next -- in addition to this challenge of stigma, we see challenges to meeting the growing needs of the growing population. inaccessibility geographically and financially. inadequate treatment capacity and inadequate provider competency. i really can't say that enough. we are not developing our workforce quickly enough and we are not paying them enough to allow them to stay. if we can build on what we know works, hold our systems accountable to the best practice standards, reimburse at a realistic rate and continue to build an easily accessible continuum of care, we can reverse the societal crisis. i was asked to speak also to prevention which i will speak to briefly here because much of what is here was already stated in terms of physician education and the surge of prescriptions. one piece that hasn't been stated and is deadly is that concurrently with the surge in opioid prescription medication,

there has been a rise in the prescription of anxiety medications and other sedative hypnotic needs. in 2014 and '15 in rhode island, 33% of those receiving opioid prescriptions were co-prescribed benzodiazapines. this is a tremendous, tremendous deadly combination and has been a significant variable in the increase in opioid overdose deaths in rhode island and the statistics show nationally. so along with fentanyl, we need to look at the co-prescription of benzodiazapine. other strategies for the prevention of initiation include but are not limited to patient education and the use and storage of medication, family education, continued public health education venues and peer recovery resources.

treatment within a recovery oriented system of care individualized for the patient that is easily accessible can prevent the progression of the disease and the possibility of overdose. and i can skip here. i'm quoting directly here from the rhode island governor's overdose prevention and intervention task force. this is a dynamic epidemic exposing the need for collaborations between public health, public safety and behavioral health. reaching in, and in partnership with civil society representing a communal call for action. this, for me, is one of the most exciting parts of the bill, itself, is that there is the piece there that mandates interagency collaboration. and the -- i believe that the interagency collaboration is going to be able to start to remove some of the silos created by funding streams.

it's a huge reason that we have the silos that we do. and that's going to create the foundation for an answer to this. so i also -- and i know that i represent the task force and those of us in rhode island providing treatment, strongly, strongly support the bill. and its focus on interagency collaboration. thank you. >> i have three questions. one for each of you. i'm going to start with ms. dare. and thank you for sharing your tragedy with us. we can tell that it isn't easy for you to do that. but you haven't given up. and i thought we ought to give you an opportunity for you to tell us about holly's song of hope and in particular how the organization works to provide community support for those struggling in addiction. >> a lot of people say, tonda, you're so strong, how do you do all this? it's not strength. it's that fight or flight and to

get off the couch in the mornings or get out of bed and not lay there and cry all day. i realized that what was lacking when i was going through everything after losing holly was family support. there's tons and tons of programs out there for those who are caught in the depths of this disease and fighting it, but the family support is greatly lacking. and the little bit that i did find that i was going to get charged for and i thought that was ridiculous. however, i also realized that i didn't tend to really appreciate somebody else talking to me unless they'd been there and been through it.

so they truly understood where i was coming from. and so it just made sense for me to offer that to others. we started holly's song of hope on facebook just as a group for friends and family to have memories about -- to post memories about holly. and maybe what things were going on with this heroin epidemic and things like that. somehow, in under a year's time, i ended up with 1,000 members. and i -- very active members. and i realized, yeah, this -- this is something that we need. i mean, members from australia and scotland and ireland as well as across the united states.

and we started posting questions every couple of days that have to do with addiction and, you know, in some form or another. so that people are constantly learning as well as getting support. and i had so many people saying, you know, you real need to take this outside of facebook. and so i started talking to members and they started sending me i want, i want, i want. and currently working with just under 50 different facilitators in states all way cross the united states looking to start their own chapters. i started actual meetings in carroll county. they run every other week at this point. we cover co-dependency. we, you know, or enabling.

those two do go hand in hand. i cover a street drug of some sort. make sure that the people that come to the meetings see what it really looks like and what signs they need to pay attention to. and different -- how much it costs, so on and so forth. i firmly believe education is what's going to change every single piece of this puzzle. every single one. we hear about educating the doctors, we need to educate the families. the stigma, education's the only thing that's going to change that stigma. i can't tell you how often every single day i'm sure there's going to be some story on this. and if you go and you look in the comments, you're going to see a lot of people who are going to say to me, well, if you'd have done your job as a

parent and raised your kid right, your child wouldn't be dead. well, let me give you a for instance. in the fifth grade, my daughter was going to a sleepover that one weekend. and she came to me and said, mom, one of the girls got a joint for that sleepover this weekend and i'm scared to death, i don't know what to do. i don't want to nark anybody out -- absolutely. don't worry. you're not going. and i will -- you know, i'll give you a good excuse. something came up, you know, that we didn't expect. i would have never went to my mother and said something like that. i don't know how many people in here would have went to their mother and openly said something like that. we talk to our kids, our girls all the time. there was no taboo issues.

we discussed very honestly and open with them. i thought i had done good and, you know, all those parent markers that you were a good parent, got them both through school, no trouble with the law, no pregnancies, no drugs -- you know, they both graduated. they were very popular in school for different reasons. but loved by, you know, all of their classmates. my oldest went into the navy and she's now a veteran, you know. and boom, i have a child laying dead on the floor. >> thank you for that. senator franken. >> ms. dare, thank you for sharing your -- your experience and your strength and your hope. and for what you're doing.

ms. hurley, you're on the treatment side. you talked about a number of things. workforce, we need to obviously train providers. my understanding is about less than -- about 20%, 21% of people who need treatment get it. you talked about -- senator durbin talked earlier about the act which is a mental health parody and addiction equity act. you talked about problems with getting, having parity in reimbursement and about insurance, the low reimbursement

rate of insurance. companies on this. can you talk about this area, about what we need to do to meet the needs we have of people who need treatment and what we should be doing and where we're not -- what barriers there are to meeting this need? >> i think everyone has spoken on what's needed of the medical community i think at this point. and that's the training and to increase capacity. and one of the methods by which to increase capacity, and i will say it again, is for someone to please hear that the independently licensed practitioners be allowed to

prescribe medication for opioid dependence. that would increase capacity. with training that would also correlate to competency. i can't say it often enough how complex this disease is. it's not just biological. psychological, spiritual, emotional. in terms of the operational side, reimbursement rates have historically been lower than -- than other mental health rates for substance abuse. so -- and that continues. you can look at any formulation of reimbursement rates for either commercial or medicaid/medicare is an area in which we desperately need -- >> and how is that determined? how are the reimbursement rates determined?

because, i mean, if someone goes into hospital for a cancer treatment, they get reimbursed and there isn't anyone going, well, it's their fault, they have cancer. >> right. >> what is -- what seems to be going on? what's the -- what's the -- one, the justification, but also what is the, as a coo, what's going on on the other side and the insurance industry and in terms of the federal government and state governments on this reimbursement? >> okay. we can start with medicaid and each state is different. and i believe that the medicaid rates have been historically lower than other commercial insurance providers' rates. and what ends up happening particularly in the behavioral

health side is we very often have a very high percentage of those who are medicaid eligible. therefore, a treatment facility is going to have anywhere from 60% to 90% of the folks that are coming to us for care reimbursed at a medicaid rate. okay? the medicaid rates are not negotiable. they are issued through health and human services in each state. we choose to do the best we can with those and stay committed to our missions, moefrt of us. on the commercial side, there are negotiations that go on over and over. we don't have a lot of juice. we simply don't, in those negotiations. we haven't historically. i've been part of this in way or another for 20-some years. we don't. so that's the real issue. and then the result -- >> let me just ask -- and i know i'm running out of time. >> i'm sorry i missed your question. i didn't -- >> no, no.

you didn't. you're speaking to the question. >> okay. >> i'm just -- medicaid obviously reimburses lower than some private in other areas, too. but is there a particular disparity between the -- the actual cost and the reimbursement in -- in recovery, in the rehab? >> yes. >> okay. that's what i wanted to know. we've run out of time. i think that's interesting and something -- >> not quite the word i use, but thank you. >> okay. thank you, mr. chairman. and thank you all. >> thank you. chief willard, i used to live in manchester, new hampshire. i'm now down in north carolina. like senator grassley, a lot of the the adjectives you used for new hampshire i would attribute to north carolina, we're just a lot further away from the arctic circle. but it's a beautiful place. you should be proud of it.

i'm glad you pointed out it's a thriving state and community. with this challenge that's not unique to new hampshire. one question i have for you as a chief, what sorts of obstacles are either the federal government in this case, i won't speak to state issues, but what kinds of things have you seen as a matter of policy here that are either helping you or give you pause in terms of taking this fight into local law enforcement? >> well, the relationships that we have with the federal agencies in new hampshire are really ro bufrt. i am concerned with the recent doj decision to freeze forfeit assets -- >> why i asked the question. >> i understand it's a hot-button issue down here in d.c. and i've read some articles about, you know, some law enforcement agencies that maybe have abused the practice of it. i think there should be oversight as opposed to, you know, shutting it down and having this conversation that

it's not being used properly. so what does drug forfeiture look like for the city of manchester police department? i use drug forfeiture money to fund my drug unit. that means i have an offsite. i have a location away from the police department i pay monthly represent on. all the undercover vehicles i have i pay monthly leases on. all the equipment that the drug investigators use, surveillance equipment, cameras, any sort of the specialized stuff they need, covert mikes so nobody knows that they're actually miked up. all that stuff costs money, and i take it directly out of the drug forfeiture money, i'm using a drug dealer's money, his ill-gotten gains to do drug investigations. now, there's even a push in the state of new hampshire now to take all that money and put it into the general fund. at such a time it's unfathomable for me to think they would do that when we're in the throes of the heroin pandemic. i think senator shaheen nailed it, it's a pandemic.

what would it look like if the doj doesn't open up this money -- and i hope the split stays the same. i hope they don't diminish that split. and then -- if the state of new hampshire does the same thing. the manchester police department has two decisions, i have to shut down by drug investigations because i can't afford it out of my budget. the city of manchester has a tax cap, so i can only do so much. or i can go to the city government, and they're extremely cooperative and supportive of the manchester police department, but then i can say, okay, i need all these line items, whatever that number is a year, that you're now going to have to pass on to the drug dealer. instead of using a taxpayer's ill gotten gains, we're going to shift the burden on the taxpa r taxpayer. it's just counterintuitive and i just think it's bad policy. i understand there is something nefarious afoot with law enforcement -- there may be some. >> the reason i wanted to ask you that question, it's a matter of balance, but i think there's

very clear nexus between the source of that money and its use, plowing it back into law enforcement and preventing kinds of cases that she deals with personally and continues to deal with in her service. i had a question for you, ms. hurley, with differences among states, are there any states that seem to be a best practice and going about providing care back in their communities? >> i'm most familiar with the new england area. i think that each state has a strength. vermont with their -- what they refer to as the hub and spoke model to access rural areas. they're doing a phenomenal job with that. i'm part of the faculty for the new england school of addiction studies so i've worked with some

of those physicians and they've done a phenomenal job. i have to say that in rhode island the governor's task force on overdose, opioid overdose prevention, has brought together all of the -- it's truly an interagency collaboration. department of health, behavioral health, hospital hospitals, e.s office. we has 17 people on the committee. and they've done a tremendous job of creating four strategies. looking at dollars communally. so i believe as we move forward that may be a very, very good model for addressing this. we've actually been looking at every single thing i think that's been noted here today. >> well, thank you. i want to thank all the witnesses. i want to thank senator ayotte for also continuing to demonstrate her interest in this important matter by sitting here beginning the committee and ending the committee with us.

this will conclude the meeting. the record will remain open for one week to provide additional information potentially to respond to any questions of members who were here or not able to attend may have. thank you all very much. god bless you. meeting's -- every weekend on american history tv on c-span3, we feature programs that tell the american story. some of the highlights for this weekend include saturday night

at 8:00 eastern, historian matthew andrews of the university of north carolina chapel hill talks about how racial tensions of the 1980s were reflected in sports. >> rocky is a heavy underdog in the first film. he loses in the first film. he loses in a split decision to apollo creed. no one thinks he's going to do well. he does remarkably well, but he does not win. in rocky 2, he knocks out apollo creed in the most implausible boxing scene ever filmed. it's absolutely impossible what happened. but rocky wins. these were both very popular movies in 1976 and 1979 but these are much more than just sports movies. these are movies about race. these are movies about american history. >> at 10:45, brooklyn law school professor christopher beacham talks about his book "invented by law" arguing alexander graham bell is solely remembered as the inventor of the telephone despite the contributions of others because he secured a

patent monopoly. sunday morning at 10:00 on "road to the whousz white house rewind" with the new hampshire primary we look back at the 1992 presidential campaign and arkansas governor democrat bill clinton's second-place finish in new hampshire and his positioning as the comeback kid. >> while the e vning is young and we don't know yet what the final tally will be, i think we know enough to say with some certainty that new hampshire, tonight, has made bill clinton the comeback kid. >> we'll also feature both democratic and republican ads that aired in the granite state. including those of bill clinton and george h.w. bush. and at 8:00 p.m., "on the presidency," university of washington history professor margaret o'marra talks about her book "pivotal tuesdays" and argues the 20th century was shaped by four elections that occurred during economic and cultural change. starting with the election of

in the white house." >> the majority of the first presidents, the founding fathers who became presidents, they were all slave owners. and so they would bring in slaves from their plantations. george washington did this as well. he brought in slaves to new york city and philadelphia from mt. vernon. and they served as the first domestic staff to the united

states president. >> sunday night at 8:00 eastern on q&a. investing more in education is a key priority in 2016 for idaho governor butch otter. on monday, governor otter outlined his education policy agenda in his state of the state address. >> for those that wouldn't shake my hand as i came down the aisle, i am coming down with something. i don't know what it is. all the meetings this morning i was careful not to shake anybody's hands but i waited until the committee came in before i actually did whatever i did with that stuff you do stuff with in order to not pass on so something. mr. speaker, mr. president, justices, judges, my fellow

constitutional officers. distinguished legislators and members of my cabinet. honored guests and friends, and my family. my daughter, carolyn, my son-in-law, colby, and of course, our first lady. hello, idaho. as soon as i entered the chamber today, one of our distinguish members is absent and i hope all of you will join with the first lady and i in hoping our minority leader to this body returns. join us with your thoughts and prayers as he returns to this chamber from the bedside of his wife. i'm sure you will. ladies and gentlemen, i'm pleased to report the state of idaho is strong. the people of optimistic, our communities are vibrant, our public institutions are running

more efficiently and better prepared than ever to tackle our challenges heads-on. idaho citizens are bringing all the energy and enthusiasm that characterize our history for the work of building an even better state for our children and grandchildren. and speaking of grandchildren, i'm pleased to report the otter family is expanding mind s inex. my son, john, his wife, molly, we are expecting a new grandson for us to enjoy. it is in february. i'm hoping for february 9th which will also be my mother's 101 birthday. [ applause ] of course, all my children and grandchildren are dear to me and my family. a family sentiment that is an idaho value that i'm sure we all share. our families inspire us to do better. work hard. and provide them with a legacy

of lifelong learning and appreciation for honest efforts and a biding compassion for those less fortunate. most of the inspiring and energizing parts of my job is visiting towns all over idaho for a day. it's a chance for the local folks who might not often come to boise to get answers to their questions about state government directly from me and my agency directors. i want to thank all you legislators who have joined us on these monthly public gatherings. and my favorite far of capital for a day is meeting students. they represent their schools and their families and their communities with great civic pride. and that's no accident. it's a product of engaged parents, committed educators and public officials from local school trustees to state leaders who embrace the fwogoal of

preparing idaho schoolchildren for an increasingly complex and competitive world. it has strengthened my belief the idaho character reflects the at pra aspirations of our children and families from generation to generation, and just as families are the foundation of our communities and our culture, so, too, can education provide a foundation for stronger families and a brighter future for all of us. we're entrusted with the singular constitutional responsibility of providing for a general, uniform, and thorough system of public free common schools throughout idaho. frankly, i'm convinced we could see this as our highest priority even if it wasn't in our constitution. so promoting and constantly improving education for the people of idaho must be the foundation of our work here together. we made promises during the great recession that we are duty bound to fulfill.

we have priorities for idaho's future that require world class k-12 schools and an advanced responsive post-secondary education system. and now we have the financial means. my legislative agenda for 2016 and my budget recommendations for fiscal 2017 reflect the priority that i place on living within the people's means while making responsible, sustainable, and data-driven investments in our k-through career education system. [ applause ] my focus is on supporting student achievement by continuing to responsibly implement the 20 recommendations of our school improvement task force. along with insistsing on transparency and robust local accountability, the foundation we're building will advance our goal of ensuring that 60% of the idaho citizens between the ages

of 25 own 34 have a college degree or a professional technical certification by the year 2020. let me impress upon you once again the urgent need to address the cornerstone of successful lifelong learning. reading proficiency. last year in this chamber, i called on the idaho business community to help us address the clear need for improving the attainment of that basic skill amongst our youngest students. proactive parents start with that process at home before kindergarten, and students refine their reading skills in those early school years. through the third grade, they learn to read, but the fourth grade on they read to learn. so if we're serious about wanting the long-term improvement in school outcomes, we must intensify our efforts to provide the kind of proven support that works for students

who struggle to develop reading skills. i want to thank the idaho business, education, and other stakeholders and practitioners who develop recommendations for addressing our early reading challenges. my budget includes $10.7 million to pay for the intervention, support for students in kindergarten through third grade who are not yet proficient on the state reading indicator. [ applause ] sherry, did you start that? that will improve the chances for more idaho students to succeed through high school and beyond. overall, i'm calling for a 7.9% increase in public school spending including more than $38 million to continue putting the teacher career ladder in place. and i'm asking for almost $1.8 million to move such school

staff as counselors, nurses, and speech pathologists onto the career ladder. i believe implementing the career ladder based on specific student success measures is essential to attracting and retaining the best teachers for idaho schools. success in teach eer retention also means continuing investments in their personal development. i know just how demanding those early years in the classroom can be. so i'm asking for an investment of $5 million for professional development aimed specifically at mentoring the new teachers. [ applause ] thank you, lori. i also support superintendent ibara's request to restore prerecession levels of operating funds to school districts. our task force recommended a five-year plan for that process, but the timeline can be cut to three years by improving my

recommendation for nearly $30 million. properly applied technology also is an increasingly necessary factor in our 21st century classroom. that's why i'm recommending we continue investing not only in devices but also in teacher training and software to make the most of the opportunities that technology affords. but with or without the latest technology, the most important resource our students have is the classroom teacher. with that in mind, the task force recommended moving idaho to a voluntary mastery-based education system. that's one in which the teachers are encouraged to provide individualized learning focused on mastery of subject matter content and concepts rather than classroom seat time. i appreciate the elelecture's investment to implement that mastery based education as well as the focus on achieving that

goal. so my fiscal year 2017 budget includes $1.1 million to support up to 20 school districts in developing model programs for others to follow throughout idaho. i had the chance last month to experience a little of what innovation mastery focus learning looks like in our classrooms. i participated in an hour of code exercise with fifth graders at boise garfield elementary school. immersing myself in that environment and watching those students do the same i saw firsthand the difference that individualized learning can make in comprehension, application, and ultimately mastery. from reading proficiency to mastering concepts from our community colleges, to our universities, our emphasis must be on going that extra mile to prepare students to succeed in a complex and competitive global

economy. that preparation, in turn, will support and advance the economic growth and increasing prosperity that we are all striving to achieve. so let's talk for a moment about the connections that we're building between k-12 and career. first, there's the s.t.e.m. action center that's been up and running since july. an executive directiver and a program manager and a board of directors have been named. now it's ready for the next step and our industry partners throughout idaho are eager to join us in supporting its work. my budget recommendation includes $2 million in ongoing operating funds for the center. as well as $10 million in one-time funds for startup s.t.e.m. programs including a k-through career program in computer science to help meet the high demands for those workplace skills. ensuring that students are

college and career ready is critical to the employer as it is to idaho's young people. i hear it every day from businesses large and small and every industry sector throughout idaho. that's why higher standards, more individualized learning, more dual credit offerings and proficient technical options are high priorities in my budget recommendation. of course, taking the fullest advantage of the investments we're making will require students and parents to have more and better information about post-secondary and career opportunities. so i'm recommending that $5 million go toward implementing more career college counseling in our high schools. local districts must have the flexibility to use that money to create systems that best fit students' needs for the course counseling, career exploration, and preparing for life after high school. [ applause ]

indeed, idaho offer many choices for those who go on. they include enrolling at one of our technical schools to study such subject areas as health occupations, web design, machine tooling, welding, or aircraft maintenance. but many of those programs have long waiting lists and with our statewide jobless rate now at a level that used to be considered full employment, too many of our citizens remain underemployed. meanwhile, idaho businesses are struggling to find qualified workers. that's especially true of companies in the high-tech and industrial manufacturing fields. so my budget recommendations includes $3.8 million to address those training backlogs in industry areas where graduates will find more high-wage jobs. i'm also advancing three initiatives that i believe hold great promise for creating a financial foundation that students can use to reach their

own and our state's post-secondary education goals. first, i'm proposing a tuition lock for our colleges and universities. it will ensure that the rate that the idaho undergraduates pay when they first enroll in post-secondary programs will remain constant for at least four academic years. that brings greater financial repredictability for idaho students and their families while also providing an incentive for timely completion of a degree or a professional certification program. second, i'm recommending -- [ applause ] second, i'm recommending a $5 million increase in funding for our opportunity scholarships so more idaho students can afford to go beyond high school. and third, i'm proposing another $5 million to be applied and allocated for a new completion

scholarship. now, it's designed to encourage idaho citizens who have some post-secondary education to return to the classroom and finish up. it will provide a real benefit for financially-strapped adults who are trying to upgrade their job skills. the completion scholarship is aimed at improving access and affordability to career-oriented education programs while helping to address our pressing workforce development needs. ladies and gentlemen, can't emphasize enough in how important improving our k-through career education system is to providing the tens of thousands of skilled workers we need to meet the increasing technical demand of idaho employers. this truly is an investment in the future of all idaho citizens. [ applause ]

talent pipelines to address the challenges ahead are being developed by the department of labor. the division of professional technical education, our post-secondary schools and a number of private sector partners, dynamic new online resources such as the college and website, nextsteps.idaho.gov, and the construction trade portal of webuildidaho.org shows the power of collaboration in achieving our shared goals. there's also an important place for our communities in this effort. nine years ago the legislature approved my request to provide $5 million in startup funds to help any counties that wanted to join together in establishing a community college district. with that promise of support in hand, the people voted to create the college of western idaho. since then, cwi has grown faster

than any community college in american history. that speaks to a huge pent up demand for the kind of low-cost, relevant, and responsive education and training programs that have been created at cwi. now the people of southwestern, south-central, and northern idaho have exciting first-rate local opportunities to advance their career readiness aspirations. so today i'd like to invite the people of eastern idaho to advance their ongoing discussions about making eastern idaho technical college a full-featured community college. i encourage serious public consideration of the benefits and the opportunities that a local community college can provide to that region of idaho. my budget recommendation includes $5 million to support such a plan. for making less costly and more flexible education beyond high

school accessible to more idaho citizens on that side of our state. [ applause ] thank you. i'm only crying out of my right eye. overall, i'm seeking a 9.6 % increase in funding for our community colleges and 8.8% increase for our four-year institutions. besides additional spending for our programs, i recommend expanding boise state university's material science program, the university of idaho's go on initiative, to increase enrollment and idaho state university's health science program. that brings me to health care. first from an education standpoint, i'm recommending that in the coming year, we follow through with our plans for providing more physician

training to meet idaho's needs. adding five more seats to our medical school partnership with the university of washington will reach the board of education's 2009 goal of having 40 seats available for idaho students. that's a great investment in our students and an important step toward traesing our community health care needs. but it's also a pipeline from which it takes years to realize benefits. there are quicker ways to address our shortage of primary care physicians. so i encourage you to keep funding ofund ing our physician residency slots and provide medical loan reimbursement incentives for primary care doctors who agree to serve our rural communities. in the meantime i'm asking the board to develop a new plan of developing future plans for

health care providers. i want to recognize and applaud a member of my cabinet who has worked tirelessly for years to develop meaningful idaho-based alternatives to medicaid expansion under the affordable care act. health and welfare, dick armstrong and his team as well as such legislative leadership, representative fred wood, have gone above and beyond in twoing the plans that we unveiled last week. and i look forward to our discussions on that plan. [ applause ] folks, making health care in our communities more accessible and affordable has been a pillar of my policy agenda since i took office in 2007 and that's why i'm so proud of the progress that we are making in addressing local crisis intervention needs for those with acute substance abuse or mental health issues. with your support, we now have

behavioral health centers in idaho falls. the response in those communities has been more than encouraging. in fact, during the first nine months that the idaho falls center was open, it had more than 1,100 admissions and diverted 47 people for more expensive in-patient psychiatric care. all while saving $86 860 hours of law enforcement officers' time. i expect to see similar results from the northern idaho crisis center. fiscal year 2017 includes funding for a third crisis center, this time in southern idaho. i appreciate the legislature's continued backing of our efforts to improve local access, care while reducing cost to the community. it remains our goal to engage local leaders and businesses and non-profits in supporting long-term sustainability. i'm sure that you will agree

that sustainability is a significant goal in a key metric of our success for much of our public policy including the management of idaho's precious water resources. mr. speaker, senator, and chairman chase of the idaho water resources board, i want to personally thank you for your efforts in bringing two water user group s together to finall settle delivery calls from the eastern snake plain aquifer. this historic settlement between the surface water coalition and the ground water users will help ensure that the aquifer is a healthy and reliable resource not only now, but well into the future. [ applause ] in fact, i would encourage others at odds to use this same agreement as a template for

addressing their own conflicts. sustainability is a central value throughout idaho from the treasure valley to the prairie. and from bear lake. that's why i'm proud to announce that the water resources board has drafted a statewide sustainability policy. now, the board will conduct public meetings throughout idaho in the coming year to gather8kñ suggestions on incorporating its findings into our comprehensive state water plan. i would encourage you to attend those meetings. preserving and protecting idaho's water is crucial to our continued economic growth and increasing prosperity. our renewable and green hydroelectric resources alone make idaho the envy of other states in the west and a magnet for businesses that put a premium on environmental sustainability. promoting idaho as a place where employers can get things done because we move at the speed of business has been a centerpiece of commerce director's work for

the past four years. as you know, jeff has returned to the private sector, but the team he's built and the programs he's launched will continue have a great impact on idaho's bottom line. from igem to the tax r reimbursement incentive, international trade to local economic development, jeff has been a champion for the people of idaho. please join me in thanking him for helping rank idaho first in the nation for job growth, third amongst the states for economic outlook, and among the top states for starting a small business. [ applause ] thank you. [ applause ] there's one additional responsibility that jeff took

on. he chaired my leadership in nuclear energy commission. its continuing task is to identify how all of too too can leverage partnership with the u.s. department of energy our line commission efforts are not limited to eastern idaho. instead they are aimed at making the state of the art facilities and research at the inl into truly a global resource. the state of idaho remains committed to helping the inl live up to its potential as the nation's premiere research facility based upon communication, accountability and shared goals. that's why i was eancouraged in november that the team will lead the new gateway for accelerated innovation in nuclear for the nation the game program will

provide a one-stop shop for private developers to federal experts to help them create safer, cleaner and more efficient reactors to reduce the emissions of greenhouse gases. ladies and gentlemen, having shared goals does not eliminate the need for us to remain vigilant in protecting the health and safety of idaho citizens. we have spent years in overcoming some of the challenge s in our relationship with the department of energy. the scientists, engineers and technology experts at the lab also run one of the world's preeminent cyber security departments. we are providing technical assistance to the cyber security task force i created last year. it is developing responses to the growing threat of hackers exploiting our state computer systems. i'm committed to implementing

the best strategies possible to protect the privacy of our citizens. our task force is working to identify what more the state can do to protect vulnerabilities, prevent cyber attacks and educate the people of idaho on how to fight this global tool on crime and terror. to help with that effort my budget includes a request for $1 million to establish a cyber security program at boise state university and partnership with the idaho national laboratory. the state will also benefit from our own idaho military be engaged in this fight. and i'm pleased to announce today that the idaho air national guard recently was among 13 commands to stand up nationwide to the designated and to be designated as cyber units. that means personnel trained in the most advanced technology will be helping to protect and stop online attackers before

they damage their cyberspace capabilities. the idaho operation squadron will include 71 air guard personnel. 15 who will be working full time on this important mission. the squadron will be a great resource for our efforts to protect that vital piece of our state infrastructure. it's encouraging that we're tackling this modern threat with such unity. a united and deliberate effort must be made for idaho's immediate responsibilities. the state has been sue d. there are claims the system,

attorneys in less populated counties spend enough time. idaho has been recognized in ensuring the right to legal council under the sixth amendment. it was part of our territorial law and put into the idaho constitution that states a legislative interview committee has been pursuing our confidence for three years. many of us know much better and have a much better idea at what we need to change. it's not -- i stand with the idaho criminal justice commission, and the state public defender's commission to address the issue this year. please join me in the commitment that all idaho citizens unveil themselves of this fundamental constitutional right. my budget recommends $5 million

to implement the changes that you approve. a number of changes, a total of 742,000 acres burned. and firefighting costs reached almost $61 million in 2015. state, federal and local authorities have identified several training resource and coordination needs that we must address before the start of the 2016 fire season. and that figure should be worse than last year that's why i'm advancing the land board's request for almost $920,000 to beef up the idaho department of lands, wildfire program.

i also want to thank the legislature for approving my past funding request for the creation of land fire protection associations, which enable ranchers to help fight fires in both public and private areas. we have six of them, they are protecting 951,000 acres of private range land. they're now into the landscape that's proven to be an invaluable asset to the department of lands, and the forest service that quickly suppressed -- now more groups around the state are seeing the results and are ready to get involved. so i'm requesting an additional $140,000 to create other rfpa's in anticipation of another rough fire season. ladies and gentlemen, know that

wildfires are a far greater threat to idaho's sage grouse population. but that reality has largely eluded the u.s. department of interior. the forest service. instead of taking the reasonable steps of supporting the local conservati conservation, and idaho stewardship measures, interior imposed arsenal restrictions on land use, and in some cases the bird doesn't even exist. that left us no choice but to file a lawsuit against the federal agencies last september. sage grouse conservation and federal responsibility remain with idaho. i'm grateful that the legislature joined with me in that effort.

in the meantime, we will continue working more broadly on the idaho habitat. my present request calls for allocating $500,000 for fire prevention, suppression and habitat monitoring on nonfederal lands. the customs, the culture and the economic vitality of our citizens and idaho in mind. i enjoy visiting offices from time to time and i'm impressed that the commitment with our employees do their job. they take great pride in being public servants and in being responsive to idaho citizens.

i'm so pleased to be able to announce today that my budget request includes funding to retain and reward personnel. it's a step in the right direction toward attracting and keeping great public servants. we have a lot to be thankful for here in idaho. "hope you'll continue to hope over frustration, instead of overfrustration and cynicism, where what we have yet to achieve. i know now is closer than anywhere in our nation to what america was meant to be finally it is my sincere wish we undertake our work together in this legislative session, without keeping one eye on the upcoming election. let us proceed with a focus committed to applying government's proper role in our current challenges.

and improving the lives of generations yet together. thank you for your time and attention. god speed. may he continue to bless the state of idaho. and the united states of america. i thank you. on the next washington journal, a history of the new hampshire primary with adam smith at the university of new hampshire. and co author of the first primary, a book about the state's role in presidential elections. then former new hampshire state senator gary lambert and later, burt cohen on his support for bernie sanders. washington journey is live on c-span. you can join the conversation with your calls and comments on facebook and twitter.

this weekend the c-span cities tour, hosted by our cox communications cable partners explores the history and literary culture of santa barbara, located approximately 90 miles northwest of los angeles on the california coast. the city is nicknamed the american riviera for its spanish influence and architecture. on book tv we'll learn about the history of endangers species of california. next, find out about rising sea levels and the threat they pose to coastal cities. >> 3 1/2 million people in california live within 3 1/2 foot of modern sea level. many of them in the bay area. that's a lot of people to move. >> then we'll visit the old mission santa barbara, to tour

their archives and the surrounding area. on american history tv, we'll travel back to the silent movie era, and learn about the central role santa barbara played of the industry, as we explore the story of the american film manufacturing company also known as the flying a studios, which produced silent films here from 1912 to 1921. next we'll visit the old mission santa barbara's outdoor museum, and how the spanish introduced plants to the native indians who cultivated these and changed the landscape of california. due to its mild climate, the city and surrounding area was promoted as a health resort and destination as early as 1870. tourism remains a big part of the city's economy to this day. >> the south facing coast gave them all day sunshine.

fresh ocean air, and that was recommended in various visitors brochures. doctors would say, come to santa barbara. fresh ocean air, fresh mountain air. that was seen as the cure for so many people in the 1870s and 1880s, when we really boom as a tourist city and a health res t resort. >> watch c-span cities tour at noon eastern. and sunday afternoon at 2 on american history tv on c-span 3. the c-span city's tour, working with our cable affiliates and visiting sit 2is across the country. c-span's campaign 2016 is taking you on the road to the white house. >> let's go win the nomination, thank you all. >> thank you, and god bless you. >> in iowa, c-span brought to you candidate's speeches. >> thank you all very much. >> thank you, folks. >> meet and greets, town halls and live caucus coverage.

this week, c-span is on the ground in new hampshire following the candidates, leading up to the first in the nation primary. live election coverage starts tuesday at 8:00 p.m. eastern on c-span, c-span radio and c-span.org. keith hall projected an increase in the deficit today at a house budget committee hearing. he predicts that the deficit will reach $544 billion and the debt will be 86% of gdp by 2026. this is about 2 1/2 hours. >> the hearing will come to order. i want to welcome all to the committee on the budget hearing on the congressional budget offices, budget and economic outlook before we begin, i'd

like to welcome two new members to the committee. frank ginta of new hampshire who is a returning member of the committee. and bill johnson of ohio. we want to welcome them to the committ committee. without objection, so ordered. the house is scheduled to have votes later today. i ask unanimous consent, the chairman be authorized to reconvene at any time. i want to welcome dr. hall to our hearing on your cbo budget and economic outlook. these numbers matter, the

consequences for the american people are real. and i think that will become much more clear in holding this hearing. if no changes are made to current policies, deficits over the next decade will total $9.4 trillion. this is up from $7.6 trillion from the estimate of last year. national debt will rise to $20 trillion, from its current all hoo high of $19 trillion. an average economic growth over the next two years will be a full one third lower than historical average. skyrocketing debt will mean less opportunity, fewer jobs and smaller paychecks. and a nation increasingly vulnerable to national security

threats both at home and abroad. this isn't an optimistic outlook for america. it's not a sustainable outlook for any nation. the longer we take to address these challenges, the harder it will be and the fewer options there will be to solve them. >> you can put up the interest, slide figure 6 for me please. you look at the interest payments on the debt just what we spent to service our debt by the end of the decade. we will talk about spending a trillion dollars a year just on interest on the debt. that's more than we spend on defense, medicaid, education. pick a priority. money that's spent on paying this interest will crown out all of the important priorities that the american people have, buying a car, paying rent. buying a house. starting or expanding a business. sending a kid to college. all of the things that are made

more difficult that the american people want to spend their money on are made more difficult because of the level of debt that we continue to accumulate in the government. interest on our debt will be the third largest line item in the budget behind only social security and medicare. how can we solve these challenges? many of our friends on the other side of the aisle think we ought to take more money out of the pocketbooks and the purses of the hardworking american taxpayer. the cbo projects that federal revenues, that is money coming into the governments are going to go up by $127 billion in fiscal year 2016 alone. a nearly 4% increase over last year. revenues are slated to be 18.3%, which is well above historical average. the government is taking in more money from the american people than it ever has in the history of our country. my constituents know, and i

suspect many of my colleagues in this room here today and in the congress that uncle sam doesn't need a raise. washington needs to get our act together and stop spending at levels we cannot sustain. according to cbo, spending will reach 21.2% of gross domestic product in 2016 and climb to 23.1% in 2026. this will far exceed historical averages. that means more money again taken from the pocketbooks of the americans and spent on things that crowd out or decrease the likelihood of being able to spend on things they want to. we ought to focus on real solutions, reforms that will make government more efficient and accountable. solutions that will support a stronger and healthier economy. we focus on these two goals, we will not only balance the budget. we will also create an environment in this country will

more americans will achieve success and provide for themselves and their families and have a nation that's more secure. sadly under the policies of president obama, americans have experienced the worst recovery in modern times. the cbo has continued to downgrade its growth predictions year after year. we learned the u.s. economy grew at an anemic 0.7%. dismal economic legacy this president continues to champion. >> we have a choice in this nation. we could continue down this road, stick with the status quo and turn cbo's projections into reality. or turn the page and put in place a budget that balances, that saves and strengthens and secures medicare and social security. that supports our brave men and women in uniform. right now our committee is hard at work putting together that plan. i want to thank you for being here today. and thank you for your work and that of your colleagues at the congressional budget office.

i look forward to your testimony and how we solve the challenge before us. i'm pleased to yield to the ranking member from maryland for his opening statement. >> thank you to your cbo team what struck me in looking at this budget outlook. it was really not that different from last year's budget outlook. it showed that deficits as a percent of the economy have fallen dramatically since 2009 and will remain relatively stable for a couple years, and then you begin to see increasing deficit deficits in health care costs. the biggest single component of the increase in the 10-year deficit projection were the unpaid tax cuts that congress

voted on just last fall. 8$817 billion. round up you get to a trillion dollars. added to the deficit last november and december. when our republican colleagues put that forward and refused to pay for a single penny. that figure includes the interest rate. your deficit goes up. so do those interest costs. you just referred to congress added significantly to those interest costs by refusing to pay for those tax increases. the good news is this forecast predicts stronger economic growth this year. 2.7%. that's good news, because although the economy has

generated new jobs for 70 consecutive months. we need to add more jobs. most importantly we should get to work on strategies and wages. it's so disappointing in this new congress instead of getting to work on the business of the american people, the very first thing we did in 2016 was vote for the 62nd time in a row to dismantle the affordable care act and just a little earlier this week, the 63rd time in an attempt to override the president's veto, which wasn't going to happen. and by the way, that vote also included the 11th attempt to roll back the programs that protect women's reproductive health. despite the fact that a grand jury recently vindicated planned

parenthood and decided instead to indict their accusers. rather than just repeating over and over again these efforts to dismantle the affordable care act, we should be focusing on growing the economy and increasing wages. and i'd like to put up a chart. we should address those issues by investing more in our economy. it's troubling to hear some members on your side may be talking about revisiting the caps that we agreed to last year, which made room for some estimates. as we look to the long term deficit. we should also remember that the largest category contributing to the deficit, according to the congressional budget office, are the so called tax expenditures. these include a lot of tax

breaks in the tax code that benefit the very wealthiest americans. they include tax breaks like the carried interest loophole for hedge fund managers which means that folks who are managing a hedge fund play a lower tax rate than people driving a bus. we need to end the loophole on inversions. every day we're reading more about companies that are changing their overseas address, to escape their responsibility to american taxpayers. which means everybody else in the country pays more, while these companies that continue the benefit from what america has to offer are paying less. as you can see from this chart, if you add up the cost and tax expenditures on an annual basis. they're higher than the total costs of medicare and medicaid. and higher than the total cost of social security. which is why it was so disappointing that rather than addressing those issues, our

republican colleagues last year voted for the largest increase in the deficit in recent times, adding over $800 billion to that 10-year deficit. if we're going to get serious about this, we're going to have to look at the tax expenditure column and end the tax breaks which disproportionately flow to the top 1%. 17% of the benefit of those tax expenditures, go to the top 1% of the income scale. that is a system rigged in favor of the wealthy, we need to change it. thank you, mr. chairman. >> thank you very much. we want to welcome again dr. hall. your complete testimony will be made part of the record and we look forward to your opening statement, you have five minutes. >> thank you, chairman price.

members of the committee. i appreciate the opportunity to testify. i'll summarize the key elements of cbo's economic forecast for the next decade. we anticipate the economy will expand by 2.7% this calendar year and 2.5% in 2017. consumer spending is expected to provide the largest contribution to that growth. the anticipated pickup in growth above last year's 1.8% rate, stems largely from investment and business capital and in housing. because of the projected growth, we expect slack in the economy to diminish over the next few years. lowering the unemployment rate to just under 4 1/2%. pushing up compensation and encouraging greater labor force participation. that reduction in slack will also push up inflation and interest rates. over the years following 2017 we project output to grow at a more modest pace constrained by relatively slow growth in the

nation's supply of labor. nevertheless, in those years, that pace of growth is expected to be greater than it has been in the past decade. describe some of our key findings about the budget outlook. in fiscal year 2016, the budget deficit will increase, in relation to the size of the economy for the first time since 20 o 9. if current laws generally remain unchanged, the deficit will continue to grow and debt held by the public will rise to $24 trillion or 86% of gdp up from 27% of gdp by the end of 2015. moreover, it would be an upward trajectory. debt would reach 155% of gdp. a higher percentage of any previously recorded in the united states. such high and rising debt could have serious consequences for the budget and the nation. including an increased risk of a fiscal crisis.

in our projections deficits are projected to increase because growth and revenue is outpaced by growth and spending. revenue will remain stable in relation to the size of the economy. reflecting changes that offset each other. corporate taxes, payroll taxes and remittance from the federal reserve. almost half of the project ed increase is for social security and medicare. in large part because of the number of people that are more than 65 years old. also because of rising interest rates and growing federal debt. the government's interest payments are projected to rise sharply over the next 10 years.

in contrast. spending subject to annual appropriations is projected to drop to its lowest share of gdp in the next 50 years. most discretionary funding is cap capped at amounts more slowly than the projected economy. that's the big picture. now a few details. i'm often asked about our our projections for medicaid. medicaid spending is expected to increase by 9% in 2016 after having grown 15% in the previous two years. the optional expansion of coverage will have been in place for two years, and the rapid growth will begin to moderate. as for exchanges, we and the staff skimt that about 11

million people per month will receive them on average during the calendar year 2016 up from an average of 8 million per month last year. the amount is -- overall, including people who do not receive sub cities on their insurance. our projections have not yet been updated. let me explain how our projections have changed since august 2015, the 2016 deficit that we project. largely because the appropriations act of 2016

extended tax provisions. we now predict a deficit larger than the $7 trillion deficit we projected 6 months ago. about 30% of the increase is change in the economic forecast. change in slower growth over the 10 year period lowers revenues more than it lowers spending. projected spending for medicaid is higher, and that increase is only partially offset by lower spending than we previously projected for social security. i'm happy to discuss any

questions you may have. >> in reading your report, it doesn't paint a rosie picture. some of the remarks you make are honest. the likelihood of a fiscal crisis increasing. the lawmakers having less. deficit would grow over the next 10 years and by 2026 it would be considerably larger than it has for the past 50 years. that's not a pretty picture. i want to touch on growth and spending, the major aspects of our slide. there are three ways to have

income coming in. you could raise taxes, our friends on the other side of the ale believe that's the way to increase growth. growing the economy is the best way to get to balance and get to an economy that can this riv. the slide that is up there, projections from your office have increased from 3% to 2.9% to 2.9%, 2.3%. and now 2.1%. a downward trend on growth and the economy.

folks are able to get a get a job and provide for their family. why does the growth continue to go down in your estimation. >> well, in our projections, like most other projections. we have been disappointed over and over again primarily about productivity growth. the most recent reduction since august was over concerns of over productivity. two things happen, the economic data changed. the bureau of economic analysis revised down. that changed our view about productivity. now we've had a sort of persistent slow productivity growth. it looks like it may not go away for a while.

that's the heart of our most recent downgrade. >> the numbers are actually projections that have been -- you put up table one, which is figure four. i'm sorry, table one. a lot of numbers will pop up here, the bottom line, there are 15 years that cbo projected growth at a certain rate. only three of them was cbo accurate. it's likely the 2.1% isn't accurate. the challenge we have, if we could grow the economy a little bit, not back to the 3% average. say .1%. we could see a decrease in the activity there. if we grew by more than is projected, what is the result on

the deficit. >> reduced by somewhere over $200 billion. >> this increasing debt and deficit. if we could grow the economy at the average rate. we would see a decrease of 3 trilli trillion. >> remarkable ought to be our goal. you mention a lot of things that are growing. what's not growing clearly is our economy. the spending that we have on -- this is the amount of spending. 1965. one third of spending in our nation was mandatory spending.

the congress could define what those priorities were year after year after year. now it's flipped completely. those programs are primarily medicare, medicaid and other mandatory programs. the discretionary part is what gets crowded out. that's everything the american people think about, when they think about the federal government, including defense. so it gets smaller and smaller. >> in your report on page 1, you identified a federal outlay is projected to rise by 6% this year. remember, the economy is growing at less than 3. 7% increase. 14% increase in interest payments. what if we had the economy growing faster than the government. we continue to grow the government faster than the economy, what happens.

>> well the reason we look at the size of the deficit compared to the growth of the economy. gives you some idea of our ability to repay the debt. over time, having the government makes it harder for us to reverse and eliminate this debt sometime in the future. >> when the government grows faster than the economy, it's more unreal we will get to the balance. >> this is a tough issue, because it gets into the scoring and how the congressional budget office figures out. if you let the american people keep more of their hard earned money, that means the government has to find more money somewhere else than -- i want to get to

the difference between mandatory spending and taxes. if that increase goes up over a period of time, not changed from the baseline. there's no effect on it from our standpoint to decrease the deficit. with taxes, with the taxes that were passed. were any of the tax extenders passed? were there any new taxes in that? >> no, no, that's right. the expiring tax provisions were extended. >> so all of the taxes that were extended or made permanent were already in place? >> what the congress did is simply continue the current policy that was in place, and yet the congressional budget office says in so doing, that increasing the deficit. what about the macro economic effect to allow the american

people keep more of their money. is that not positive? >> yes, it is. >> and in this estimate, we were able to update our economic forecast all the way through the end of the year, we weren't able to update our budget forecast on that new economic forecast. we missed some of the economic data in the summer. we missed the growth effects of the extension of the tax provisions. just to put a fine point on this the tax credits that were allowed to continue. allowing the american people to keep more money in their pocket. none of them were new, it was a continuation of current policy, our friends tell us that those need to be paid for from a government ap standpoint. one of the reasons my constituents get so irritated with how we do things in washington.

the government, congress runs around trying to figure out how to take more money out of their pockets. you can put up the budget chart, the smile chart. this -- when you talk about all these numbers, people's eyes glaze over. they also get depressed. this craft shows the level of debt that we have in this nat n nation. we've gone from 76% to 86%. we're getting in that red part where the debt continues to increase. that's a bad place to be. the budget we'll continue to offer is the blue line, that gets us down too a point where we're able to pay off the debt. isn't that a better path to be on than the current path we're on right now. >> it's certainly a path that

reduces our risk of financial growing somewhere down the line when the debt gets very, very high. >> creating more opportunity for americans. more jobs, more economic vie tail 2i? >> yes, certainly it will reduce risk of having to deal with financial crisis and gives the government economic policy makers a bit more tools to deal with future challenges. >> thank you. >> mr. van hollen, you're recognized. >> thank you. >> let me begin on a comment i made in my opening remarks. director hall. i have here the estimate of the cbo, impact the deficit increase from the tax cut bill that was passed just last november. and this is dated december 18th,

2015 it shows an increase of $679 billion over ten years. and that does not include interest. this legislation is the single largest component of the increase in your ten-year deficit estimate compared to last year, is it not? >> that's right. >> i appreciate the chairman's concern and focus on increasing deficits. the record is pretty clear, just last november and december, our republican colleagues passed an unpaid for tax cut that is the single largest contributor to the new ten-year deficit estimate. now, the chairman mentioned this was a continuation of current policy. there were some policy changes actually. it was not a continuation of current law. and the point many of us have been making.

is that if you want to extend some of those tax cuts, you should pay for them. so you don't increase the deficit. they keep taking actions directly contrary to that express concern. that's why if we could put back that chart. there's plenty to choose from. the revenue lost through tax expenditures is higher than the total amount we spend on social security. it includes all these tax breaks that benefit the top 1%. if you look at that big set of tax expenditures that are more than the value of social security. 17% of the benefit go to the top 1% of income earners. surely, you can find a way to

pay the tax credit or some of the other provisions by knocking it out some of these tax breaks. we have to stop protecting the folks that have done really well over the last 20 years and focus on increasing the incomes and tax benefits for people in the midd middle. >> just going to the fine print. if you look in the appendix and look at table f1. i would just point out to my colleagues, that the last time we actually balanced the budget and had really low deficits. revenue as a% of our economy was in the 19 to 20% range. this is on page 145.

meaning the revenue that was coming in was a little higher than it is now. you have a big economy, over a 10 year period would decrease. even a 1% growth in gdp makes a difference. hopefully we can help find that revenue by closing tax breaks for folks at the top, rather than cutting kids education, cutting our investment in transportation. and as the chairman showed his chart, most of that growth is in mandatory expenditures he was talking about. the big items he was talking about are social security,

medicare and medicaid. really, you only have a couple choices, you're either cutting social security and medicare or medicaid, you're cutting tax breaks for wealthy people. and what we're saying is we would like to go after some of those tax expenditures. we don't think hedge fund managers should get to pay a lower tax rate than people driving a bus. if you're really serious about the deficit, mr. chairman, let's not run it up like we did last night. let's find ways to offset that, that includes some of the tax expenditures that go to the folks at the top. i would point out we have an aging population. if we're going to reduce the deficits in the long term. we're going to have to at least get back to that% of revenue that we were back in the late 1900s and 2000s, when we balanced the budget, we had a lot fewer seniors then.

so what our republican colleagues are proposing, less revenue as a% of gdp than we had back in the last time we balanced our budget. with a lot more seniors on medicare and social security. simple math tells you, you're either cutting social security and medicare or you're going to cult some tax breaks for wealthy people. now, let's talk about economic growth for a minute. director hall, you did an analysis about the economic growth impacts of immigration reform. you're familiar with that projecti projection? >> yes. >> and what that showed was, if we had adopted the comprehensive immigration reform legislation that came out of the senate a few years ago, by the year -- within 10 years we would have -- we would see 3.3% more growth compared to what we would

otherwise see in that year, is that what you would recall? >> i don't recall the number exactly. but i can find it. >> and 20 years out, you would see in that year 5.4% greater gdp than you would otherwise. in other words, 5.4% over what it would be in that year? >> the chairman was just talking about the additional revenue coming in from a .1% increase in economic growth. what these numbers showed, you get more than that 1.1% increase in the economic growth. so that would also as the cbo

told us help with the social security trust fund insolvency. there are lots of things we could be doing to address these issues. now, in terms of the tax code, i really hope our republican colleagues will work with us to get rid of these provisions that hr skewed to the folks at the top. because that will help reduce the deficit and end a system that right now allows those benefits to flow upwards rather than benefiting the broad population. i always enjoy the discussion that we have at these -- on these reports, and i would just ask my colleagues to look at what the american people understand, that every equation has two sides. you have the spending side and

the revenue side. and on the revenue side you have a system where folks at the very top have a tax system that disproportionately benefits them. and we need to change that if we're going to address some of these fundamental issues, as we invest in economic growth. i'm going to say i hope as we go through the budget process this year, we will not renege on the agreement that was reached just last november in this house of representatives of the united states senate. sequester caps are still very tight, to allow for greater investment in the economy and help boost economic growth and invest in our kids education, invest in modernized structure. i hope we will not revisit that

agreement, because we like to have a budget process that at least is predictable as possible for the american people in the economy. thank you, director hall. >> thank you. mr. okada from indiana, you're recognized for five minutes. >> hearing mr. van hollen's statement about the two sides reminds me of an old indiana saying, perhaps it's said elsewhere too. there is a revenue side and there is a spending side. let's look at that a little bit. isn't it true when you look at the next 50 years, money that's actually come in, forget about your models and the scoring.

the money coming in over the last 50 years has been about 17.4% of the economy. >> that's a long term average. and right now, we're collecting 18% of the economy and tax revenue. >> so the money is there. the revenue's there. as it has been over the last 50 years. so the problem isn't revenue, the problem is spending. now, conveniently, mr. van hollen is showing a chart that talks about tax expenditures. it's not accounting for the macro economic effect of lowering taxes. when people have money in their pockets, they spend it more efficiently than government. they spend it to add value to the economy, is that correct? >> the evidence is, that there is a boost to growth with

reducing -- >> so for this report that mr. van hollen raised today you didn't have a macro economic effect of that tax extenders yet, did you? >> no, we didn't. and that's in fact one of the mismatches that we have in this report. >> let's talk about the mismatch, and now that you have some more information, what will you expect in the first couple years? >> well, let me just put -- i would estimate the mismatch, the economic forecast we've updated, about a month, extra month of data, we have the new legislation in that. but it's not in our budget forecast. if it had been in our budget forecast we're probably talking about 100 to # $00 billion in the budget deficit. >> for? >> over 10 years. so it's not a huge effect. and not all of that is the tax

extenders, but some of it is. >> as you get more data, do you expect that number to increase or decrease? >> i don't know, we'll be making that prediction soon many. >> when people have more money in their pocket, they add value to the economy, correct? >> that's correct, we expect some macro economic boost. >> even democrats, many of mr. van hollen's democratic colleagues know this. 77 of them, approaching half of their conference voted for extending current law last november. and in fact on this committee, five of mr. van hollen's democratic colleagues agreed with what you're saying about the economic benefit of extending current law so people have more money in the pocket. they know what to do with the

money better than government does, especially when it's wasted on paying interest that we shouldn't be paying in the first place. >> dr. hall, you've been here about 10 months now or so? >> something like that. >> it seems shorter. >> we're just starting. let me quickly ask you about some internal practices and policies. what did you find when you got there, what have you been able to -- don't take this as any comment on your predecessor, what have you been able to improve, change or otherwise help us out with from inside your shop. >> a place that i believe runs very, very well. and runs independently and does very, very good work. but i also got a lot of -- a fair amount of feedback from the hill that they wanted the cbo to be more trans parent in their

work. that's one of the things we tried very hard to do is reshift our priorities a little bit to better document. and better explain our work. you know, two particular areas i think are challenging for us, is this -- beginning to estimate the macro economic effects of the dynamic scorings. we tried hard to be transparent on that, and then our health care estimates. we've done a lot of modelling on health care, and we have a lot more to go. we've added some things to our website to help explain what we're doing. >> looking forward to your work, sir. >> gentleman's time is expired. >> mr. yarmouth from kentucky is recognized. >> i want to pursue this discussion of the tax expenditures and the impact on deficit deficits if i understand you correctly, you're saying if you were able to project additional

growth due to the tax expenditures, that over ten years it would be 100 to $200 billion total is that right? >> probably a little less than that, it would be -- that would be a maximum. >> you still lost $800 billion worth of revenue? so essentially what the impact would be, instead of an 800 plus billion dollar, impact on the deficit. increase on the deficit, it would be something slightly less fan that, overall, there's no question that the tax expenditures are still the biggest contributor to the deficit over 10 years? >> yeah, from our change from august, that's right one of the biggest factors we know ongoing is the cost of medicare and

medica medicaid. i'm interested in what per capita growth rate you assumed over the 10-year period. do you >> if my memory is correct, what we've experienced in the last few years is about a 3% since the affordable care act was enacted, about a 3% growth rate per capita per year of medicare versus 7% before the affordable care act. i'm curious as to whether you project a continuation of a smaller growth rate per capita over the next ten years or whether you forecast some kind of change in that? >> i think we still expect to see it accelerate. in fact we expect the number of people getting medicaid and the per person cost of health care to continue to rise. that's actually still a big part of our growing deficit is the rise in per person health care.

>> but we are rising at a lower rate than before the affordable care act? >> that's right. >> what factors do you think will contribute to the increase in the per capita growth rate over that time? >> a lot of it is we've had a long history of growing per capita health care that's just been our experience so far. and there's no reason that i know of to think that that's going to slow down. >> well, let me just kind of speculate a little bit. what would it do to the -- you think it would do the deficit if we found a cure for alzheimer's? >> it would have an impact. >> and a cure for cancer. >> depends on the cost. >> if we figured out a way to either cure diabetes or manage it effectively. we're talking about hundreds of billions of dollars of cost removed from the system, aren't we? >> right. >> per year. >> right. >> investment in medical research is something that offers great potential to combat

our long term deficits as well as its human benefit? >> in fact, i think some federal spending does, in fact, investment can, in fact, increase the growth of the economy, not that it pays for itself but it does have an effect on growth. >> you made a statement a minute ago in response to a question on tax cuts, and tax cuts do have a positive benefit on the economy. in 2001 and 2003 there were substantial tax cuts put into place. was there an overall benefit to the economy of those tax cuts? >> yeah. you know, i don't offhand know what the research says. on anything like this it's very difficult to estimate because lots of other things are changing or happening. our reading of it is generally that the evidence is that tax cuts do have some benefit for economic growth. you see it in our estimates. it's not a huge effect but it's there and the evidence is that it's there.

>> one final point, we're talking about mr. van hollen talked about the lower tax rate paid by many of the highest income people in the country. i read a statistic the other day the 400 top earners in i guess this was 2014, that's a group that one estimate is owns more wealth than 50% of the united states population. those 400 earners paid an average tax rate of 16.6% and these are incomes that reach well into the hundreds and millions if not billions of dollars a year. so, that number certainly reinforces mr. van hollen's argument. thank you very much for your testimony. i yield back. >> the gentleman's time has expired. mr. mcclintock, you are recognized for five minutes. >> mr. chairman, first i warn my friend to be very careful by suggesting the top 1% should pay

its fair share. i just took a look at the numbers. top 1% earn 22% of all income in the country but they pay 38% of all income taxes. so, if you want them to pay their fair share you're advocating to cut their tax burden by a third and i don't think your friends in occupy wall street would appreciate that. what it said that the deficits have dramatically fallen since 2009. i'm reminded that obama added nearly a trillion dollars to the federal credit card that year for his stimulus programs, which nearly tripled the deficit. so the claim by his apologists here that the deficit has fallen dramatically since 2009 is a lot like a shopkeeper who triples his prices and then announces he's going to have a half-off sale. i don't think that's a very compelling argument, either.

we keep hearing that taxes are the antidote to deficit. aren't taxes and deficits the same thing? aren't deficits future taxes. you either tax now or you borrow now and tax in the future to redeem that borrowing, is that correct? >> i suppose that's one way of looking at it although one of the things we always try to point out is, you got taxes and you've got spending and you've got both. all those things will work. >> taxes and deficits are really two sides of the same coin. they are the only possible way that you can pay for spending. and it is spending, therefore, that is driving this fiscal crisis. you know, i note that this is the only time in our history except for once other when we carried as much debt proportionately to the economy as we carry today and that was at the end of world war ii when we had exhausted our credit,

exhausted our resources fighting the bloodiest war in human civilization. how did we get out of that deficit, out of that debt? >> i'm not a history of -- >> the economy grew? >> right. right. >> i think that period is instructive for us and i would appreciate it if you haven't taken a look at it take a look. my recollection is that fiscal year '45, president truman abolished the excess profits tax. in fiscal '46 he slashed the top income tax rate. in fiscal '46 he cut federal spending from $85 billion down to $30 billion in one year. he fired 10 million federal employees. it was called war

demobilization. they predicted 25% unemployment and a second great depression. instead we got the whole post-war economic boom. isn't the truman model the same model kennedy used and robbie reagan used in the 1980s and bill clinton used in the 1990s. we forget bill clinton cut spending by 4% of gkp, went after entitlement spending, ended well fire as we know it, approved the biggest capital gains tax cut in history and as a result was able to balance four budgets in a row and lead a period of profound economic expansion. isn't that the model we should look at to get ourselves out of this enormous hole we have dug? >> economic growth is very important. and economic growth can help with this budget deficit problem. a couple of things. first we have a real strong head

wind with an aging population. in fact, that's one of the real -- that's the main reason why our economic forecast drops down. >> i think that's all the more reason to have a thriving economy because of that aging population. let me just ask one more question. on the impact of taxes and deficits on the economy. those revenues if not taxed by the government either now or in the future through running deficit would either be spent or saved. those are the two options you have. you spend your money or save your money. if you spend your money you will be spending it on consumer purchases. two-thirds of economic growth depends on consumer spending or you'll be saving it. by saving it you invest it which means economic expansion. isn't that a much more logical model to use to get out of this mess? >> well, again, certainly that's a way to help get out of this mess and that would be an important contributor in going

forward if we can increase growth. >> gentleman's time has expired. gentleman from washington state is recognized for five minutes. >> thank you, mr. chairman. i'm pleased to be here at the annual sky is falling hearing. we've had these -- i've been on this committee since '93. and what's amazing is that the republican response to the sky is falling is to schedule less days in session than the state legislature in the state of washington. a part-time legislature is in session more than 111 days. if there was a real crisis, you guys would be here working on it. but you know this is all political rhetoric. now i've listened to this over and over again and i'm not going ask you, mr. hall, because i don't think there's a day when the united states will disappear. even though we have all this doom and gloom that we hear about the debt, the debt, the debt, that's the mantra of the american enterprise institute that has been pushed in this

place in the 28 years i've been here. one of the stupidest things that we talk about here is treating it like we're a family sitting around a kitchen table. and we've got to decide well, what do we have to cut if we're going to keep on doing. that is not the metaphor for the united states of america. we are not a family. we are a government that needs to deal with what people need and that means we make critical investments on behalf of the country. we would not build ports, we would not build roads, we would not do any of the critical investments in this country if we waited for the private sector to do it. if we just sat back and said well, we're not going to build any more roads. let's wait for the private sector to decide we need more roads. that's why the national

institutes of health would never have been created. if we had waited for the private sector to do it. now, what is really clear is that this debt thing is really to take away any money, any ability of the government to deal with the problems of ordinary people in this country. but the discretionary spending just keeps getting cut. we've got our kids in debt. the biggest debt crisis in this country is c.h.i.p. kids school debt. 1.7 trillion hanging over our kids. they can't buy houses. they can't buy cars. they can't do anything because they have this debt. and yet we perpetuate that system. now what is troublesome to me is that i was here during the clinton years. and i saw us get to the point where we just about were at surplus. and wall street was petrified. if we don't have any debt, we

don't have any federal debt what do we do. we can't let the government get out of debt. so george bush came in and he took care of it quite easily. he gave tax breaks and tax breaks and tax breaks and then started two stupid wars. one in afghanistan, and one in iraq that were absolutely no public benefit for this country. if you ask the average citizen what's the benefit we got out of the iraq war or out of the afghanistan war? there is none. and what mr. mcclintock talks about, yes, there was war demobilization after the second world war, and the first thing we did was we gave the bill of rights to every veteran. anybody who served in europe or asia wound up going to college free. we invested in our young people.

we're not invfted in our young people now. the national institutes of health, i know this one because i'm a doctor and i've been watching it for a long time. we used to fund 20% of the proposals made to the national institutes of health. we're down at 6%. young professionals in the health care fields today are going to europe. they are going to england. they're going to singapore. they are going all over the place because there's no research money in this country. and if we don't continue to fill the pipeline of investment, we are simply going to be in long term problems. it won't be because of debt. it will be because we refuse to invest. like having a house and you see there's a little spot on the ceiling and think gee, there might be some rain damage. if you don't go up on the roof

and fix it you're going to have the ceiling fall down and that's when the ceiling will actually fall down is when our lack of investment catches up with us. i yield back the balance of my time. >> the gentleman's time has expired. gentleman from georgia, mr. woodall, is recognized for five minutes. >> thank you. dr. hall, thank you for being here. since we have the benefit of your counsel, i thought i would ask you some questions with my time. thinking about the student loan issue that dr. mcgovern mentioned, if i'm also concerned about that and i want to reduce the number of student loans that are going out the door i'd rather be involved in grant programs, work study programs, co-op programs. if i reduce the number of student loans we're originating today, is cbo going to score that as a net spending reduction or a net spending increase? >> it's going be a spending decrease, i believe if you reduce --

>> i looked at some proposals that are out there for how we might grapple with that. it looks like the way cbo scores it scores all the fees associated with originating that debt. doesn't score any of the risks associated with the failure of that debt and thus every time we try to curb the amount of student loans that go out the door in favor of another program it looks like we're reducing federal revenue as if issuing a student loan is a revenue stream for the government as opposed to a risk that the american taxpayer is taking on. >> i think what we do is we focus on the subsidy aspect of it and do try to take into account the risk, the market risk. >> it is those kind of anecdotal challenges folks back home, doesn't make sense to folks. if you take on more risk that should be a larger cost to the government, fees associated with that don't impact. if i can bring up a cbo slide here on labor participation.

a lot of what we do is driven by how cbo scores as opposed to my preference, which would be public policy. so i want to ask you to see where we could meld cbo scoring with good public policy. i look at the labor force participation rate. it looks like the same kind of anemic participation rates we had when the gentleman from georgia was president of the united states the great malaise of the late 1970s, but as i look at this cbo chart, we are going to call this relatively full employment. is that right? historically low unemployment rates. >> yeah. actually with respect to labor force participation i still think we're not -- we still have significant slack in the labor market. that number should be quite a bit higher. >> that's exactly what i want to ask you. tell me what kind of policies can come out of congress signed

by the president tomorrow cbo would begin to move that chart instead of the downward glide path on an upward glide path. give me some examples of policies that would come out of congress that would cause cbo to raise its projections of labor force participation. >> let me just say that part of what's going to happen is if the economy continues or begins to grow a bit quicker and eliminate the slack, we are going to get some of that back. but there are things that impact labor force participation. it's in our estimates. things that affect what we gall marginal tax on work. so there are tax policies that affect people's willingness to work. the aca probably affects the incentives to work. there's a few things like that, that will affect our forecast of labor force participation. >> aca affects the incentives to work positively in that it encourages me to go to work? >> it's the opposite. the aca discourages people from

going to work. because there's an increased penalty for increasing work in the aca. >> reducing tax rates on work could drive up my labor force participation rate. eliminating the disincentives that are within the affordable care act for work would drive up my labor force participation rate. and all things being equal if i drive up our labor force participation rate we already heard about what happens with economic growth, how that impacts deficit, if i drive up my labor force participation rate i expect what in terms of economic growth longer term? >> we expect stronger growth. expect -- any time you have a larger labor force, more participation you'll increase growth, increase revenues, that's going to have an impact on the budget. i want to say, you can't exaggerate this too much because we had some real demographics here. labor force participation right now is about 3.5 percentage

points lower now than at the start of the recession. a lot of that is aging population. >> now, my understanding is we have the healthiest aging population we ever had in the history of this country. why would me getting older requires me to leave the workforce? >> it doesn't. the current baby boomer group in some respects creating records. people will still retire and that is a large group of people and we still expect that to be big drag on labor force participation as time goes on. >> mr. chairman, i hope this is common ground we work together on and i yield back. >> gentleman from wisconsin is recognized for five minutes. >> thank you, mr. chairman. thank you, dr. hall. i want to go back to the tax extenders, i think we know the deficit has gone down by two-thirds since this president took office but the blip going back up occurred because of what we did with the omnibus bill in december of which $800 billion roughly is the tax extenders.

i heard the chair talk it's important allowing the american people to keep more of their money and i heard money in the pockets will boost the economy something i'm going to respectfully remind him of when we talk about the minimum wage. if we ever get a chance to. i do think that's a valid point. when i look at those tax extenders,úí'ú; me through thi in a very basic way so i can explain to people back home. i'm looking at a list of extenders that i have and i'm going to give you two scenarios. family of four upper 30s, early 40s. one parent is a school peacher the other one is a plumber. one is making $35,000 a year, the other $45,000 a year. they have two children. $80,000 family income. the other one is 68-year-old widow. limited social security, limited savings. 0% increase this year in social security. help me as i go through these very quickly and tell me if it's

likely that that family of four, that single widow will be eligible. bonus depreciation. it's unlikely either one of those would be eligible for bonus depreciation tax break, correct? >> i believe that's correct. >> research tax credit, i support research tax credit but unlikely either of these two will benefit directly? >> that's correct. >> active finance exception i really doubt that overseas profits probably not dealing with that, correct? >> yes. >> depreciation for smaller businesses doesn't sound like the widow has the smaller business or that school teacher or person working for a plumbing firm does. wouldn't qualify either? >> probably not. >> controlled foreign corporations break. again -- >> right. -- unlikely? >> right. >> biodiesel tax credit? >> correct. >> depreciation of leasehold restaurant equipment. >> same.

>> so i've gone through over i think three quarters -- i'm going to argue the tax credit for energy-efficient homes. they may not take advantage of but they could, right? that could be money in their pockets. renewable energy production credit. >> production credit, yes. >> probably not the production credit. what else do we have. work opportunity tax credit? potentially? >> potentially. >> there's a really thin gray line to be found on this graph. we found a really thin pink line. i'm getting up to about 10% of them. deductible treatments for mortgage insurance. when i look at this and the other provisions if i add them all together i'm at less than a quarter. i don't know what's in that other provision category. do you know roughly what percent would be eligible? >> i don't. >> i guess the bottom line i'm saying if we're going to talk about increasing the deficit and

talking about putting money in people's pockets, what we did with those tax extenders didn't put money in the pocket of the average constituent i have or any of our average constituents. it might have benefited some very narrow groups of people and some corporations. and then i look at your slide you handed out on major changes and projected revenues from 2016 to 2026. in two of your four categories, rising income is a factor why you're changing projections. i would argue the very activities we're doing in this congress isn't benefiting real people to put money in their pocket so that they can boost the economy but we're benefiting the very narrow small amount of people and that that average widow and that average family that school teacher and plumber really aren't seeing that benefit as we have expanded that deficit and they are not getting that economic direct benefit. is that fair to say on those numbers that we went through? >> from what we discussed it sounds like it. we haven't done a distributional

analysis of anything like that. i don't want to be -- >> it's pretty fair their foreign investment stuff, not taking advantage of those tax credits as we discussed. i think that's an important point because i think, again, there's a real difference in that, really quickly if i can in 25 seconds left. simpson-bowles. we accomplished about 70% of the simpson-bowles cuts if that had been enacted but only a third of the revenue side of it. in fact as of today we would be at 130% where we would have been on cuts but not dealt with the revenue side. is that something you can kind of confirm roughly in the ballpark on that. >> i can get back with you. i don't know enough about it. >> mr. chairman, that's something that's worth this committee taking a look at. for people who did propose that and supported that we certainly haven't affected that part of the ledger and what we did last december certainly didn't affect it either. >> gentleman's time has expired.

we will hear from the gentleman from ohio for five minutes. >> it's interesting, i was here, my first time on the budget committee was 2011 when i first got elected, and i kind of heard some of the same discussion so it's interesting to hear the same discussion. what really is interesting is that we use so much as one of the presidential candidates said, we use washingtonese down here. we talk in washington dialect, tax expenditures, american people don't know that if they're watching this, most of them would say i don't know what everybody's talking about. tax expenditure, tax credits, we talked about some of those issues. we indicated that's one of our big issues. we also said we're not in a debt crisis yet. last time i sat in this chair the debt is now up 29%. i think, dr. hall, you've said that it could increase as much as $8 trillion or $10 trillion

over the next ten years, is that correct? >> that's right. almost 10 trillion. >> that's another 40, 50%. if we're not in a debt crisis i'm not sure what we're in. when it comes to tax expenditure, we keep talking about these things that we made permanent. doctor, i'm not sure if you can answer this. some of these same tax credits were around in 2006 and 2003. they were just extended for two-year periods, is that correct? >> that's right. >> when they were extended for two-year periods we didn't count them as being added to the deficit but we made them permanent, cbo counts them as being added to the deficit, right? >> that's right. when we look at tax provisions that have an expiration date we assume they will not be extended. so when they are extended it becomes a budget change. >> some of these credits have been around for 25 years. would you think if they are around for 25 years they're pretty much permanent, even though they're not? they seem to be permanent in the system.

>> right. we do it that way in a sense because the budget committees told us to do it. >> i understand that. >> i get your point. >> i was thinking back in 2006 even when the other side, the democrats had the opportunity and when they were extending them did they pay for them then? did they talk about paying for them then? are you aware? >> i don't know. >> i don't think they did. that's what's kind of interesting here. we continue to extend them for two-year periods and not talk about paying for them. that's why we shouldn't be talking about them as the issue today. because republicans and democrats know most of these credits are good credit. some credits were named off. he forgot about the unearned income tax credit. child tax credit. american opportunity tax credit was extended. helps pay individuals going to college. these are all good programs that i think would actually, i mean there was one individual that said we're in a debt crisis because our kids' school debt. that's a credit that would help. we have to get away from this washingtonese and have to start

talking about the issues. i was a businessman for 28 years. i always looked at budgets and said how do i grow my revenues. doesn't mean add prices to my product. how i do grow my revenues. if i have expenses growing, how do i slow that growth down. so my question for you, how confident are you, because i do believe the way we get out of this debt crisis is growing the economy and how confident are you in your most recent growth projections because i think that's a real key. >> this is always our best, our best projection. it's very hard to project the economy but one aspect of this, i think, is clearly going to happen and this is the aging population, the main reason this drop in labor force participation as baby boomers retire, main reason we're looking at a decline in growth to around 2%. and that's going to be really hard to deal with. also, productivity has been very disappointing through this whole

business cycle and one of the big risks i think going forward will that productivity return. we don't know what's caused the lack of productivity. that will make a big difference. but still, growth will help but we're so far behind it's hard to imagine that just growth is going to fix this deficit and debt problem. >> that leads me to my next question. would you agree that spending is really driving the projected increase of the deficit rather than the lack of revenue especially since this last year we had record revenues. if i was back in my business and had record revenues i would be having a celebration. but then i would look at expenses. saying we got to do something. would you agree expenditures are causing this deficit? >> the big growth in deficit is from social security and spending on major health care programs. those are the two big ticket items that are creating this problem going forward. >> one last question. is this ever-rising debt level a

share of the economy sustainable? >> it's not. what's tricky about it is it's getting to a very, very high level. trajectory is all wrong. i can't tell you exactly what's too much. >> thank you, dr. hall. i yield back. >> gentleman's time has expired. gentle lady from michigan is recognized for five minutes. >> thank you, mr. chairman. i'm not talking as well. i had major surgery on my mouth this morning and my experience in the dental chair is probably more pleasant than yours at the budget committee. one of my top priorities in congress is ensuring we have a strong manufacturing base in this country and that we continue to design and build the best cars in the world right here in the united states. we have seen this year, we know that the auto industry was in dire straits in 2009 but thanks and i do believe to the federal investments that occurred in our manufacturing base the auto industry is back and is as strong as ever.

this year we added nearly -- we've added nearly 650,000 jobs since mid-2009. including more than 100,000 jobs in 2015. last year auto sales hit a record high of 17.4 million units in 2015. this means that the u.s. car and truck production has more than doubled since 2009. we hit record levels. we've seen the benefits of that in michigan where the unemployment rate has fallen two thirds since 2009 and is down to 5.1%. but i know we can't take that for granted. we have to ensure that our manufacturers have the resources they need to succeed and they are competing on a level playing field. autonomous and connected vehicle technology represents the future of auto industry worldwide and they've got both the potential to save lives and to reduce fuel consumption. i want to make sure like many of us, i think all of us, that that technology is developed here in the u.s.

the president's budget will include $4 billion proposal to accelerate the development and adoption of automated vehicle technologies through real world pilot projects. i believe that this is exactly the type of investment we need to stay on the cutting edge, to ensure we keep the jobs here and that that's going to impact the economy. as you might imagine, i've got a site or two in michigan that will run that i think are good sites. director hall, what is the outlook for federal spending on investments like the president's proposal on autonomous vehicle research and all things being equal, are we likely to see fewer jobs and lower levels of economic growth if we fail to have adequate levels of investments in these priorities? >> well, one of the things that's actually particularly difficult for us is understanding the role of federal investment in economic growth. obviously, there's impact of it.

it's understanding how much of an impact it has on growth and therefore on revenues. it's difficult and the timing of that is difficult. we are in fact doing a fair amount of work on it. we should be producing something pretty soon, talking about it and we continue to work on it so i can't -- it's hard for us to deal with that aspect of the budget, the investment side on the impact on the deficit. >> when you come out with it i will be very interested in it. we won't debate it here. i know you know what the impact would have been on this country in 2009 if the auto industry had collapsed i want to continue on the issue of jobs. we have seen a significant reduction from 5.7% in january 2015 to 5% in december. do you believe there's enough slack in the labor markets to allow for further reduction in unemployment? >> we in fact forecast that. we in fact that the unemployment

rate is going down to 4.5%. what's tricky about that is part of that forecast is we are seeing people jump from entirely out of the labor force into employment so what's still lagging behind even as the unemployment rate goes down, labor force participation is still too low. so that's not a good judge of slack in the labor market. slack in the labor market will be gone when labor force participation gets back up, a bit from where it is now, and actually the unemployment rate is likely to go back up a little bit from 4.5% once that happens. >> i have more questions but i don't have time. i will do one more. i hope we are going to get a chance to talk to you about some of these because i think it's really critical even in terms of your projections on what's happening to the economy and jobs overseas. wages have remained relatively flat throughout the recovery. do you -- you know, the auto industry for the last eight years, they have this new contract, that is going to impact that. do you anticipate the rate of

wage increases for most of the work force will return to historic levels? i think one of the problems right now, most americans are insecure and not feeling real wage increase. what's your prediction on this? >> i do think, we do think wage growth will resume. the big challenge probably for the next couple years is there is still significant slack in the labor market. we are probably 2.5 million people short of jobs right now, still. so i think certainly once that slack goes away, we will get back to more traditional wage growth. then i think the challenge becomes do we get productivity back to support that over the longer time period. >> the gentle lady's time's expired. gentleman from ohio is recognized for five minutes. >> thank you, mr. chairman. first of all, let me say to my clae colleagues on the budget committee, i'm very honored to be joining you.

i think establishing and implementing a balanced budget is a necessity and a responsibility of our institution and i think we owe it to the american people to do that. i remember not too long ago the imperative that we were given from the former joint chiefs of staff chairman, admiral mike mullen, when he said that the biggest threat to our national security is our national debt and given that the oath that we swore when we took office, each of us and the president, to support and defend the constitution, national defense is our paramount priority. thereby, the national debt should be our number one priority as well. i want to go back, mr. hall or dr. hall, and thanks again for being here, i want to go back to

something that mr. renacci said talking about how we talk in washingtonese. i want to give the american people an opportunity to hear from the kind of language that they hear on main street every day, some of the talk. you have indicated in your testimony that revenues between now and 2026 are going to remain relatively stable compared to the past. am i saying that correctly? >> yeah, that's right. they are growing but at the same pace as gdp. so it will be flat. >> so pretty much stable. i want to get, for the record, one more time because i want to make sure i understood what you said, then the increasing deficits and the mounting debt is by and large an issue with spending. that's the real problem that we have to deal with, correct? >> the driving force is two particular things in the spending. the mandatory spending, social

security and health care. >> okay. well, you know, the national debt has increased by nearly $8.3 trillion since president obama took office, and as a percentage of gdp, the total debt including intra-government debt, the social security trust fund stands at about 104% of gdp. can such an irresponsible spending path, fiscal path, eventually invite a debt crisis here in the u.s. mirroring the types of crises we have seen in some european countries in recent years? >> well, that's certainly part of our message is that over the next ten years, we could see debt go from 74% of gdp to 86%, then eventually to 155% over 30 years which is a really high number, so that's really the concern. at some point along this trajectory, we are going to get people starting to be unsure about investing in u.s. securities and demanding a

higher interest rate. then we have issues with financial markets. >> we are going down a slippery slope. >> we are. >> okay. can you give me some idea, any new numbers about how much debt per person does each american owe today? you got any number on that? >> yeah, i don't offhand, no. i would have -- we would have to do a little math. it wouldn't be hard math. >> can you get that? >> absolutely. >> if the congress were to enact a deficit reduction plan that could halt the expected rise in the debt levels, would this be a net benefit for the economy over the long run? >> i think it would. i think part of our forecasting here is the macro economic drag from having the debt grow. that is a drag on growth. that is something that's not trivial. >> what would that mean to the american people? let's talk to them in terms that mean something to them around the dining room table.

if we were to enact a deficit reduction plan that would actually halt the expected rise in the deficit and we see an improvement in the economy, what kind of opportunities are we talking about for the american people? what does that mean? >> well, first, of course, they have to deal with how the debt is eliminated. either you have to either have tax changes, you have to have spending changes -- >> spending being the biggest part of the problem. that's where we should focus our attention, right? >> well, our notion is that you can do it, it's up to you to decide how to do it, how to fix the problem. you can do it with taxes, you can do it with spending or you can do it with both. >> one final quick question. i'm sorry to interrupt you. you said in your testimony the unemployment rate is expected to drop from 5% to 4.5%. what's the real unemployment rate with roughly a third of our population out of work, quit looking for work, dropped out of the work force, low labor participation rate, what is the real unemployment rate?

>> that's a good question. actually, we can do a little calculation for you because i think -- i think if we assume that the labor force was at its potential, not its current lower level, we would have probably higher unemployment rate. >> can you get that back to us? >> sure can. >> mr. chairman, i yield back. >> the gentleman from new jersey is recognized for five minutes. >> mr. chairman, thank you for being here. i want to go back to our comrades mentioned former presidents who responded differently, quote unquote, to economic problems. one of the presidents that was mentioned was president kennedy, who cut spending. we forget at the time that president kennedy was in office, what the tax rate was when he

was the president. over 90%. so when you take things out of context, you would think that we are at the apocalypse. let's call this apocalypse two. i want to start with a question, mr. hall, if you will. payroll taxes, which as you know fund social security, are expected to decline in 2019. that's the projections. and thereafter. chiefly because as wages and salaries grow more quickly for high earners, a greater share of income will be above the maximum earnings subject to social security. so would you say that the increase in income inequality directly threatens social

security solvency and further contributes to the deficit briefly? >> sure. i don't want to guess about how it -- if it threatens its solvency but you're absolutely right, the maximum on social security taxes does in fact reduce the revenues for social security. that does have an impact. it's an important part of our forecast. we do anticipate increase in income inequality going forward will have that impact. >> will raising the payroll tax threshold, let's say to $400,000, as the social security act -- the social security 2100 act does, would it extend the solvency of social security and meaningfully reduce the deficit? >> i'm sure it would extend the

solvency, extend the time period. i don't know offhand exactly how much of an impact it would have. we might have done that or i could get back with you on exactly what that would look like. >> i would like to hear from you. also, when is the last time we raised that threshold? >> that, i don't know. i don't know. we can get back with you on that as well. i don't know that one. >> long time ago. look, we're in 2016. we have heard the doomsday predictions, the budget deficit is the smallest it's been in seven years. by the way, in the charts we saw up there, we saw 2012 when the gdp was over 3.1. i never heard anybody on the other side, i never heard one person on the other side give credit where credit was due. because this president can't do any good.

he's never recognized, anyway. i believe he's done a lot of good. i've disagreed with him on many things. so now, all we hear from is the apocalypse. i'm not exaggerating, i don't think i'm using hyperbole at all. discretionary spending, funding for everything from medical research to investments and education, by 2019, will reach its lowest levels since 1940. that's astonishing. i would argue there are many important investments you are not making, mr. yarmouth pointed some out that will cost us in the future. cost increases moving forward will be exclusively from mandatory programs as you pointed out, mr. hall, social

security and medicare. the increases are mostly due to an aging population. the demographics are there. how do we tackle these fundamental issues? one thing we started to do in the affordable care act which extended the life of the trust fund, of medicare. that was a good thing. 12 years. 12 years. when you do away with the affordable care act, there are a lot of things that we are going to be doing away with. so whether you have a republican president next year, a democratic president, we need to think of what those consequences are. i yield back. >> thank you. gentleman's time has expired. gentleman from virginia is recognized for five minutes. >> thank you, mr. chairman. can we get up the outlays by type of spending graph if possible? thank you guys very much. dr. hall, thank you for being with us today. i just want to respond a little bit to the politics of jfk and all these kind of things.

if you look at the graph in our pack on total revenues and outlays, go back to the '60s and see that average revenues have been about 18% over the long run on average. so you can change the top marginal rates quite a bit or whatever but there seems to be a long run historical inability to raise revenues above that 18%, 19%, and i think that's probably just due to political economy. there's an upper bound on what the american people -- are you familiar with anything in literature that gets at that? there just seems if you have that much data over that long of a span, what's the political economy behind that line? >> yeah, i don't know the literature offhand. we can look into it if you like. >> that would be good. because what i'm about ready to get at is a coming train wreck. so the bipartisan squabbling doesn't do any good. it's a spending problem, a revenue problem. the revenues aren't going to go too much higher than that. when you talk about the spending, what i want to get is this part of the spending. here's the train wreck.

we're not really having a debate about discretionary spending. we are having a debate about that line right there, mandatory going straight up through the roof. if you don't solve that, you got a fundamental problem. then we can deal with the equity considerations to van hollen was mentioning the top 1% or whatever going to wall street fat cats. we can deal with political economy analysis of that, too. can you give us the numbers, give him the most generous assumptions you can and what the savings would be if we get rid of all those tax expenditures, but then also look at the political economy and look at the donations to the democrats and the republicans in wall street. i think you will find they're 50/50. the reluctance if we're being honest, if you do the political economy, you guys can talk about income distribution, whatever, but you guys got half the fat cats, we got half the fat cats. i think that's just being honest. if i'm wrong -- >> not quite. >> that's fair. let's look at it. i just don't want to be searching after false answers. because i think the true answer

is right there. i have been teaching it for 20 years or whatever. the debt's $19 trillion, that's a serious deal, but nothing in comparison to this thing, the mandatory spending right now and the unfunded liabilities are $100 trillion right now. $127 trillion on the bottom of the debt clock, two years ago for some reason went to $100 trillion. what's that mean, that's the amount we're not going to be able to pay for medicare, social security, et cetera. that's not going to be a financial crisis. that's just going to be a reduction in those programs going forward to the next generation. medicare and social security are both insolvent around 2032. both programs insolvent. the next generation won't get what current are getting. and the basic take-away, what's the $100 trillion mean, that's the biggest number, the economic textbooks, it means in 11 years, there won't be any federal revenues or another way of saying ith i is all federal revenues will only go to pay for mandatory programs and interest

on the debt. another way of saying that is there won't be a dollar left for the military, education, transportation, all of running government in 11 years. that cbo, the main graph, and it's related to this graph. so dr. hall, i'm just going to run, these are easy softballs. i want to run through the logic to kind of put this out there. how do you interpret this graph? as mandatory and discretionary? >> well, obviously, obviously the issue is the mandatory spending and you know, a lot of what seems to be happening is it's crowding out discretionary spending and it's part of the problem going forward. >> right. annually, appropriated discretionary spending is declining fiscal burden on tax payers, net interest on auto pilot, mandatory spending are increasing. in other words, the part of the budget we control through appropriations in this committee is getting smaller, is that correct? >> yes. >> that's correct. can congress do anything directly to reduce net interest

costs or is that kind of off on the side? >> you have to reduce the debt. >> right. so that's nothing we can do on the net interest costs. auto pilot direct mandatory spending programs are clearly what we have to deal with. dr. hall, does cbo provide estimates of how various policy options could reduce the deficit? >> we do. we have a nice document on that. >> right. so we can all take a peek at some of that. among -- this is of interest this year with the budget debate we're having, among those policy estimates, just focusing on auto pilot spending programs, how many different combinations would you say could save roughly $30 billion in relatively short order? >> i don't -- i don't know offhand. >> but do you -- maybe we can just ask you to see if you can find us any bundling of those. because that's kind of the number in play. >> the gentleman's time has expired. the gentle lady from wisconsin is recognized for five minutes. >> thank you, mr. chairman. can you leave that chart up

there, please? thank you, mr. chairman, mr. ranking member, colleagues. good morning. just a question for the gentleman and i will yield to him to answer. outlays by type of spending. does this include the spending through the tax expenditures? >> the tax expenditures, that's on the discretionary side. >> would you agree with that, dr. hall? >> no. they are not really in there. >> right. that's what i thought. this chart doesn't make any sense to me. okay. thank you. can you put the chart up with -- that i asked you to put up? okay. i agree with my republican colleagues on a number of things. we really do need to get away from the sort of washingtonian speak and speak plain old english that everybody understands. the tax breaks that we all voted for on november 15th, it's

spending, people. it's spending. you can say we're putting monies back into our constituents' pockets, you can say whatever you want to say. it's spending. and as you look at this chart, you will see that tax breaks, we all depend on, some of us, i'm going to claim my mortgage deduction, all of the things that we have spent tax breaks to oil companies, all of that, exceeds the spending that we do on medicare and medicaid. and so when we hear the republican mantra that revenue is not the problem, it's a problem with spending, i guess i can agree with that. i guess we are in agreement on that. spending is the problem. so what i would like to ask you, dr. hall, is something about your testimony on page four. you talked about discretionary spending is projected to drop from 6.5% of gdp this year to

5.2% in 2026, a smaller percentage than in any year since 1962. so we start talking about cutting spending, you know, they always say we need to cut discretionary spending, you know, head start and you know, other kind of programs, you know, where's the greatest opportunity to cut spending? i mean, is there more money in like head start, wick, than there is in these tax expenditures? we can't cut to the bone. where are our opportunities to cut? >> well, the document i referred to, we do have policy options document that gives you some idea of what possible tools you have cutting spending, raising taxes, et cetera that will help with the deficit.

>> correct. because you agree with my assessment that tax cuts are spending. >> well, i don't really have an opinion on that. >> i'm not asking for your opinion. i'm asking you to tell me, when we provide tax cuts, that that is spending from the treasury. >> no, it's -- >> we are denying ourselves revenue. >> okay. that's true. >> the same as if we sent out a check to the head start program. that would be spending. we are denying the treasury those monies that we would use for something else if we were funding head start. so it's the same sort of process. let me ask you something else before my time expires, dr. hall. this committee is poised to use a process, budget reconciliation, to cut the mandatory spending such as

s.n.a.p. and medicaid and we have had kind of discussions on voucherizing medicare and so on. do you agree that things like s.n.a.p., for example, actually increase growth of our economy? that actually, it is, you know, it's penny wise and pound foolish to, you know, food stamps are only used in counter cyclical times and if we cut food stamps, we are actually cutting revenue? >> well, i don't know in terms of whether they sort of pay for themselves in any way. i don't know if they help growth. but you're right that they are automatic stabilizers in that when the economy goes into recession, some of these programs -- >> they are like $1.75 benefit for every $1 we spend on s.n.a.p.

so to block grant this, we are automatical automatically cutting gdp. i don't have much time. mr. chairman, i just want to say -- >> you don't have any time. >> i'm talking to you now. i'm not asking any more questions. >> the gentle lady's time has expired. >> okay. >> we will now hear from the gentleman from south carolina for five minutes. >> i was asking about the process. >> i think, chairman, a couple observations and a question. one, i was struck by my colleague's conversation from new jersey on social security and raising the payroll tax. as we all know, there are unintended consequences and politics is ultimately what drives washington, d.c. as we remember, you know, social security was put in place as a social insurance program. if you lift the caps, you really move it to a social welfare program. people like to link it between i pay in, therefore i get more over the years. if you de-link those things, it becomes a pure social welfare program which really undermines the constituency for that system

itself. so from both sides of the aisle, i think there have been legitimate questions about doing so. i want to follow up on my colleague from virginia, dave bratt's thoughts on sort of the bigger picture where we are. i think he was really hitting on something in that you know, from the republican side, we blame obamacare and the obama economy for the deficits and where we are. from the democratic side, we blame tax cuts. but the reality is if you look at where we are, i do believe, i guess it was my colleague from the west that said the sky is falling hearing. sky's not falling but we are in an incredibly dangerous financial spot which is what i think my colleague from virginia was getting at. from both sides of the aisle, we have to look earnestly at how do we make reforms because where we are headed is to a spot that i think is enormously dangerous.

as he pointed out within ten years we will be in a spot where there is only enough money for interest and entitlements and nothing else. if you believe the financial markets anticipate which they always do, we will see a day of financial reckoning given the difficulty from both sides, whether it's cutting taxes or cutting programs on either side of the equation, you look at that ramp-up on mandatory spending, we are in, something's going to give. i don't think it's a sky is falling phenomenon. i think it's felt at the gut level by the american public. what folks tell me in my home district is there is a lot more lightning to the way we can't get on spending forever in our business, in our state, in our family budget, and ultimately gravity works with government, too. so you look at those numbers and you say okay, we are in a more difficult spot. you look at global economy and gdp shares around the world relative to 1950s when we came out of world war ii, we are in a

spot. you look at the buildup of debt, you look at, you know, we are in a different spot than we have been in ages past. the aging population. we have a lot of things that curtail rather than -- this is not our grandkid's time or our kid's time within our lifetime? >> well, that's right, and that's the real concern. you hit on something i probably should have stressed more. is the sooner you start to fix this, the less pain you're going to feel in fixing it. if you wait ten years or 25 years, then try to fix it, you've got to have a lot more dramatic policy changes that the american public's not going to like. >> two related questions. one, do we not have an accounting fiction that's in place right now? if we ran our books under cruel

accounting which is what every system in corporate america is required to do, wouldn't we be in incredible financial pinch right now? rather than an in illusioned form be decreasing. >> certainly would give you a different picture, different look at things. give you some idea of what you've committed yourself to when you've -- >> to be more precise, unified budget mass operating deficits currently, they'd be rising rather than shrinking, wouldn't they? >> right. >> i looked at fed numbers around the country. the atlanta fed predicts it will have 1.2% economic growth next year, which is below your number. they're a bit more pessimistic. if you were to see that 1% decrease, we would have a complete hole blown into the,

you know, the scale of the deficits that are coming our way. any thoughts on this and the possibility of lower economic growth, given what's happening around the world? >> that would be a concern. we still have significant slack. we still have employment -- employment's 2.5 million people short of what we think is potential employment. slower growth next year would create more of a problem. it would make these numbers look a lot worse. >> i will just say this in closing, mr. chairman. i think this day of financial reckoning is coming. i think it's coming within ten years. i think it has real implications in terms of the value of the dollar, future interest rates. >> the gentleman's time is expired. mr. norcross recognized for five minutes. >> thank you, mr. chairman. my apology also for getting here late. i was at the national prayer breakfast. it's good to be here. here we are again. seen in various ways where we're going to be this year and a few

years from now. less growth obviously creates more on an inversion basis and conversely growth will help us. let's talk about minimum wage. 2009 was the last time the minimum wage was increased. obviously for those who are earning that, they've had a huge loss of their purchasing powers. inversely, if we were to raise that wage over the next few years, let's say a dollar a year to $15 an hour, what would that do to your projections? >> well, we'd have to of course do a full analysis to get you a more precise number. >> but in general. >> i think in general the tricky part about something like minimum wage is when you raise minimum wage, some people get a higher wage. the problem -- the problem can be is that labor markets are like any other market and if you raise a price, demand declines. and so there's the possibility that you'll have a reduction in employment. when we did an estimate for -- a little while ago on raising the

minimum wage to i think 10%, something like that, we forecast a decline in employment as a result of the increase. so that's sort of your tradeoff because you do get higher wages but you run the risk -- >> -- states having to raise their minimum wage, they've increased their employment. so the basis for that is -- >> well, what's tricky about that, i can't speak to that specifically. what's tricky about that is lots of other things change at the same time. there's a lot of economic literature on the effects of minimum wage. there is probably some reduction in employment when you raise minimum wage significantly.

>> so at the end of the day, as we increase the revenue because those that pay the minimum wage are paying more in taxes? >> i think that sounds right but i don't recall our budget estimate on that. >> anybody who is unfortunately making minimum wage without a raise. when you talk about raising the cost of doing business -- >> right. >> which minimum wage, by your suggestion, is doing. so those who would take the profits out of a company who want to take more profits would cause the same effect if they're taking more out of the company? >> right. that's part of the debate, right, is whether a company can handle the higher wage, take it out of profits, or whether they'll look for subsidies, right. a lot of minimum wage jobs where there are a lot of subsidies. to the degree that happens, technology is a good substitute, then you've got an unintended consequence. >> if it costs you more on the bottom end or on the top end,

it's costing you more money. >> i got you. >> that's the point we're trying to make. so it's going to have that impact. point of the matter is those who are making minimum wage are guaranteed to spend every dollar here in this country. >> oh, yes, i got you. okay. i yield back the balance of my time. >> i thank the gentleman. the gentleman from new hampshire is recognized for five minutes. >> thank you, mr. chairman. i want to thank the chair and

dr. price for their confidence in me to rejoin this committee. i enjoyed my time on the committee in the first term. and see some of the similar faces and look forward to what is amounting to a continued and ongoing spirit debate about the budget philosophy and process here in washington. i just wanted to say to dr. hall, first, thank you for being here. my background is -- i was in the private sector. i ran our state's largest city, manchester, new hampshire, for four years. i come from a background of balancing budgets. i actually was able to reduce taxes, reduce borrowing. we were named one of the best managed city, small to medium sized cities in america. i also recognize the obligations and responsibilities we have in the confines of the budget. there are a number things that concern me that you've touched upon. first of all, the growth rates.

other estimates that have been discussed are a little bit lower. i think we're probably somewhere between 2 and 25. i hope it doesn't go lower. the fact the budget deficit is going to increase up to that 86% over time. that is a -- if i saw that in the private sector on the balance sheet, that would be a big concern. would you share that view? >> i think that's right, yes. >> the other concern i have is -- you touched upon it. the labor participation rate. that has to increase in order

for the consumer confidence to be affected for spending, local spending to be affected, and for our opportunity for revenue to the federal treasury, correct? >> that's correct. >> i think you said 1% increase in growth would be $300 billion over ten years. >> that's right. >> in reduced deficits. well, that's all about the labor participation rate. and what kind of jobs and salaries people will have. >> right.

>> you mentioned we have a lack of productivity but you're not exactly sure why. >> right. >> is it because of the lack of lower participation rate and then the types of jobs that is impacting the decline in unemployment rate. which is retail sector driven, rather than driven by higher wage sectors. the very people that are graduating today that would like to get a job at a minimum of $1,000 a week or more. i guess my question for you would be this. what component of the regulatory requirements that we have in this country affect those decisions to have greater output by our small-medium sized employers in the country? >> that's a tough question. because you do obviously expect that regulation -- labor market regulation can have an impact on employment. certainly companies, decision to bring on workers or invest in capital, it's not easy to undo that decision. it likely effects that. as to how much -- i don't think the literature has been very successful in figuring out carefully the impact of regulation. it certainly depends on what kind of regulation. some is good for economic growth. some is not so good. >> some in the affordable care act is problematic. some in dodd/frank are prolow matic.

if you can pull up slide ten. the projected outlays for major budget categories. so if you look at those lines. major health care programs. social security's actually going up. discretionary is going down. because we've capped through 2021 the amounts of that expenditure as it relates to gdp. those two lines that are going in the upper direction appear to be the problem in terms of increasing our debt, is that a fair statement? >> that's right, major source. >> okay. if we could get then to slide -- the next slide, projected net interest outlays. this is a concern i have as well. when you're looking at the amount of billions of -- this is in the billions, of net interest outlays, that is a source of concern. despite the fact that our discretionary spending is on the decline. as it relates to gdp. this is going in the opposite direction. so this seems to be a serious source of the problem, is that correct? >> oh, yes, that's right, it is. >> this is something we need to fix. >> gentleman's time is expired.

>> thank you, gentlemen. i want to talk about the farm bill and the farm subsidies. i remember when this discretion was happening several months back, we were having a big conversation about what the costs were going to be of some of the outlays for a couple of the programs. the agricultural risk coverage program and the loss coverage program. can you talk to the committee about what the projections of the costs are going to be back then and what the projections are now? >> i just don't have that level of detail in my head on the farm bill. i can get back to you. i'm not going to be able to remember right now. >> i have the information. >> how fortunate. >> so i can help you out. because you help us out all the time. the projections for these programs, both the arc program and the plc program together were projected to cost $11.6 billion from 2016 to 2018.

the new estimates released this week say the combined costs for those years will be almost $20 billion, which is 70% higher than the original projections. so the conversation that we need to have on this committee, mr. chairman, also needs to get into what we're doing with regard to the agricultural risk coverage program, the price loss coverage program and some of these other programs that are involved in the farm bill because we're seeing significant increases to the tune of 70%. i can only imagine what this committee would say and many members of our friends on the other side would say if there's a 70% increase in projections in certain other programs that maybe weren't going into the agricultural sector. what the opinions would be on the other side. i think we need to look very closely in this budget about these projections and about what the costs are. how about the affordable care

act? can you talk to us a little bit about what impact that's having on the long-term budget deficits in the country? >> sure. it's really hard to know what impact it's having because a lot of things have changed. we have done some elements recently on what the effect would be of its appeal. we did an estimate of the complete repeal in june and our estimate there was that it would actually reduce the add to the deficit. that's in large part from the medicare payment controls. the reconciliation bill, we did a look at just the subsidies. proposal without the medicare payments. from there, would reduce the deficit from about $500 billion, about ten years. reductions are working sort of in the opposite directions. of course you have the impact on a number of people who have health insurance. >> so some of the reforms in there, you talk about the

medicare program are bringing the deficit down by $150 billion over the course of the next ten years. you have the 20 year outlays? >> i don't offhand. >> okay. >> i don't thing we estimate. that's the whole thing. that's remopping the subsidies and then removing the controls on medicare payments. >> repeal obamacare. >> right. >> repeal, you're going to have $150 billion hole in the deficit. >> right. >> i think this is an important issue here, mr. chairman. because we talked about long-term deficits and we put the slides up on the tv screen and we talk about how this is such a terrible thing. we obviously have a lot of personal stories. people in states of ohio who now have medicaid coverage, now have coverage, subsidies helping them out, pay for the coverage, pre-existing condition.

and to go in and just this 60 or 70 votes on repealing this without any real plan to replace it. but also sending all those folks into a more dangerous insurance market because they will go back to being denied coverage because of pre-existing conditions. they go back to if they had a tragedy in their family hitting a lifetime cap of course in several months. i think it's important we put all of this into context. the issue with regard to the farm subsidies, what we can do there, investments we need to make in the prevention, healthy foods, getting them into our schools, so on, so forth. if we do what our friends on the other side wanted to do, repeal the affordable care act, blows a huge hole in the deficit. thank you, mr. chairman. >> gentleman from arkansas recognized for five minutes. >> thank you, mr. chairman. thank you, dr. hall. i'm fascinated by the work that

you all do. i studied some economics classes in graduate school in yale. it causes some mental gymnastics when you try to put all this together. i think i would frame it in an economic double negative when we talk about how a tax cut is a spending increase. but i guess it goes back to where you assume the ownership the money is. if the government owns everything, then if you cut taxes and you in theory i guess increase costs or spending for the government. if you follow that out, maybe if you raised taxes high enough, you could totally drop spending to zero along those lines. i'm not sure i'm still trying to process that economic double negative theory. but i was also as an undergraduate trained as an

engineer which basically they just teach you how to solve problems. the first part of solving the problem is to identify the problem. we've obviously identified a problem we have. that is debt. and deficit spending. and if we drill further down into that, you know, we talk about how we're on a slippery slope. and we look at the tops of spending we have that's driving the debt and we see -- you've testified two major areas. social security and government-funded health care. and we seem to be on a slippery slope with moving targets. the reason i say that, just back in march, the experts at cbo said we would have about 21 million enrollees in the aca exchanges. and the latest report you've reduced that by 33% that says 13 million enrolled in the exchanges. so that number's moving. then we look over on the medicaid expansion side of the affordable care act and we see a

projected increase of $187 billion over ten years. compared just to the cbo's estimates back in august. so we're seeing a projection that -- if that's based on increased enrollments, projection's $14.5 million over $11.5 million. why do you think the expand enrollments are increasing beyond cbo's prior expectations and the exchange enrollments are decreasing? >> it's hard to say. with the exchange enrollment to be honest, our earlier estimates were not based on data. they were based on our modeling. we're now getting data in. this is our new estimates based on our experience with the data up to this point. so it should be better at that point. but it certainly suggests that the rate of enrollment is slower than we thought. it doesn't mean we're not going to get to the same level we ultimately forecast for that. it certainly means it's been slower than we thought. as to why, you know, i just don't know.

>> could it be that the exchanges are failing and more people are just being dumped into the medicaid expansion? which still only includes, what are we up to 31, 32 states? we're not even up to all 50 states on the medicaid expansion. >> there has been a big shift towards that. and we expect -- and that's been more so than we thought would happen. >> could you give me an estimate as to the federal government's share, more accurately, the american taxpayer cost per beneficiary? >> i can't off hand. i can -- >> we're in the $6,000 per beneficiary? maybe you can get that number and -- >> i'd be happy to. >> we talked about this projected 14 million population in the aca medicaid expansion. what percentage of those would be classified as able bodied working adults? >> i don't know. >> the expansion population is obviously different from the traditional medicaid population. >> the eligibility is for those who are 138 -- have an income of

138% of poverty or below. so it is a rather different population. >> could you try to get that number for me? >> yes, we can tell you. >> percent of able bodied working adults in the medicaid expansion. also, how many of them are contributing to their health care costs? >> yeah, that i don't know. we can add that to our list. >> probably zero percent. if you can get that number, i'd appreciate it. >> thank you, gentleman, time is expired. >> thank you, mr. chairman.

thank you, dr. hall, for being here. unlike my colleague from arkansas who is a graduate from yale and had studies there partially in economics, i did not. i agree with him this is mental gymnastics. the difficulty is we have to make decisions upon projections. and knowing whether those projections are good projections or projections that may not happen just because what happens in the economy or some other factors is often difficult. as has already been talked about in here, the debt is continuing to grow and the economy after

eight years is still lagging behind and we're in a situation of just how do we rectify all that so my children and now my grandchildren are not going to be left with all this debt. so that just sets up the premise of what i'd like to do is take a look at the side deck you gave us on the economic forecast. i want to go to page number two with the growth of real gdp. i'm curious because on this you're projecting 2.7% growth of gdp. what was the growth last year? >> growth last year was only 1.8%. >> 1.8%. and what was the projected growth? >> i thing we projected 2%. >> 2%. >> we were off. >> i think it may have been just a little more than that. just the fact of the matter is, it did not reach what was projected. there are a lot factors. let me get to that second point of factors of how it is you make those determinations. i actually like your optimism.

guarded with that optimism because we've not seen that. we've continued at least the five years i've been here, undermet every projection that's happened by the cbo on economic growth and that's sad for our economy but, again, making those decisions that we make, we have to have information that is the best we can get. i want to turn to your page number three here where you have projected contributions to the growth of real gdp. you're estimating there's going to be an increase in business investment and also an increase in residential investment. and i'm not sure how you can get to that when at least in my area, what i'm reading on the news is things are not looking that cheery. as a matter of fact, i just this morning was reading the clips. reuters. loss of momentum, projective plunges. the number of americans filing for unemployment benefits rose more than expected last week suggesting a loss in the labor market amid a sharp economic downturn and sharp stock market sell-off. i'm concerned about that. and then on your next page there on page number five, total real compensation of employees.

you're estimating that to rise. we have a lot of business around us and my district. nobody is giving the employees raises right now because everything is so stagnant. growth in business on the next page there anticipated demand. and on the residential formation. so if you can help me with how you get to those projections so i can be more confident as we make those decisions moving forward. >> i'll tell you how we got that number and what the risks are to achieving that 2.7%. first and probably the most important is that consumer spending continues to be pretty strong. it actually has been pretty strong. even this last economic estimate of gdp for the fourth quarter. consumer spending was still okay on that. so that's a necessary thing. but the reason we think business investment and residential investment are going to increase is because they've been very low now for a number of years. and if businesses haven't been investing, they're sort of overdue to update and so that's the main reason why we see an acceleration next year. business investment and then

residential investment as well. so that's our optimism there. >> let me -- i have only 45 seconds left here. what i am proud of, in our budget, we're making some assumption if you go out and look at what helps the recovery. on many of the papers i'm reading say if we could do tax reform where we can lower the taxes for both people and businesses. if we can get our free trade agreements going. entitlement forms. these are all the kinds of things that will actually help us grow. and i recognize your projections. but until we do some of these things that really will be

meaningful, i'm not sure that the projections are really going to matter because we've got to take the bull by the horns and do the kinds of things that will help the economy grow. >> gentleman from alabama is recognized for five minutes. >> thank you, mr. chairman. dr. hall, as has been pointed out several times. you projected to increase. what accounts for this increase in such a small amount of time? >> this is from our august numbers. i'm not sure what the spending part to be honest is. we had some changes in -- i'm remembering now. we had a couple changes. one, we looked at spending on

medicaid. it looked like more people were moving into medicaid as a part of the aca. so because more people are taking advantage of medicaid, we think that spending is going up. the other one is veterans compensation. in particular, the number of veterans going on to disability and the average amount of disability payments have been much higher than we thought they were going to be so we've raised our estimates on that. those are the two big things that affected spending. >> i wasn't going to touch on this, but since you brought up medicaid. your projections for the federal outlays for medicaid reflect an increase of spending for the newly eligible enrollees under the aca. >> yes. >> is this all the $187 billion increase shown as a technical change to medicaid in table a-1? >> yes, it is. >> i want to go back to what i was working on a moment ago. how much of the increase in the

deficit between this january's baseline and last january's baseline is driven by legislative changes in 2015? >> the increase -- i can tell you the increase since august. our forecast there. about half of it was because of the -- >> $750 billion? >> that's right. was about half of it. >> does that take into account interest on the amount it will have to borrow? >> yes, it does. >> okay. how much of the increase in deficit was driven by legislative changes in 2014? >> that i don't know offhand. >> okay. could you get that to us? >> sure can. >> appreciate it. the report shows that projected spending as a share of gdp over the next ten years is about 2.9% above the 50 a year average. so even if we do make some cuts and reform entitlement programs, it would just be returning

spending to a more historical average. would you agree with that? >> that's right. >> if we were to repeal obamacare revenues, how much would you need to save in order to balance the budget in ten years? >> you mean given the absence of the aca? >> not only are we cutting spending on that, we're also eliminating some of the taxes that are associated with it. >> our full estimate of eliminating the aca would be it would add $140 billion to the deficit over ten years. so this would be all of it. this would be the subsidies and reductions in medicare payments. the reduction to medicare payments actually have been --

>> that's just on the revenue side, that doesn't take into account the spending side. >> oh, i'm sorry. yeah, i don't know the breakout. yeah, i'm sorry. i don't know the breakout right now. >> if we were to properly account for the offsetting collections as government receipts and not count them as negative spending and all the money currently spent was still spent, what would the outlook be for 2016, have any idea on that? >> i don't right now, i'm sorry. can we -- do you have a calculation? >> i don't. >> okay. >> that's why i'm asking you. >> okay, i'll get back to you. >> we'll see if our calculations come out. if we're close to that. >> okay. >> in the time i have left.

for what it's worth, everybody else has been optimistic. >> the je plan's time has expired. the gentleman from new jersey is recognized for four minutes. >> can i can he answer the question? >> someone from new jersey raised the point saying this hearing is about the sky is falling and austerity. i'll tell you what the sky is falling for people back in nj nm, the people who lost his job and can't get a new one.

the small business owner who doesn't have a business anymore. the single mother who can't buy enough food or clothing because of the economy. it's the 50 million people in poverty, their sky is falling. a dollar can only be spent one time. and if we have programs that aren't wasting money, they're not going to get it. for those people i think the sky is falling and that's what we're trying to do is to make sure that it's not made worse because of the budget. >> the gentlelady from wisconsin talked about this. what popped in my mind, anybody who works in an h and r block office or fills out turbo tax and at the end of the process the lady says, here's your refund for x number of dollars, i'm sure the person didn't think isn't that swell. the government spending money on

me by giving me $400? they're thinking i'm getting any money back. i don't think they think spending. i think they think that is their own money that they spend for the good food, clothing housing and the rest. that brings us to this point a moment ago i didn't quite get your answer to as to why did we see the unexpect uptick in discretionary spending last year. you gave, you weren't quite sure. let me help you out. the cbo's own report states, and i quote, the increase results larnlly from the bipartisan budget act of 2015. larnlly from the bipartisan budget act of 2015. it's in your report. isn't that correct, then? >> if it's in there, it's correct. >> so that answers the question why we're seeing an uptick in

spending of $32 billion, it's because of this bipartisan budget act. and if you look over history, one of the disappointing things over the last four or five years is you know cbo took a look into spending over this period of time and we were trying to get the house in order. in 2011 congress passed the bca, the budget control act, did what. capped the spending, right discretionary spending over a ten-year period, 2012 to 2021, i believe. and the idea behind it, wasn't that to say how can we save a trillion dollars over that ten-year period. that was the basic idea, correct? >> i believe so. >> here's the problem. in 2013 didn't congress suspend it for two years? >> yes. >> and now with this current law we just suspended it again in

2015 for another couple years. so although we sad savings plans in place, each time we don't enact them we postpone them. so my question to you on this is, do you take that into consideration? i mean that we're going -- congress is continuously going to postpone the savings? and if you don't, why not, in about ten seconds. >> we basically following direction from the budget committee. on some things we assume that when they're due to end they will end. and some times we've been told to assume that they're going to continue. >> but based upon those assumptions your assumptions having wrong each time. and because of that, the forecasts have been understating what our actual deficit is. last question. >> on those issues, yes. >> the gentleman's time has expired. there was a 15-minute vote called 15 minutes ago. members are allowed to submit questions up to seven days that will be included in the record to be answered by the chair, mr. hall later. seeing no more business before the committee, i would like to thank any colleagues again and the witness. this committee meeting is adjourned.

>> as puerto rico is in the process of defaulting on some debts, the bipartisan center looks at strategies and potential solutions to the debt crisis. watch live on c-span2. >> columbian president juan manuel santos is visiting the u.s. this week. he'll meet with john kerry friday. and afterwards, they're scheduled to speak at a joint press conference. we'll fwring it to you live at 2:00 p.m. eastern c-span and c-span radio. >> every weekend on american history tv and c-span3, we feature programs that tell the

american story. some of the highlight for this weekend includes saturday night at 8:00 eastern. historian matthew andrews of the university of north carolina chapel hill talks about how racial tensions of the 180s per reflected in sports. >> "rocky" is a heavy underdog in the first film. he loses in the first film, he loses in a split decision to apollo creed. no one thinks he's going to do well. he does remarkably well but he does not win. in "rocky ii" he knocks out apollo creed in the most implausible scene ever filmed. rocky wins. these were both very popular movies in 1976 and 1979, but these are much more than just sports movies. these are movies about race. these are movies about american history. >> at 10:45, brooklyn law school professor christopher beauchamp

talks about the patent monopoly. the upcoming first in the new hampshire primary, we look back at the 1992 presidential campaign. and arkansas governor democrat bill clinton's second-place finish in new hampshire and his positioning as the comeback kid. >> well, the evening is young. and we don't know yet what the final tally will be, i think we know enough to stay with some certainty that in new hampshire tonight has made bill clinton the comeback kid. >> we'll also feature both democratic and republican ads that aired in the granite state, including those of bill clinton and george h.w. bush. and at 8:00 p.m. on the presidency, university of washington history professor margaret o'marra talks about her book "pivotal tuesdays and a argues the 20th century was

shaped during four elections, starting with the election of 1912. for the complete american history tv weekend schedule, go to cspan.org. >> defense secretary ashton carter outlined his budget request in a speech this week. it included increased spending to challenge russia, and threats from the islamic state and nort korea. from the economic club of washington, this is an hour. >> very honored today to have the 25th secretary of defense as our special guest.se as ash carter has had a distinguished career in government service and in academic life. of def very briefly, he became the 25tn secretary of defense inform member of last year. prior to that, he served as deputy secretary of defense for two years and served as undersecretary of the defense

for acquisitions, technology and logistics.ics.ecre he served as assistant for r se international security policy.cr for those services in the defense department to date, he has been awardedpartm the distinguished service medal of s the department and awarded the defense intelligence medal.iand in the academic world, he's had a distinguished career, as well. graduate of yale university majoring in theoretical physics and medieval history. an unusual combination. he won a rode scholarship.he taught at oxford for a while. came back and was a research la. fellow at m.i.t. and a research associate in the brookhaven laba ultimately in 1986 he went to the kennedy school where he ultimately became the head of an the bellford center in a chairel professor at the kennedy schoole he is the author of 11 or co-author of 11 books and more

than 100 scholar articles on an0 subjects like management and technology and national security so it's my pleasure to introducp the 25th secretary of defense, ash carter.defense, [ applause ] >> thank you. thank you. thanks, david. appreciate it. good morning, everyone.david. appreciate you being here. it's a pleasure for me to be what i understand, david, to ben the first secretary of defense t to address the economic club of washington. and one of the core tasks for me and one of my core goals in thie job has been to build and to rebuild bridges between our r wonderful department and the rtt wonderful, innovative, strong american technology and industry community. so i appreciate you returning

the favor by giving me the opportunity to be here as what is, of course, the largest institution with the largest int budget in america. and it's that budget i'd like to discuss with you this morning. t a week from now, president obama will release his administration's budget for admi fiscal year 2017. about half of its discretionary portion, that is $582.7 billion to be precise, will be allocateo for the department of defense. and today, i'd like to preview with you some of the overarching themes and some of the new mak investments that we'll be makin because the fact is this budget marks a major inflection point for the department of defense. in this budget, we are taking the long view.

we have to because even as we fight today's fights, we must l also be prepared for the fights that might come ten, 20 or 30 years down the road.budget. last fall's budget deal set the size of our budget. allowing us to focus on the he shape, making choices and trade-offs to adjust to a new, strategic era and to seize opportunities for the future. si let me describe the strategic me thinking that drove our budget decisions. first of all, it's evident that america is still today the world's foremost leader, partner and underwriter of stability and security in every region across the globe. as we have been since the end of world war ii.obe. and as we fulfill this enduringf role, it's also evident that we're entering a new strategic era.entering context is important here. a few years ago following over a

decade when we were focused of necessity on large-scale countea insurgency operations in iraq and afghanistan, d.o.d. began embarking on a major strategy shift to sustain our lead in full spectrum war fighting. while basic elements of our it resulting defense strategy me remain valid it's also been wod abundantly clear to me over thet last year the world has not and stood still since sen.ussia emergents of isil and the resurgence of russia being just a couple of the examples. this is reflective of a broader strategic transition under way, not unlike those we have seen in history following the end of other major wars. today's security environment is dramatically different than theh one we have been engaged in forv the last 25 years.

and it requires new ways of thinking and new ways of acting. i talked with president obama about this a great deal over th last year. and as a result, we have five in our minds evolving challenges so that have driven the focus of the defense department's ing an planning and budgeting this se year. two of these challenges reflect a return to great power of compe competition. first is in europe where we're i taking a strong and balanced approach to deter russian aggression. we haven't had to worry about ah this for 25 years. while i wish it were otherwise e now we do.therwis second is in the asia pacific where chi that's rising and where we're continuing to retain the stability in the region we have underwritten for 70 years t and that's allowed so many h nations to rise and prosper and win. that's been our presence.ird c

third challenge is north korea.. a hearty perennial. a threat to both us and to our e allies and that's why our forcen on the korean peninsula remain , ready every single day, today, t tomorrow, to as we call it fight tonight.ght iran is the fourth challenge because while the nuclear deal was a good deal and doesn't limit us in the defense department in any way, none of its provisions affect us or its limit us, we still have to counter iran's malign influencel against our friends and allies in the region. especially israel. and challenge number five is ouo ongoing fight to defeat ly terrorism and especially isil. most immediately in its parent o tumor in iraq and syria. and also where it's metastasized

in africa and elsewhere, all th time we protect our homeland and our people.be while isil must and will be defeated now, in the longer a perspective, we must also take into account in our budget thats as destructive power of greater and greater magnitude falls inta the hands of smaller and smaller and more abhorrent groups of people, countering terrorists will likely be a continuing parn of the future responsibilities of defense and national security s i leaders far into the future as . can see. d.o.d. must and will address ala five of those challenges as parg of its mission to defend our people and defend our country. e doing so requires some new thinking on our part, new w posture and in some regions and also new and enhanced new capabilities. for example, as we confront tie. these five challenges, we'll nol

have to deal with them across al all domains, not just the usual air, land and sea but also s particularly in the areas of cyber, space and electronic warfare where our reliance on technology has given us great strengths but also led to vulnerabilities that adversaries are eager to exploit. key to our approach is being able to deter our most advanced competitors. we must have and be seen to havn the ability to impose either unacceptable costs on an egret advanced aggressor that will either dissuade them from takinf provocative action or make them deeply regret it if they do. to be clear, the u.s. military will fight very differently in coming years.

than we have in iraq and ur afghanistan or in the rest of ts the world's recent memory. we will be prepared for a high-end enemy. that's what we call full spectrum. in our budget, our plans, our capabilities and our actions wet must demonstrate potential foesn that if they start a war we havs the capability to win.eloping because the force that can deter conflict must show that it can dominate a conflict.n in this context, russia and ths china are our most stressing ci competitors. they have developed and are r continuing to advance military g systems that seek to threaten o our advantages in specific areai and in some cases they're hese developing weapons and ways of war that seek to achieve me

objectives rapidly before they e hope we can respond.lenges because of this and because of their actions to date, from d ukraine to the south china sea, d.o.d. has elevated their tions importance in our defense planning and budgeting. while we do not desire conflict of any kind with either of these nations, and let me be clear, though they pose some similar nr defense challenges, they're wih otherwise very different nations and situations. we also cannot blind ourselves to the actions they appear to choose to pursue. let me now highlight some new ct investments we are making in this budget to address both near term challenges. i'll start with the near term challenges. back and begin there with our campaign to deliver a lasting defeat to isil.

as i said a couple of weeks agoi at ft. campbell, kentucky, and s in paris a week and a half ago and as i'll reiterate when i meet with my coalition er-gui counterparts in brussels next ee week we must and we will defeat isil. because we're accelerating the y campaign, d.o.d. is backing that up and we need to back it up in the budget with a total of $7.5 billion more in 2017, 50% more than in 2016. this will be critical as our ura updated coalition military prev campaign plan kicks in. for example, we've recently bees hitting isil with so many gps-guided smart bombs and a-1 laser-guided rockets we are starting to run low on the ones that we use against terrorists 5 the most. s so we're investing $1.8 billion in f y-'17 to buy over 45,000 more of them.

we're also investing to maintain more of our fourth generation fighter and attack jets than we previously planned including a-10 which is devastating to isil from the air. re the budget defers a-10's final 0 retirement until 2022.ar replacing it with f-35 joint strike fighters on a squadron by squadron basis so we'll always have enough aircraft for today's conflicts. another near term investment in the budget is how we're reinforcing our posture in europe to support nato allies in the face of russia's aggression in pentagon parlance, this is called the european reassurance initiative and after requesting about $800 million for last year, this yee year we're more g than quadrupling it for a total of $3.4 billion in 2017. that will fund a lot of things,a more rotational u.s. forces in europe, more training and xer sidesing with our allies, more prepositioned war fighting geara and infrastructure improvementsy to support all of this. and when combined with u.s. forces already in and assigned to europe, which are also substantial, all of this together by the end of 2017 will let us rapidly form a highly capable combined arms ground force that can respond across also that theater if necessary. as you can imagine, the budget o

also makes important investmentd in new technologies. i we have to do this to stay ahead of future threats in a changing world as other nations try to h catch up with the advantages we have enjoyed for decades in ares areas like stealth, cyber and space. some of these investments are long term. i'll get to them in a moment. tm but to help maintain our advantages now, d.o.d. has an d. office we don't often talk aboud but i want to highlight today.bt it's the strategic capabilities office or sco for short. i was deputy secretary of short defense. to help us to reimagine existing d.o.d. and intelligence, community and commercial systems by giving them new roles and g game changing capabilities to confound potential enemies. the emphasis here was on rapidity of fielding.ed to m not ten and 15-year programs. getting stuff in the field quickly. we need to make long-term

investments, as well.invwell. i'll get to them in a moment but the focus here was to keep up iu with the pace of the world. i picked a talented physicist, a rhodes score lar, to lead it. sco was incredibly innovative, u and rapid development and even g the rarer virtue of keeping current capabilities viable for as long as possible. in other words, it tries to build on what we have.it's go smart. so it's good for the troops, it's good for the taxpayers, too. thinking differently in this way as is well-known in u.s. defenss history and space, country on the moon, computers in the c pockets, information at the s i fingertips. all that.th taking airplanes off of the of e decks of ships, nuclear s submarines beneath the sea, satellite networks that take pictures of the world.

all those things. this kind of bold and enno investigative thinking can't be lost to history. it's happening now every day not only in sco but in other placese throughout the department of defense like the dozens of get r laboratories and engineering centers all over the country. as we drive this work forward, the budget grows the research and development accounts for the second year in a row. investing a total of $71.4 ting an in r&d in 2017.row. a number that no other institution in the united states or the world comes close to. and to show the return we're getting on those investments i'll tell you about a few projects in the sco. r that it's been working on and that are funded in this budget.. some of them you may have heard of but my guess is some of you a have not and some of them we're talking about the first time here.ut mys first one is advanced navigation. ed taking the same kinds of micro

cameras, sensors, so forth ting littered throughout our small smartphones and everything today and putting them on the small diameter bombs to augment the existing target capabilities on the sdv.exis this will eventually be a modulr kit to work with other payloadsr enabling off targeting, small o enough to holdth in your hand ln your phone and cheap enough to own like your phone. another project uses swarming autonomous vehicles in all sorts of ways that in multiple domains. in the air, they develop microdrone that is are really dd fast, really resist tent. they can fly through heavy winds and be kicked out the back of aa fighter jet moving at mach-spoint 9 like they did in alaska last year.

or they can be thrown into the air by a soldier in the middle t of the iraqi desert.og and for the water, they've developed self-driving boats to which can network together to do all kinds of missions from fleet to defense to close end surveillance. without putting sailors at risk. each one leverages the wider world of the technology. microdrones are actually 3d printed. same and the boats built on some of the same artificial intelligence algorithms that a long time ago and in a much more primitive form were on the mars lander.ore they've also got a project on gun based missile defense. where we're taking some of the i same hyper velocity smart for t projectiles we developed for the electromagnetic gun, that's the rail gun and using it for pointe defense by firing it with f artillery we already have in our inventory.lready including the 5-inch guns on the front of every navy destroyer fn

and also the hundreds of army ow self-propelled howitzers. mone in this way, instead of spending more money on more expensive m interceptors or new platforms, n we can turn past offense into os future defense. defeating incoming missile raids at a much lower cost thane round and imposing higher costs on an attacker. in fact, we tested the first shots of the hyper velocity projectile a little over a month ago and we also found that it y significantly increases the range.sig and last project i want to highlight is one we're calling the arsenal plane which takes one of our oldest aircraft platform and turns it into a ato flying launch pad for all sorts of different conventional payloads.

in practice, the arsenal plane t will function as a very large airborne magazine, network to fifth generation aircraft that act adds forward sensor and tar getting nodes, essentially combining different systems who already in our inventory to create wholly new capabilities. so these are just a few examples of what the sco has done so far. and they're working on a lot more.e. orking now, there are many other arease where we're driving smart and is essential technology p gical innovation in the budget to sta ahead of threats in the long ded term andes keep our military in the decades ahead the best in the world, the first with the most bar none. wit one of these is undersea capabilities where we continue to dominate. and where the budget invests over $8.1 billion in 2017. and more than $40 billion over . the next 5 years to give us the most lethal undersea and anti-submarine force in the world. it buys more advanced payloads and munitions like better

torpedoes and unmanned undersea vehicles.s it buys more advanced maritime l patrol aircraft. and it not only buys nine of ouo most advanced virginia class urs attack submarines over the next five years it also equips more of them with the versatile it virginia payload module which 't triples each submarine's platform strike capacity from 12 tomahawk missiles to 40. now, budgets often require trade-offs, which all of you in your own domains are very ry familiar with.be so where trade-offs among force structure modernization and readiness posture needed to be o made, we generally pushed to favor the latter two. w this is important because our military has to have the agility and ability to win not only the wars that could happen today but

also the wars that could happens in the future. to put more money in submarines, navy fighter jets and a lot of other important areas one trade-off was to buy only as ay many litoral combat ships as we really need.this is this is part of a broader effort in our budget to focus the navye on having greater lethalitygreat and capability that can deter and defeat even the most high-end future threats. i'll be discussing this further tomorrow in san diego when i visit some of the navy surface warfare sailors. we we're also investing more in cyber.ly totally nearly $7 billion in ovr 2017 and almost $35 billion over the next 5 years. among other things, this will 5r help to further d.o.d.'s network defenses, build more training ue ranges for our cyber warriors and also develop cyber tools and infrastructure needed to provide offensive cyber options. i also want to mention space because while at times in the n

past space was seen as a hat's sanctuary, new and emerging threats make it clear that's not the case anymore. last year, we added over $5 billion in new investments to make us better postured for that and in 2017 we are doing even more.ed forand i enhancing our ability to identify, attribute and negate all threatening actions in space.space. like with so many commercial space endeavors, we want this domain to be just like the oceans and the internet. f free and safe for all.n't wa there are some in this world who don't want that to happen. who see america's dominance in these and other areas and want to take that away from us in the future so we can't operate y frm effectively around the globe so we're not waiting to invest glo until the threats are fully realized. waitiwe we're investing now so we stay ahead of them. so now, of course, pioneering and dominating technological mina frontiers is just one way that our budget seizes opportunities

for the future.we're we're also innovating operationally, making our contingency plans and operationd more flexible and dynamic from europe to the asia pacific. and we're investing to build the force of the future as i call s it.nteer force of -- the all-volunteer force of the future because as good as our technology is, it's nothing compared to our people. our people are the reason we have the finest fighting force the world has ever known.nt we and we have to ensure that the talent we recruit and retain generations from now is just ash good as the excellent people we have today. i made several announcements over the last few months to hel. to do that. we're opening all remaining combat positions to women. very simply so that we have access to 50% of our populatione for the all-volunteer force.a

and every american who can meet our exacting standards, and that's important, has -- will have the equal opportunity to contribute to our mission. we're also implementing severald new initiatives to improve and modernize our personnel call management systems to create what i call on-ramps and off-ramps that allow more people inside and outside d.o.d. to engage with and contribute to our mission. people outside defense to come in for a while, maybe not for a career but for a few years.not f and contribute to the most consequential mission that a human being can contribute to.an and our own people to get out o and learn about how the rest ofs the world works and make sure he they're up to date and up to speed. i have emphasized this both in silicon valley and our boston technology hub. valto the m and we're strengthing the famili support we provide to our military families to improve

their quality of life. th the emphasis here being on tentn retention of excellent people and where we can making it possible for them to reconcile f the needs of having a family with our needs of military service. not always possible to reconcile but we're making an effort where we can consistent with the profession of arms and our needs. w there will be more to come along this line. ta now, having told you about the budget and particularly talking to an audience like this, i need to say something also about how we're reforming the d.o.d. toths enterprise to make us more efficient.t.efore i can't come before a group liki this and ask for the amount of money that i believe we need for our defense unless i can also st satisfy you that we're spending. it in the best possible way. just like you have your shareholders, we have our

taxpayers, and we owe it to them to ensure we're doing everythin we can to spend our defense dollars as wisely as responsibls as possible.at's w that's why along with our reform budget we're keeping up our focus on, for example, acquisition reform. we're starting to see results from our better buying power ng to stsrom our initiatives. we're looking to do more and get better. we're also doing more to reduce overhead, which we expect to bl help nearly 8 -- provide us more than $8 billion over the next five years. $8 billion that we can use elsewhere for real capability e and not overhead. and we're looking at reforms to the goldwater-nichols act, the famous act of the 1980s that fau defines much of d.o.d.'s institutional organization. we e on this last point, we have been doing a thorough review for the last several months. and i expect to begin receivinge recommendations on thatk in

coming weeks and making decisions. let me close by touching on the broader shift that is reflectede in this budget. for a long time, d.o.d. tended . to focus and plan and prepare for whatever big war people thought was coming over the horizon. becomi badadthat at one point becoming so bad ae that after a while, it started to come at the expense of f cere current conflicts, long-term at the expense of the here and now, thankfully, we were able to the realize that over the last decade, correct it and turn ourt attention to the fights we were. in. we had do that. the difference is, while that kind of singular focus may have made sense when we were facing off against the soviets or sending hundreds of thousands on troops to iraq and afghanistan, it won't work for the world we live in today.n, now we have to think and do a he lot of different things about a lot of challenges at the same na time. sad to say but true. at not just isil and other terrorist groups but also

competitors like russia and hina and threats like north korea and iran. we don't have the luxury of just one opponent. or the choice between current fights and future fights. we have to do both. and that's what this budget is s and designed to do. i when this forum we're in now was founded 30 years ago, its inaugural speaker declared thats america's best days should still lie ahead. with this budget and with our es magnificent men and women of the department of defense, they will -- our best years will lie ahead.artme as those men and women of the department of defense continue to defend our country, help make a better world for our children. thank you.. [ applause ] i

>> in introducing you, i neglected to say when you were in high school you were a lacrosse player, a football yea player, a cross-country runner and also basketball.did how did you manage to do all in those sports? >> i always did a sport in each of the three seasons. i did swimming and diving in the summer. plus i always had a job at night. alwaysys worked at night.mer. fishing boat, gas station, hospital orderly. i was a busy guy.do all but i couldn't do all the sports you named at the same time. and when people got a lot bigger and taller than i did, i gave up basketball. started wrestling. when they got beefier than i did, i gave up football and i started to run cross-country. and lacrosse isble onean of th things where if you're pretty good at everything you can be pretty good at lacrosse. if you're pretty dexterous and pretty fast and you have prettyd good endurance and you're prett tough but you're not a big football player or a tall re no basketball player, something you can do -- it's a good sport..pl. >> when you are the secretary of defense, you have all the military under you. are thehe they're in pretty good shape.

you have to stay in shape. what do you do to stay in shape? you look like you are in good shape. >> i try to work out whenever i can. really every day.e > to if i can. i drive everybody crazy. i think people like it. i walk a lot. one of the nice things about -a working at the pentagon is -- it has these great big hallways. i walk around. i talk to people. ound.o a little bit of talkking management by walking around. >> you walk in somebody's offico and surprise them? >> when you get to the top, you. everybody comes to you.not mov so you can sit there all day and not move. if i worked in a smaller office building -- nobody has a building as big as the pentagon. i think i would go nuts. because i like to get out and move around. >> let's talk about the budget o for a moment. is it harder to negotiate the budget with service chiefs or omb? what's harder? >> well, i've got to say, omb bt tradition is not totally but

quite deferential to professional military and d.o.d. advice. ional we get a lot of latitude i woull say compared to the civil agencies..say c within the department, we have a very -- a process that has gonee back for a long time. you know, it really makes the best use of the uniformed and civilian leadership.p. and i was undersecretary as you mentioned for acquisition and technology and logistics. chnolo and whenever a decision was made above me, i always said, i wish somebody had asked the person o who has to carry that out. so i'm very -- i believe in involving the people who have to carry out these decisions and execute these budgets in the e decision making. miserv so i'm very inclusive in that t regard. i think we have an excellent -- professional military judgment in all of our services. and that's all reflected in thie budget.

this is what these people who do this for a living and have for many decades think is the best way to spend this money. i have a lot respect for their judgment. tois y. >> the defense budget the president will propose is $582 billion more or less.se congr suppose congress says, we think you need more. what will do you?you you'll resist that? you won't take that money? >> no. don't say that.we h look, the budget that we have reflects the bipartisan budget u deal of this year for which i am grateful.and i and i'll tell you why. and i will tell you why. we have started every fiscal year for six years, david, withs a con continuing resolution.w i won't go through -- most people in this room know how debilitating that is, how inefficient it is. litat it's dispiriting to our troops. they say, what's going on? other countries look and say, what's going on with you guys? can't you get your act together? it's very important that we not be jerky proceeding.o-year

it was only two years. only a two-year budget deal..bue i would have liked something longer than that.uestion but it was what i have hoped for and was speaking about since i became secretary of defense, , which was a coming together in washington.n. end of gridlock. what that means to your questio is, did i get everything i want? no. but i think that's the definition of people coming together and compromising is ba everybody walked away without having everything they wanted. that said, with the money we have, the shape is what matters. we have been working on the shape within the size that the bipartisan deal gave us. >> for many years we have had a dual budget for defense. we have had the regular budget vebudget and a so-called oco account where -- for the war. is the new budget agreement such that you can't get more money for oco and 582 is including that. both.

>> 582 does include oco. the budget deal did take account of both. let me tell you why the theory of oco is a good one.e. i'm sorry.o it's overseas contingency operations funding, so-called wartime funding. c it is funding intended to cover the variable costs of operationp that go up and down in the course of a year. down i the base budget funds the enduring military that will be here ten years, 20 years down the road. if you think about it, david, think about hurricanes, for example. prosaic example. thanes, a major hurricane occurs every three years.. we're asked to respond. can you can have us do that. you can give us the money every year and we will spend it. or you can give us the money when the hurricane occurs and wa will spend it. we then. that's obviously more efficient. it makes sense to have variable costs in the budget. leaked

>> it has been leaked -- sometimes there are leaks from y the pentagon. you probably are familiar with that. something that has been leaked that the navy would like to havy a few more ships.thos i think you cut the number downg to about 40. they wanted maybe more. suppose they go to capitol hill and try to get more. will you resist those? of t >> well, i'm going to argue for what we, including in the navy, think is the best balance. by the way, the size of the navy is increasing. we're going to go up to 308 ships. >> you have -- what do we have now, 280 or so? avectly r >> exactly. that's exactly right. 278 actually. we are increasing the size of the navy.278 but what's really important is to increase the lethality of each ship. emphasi so we're emphasizing that. and we're emphasizing under sea. we had to make tradeoffs. in each of the services you make tradeoffs as i said amongst tod force structure, capability, foe investment and readiness.

all three of those are important. you just have -- we only have so many dollars. >> there's one ship you are building. it's a new gerald ford class bi aircraft carrier that supposedln will cost as much as $15 billion for one ship. fo how did one ship get to be so r expensive?u goi and are you going to build more of those?ore. >> i'm sure we will build more in the future. we will not build them in the way that that was built. that's an example.hewill not in i talked about the need for discipline.rogram that is a program that was undisciplined. we're trying to wrestle that onh into shape.at othe i'm not going to try to justify the history of the ford class carrier over the last 15 years g or so. we have been trying -- i started when i was -- to get that program under control. by the way, a lot of our

programs we are getting under s control now. the figures reflect that. but we have got to do more. peop it's important because not only for efficiency sake but for the confidence of our business community and our political leaders and our people. they say, look, we're giving u you, you know, this much money for defense. we need to see that you are using it well. when we have an example of that where there's a cost overrun of that magnitude, it casts into doubt the whole enterprise. it's not okay. of course, we will buy more aircraft carriers in the future i'm supposing we will. but not that way. >> so on isil, do you expect it's likely for any possible way that you can see the u.s. government during the obama administration sending ground q troops into the syria iraq area to combat isil? >> we are. >> significant ground troops. 50,000, 100,000, anything significant??50,0 >> we're looking for a couple things about that.

just to remind everybody, we have 3,700 boots on the ground in iraq today and we're looking to do more. we're looking for opportunities to do more. look o oto to get to your question, we're not looking to substitute for local forces. we're looking to enable local m. t forces. why is that? it's because we not only have tp beat isil, we have to keep theme beaten. that is, there has to be somebody who sustains the defeat afterwards.we kn we know what it's like when you don't have that force to sustain the defeat. e and so we're -- our strategic approach is to enable capable motivated local forces. they are hard to find in that t part of the world. but they do exist.ng but do we have troops that are o helping them? yes. foppo we're actually looking for opportunities to do more. go so as we go north to mosul, we have to take raqqah.sul, that will prove there's no such thing as an islamic state based on this ideology.e. we need to take those two

cities. need you'll see us doing more.e. we've asked for more. every time the chairman and i have asked the president for more capability to do that, he has said yes. i expect that will continue. one other thing, david, which is it won't just be americans. this is crucial. it's got to be the other member. of our so-called coalition.a a lot of them are doing -- making considerable is right contributions to this. but some of them are not. and you really have to look -- this is a fight of civilization for its own survival. we need everybody -- and that's all the europeans, the gulf states, which are do -- turkey which is right there on the border. there are a lot that need to make more contributions. are we going to do more? yes. we have to win.

>> in your coalition, you have 65 countries. i think in davos and other coui places you said the other r d te members of the coalition aren't doing very much. what are you doing to encourage them to do more?t are >> well, not all of them are in that category. tocourage>> we but many of them are. d so what am i doing to encourage that? i next week i will be for much of the week in europe.fense and i've asked the defense ministers -- the first time ever interestingly since the campaign against isil began, that the defense ministers -- not the foreign ministers.nst they've met before. but the defense ministers getting together. what i'm going to is sit down and say, here is the campaign plan for -- if you think world war ii news reel picture terms, think of an arrow going north tn take mosul and another arrow coming south to take raqqah. that's kind of a good mental picture of taking care of isil w in syria and iraq. we have other places in the world, but we have -- it's necessary, not sufficient but

necessary to destroy isil in 's iraq and syria.d. and what i'm going do with them is say, here are all the capabilities that are needed. boots on the ground. he airplanes in the air.. more prosaic things. logistics. bridging. training. training for those police that are going to patrol cities like they're patrolling ramadi now ae once the cities are retaken. you i will say, okay, guys, let's match up what is needed to win with what you have and kind of d give everybody the opportunity to make an assignment for themselves. this is important.rtant.thates i the united states will lead bec this. and we're determined. real but other people have to do their part. because this really is -- civilization has to fight for itself. -- >> we've flown about 10,000 sorties over iraq and syria in this effort. but most of them have been from ave floted states.self. is anybody else actually flying and dropping bombs?

>> yeah. others are flying and dropping bombs.pping >> and and we're grateful for that. otr but there are other ones that are flying transport aircraft, that are flying tankers,s,are f are flying awacs aircraft, that are flying isr reconnaissance airplanes.connais there are people doing training, the brits, the australians, a number of people besides us aree doing training in iraq and taking action in syria. s so i don't want to suggest that we're doing it all by ourselvese now, there are some folks that are really doing amazing ves. courageous creative heroic work. but the reality is we have a coalition that is committed at the political level to defeat isil and that needs to be translated into the operational military contributions they are making. that's what i will be doing next week in europe.tributi be >> the russians say they want to defeat isil. but their guided missiles don't seem to be going to the right

places. is that because their technology is not as good as ours? >> that's so true. they did. they said they were going to go in and fight isil. g that's not what they did.the ma that would be welcome if they did it, but it's not what they are doing. in the main what they are doing. is propping up assad. so this is wrong-headed in two e ways. it's wrong-headed in the sense that it's not doing what needs to be done.hat remember, they have a threat from isil too. in the caucasus and so forth., . you've seen isil going after the russians too. so serious business for them as it is for us and the rest of the civilized world. >> when they are flying around and we are flying around, how do we coordinate? >> we have worked that out. we talk at the working level and make sure we have safety of tag flight. they are behaving professionally in that regard. what they need to do -- i don't know whether they will do ur to

that -- is get on a different strategic track. that would be one where they pe help us to make the transition g in syria that has to occur to end the civil war there and get a decent life for people there again. that means without having the whole state of syria collapse and all the state structures go away, without the person of pes bashar assad, who is a lightninl rod for civil war. but a transition where the state structures, as the russians say, survive and the moderate opposition and those state m structures combine to make a government of syria that can rue the place on some decent us principles and then help us turn against isil. a that's what they should be doing.at th but they got off on the wrong foot. tr

i think they have a es self-defeating strategy.and s i don't know how long it will take them to realize that. >> speaking of the russians, on ukraine, it has been reported that we're training in the united states ukrainian soldiers and sending them back now. do you expect to have more youe conflict there? >> we actually train them in ukraine.vious mostly. we send equipment and so forth. it's hard to say -- obviously, while we're watching the the russians' activities in the middle east, we're not taking i our eye off of ukraine. i mention that we're making e investments in europe, supporting our nato structure in europe and also supporting the ukrainians militarily and in other ways. >> you expect more conflict in t the near future? >> it's hard to say what -- whether the minsk accords are not being implemented to the letter. at the same time, the level of

violence is low are than it hast been. i certainly hope it stays that way. the minsk accords is the right way to go to settle things downi there.ven don't forget, david, even if st things settle down, crimea was still annexed.>> you >> i know. >> you have to look at this conduct by russia and the rest of the europeans do as well and say this is an unwelcome this n development in european history. as i said in the speech, it has been a quarter century since we had to be preoccupied with that. unfortunately, it looks like no. we do. i wish it were otherwise, but both ukraine and in nato, we're going to have to help countries to harden themselves against e russian influence, including thd little green men phenomenon, and also mount, as we did in decades past, staunch defense of our nato allies. >> so in afghanistan, before you leave office, obama administration is over, what do you expect that we'll still have 8,000 to 10,000 soldiers there?

>> the plan is to have 9,800 through the end of the year. that's our plan. we adjust plans.s the the president adjusted his plan. in october.get i the thing to look for in this coming up season is the growing capability of the afghan security. -- the whole deal is over a period of time that's not going to end by the end of this year, we have a plan to stay with it. the budget i described -- i supd should have said this in the budget contains full funding for the afghan security forces. remember, that's the key. they are supposed to be increasingly able to take over i their own security. so in this season coming up, you watch whether they are using ane operational mobility more than v they did in this last fighting

season, whether they will have now fixed wing aircraft. we just delivered to them. rotary wing airport. all these capabilities they didn't have last season they will have this season.heseiti you hope that that -- not hope.d that's the plan is to have that strengthen their hand against taliban. full self-sufficiency is years away. kor and everybody knows that. >> you mentioned north korea as one of your favorite subjects in your speech. did the north koreans explode a hydrogen bomb recently? >> i don't think that they were as successful as they may have a claimed. may we don't know that fully. i don't want to go any further than that. but i -- that's the story. don't forget -- i don't want you to take any consolation from do that, because nuclear weapons in the hands of north korea, particularly coupled with cou ballistic missiles, coupled with their -- how do i say this?ight odd demeanor and position right there on the dmz, that's a really serious combination. they're not in the headlines a

lot. mz, but we, as i said, never take n our eye off that. >> you famously wrote an articl with bill perry when you were not in government saying that maybe a pre-emptive strike against an icbm or other missile capabilities of the north koreans will be something the e u.s. should consider.umstan do you still have that view?nch >> that was a different circumstance then. it was a test launch missile. our policy was that we were not to tolerate it. we were trying to figure out how to not tolerate it. so that was then. now is now.rth but for now, the nuclear program of north korea is a serious concern, the ballistic missilesc are a serious concern, the sizee of their force positioned righta

there on the dmz and the size of the special forces which they work on quite hard, in every way they are a serious business. n about and i just got to remind you, we're on the korean peninsula. we will win.rea no question about it. but it is a very, very savage te and intense war.rren so it's no -- it's not something that -- not an area where you want deterrence to fail. but deterrence has to be very strong there every day. >> the chinese seem to be building islands in the south china sea. are we going to just let them do going are -- are we going to -- do you think they're going to use it for military purposes? goio send are we going to send our ships nearby? >> they are.arby? act. and we're reacting. we have to react.. by the way, it's true that they

are not the only ones doing this. therefore, our formal position as a matter of what about these claims in the south china sea id that we, the united states, s. don't adjudicate those claims. we do want is everybody to stop land reclamation and stop military.nd the one you described, namely, we will keep doing what we have done, what we have done for 70 years. we will fly and sail and operation where international law permits, period.t stop ki and we demonstrate that and thae won't stop.ntsfense second, we're making all these investments that you see in our defense budget that are specifically oriented towards the checking development of the chinese military.hinese third, they are having the effect -- i don't know when thie will dawn on them -- of causing

widespread concern in the region which makes others react, ager including others react by joining up with us. so to give you a few examples. vietnam, for example.rity. very eager to work with us on maritime security. vietnam. and then good old friends that you are very familiar with, , ri australia, the philippines, gion probably notice that japan is a rising military power in the of pacific and close longtime friend of the united states.self so all around the region peoplew are reacting. the chinese are with this kind l of stuff going to get people to react and compensate. more importantly, it's self-isolating behavior. i don't know when they will nitd realize that, whether they will realize that. it's not the american approach to have a cold war there, to carve up the region, to divide.

we're not trying to stop the th chinese from doing what they're doing.d look at what the united states itted has brought to the asia pacific region over the last 70 years. the most rapidly growing region economically in the world. it has been the peace and lives stability there that we underwrote that's allowed first japan to rise, then south korea, then taiwan, then southeast asid and now china and india. that's what we have stood for. and they have benefitted from dr that. so to disrupt the security environment where half of humanity lives and half of nk humanity's economic behavior is is not a good idea on their part.d? been certainly for our part, we intend to continue our strong role there. >> before you leave office, do n you think guantanamo will be cle closed? >> don't know. i have been completely unabasheu about this. i would like to see it closed. i think on balance it would be good for us.hat

but here is the issue. there are people in that detention facility that -- there's no other way to say this -- have to be detained. there's no way that i can safely have them transferred somewherey else.stio so to answer your question can it be closed safely?n for us to do that, we have to e. find another place to detain the people who must be detained. now, at the moment it's against the law to establish another detention facility. some in congress have considered a willingness to consider a proposal to build an alternative facility. we have such a proposal. and we'll see whether we get the support for it. this is something that i just would rather not leave to my y successor, the job of this next detention business and to the gt next president. but i don't know whether we will get it done this year. it's not something -- to do it this way, we need the help and support of congress.

i hope we're getting it. i'm working on it. i think it would be a good thing for the country on balance. >> how damaging were the snowden revelations? and has it made it difficult for you>> to work with silicon vall firms? >> no question it was damaging.i it was damaging first to our security in compromising important secrets to our foreign policy and relations around the world but critically to our arustry. and yes, it created some hich i distrust, which i'm working very hard to try to overcome. to not by preaching to people and not by -- trying to work through issues. -- but also, you know, for our companies, it has put them -- it has used as a -- essentially a guise for protectionism by some competitors to american companies. no question about it.sadvant so it has put -- edward snowden's actions put our companies at a disadvantage to the point where some countries

that -- from whom it is wild to hear such a claim are saying, oh, store your data in our country, it will be safer there you oh, go, really? safer than here? you know, i'm intent upon building bridges of trust. when i was started out in this business and was a physicist, ny everybody in the generation older than me that brought me ht up, they were all manhattan project people and so forth.forn they had a reflex that it was ap important duty to use your knowledge for good and in service of the public good. i can't expect that for he. everybody today, not as big a fraction of the young people a have the experience of closeness to the military.

that's why i'm trying to reach out to people and make them sit familiar with what we're doing, give them a user friendly way to make a contribution. i do find that people out in silicon valley and our who innovative community -- i need to say this. these are people who have -- ar where they are because they liks to do things of consequence.et they see that defending our have country and defending our world is something of consequence. so the mission does grab them. they get it. they look at isil and they look at these problems i have talked about russia and china and so on, they understand this is serious matter.ndr. to we have to defend ourselves.hal but i need to meet them halfway, listen to them and find a way in this very different age from when i started where a young person can see their way to hei contributing to the greater -- w what's better than waking up in the morning and being part of something bigger than yourself? >> you have said that women canb be in all combat parts of our military force.ce. the marines were not thrilled with that, i think.you you overruled them?

how did that work?we >> the marines raised some issues which we have to addresse we are addressing in implementation that didn't make me say we're not going to it, o but it made me say -- if you read my statement, i'm working w right now on the implementation. simply declaring things open is. not effective implementation. there are real issues here. we're working through those issues. it was important to them, for example, that i say and i did sd that the way we implemented thie was going to be important, that standards were not going to be relaxed, that there would be no quotas. this was about creating the hey opportunity. but i couldn't make it so that

women would be able to satisfy o that -- those standards in the numbers that -- there's a lot that needs to be done here.ry n i thought they raised some veryy important considerations. and we're addressing those in h implementation. but for the army and the navy and the air force and our special operations command, thee all recommended no additional restrictions.tandarex they also gave me their reasoning. i took all this together, put i- together and said what i said, which is this is the right m decision, but we have to not me implement it carefully, standards are important, don't expect quotas. we're going to do it in a p serious professional way like - i'm not saying this about me.ler i'm saying about the department of defense. i'm so proud of a place like that that is a learning, adapting organization.y. they take on things -- we took on counter insurgency. before me time. mastered it. you may not have liked the u ma circumstances.y i'm not trying to say that.

but we got really good at it. o this say place that takes on a y mission and then very carefullye very deliberately, very professionally works it throughy we will do that. we will do that for this. i'm completely confident. >> you have a ph.d. in theoretical physics.vetical p and you're a summa cum laude graduate in physics and medieval history from yale. mee when you deal with members of congress, are they often on the same intellectual plane you aree is that hard for you -- how do you deal with that? >> the joke that everybody tells me, not with congress wit specifically in mind, is that i have finally -- they were two e completely separate majors. they were kind of a left brain/right brain kind of thing. i liked them both. i but people now say that i work m in a field that is the perfect union of medieval history and physics.m but for congress i'm going to say something that may surprise you. goin memb

i find that the great majority e of members of congress that i interact with are really serious, thoughtful, want to doh the right thing. they sometimes find themselves in a situation where they can't find a way to do the right thing. i think that's frustrating for r when lot of them.uge that's why when we do come together behind this budget deal and so forth, i think it's a huge triumph. the folks who did that, despite all odds sat down, worked it out, the old-fashioned way in congress, i really think deservt o think a lot of credit for the -- it wasn't everything everybody sn' wanted, wasn't forever. it was for two years.body that's the way things ought to sn't ne. you can't just pound your spoon on your high chair in this country and get what you want. i can't do that. i have to work with other eople. want. >> final question. what's the best part about being secretary of defense? >> the troops. absolutely. it's being among the people.mong that's what lifts you up every time.y

you look at them and you say --u it's just -- it's incredible. my wife works -- she can't spenk a lot of time doing things.nd but when she does, she loves the troops. they are families. these are fantastic people. that's by far and away the best part. part. >> and the worst part i should say is having to write the letters to families? >> yeah.tofamam you never get used to the loss.e i've been at this now seven years. fortunately, the numbers are re less than they were when i came in.en i c but that never stops being harde >> thank you very much for yourr service to our country. >> thank you for having me. >> appreciate it. [ applause ]

♪ if a caucus is the test of a candidate's organization, which is what we saw in iowa, a primary is really a test of the candidate's message. a primary is different because you go in, you cast your ballot, and then you leave, versus a caucus where you have to spend a couple hours in a room hearing speeches and then making decisions. so what we'll see in new hampshire and what we've seen in the past is the field really begins to winnow out, especially on the republican side. it's a two-person race for the democrats. and it's a question of expectations and which candidate is able to meet or exceed those expectations, and we see that in new hampshire because it is of

course a real test from voters who go to the polls. if you saw our coverage right before the iowa caucuses, the one thing that we were able to do that no other network did is really take you to the campaign rallies, take you to the venues as the candidates try to close the deals before the iowa caucuses. we'll be doing the same thing right before the new hampshire primary on tuesday. so as the candidates crisscross the state, whether it's a small event or a large campaign rally our campaign bus will be on the road as well and really give you a sense, a flavor of whapgz in this key state. it's the first in the nation primary. new hampshire has a long and rich history. and for those of you who are not in new hampshire, a chance to watch it all unfold. >> our road to the white house coverage continues in manchester, new hampshire ahead of tuesday's primary. first a campaign event with carly fiorina live at 8:30 a.m. eastern on c-span 2. then vermont senator and democratic presidential candidate bernie sanders at a politics and eggs breakfast live

at 10:00 a.m. eastern on c-span and c-span radio. friday evening, democratic presidential candidates hillary clinton and bernie sanders will speak at a new hampshire democratic party dinner. that's live at 7:00 p.m. eastern on c-span, c-span radio, and online at c-span.org. colombian president juan manuel santos is in the u.s. this week to meet with president obama. after a meeting in the oval office the two spoke in the east room of the white house. this is just over 20 minutes. ladies and gentlemen, the president of the united states and the president of the republic of colombia. [ applause ]

>> thank you so much. please be seated. well, good evening. bienvenidos a la casa blanca. thank you all for being here as we reaffirm a great partnership between the united states and colombia. and as we celebrate a decade and a half of progress under plan colombia. it's a great honor to welcome my good friend, president santos, the first lady, ms. rodriguez desantos, their outstanding sons, who are -- one is at uva and he reminded me that the basketball team there is better than the kansas jayhawks, his father's alma mater. i want to recognize former president pastrana. we are honored to have you here

as well. and i want to thank all the leaders, all the members of congress who have been critical to this partnership over many years. it's been a bipartisan effort of support, democrats and republicans. business leaders, faith communities, civil society. our military that has done outstanding work. and i especially want to recognize someone who's played a vital role in the peace process. that's our special envoy bernie aaronson. so thank you, bernie, for the good work you're doing. in the united states we are big fans of colombia. we love its culture. we love its contributions. we love shakira. carlos vides.

sofia vergara. i really, you know -- [ laughter ] we're joined by many friends from colombia. we have a lot of proud colombian americans. and that includes some of the great talents who are here tonight. we've got actors like jon leguizamo. where's john? right there. [ applause ] juan pablo montoya. [ applause ] there he is. former shortstop for my beloved chicago white sox, orlando cabrera. there you go. [ applause ] so the bonds between our country are not just at the level of government. they're people. they're cultures and friendships

and family. and reflective of that, president santos and i just had another very productive meeting. this is one of the strongest partnerships in the hemisphere. and increasingly, we're global partners. it's a partnership grounded in mutual interests and mutual respect. and juan manuel and i discussed ways that we can continue to strengthen our ties with more trade, more investment and clean energy, ever deeper combination in the region. of course much much our work seized on how to seize this incredible moment of promise in colombia. we all remember a time not long ago when colombia was torn apart by terrible violence. plagued by insurgency and civil war. . many of you who are here lived through those times. some of you here lost loved ones or friends. cleegz. and that's why the united states and colombia forged what became

plan colombia. starting with president pastrana and transcending the administrations in both of?kcñ countries. we were proud to support colombia and its people as you strengthened your security forces, as you reformed institutions. so plan colombia has been a tribute to the people of colombia and their efforts to overcome so many challenges. and after 15 years of sacrifice and determination a tipping point's been reached. the tide has turned. as president santos would be first to tell you, obviously serious challenges remain. but from cartagena to the campo there's no denying colombia's remarkable transformation. today colombia is a country of artists and entrepreneurs and dynamic cities in the barrios of

medellin new businesses along with giant outdoor escalators up the hillsides are literally lifting people out of poverty. children who once lived in fear now have the chance to pursue their dreams. in short, a country that was on the brink of collapse is now on the brink of peace. i had the privilege of seeing some of this change myself when i visited cartagena. i still believe what i said then. in colombia today there is hope. fully realizing that hope requires a just and lasting peace. so president santos, i've said to you privately. i want to reiterate publicly how much i admire the great courage and resolve you've shown in pursuing negotiations to end the war. you've committed to an agreement that upholds colombia's national and international legal obligations and you've put victims at the center of this

process. i want to thank all of the parties for their efforts, including the government of cuba for hosting the talks. we all know it's easier to start wars than end them. but after half a century of wrenching conflict the time has come for peace. it's time to make real the words of the young colombian who said "the only thing i want to see die over here in the west side of town is the sun at the end of the day." of course, peace will just be the first step. any agreement will have to be implemented. and just as the united states has been colombia's partner in a time of war, i indicated to president santos he will be your partner in waging peace. so today i'm proud to announce a new framework for the next chapter of our partnership. and we're going to call it peace colombia, paz colombia. [ applause ]

so as colombia transitions to peace, the united states will work with you hand in hand. i'm proposing that more than $450 million be devoted to helping to reinforce security gains, reintegrate former combatants into society, and extend opportunity and the rule of law into areas denied them for decades. we will continue to stand for human rights and justice for victims. and we will keep working to protect our people as well as the colombian people from the ravages of illegal drugs and the violence of drug traffickers. as part of our global demining efforts the united states intends to support colombia as it works to remove every

landmine in the country within five years. that's our goal. and secretary kerry will lead this effort. [ applause ] . i want to thank our partner norway. and we invite others to join in this really important work so that every colombian child can walk into a brighter future free of fear. i can't emphasize enough how this is a concrete manifestation we can achieve in a relatively short time frame that not only ensures that innocents are not injured or killed but it also means that land that may have been very difficult to develop or to farm now is available. and we're very proud to be part of that effort. i indicated to president santos that as the negotiations

conclude, assuming success, assuming an embrace by the colombian people, we will continue to solicit ideas from your government and the colombian people about how else we can help and mobilize the international community to support your efforts. but the point is that because of the vision and leadership of not only the colombian people and colombian government but also democrats and republicans and members of congress and so many who invested so much in this effort many years ago, we want to make sure that we are showing that same commitment going forward. we don't consider this an end to our friendship and our partnership but rather a new beginning. and just as we did 15 years ago, we intend to bet on colombia's

success. we're united by a common vision. a future that is more just and more equitable, more prosperous for all of our people. you know, one of my most memorable experiences in colombia was when i accompanied president santos as he granted land title to two afro-colombian communities. and it was a wonderful day. not just because we were hanging out with shakira. [ laughter ] there in the plaza de san pedro we watched as the descendants of slaves laid claim to their piece of a new colombia, and it was a reminder of what peace really means in people's daily lives. what's possible when people are empowered, no matter what they look like or where they come from. and that's a vision that president santos believes in. that's a vision that we share, that this is not just an abstract exercise at the highest

levels of government. this is something that has to affect ordinary people in increasing their security and their opportunity. that's what we mean when we talk about building a truly peaceful, prosperous colombia. that's what we hope to help you realize. a place, as the great novelist gabriel garcia marquez once imagined, a place where no one will be able to decide for others how they die, where love will prove true, and happiness be possible. in this great work colombia will have no greater friend than the united states of america. muchas gracias. [ applause ] ♪ [ applause ]

>> thank you very much, mr. president, and good evening to all of you. you said at the beginning that americans love and admire colombia colombians. i must say the same thing. colombians love and admire americans. and they love you very much. you are the most popular person in the colombian polls. [ laughter ] >> that's not true here in the united states. [ laughter ] [ speaking spanish ]

>> translator: today i come back to washington to thank you, to thank the people and the government of the united states for the support that they have given to colombia during the last 15 years and to project our cooperation throughout the next few years. there are many people that i would like to recognize for their support, who have participated in the creation and the administration of plan colombia over the past three years. many of them are present here today. the ex-presidents of the united states, bill clinton and george w. bush, as well as my predecessors andres pastrana and alvaro uribe, the secretaries, ministers, ambassadors and high officials of both governments, the senators, the congressmen of

the united states and of colombia, the leaders and members of the armed forces and the police of both countries, of businessmen and so many people who have contributed to this plan, thank you all very much. and thank you to you, president obama, because you've not only maintained your support for plan colombia but you have inspired us to find a better and deeper partnership between our two countries. today we can say without a doubt that the goals that we had in 2000 such as fighting the drug war, strengthening institutions, and imposing the rule of law, and to take social programs to great parts of remote colombian

territory have been -- those objectives have been met. today's colombia is much, much different from the colombia of 15 years ago. our country at that time was going through the worst recession -- economic recession of the last 70 or 80 years. we were very far from controlling our own territory. and we were very close to being declared a failed state. practically a third of our national territory was controlled by paramilitaries. another third was being controlled by the guerrillas. and both were financed by drug trafficking. we had a very dark and uncertain future. today the outlook is completely opposite. today we see the future with

hope. we've gone from the worst economic recession in our recent history to being leaders in economic growth in latin america. and not just in growth. we are also leaders in job creation, in reducing poverty, in strengthening our middle class. we have gone from the shameful international championship of being the first in murders and kidnappings to have the lowest indexes of these crimes that we've ever had in the last 40 years. and despite the increase over the last two years in coca cultivation in colombia, almost 60% of that cultivation has gone down. the number of rural families that are involved in this business of cultivating coca has been reduced by 2/3.

and all of that, while we continue very vigorously and decidedly to fight against drug trafficking, so much so that last year we were able to overcome all kinds of records in the volume of cocaine seized, more than 250 tons of it. those thousands of families who entered into the legal economy thanks to your help, thanks to plan colombia, have shown us the way of what our cooperation can be over the next 15 years. in fact, we have already implement implemented a comprehensive policy of crop substitution that contemplates every link in the chain of drug trafficking. and it will be much more important because it will attack

the roots and not just the symptoms of this problem. all of these advances are due in great part fought fato the fact that 15 years ago when we were in such serious straits the colombians received a friendly hand. and that friendly hand came from here, from washington, from both sides of the aisle. democrats and republicans. and thus it has remained. a lot of people say that plan colombia is the bipartisan incentive that has been most successful over the last few years. but people perceive it as the exclusively military or security initiative. but it was much more than that. it's true that plan colombia helped us to have the most

powerful armed forces, the most effective armed forces that colombia has ever had in its history, and they today are out there training armed forces of other countries in the region. but the reason for its success was that it was a comprehensive strategy. a strategy that also bet on social programs, on justice, on rural development, and on strengthening our democratic institutions. in the name of the residents of that forgotten colombia who are finally seeing the presence of the state, thank you. in the name of those rural dwellers who are now cultivating legal crops and have bettered their conditions of life, thank you. in the names of millions of colombians who are starting to live without fear, thank you. but above all, in the name of

new generations throughout colombian territory, in the names of those children who can see a better future now, thank you. thank you very much. >> dear president obama, if in colombia we're on the brink of a peace agreement, i can say without a doubt that colombia was crucial -- that plan colombia was crucial in helping us get there. from the very beginning you, mr. president, supported the risky and bold step of trying to achieve peace in our country. you were one of the first persons i confided my intentions to start a peace process. back when many, the great majority, thought that it was

basically a mission impossible, many people warned me that it would be political suicide. making war is so much easier than making peace. and you not only believed it was possible. you encouraged me to go ahead and gave me your full, enthusiastic support. since then you have walked by our side. and today, mr. president, you stand with the colombian people when we are on the verge of transforming this dream into reality. i believe also that i speak for all the people in latin america and the caribbean. all the people who live south of rio grandee. when i say to you thank you. thank you, mr. president, for

your audacity in re-establishing diplomatic relations with cuba. thank you for understanding that peace in colombia means peace for the entire region. peace will be the cherry on the cake of plan colombia and the start of a new chapter. a new chapter of collaboration and friendship between our two nations. a chapter that we have decided, and what a good name, to call paz colombia, peace colombia. peace will help us consolidate a new nation. a country that will be safer, more prosperous, more just and equitable. better educated. and of course happier. we'll be a country, a confident

mission that will continue to earn the trust and admiration of the entire world. and we will build this new country in cooperation shoulder to shoulder with a dear and true friend, the united states of america. thank you. [ applause ]