everybody -- the health care providers get it. they're getting paid for people they weren't getting paid for and now they are. the hard thing was to attack costs. and in the state government federal government, that's eating up everybody's budget. you've heard the joke the u.s. government is about to be a large health insurance company that happens to have an army and navy. medicaid is taking every dollar in the budget. so, we have to do something to address the costs.

our revised kind of proposal for what to do about medicaid, we think, address the cost side on both the user side by having some incentive in there for premiums and co-pays but that you could get reimbursed for if you made healthy choices. if you didn't use the emergency room for non-emergency basis. if you got an annual physical, regardless of what imphik circumstances, you could get credit back to your account for that. and then on the provider side, to really move toward more of an outcome based system instead of just fee for service where you go get a hip transplant, you're paying the anesthesiologist, the surgeon, the hospital, the pharmacist, et cetera. no, we're going to pay "x" dollars and we'll pay even more if you get a good result. we've got to go there. and our program, we think sped it up. but obviously what happened in our state, we have a very, very red state. we have 132 state legislators, 100 of whom are republican. by the way, its kind of an historic shift. i'm the first governor in history to ever serve with a republican majority.

so, we went from rarely ever having a republican majority to having these -- we went from majority to super majority, now they call it a super duper majority because we're so big. so we had this historic light blue to red switch. and we have to many legislators that were terrified of being identified with something that said obamacare. >> is the obamacare brand so toxic that even though you can argue it's not obamacare, it's just -- >> no, there's no question. we made the arguments and said, here's what obamacare is everything from the individual mandate to what they did. here's what we're saying in a program, again, that had premiums and co-pays that really wasn't a different idea but it was hard to get away from that. you say they should get past the politics but some of that is leftover residue of if you like it you can keep it.