way, in a transparent way, in a spirit that says to our political opponents that we welcome their ideas, we are open to compromise, but what we're not willing to do is to give up on the basic notion that this government can be responsive to ordinary people and help give them a hand up so they can achieve their american dream -- we will not give up that ideal. .

the remedies to save those jobs are very ineffective -- long delays, proceedings before the international trade commission, subject to being overruled by the president. we have china violating international law with subsidies and dumping -- really, a form of international banditry.

they take our money and then they lend it back to us and own now a big part of the united states. the first part of my question is, would you support more effective remedies to allow injured parties -- unions which lose jobs, companies which lose profits -- by endorsing a judicial remedy, if not in u.s. courts perhaps in an international court, and eliminate the aspect of having the itc decisions overruled by the president -- done four times in 2003 to 2005, at a cost of a tremendous number of jobs on the basis of the national interest. and if we have an issue on the national interest, let the

nation pay for it, as opposed to the steel industry or the united steel workers. and the second part of the question, related, is when china got into the world trade organization, a matter that 15 of us in this body opposed, there were bilateral treaties. and china has not lived up to its obligations to have its markets open to us, but take our markets and take our jobs. would you support an effort to revise, perhaps even revoke, those -- that bilateral treaty, which gives china such an unfair trade advantage? thank you. >> arlen, i would not be in favor of revoking the trade relationships that we've established with china.

i have shown myself during the course of this year more than willing to enforce our trade agreements in a much more serious way. and at times i've been criticized for it. there was a case involving foreign tires that were being sent in here, and i said this was an example of where we've got to put our foot down and show that we're serious about enforcement. and it caused the usual fuss at the international level, but it was the right thing to do. having said that, i also believe that our future is going to be tied up with our ability to sell products all around the world, and china is going to be one of our biggest markets, and asia is going to be one of our biggest markets. and for us to close ourselves off from that market would be a mistake. the point you're making, arlen, which is the right one, is it's got to be reciprocal. so if we have established agreements in which both sides

are supposed to open up their markets, we do so and then the other side is imposing a whole set of non-tariff barriers in place, that's a problem. and it has to be squarely confronted. so the approach that we're taking is to try to get much tougher about enforcement of existing rules, putting constant pressure on china and other countries to open up their markets in reciprocal ways. one of the challenges that we've got to address internationally is currency rates and how they match up to make sure that our goods are not artificially inflated in price and their goods are artificially deflated in price. that puts us at a huge competitive disadvantage. but what i don't want to do is for us as a country, or as a party, to shy away from the

prospects of international competition, because i think we've got the best workers on earth, we've got the most innovative products on earth, and if we are able to compete on an even playing field, nobody can beat us. and by the way, that will create jobs here in the united states. if we just increased our exports to asia by a percentage point, by a fraction, it would mean hundreds of thousands, maybe millions of jobs here in the united states. and it's easily doable. and that's why we are going to be putting a much bigger emphasis on export promotion over the next several years. and that includes, by the way, export promotion not just for large companies but also for medium-size and small companies, because one of the challenges -- i was up in new hampshire yesterday, and you saw this terrific new company that had just been started up -- it's

only got 13, 14 employees at this point. but it has a new manufacturing technique for the component parts in led light bulbs, potentially could lower the price of led light bulbs, cut them in half. and these folks, they potentially could market not just here in the united states, but this is a technology that could end up being sent all around the world. but they don't have the money to set up their own foreign office in beijing to navigate through the bureaucracy. they've got to have some help being over there. and so that's one of the things that we really want to focus on in this coming year, is making sure that our export-import banks, our trade offices, that we are assisting not just the big guys, although we do want to help them, but also the

medium-sized and small businesses that have innovative products that could be marketed if they just got a little bit of help and a little bit of push from the united states government. >> sir, michael bennet, colorado. >> thanks for coming, mr. president. it's good to see you. you talked in the state of the union very well about a number of the challenges that we face as a country, which are serious. i mean, even before we were driven into the worst recession since the great depression, the last period of economic growth in this country's history, was the first time middle-class family income actually fell during a period of economic growth; no net jobs created since 1998; household wealth the same at the end of the decade as it was at the beginning; and an education system that's not working well enough for our kids. and on top of everything else, got a $1.4 trillion deficit and $12 trillion of debt. i was saying that the other day, by the way, in colorado, and i was talking about how our kids were going to have to pay this back if we didn't make this decision that we've got to face up to.

and my daughter, caroline, who's 10, was there, and she walked out with me at the end and she said, "just so you know, i'm not paying that back." so she has the right attitude, i think. >> but just in case you're counting on it. [laughter] >> at the same time, this place looks broken to the american people. our ability to make these decisions is open to enormous question in the wake of the health care discussion, in particular. i had a woman the other day in glenwood springs, colorado, ask me where she could get her lobbyist in washington, d.c. what are we going to do differently? what are you going to do differently? what do we need to do differently as democrats and republicans to fix this institution so that our democracy can actually withstand the test that we're facing right now? >> well, let me just make a couple observations, having served in the senate and now seeing it from the perspective of the white house. first of all, whenever people ask me, why isn't washington

working -- i am a fierce defender of the integrity and hard work of individual members, which is, by the way, matched up by --when you look at polls, people hate congress, but individual members a lot of them feel are really working hard on their behalf. so the problem here you've got is an institution that increasingly is not adapted to the demands of a hugely competitive 21st century economy. i think the senate in particular, the challenge that i gave to republicans and i will continue to issue to republicans is if you want to govern then you can't just say no.

it can't just be about scoring points. there are multiple examples during the course of this year in which that's been the case. look, i mentioned the filibuster record. we've had scores of pieces of legislation in which there was a filibuster, cloture had to be invoked, and then ended up passing 90 to 10, or 80 to 15. and what that indicates is a degree to which we're just trying to gum up the works instead of getting business done. that is an institutional problem. in the senate, the filibuster only works if there is a genuine spirit of compromise and trying to solve problems, as opposed to just shutting the place down.

if it's just shutting the place down, then it's not going to work. that's point number one. point number two. in terms of what -- how we operate, we as democrats, i do think that the more open we are, the more transparent we are, the more people know exactly how things are working even if sometimes it takes longer to maintain that transparency, the better off we are. and i think the health care bill is a perfect example. and the truth of the matter is, is that the process looked painful and messy, but the innumerable hearings that were held did give an opportunity for the product to get refined so that i think that the ultimate package, after potential negotiations between the house and the senate, is better than where we started. and there was a possibility and

continues to be a possibility to be in discussions with the american people about what exactly that bill accomplishes. on the other hand -- and i take some fault for this -- at the end of the process when we were fighting through all these filibusters and trying to get it done quickly so that we could pivot and start talking about other issues that were so important to the american people, some of that transparency got lost. and i think we paid a price for it. and so it's important, i think, to constantly have our cards out on the table and welcome challenges and welcome questions. if the republicans say that they can insure every american for free, which it what was claimed the other day, at no cost, i want to know. because i told them, i said, why would i want to get a bunch of lumps on my head doing the hard thing if you've got the easy thing?

but you've got to show me, you've got to prove to me that it actually works -- because i've talked to every health care expert out there and it turns out if you want to reform the insurance system, if you want to make sure that people without preexisting conditions are able to get insurance, if you want to provide coverage for people, if you want to bend the cost curve, then you need a comprehensive bill, because this is a complicated area involving one-sixth of our economy. but we should be open to that dialogue, and not underestimate the power of the american people, over time -- despite millions of dollars of advertising to the contrary from the insurance industry and others -- we should not underestimate the american people's willingness to say, okay, i got it. and there are still going to be disagreements, and some will disagree with us. but we've got to constantly make our case, i think, and not play an insider's game.

play an outsider's game. last point i would make about this. you know what i think would actually make a difference, michael -- i think if everybody here -- excuse all the members of the press who are here -- if everybody here turned off your cnn, your fox, your -- just turn off the tv -- msnbc, blogs -- and just go talk to folks out there, instead of being in this echo chamber where the topic is constantly politics -- the topic is politics. it is much more difficult to get a conversation focused on how are we going to help people than a conversation about how is this going to help or hurt somebody politically. and that's part of what the american people are just sick of -- because they don't care, frankly, about majority and minorities and process and this

and that. they just want to know, are you delivering for me? and we've got to, i think, get out of the echo chamber. that was a mistake that i think i made last year, was just not getting out of here enough. and it's helpful when you do. >> mr. president, you've told me -- suggested don't pay any attention to the blogs, don't listen to talk radio, don't watch cable tv. and i follow that advice pretty good. [laughter] next question will be from the chair of our agriculture committee, the senator from arkansas, blanche lincoln. >> me, neither, mr. president. i stay away from the tvs and everything else. but thank you so much for being here with us today. and i want to thank you also -- i had an opportunity with

several of my colleagues from the house and senate to have a bipartisan meeting yesterday with the first lady on childhood obesity. it was a great meeting and we look forward to working with her and you and your administration to really tackle that problem on behalf of our children and the future of our country. mr. president, i come from a seventh-generation arkansas family. my dad was a good democrat, and he was a great arkansan, and he was very typical of arkansans in that he was very independent- minded, as am i, and as most of my constituents. and he used to tell me early on when i ran for congress, he said it's really results that count. and as i look at what's going on in my state and among my constituents -- i visited with a constituent yesterday, good democrat, small business owner, who was extremely frustrated -- extremely frustrated because there was a lack of certainty and predictability from his government for him to be able to run his businesses. he's -- he and his father have

worked hard, they've built three or four different small businesses, and he fears that there's no one in your administration that understands what it means to go to work on monday and have to make a payroll on friday. he wants results. he wants predictability. and i think that you're exactly right. people out there watching us, they see us nothing more than democrats and republicans up here fighting, fighting only to win a few political points, not to get the problem solved. and so i just -- i want to echo i guess some of what my colleague, michael bennet from colorado, mentioned, but also to ask you, in terms of where we are going, what can we tell the people in terms of predictability and certainty in getting this economy back on track? how are we going to do that? and are we willing as democrats

not only to reach out to republicans but to push back in our own party for people who want extremes, and look for the common ground that's going to get us the success that we need not only for our constituents but for our country in this global community, in this global economy? are we willing as democrats to also push back on our own party and look for that common ground that we need to work with republicans and to get the answers? and it's really the results that are going to count to our constituents. and we appreciate the hard work that you put into it. >> well, the -- look, there's no doubt that this past year has been an uncertain time for the american people, for businesses and for people employed by businesses. some of that certainty just had to do with the objective reality of this economy entering into a freefall. so let's just be -- let's remind ourselves that if you've got an economy suddenly contracting by 6 percent, or a loss of

trillions of dollars of wealth basically in the blink of an eye, or home values descending by 20 percent, that that's going to create a whole lot of uncertainty out there in the business environment and among families. and part of what we've done over the course of this year is to put a floor under people's feet. that's what the recovery act did. that's what the interventions and the financial markets did. it broke the back of the recession, stabilized the markets. nobody is talking about a market meltdown at this point. and people haven't recovered all that they had lost in their 401[k]s, but they're feeling a little better when they open that envelope now than they did six months ago. state budgets were in freefall;

that was stabilized. states are still going through incredible pain, but they did not have to lay off teachers and firefighters and cops at the levels that they would have to otherwise lay them off. that provided some stability and some certainty. so the steps you've taken as a congress, the steps we've taken as an administration, have helped to stabilize things. now, moving forward, blanche, what you're going to hear from some folks is that the way to achieve even greater economic growth -- and keep in mind the economy is now growing at a 6 percent clip, so the question is when do businesses actually start hiring, because they're now making a profit -- what you're going to start hearing is the only way to provide stability is to go back and do what we'd been doing before the crisis.

so i noticed yesterday when we were -- there was some hearing about our proposal to provide additional financing to small businesses and tax credits to small businesses. some of our friends on the other side of the aisle said, "this won't help at all. what you have to do is to make sure that we continue the tax breaks for wealthiest americans. that's really what's going to make a difference." well, if the agenda -- if the price of certainty is essentially for us to adopt the exact same proposals that were in place for eight years leading up to the biggest economic crisis since the great depression -- we don't tinker with health care, let the insurance companies do what they want, we don't put in place any insurance reforms, we don't mess with the banks, let them keep on doing what they're doing now because we don't want to stir up wall street -- the result is going to be the same.

i don't know why we would expect a different outcome pursuing the exact same policies that got us into this fix in the first place. michael bennet articulated it very well. part of the reason people are feeling anxious right now, it's not just because of this current crisis -- they've been going through this for 10 years. they've been working and not seeing a raise. their costs have been going up, their spouses going to the workforce -- they work as hard as they can. they're barely keeping their heads above water. they're trying to figure out how to retire. they're seeing more and more of their costs on health care dumped in their lap. college tuition skyrockets. they are more and more vulnerable, and they have been for the last decade, treading water. and if our response ends up being, because we don't want to -- we don't want to stir things

up here, we're just going to do the same thing that was being done before, then i don't know what differentiates us from the other guys. and i don't know why people would say, boy, we really want to make sure that those democrats are in washington fighting for us. so the point i'm making -- and blanche is exactly right -- we've got to be non-ideological about our approach to these things. we've got to make sure that our party understands that, like it or not, we have to have a financial system that is healthy and functioning, so we can't be demonizing every bank out there. we've got to be the party of business, small business and large business, because they produce jobs.

we've got to be in favor of competition and exports and trade. we don't want to be looking backwards. we can't just go back to the new deal and try to grab all the same policies of the 1930s and think somehow they'd work in the 21st century. so blanche is exactly right that sometimes we get ideologically bogged down. i just want to find out what works, and i know you do, too, and i know the people in arkansas do, too. but when you're talking to the folks in arkansas you also have to remind them what works is not just going back and doing the same things that we were doing before. and, yes, there's going to be some transition time. if we have a serious financial regulatory reform package, will the banks squawk? yes. will they say this is the reason we're not lending? yes. the problem is we know right now they're not lending, and paying out big bonuses.

and we know that the existing regulatory system doesn't work. so we shouldn't be spooked by this notion that, well, is now the time to take seriously in an intelligent way, not in a knee- jerk way, the challenge of financial regulatory reform so that you don't have banks that are too big to fail and you're not putting taxpayers at risk and you're not putting the economy at risk -- now is the time to do it. the same is true with health care. the same is true with health care. there are, i promise you, at least as many small businesses out there, if you talk to them, who will say, i just got my bill from my health insurance and it went up 40 percent. and we've got to do something for them. all right? >> next question, the junior

senator from the state of new york, kirsten gillibrand. >> mr. president, i have an issue i'd like to -- >> kirsten, we've got a mic for you. >> thank you, mr. president. i have an issue i'd like to raise that is very important to every new yorker and to many, many americans, and that's health care for our 9/11 responders and for all the communities that live near ground zero. now, these americans hail from every one of the 50 states and every single congressional district in the entire united states. and now, because of exposuroiñio toxins from the collapse of the world trade centerñi towers, there's about 20,000 people who are sick -- some of them gravely ill, suffering from serious health effects, some are disabled, some have died. i've introduced legislation to provide permanent care and proper compensation for these americans.

and my question is: would you today commit to working with congress to pass comprehensive 9/11 -- a comprehensive 9/11 health bill that's fully paid for? >> well, i fully commit to working with you guys. keep in mind that our budget already significantly increased funding precisely for this purpose. so i'm not just talking the talk; we've been budgeting this as a top priority for the administration. i confess, kirsten, i have not looked at all the details of your legislation. but i know that not only you and chuck, but everybody here, wants to make sure that those who showed such extraordinary courage and heroism during 9/11, that they are fittingly cared for, and that's going to be something that we are going to be very interested in working

with you on. all right? >> thank you, mr. president. >> good. >> the next question is the chairperson of the environmental public works committee, senator barbara boxer. >> hey, barbara boxer. >> great to see you here, mr. president. and thanks for doing this and thanks for meeting with the republican caucus at the house. i thought it was very instructive for the american people. as senator feinstein and i tell our colleagues every day, california is hurting. i think -- i know -- that you're aware of that. and they really want to see a fighting spirit in us -- that we are committed, even though we've had some political setbacks, to get the job done. and i just want to tell you, as i watched you during the state of the union, listened to you, what you are doing now is really important to the folks that i represent, because you're showing that fighting spirit no matter what the adversity is, and you're coming up with specific proposals. so i want to ask you about small business. we all know they're the job

creators; 64 percent of new jobs over the last 15 years came from small business. your new proposal, which does mirror a couple of people -- i look at senator merkley, i know senator warner and others, we've worked hard on this. for community banks to lend, can you do that by executive order? because my understanding is you can use some of the tarp funds that were paid back and use that -- or those funds that have not been used -- can you use that and get this going by executive order, or do you need us to put that program into a jobs bill? and second, are you using your influence as much as you can to get the big banks to lend? they've dropped lending by $12 billion over the last year, so i wonder if you can give us an

update on that. >> first of all, i've now taken trips to allentown, pennsylvania; elyria, ohio; most >> i was in baltimore. had a great time in baltimore. just recently in -- >> searchlight. >> -- nashua, new hampshire. haven't been to searchlight yet, but we're going to get there. and everywhere i go, you talk to small business and they will tell you they are still experiencing a severe credit crunch. the larger businesses right now are able to get financing. even the medium-size businesses, the credit markets have improved. smaller businesses, even if they are making a profit and have not missed a payment, are finding that banks are averse to providing them capital. now, two reasons that they cite: one is they say their bankers

are telling them that the regulators are just looking over their shoulder too much and so the community banks feel that their hands are tied. these are independent regulators. they are diligent in doing their jobs. obviously they feel caught off guard because of the lax regulation, in some cases, of the banking industry before the financial crisis. you get a sense that the pendulum has swung too far in the other direction. the challenge that we've got is we've got to be careful because these are independent regulators and we don't want to politicize them. but what treasury secretary geithner and others have done is to discuss with the regulators what we are hearing in the field and to make sure that there is a consistency of

approach that doesn't prevent banks from making what are good loans and taking reasonable risks. so that's one thing we're hearing. the other thing, though, that is still out there is that the larger banks generally haven't been in this market; a lot of the smaller companies never had access to them in the first place, and we want to actually see if we can get more of those large banks to get into this marketplace. and when i met with the big bank ceos, this was something that i pushed them on. they tell me, and we have seen some confirmation of this, that they are actually ramping up some of their small business lending and setting up more aggressive divisions actively seeking out loans. so that's the effort that we're

making to jawbone the private sector to do what it needs to do. in the meantime -- you mentioned the specific proposals that we've put forward -- i do think it's better to do them through legislation than through executive order. tarp was a congressionally created structure with some fairly stringent guidelines in terms of how we were supposed to approach it. it shouldn't be hard to do, though. it's a pretty simple concept. banks have repaid money; there's $30 billion that we could take that has already been repaid -- immediately apply that to a fund so that small banks are -- community banks are able to provide their small business customers with greater lending. and i do think that getting that as part of a jobs package is priority number one. and i know i've already talked to harry about this -- my assumption is, is that if you

combine that with the tax credits that we've put in place for hiring, the provisions that we talked about to incentivize weatherization programs that can immediately start hiring people to retrofit homes and businesses and help reduce our energy costs -- taking some of those immediate steps now i think will pay some big dividends down the road. and the timing of it is perfect, because our job last year was to make sure the economy was growing. the economy is now growing. but what's happening is businesses, either because they can't find financing or because they're still just dipping their toe in the water, have been hesitant to hire full-time workers. and for us to start giving them some serious incentives, giving them additional access to financing, could accelerate a process that otherwise could take a much longer time and, frankly, all those folks out there who are out of work right now, they just can't afford to wait any longer -- they need it now. all right? >> we have time for one or two

more questions, if the question is short -- >> and the answer is short. >> otherwise we'll only have one question. the chairman of the judiciary committee, pat leahy. >> mr. president, i want to thank you for coming here. i think this is -- thank you for coming here. i was just whispering to marcel these answers are so good and need to be heard. you have a great sense of what the federal judiciary should be. i think back to president clinton's time, when the other side blocked 61 of his judges. you've had some superb judges. you've talked to both republicans and democrats, sent up some superb names. and senator reid still has to

file a cloture. we have to spend a week of doing that, and then they pass by 100 to nothing or 90-10. my thing is this -- because of what they did last time, we end up with the greatest shortage and the most judicial crises i think in our history. will you continue to work very hard to get up names as quickly as possible, so that we can do this, and help us get these judges through? i don't want the same judicial crises to occur. you've had good nominees. can you commit to work with us, both parties, and keep trying to get them through? >> well, this is going to be a priority. look, it's not just judges, unfortunately, pat, it's also all our federal appointees. we've got a huge backlog of folks who are unanimously viewed as well qualified, nobody has a specific objection to them, but end up having a hold on them because of some completely

unrelated piece of business. that's an example, michael, of the kind of stuff that americans just don't understand. on the judges front, we had a judge for the -- coming out of indiana, judge hamilton, who everybody said was outstanding -- evan bayh, democrat; dick lugar, republican; all recommended. how long did it take us? six months, six, seven months for somebody who was supported by the democratic and republican senator from that state. and you can multiply that across the board. so we have to start highlighting the fact that this is not how we should be doing business. now, in fairness -- in fairness, when we were in the minority, there were some times where we blocked judges, we blocked appointees.

i think it's fair to say we were a little more selective in how we did it -- "a lot more," somebody said. [laughter] so this is an example of where i'm going to reach out to mitch mcconnell; i know harry has as well. and i'm just going to say, look, if the government is going to work for the american people, i can't have the administrator for gsa, which runs every federal facility, all federal buildings all across the country -- here we are, we're trying to save billions of dollars, cut waste -- claire mccaskill has been all on top of how can we audit our spending -- and we could save billions of dollars in ending old leases that don't work or renegotiating them or consolidating buildings and efficiencies.

but i don't have a gsa administrator, even though i nominated somebody who was well qualified several months ago, and nobody can tell me that there's anything particularly wrong with her. they're blocking her because of some unrelated matter. i don't know, you guys may know better than i do. and that is -- that has to end. it has to end. [applause] and the american people want it to end. let's have a fight about real stuff. don't hold this woman hostage. if you have an objection about my health care policies, then let's debate the health care policies. but don't suddenly end up having a gsa administrator who is stuck in limbo somewhere because you don't like something else that we're doing, because that doesn't serve the american people. then they don't know what the argument is about.

then it's just sort of a plague on both your houses because it looks like you guys are just fighting all the time. and we've got to put an end to that. >> i missed somebody on my list. if you would just be patient with us, we'll have two very short questions. >> i will indulge, harry. >> the first question is going to come from the only person that's a member of the united states senate who has a spouse that's won a pulitzer prize -- sherrod brown from ohio. [laughter] >> thank you for joining us. thank you for your visit to lorain county, ohio, a week and a half ago; first presidential visit to that county of 300,000 since harry truman in 1948. >> it was a great visit. we had a great time. >> it was terrific. ten miles from there, oberlin college, one of the great private institutions of higher learning in this country -- at oberlin college, there was a building built there seven or eight years ago, fully powered by solar panels. it's the only -- it's the largest building on any college campus in america like that. those solar panels were bought in germany and japan, not

surprisingly -- germany, a country that has both an energy policy and a manufacturing policy. seventy-five miles west of there is toledo, ohio, where you've been several times, and toledo has more solar energy manufacturing -- solar manufacturing jobs than any city in america. it begs the question of two things in terms of manufacturing policy and energy policy. we have all kinds of things in so many of our states -- manufacturing wind turbine components and solar panel components -- but we're the only major industrial country in the world without a manufacturing policy. and every rich country in the world has one. we don't. i know what you're doing with ron bloom in the white house and other things, but how do we get there? how do we -- when we read these articles in the paper that china is just exploding in terms of wind turbine manufacturing and solar panel manufacturing -- how do we rebuild our manufacturing sector with a

manufacturing policy, combined with an energy policy that gets us there? >> i hope people had a chance to read that article that was in the new york times i guess last sunday, talking about how china is not waiting, it is moving. and already the anticipation is, is that they will lap us when it comes to clean energy. now, they're not a democracy and so they don't debate. [laughter] and there are no filibuster rules. and so obviously over the long term a system that allows for robust debate and exchange of ideas is going to produce a better result. i believe that. but we have to understand that when it comes to some key issues like energy, we are at risk of falling behind. we've already fallen behind, but it's not irrevocable because we still have the best research, we

still have potentially the best technology, we've got the best universities, the best scientists, and as i said, we've got the most productive workers in the world. but we've got to bring all those things together into a coherent whole. now, i think there are a couple of elements to this. one, in terms of manufacturing generally -- you just mentioned ron bloom, who we put in charge of a manufacturing task force, is just issuing now a report to me about the direction we need to go to have some coordination when it comes to manufacturing. now, this is not some big bureaucratic top-down industrial policy; it is figuring out how do we coordinate businesses, universities, government, to start looking at where are our strategic opportunities, and then making those investments, filling holes that exist so that we can be competitive with what china is doing or what germany is doing or what spain is doing. and my hope is, is that during

the course of this year we're going to be able to work with all 50 senators, because all of you have a stake in this, to just see where are our manufacturing opportunities and where can we fill -- plug some holes in order to make sure that we're competitive internationally. specifically on clean energy, we know that's an opportunity. i continue to believe, and i'm not alone in this, that the country that figures out most rapidly new forms of energy and can commercialize new ideas is going to lead the 21st century economy. i think that is our growth model. [applause] >> final question -- >> but -- hold on, just one last

thing i want to say about this: in order for us to maximize it, part of it is the good work that jeff has been doing in terms of just finding the right incentives. we've got to be open-minded about a whole range of technologies. we've got to look at clean coal technology. we've got to look at nuclear technology. we're going to be making some significant announcements this year. this is an example, blanche, of where we can't be stuck in the past in terms of how we see these things. we're not going to be able to ramp up solar and wind to suddenly replace every other energy source anytime soon, and the economy still needs to grow. so we've got to look at how to make existing technologies and options better. but -- and this is just the point that i wanted to make because it came up in new hampshire yesterday -- we still -- one of the best ways to be on the forefront in energy is to

incentivize clean energy, and discourage the old sources or methods that aren't going to work in the future. and so the fact that joe lieberman is working with lindsey graham, john kerry has been all over this -- the three of them are coming together to try to find a workable, bipartisan structure so that we are incentivizing and rewarding the future -- and understanding that there's a transition, so that we've got to make sure that the disruptions are minimized as we move into this new energy future -- that's going to be vital. so don't give up on that. i don't want us to just say the easy way out is for us to just give a bunch of tax credits to clean energy companies. the market works best when it responds to price. and if they start seeing that, you know what, dirty energy is a little pricier, clean energy is

a little cheaper, they will innovate, and they will think things through in all kinds of innovative ways. so i want to congratulate specifically john kerry, joe lieberman, and lindsey graham, who it probably doesn't help him for me to compliment him -- [laughter] -- but has been very thoughtful in terms of how they're approaching this issue. >> final question, evan bayh, indiana. >> thank you for being with us, mr. president. >> we can get you a mic. nice sneakers, by the way, evan. [laughter] >> oh, thank you. you've got to stay light on your feet around here, right? [laughter] mr. president, you've already addressed this in part, and several of the other questioners have raised this, but i'd like to present it in a little bit different way that i think is on the minds of people in my state, and perhaps in the minds of independents and moderate republicans and conservative democrats around the country -- and that's this issue of the

deficit and rising debt, and restoring the fiscal health of this country to a position where it ought to be. frankly, i think the public and average citizen have been way ahead of the political class on this. they understand in the long run this is unsustainable, it's bad economics. they understand that generally -- generationally, as michael was mentioning, it's unfair to our children to ask them to pay these bills. and most of all, there's a sense of unfairness. they're having to make sacrifices in their daily lives, but too many in washington expect to have continuing increases in the programs they care about; ordinary citizens are making sacrifices, and yet we want our earmarks or pet projects. and they ask, why can't washington make the same sacrifices that we're willing to make? now, i think they realize that the other party doesn't have much credibility on this subject. they handed you a -- what, a $1.3 trillion deficit. vice president cheney famously said that in his opinion deficits didn't matter. he just flat out said it. that's wrong.

it's bad economics. it's wrong. and so we've got a job to do. but i think many people across the country candidly look at us and say, i don't know if the democrats are willing to take this on. they think we want to tax too much and spend too much, and do we have the backbone to really stand up and make some of these hard decisions? now, to your credit, you've called for some things that aren't always popular in our party. the first thing i noticed when you put into effect that non- security discretionary spending freeze is you got kicked in the shins by some of the left-wing blogs. and you called for more restraint on earmarks. that's not always popular among our group, but to your credit, you've called for those things. so my question to you, mr. president, is speaking to independents, conservative democrats, moderate republicans -- people who know we have to do this -- why should the democratic party be trusted? and are we willing to make some of the tough decisions to actually head this country in a better direction? >> well, i'll tell you why the democratic party should be trusted -- because the last time this budget was balanced, it was under a democratic president who made some very tough decisions. [applause] i think this is pretty

straightforward. bill clinton made some very hard political decisions. some of you were there in congress. you know how tough those votes were. you got no help from the other side. but as a consequence, the economy took off and you had a $200 billion surplus at the end of his presidency. so i think he deserves enormous credit for that. those of you who took those votes deserve enormous credit for that. that's why we've had -- we should have credibility. but we're still haunted by the debates that took place from the '70s, the '60s, right? and that hasn't completely worked through the political mindset. so we're still saddled with this notion of the tax-and-spend model when, if you actually look at it, we've been very fiscally responsible. now, having said that, we have been complicit in some ways over the last decade. the prescription drug bill -- not paid for. two wars -- not paid for. two tax cuts -- not paid for. the emergence of a structural

deficit that is only going to grow because we all know that the biggest drivers are medicare and medicaid, and as people get older, as the population gets older, and as new technologies come online, people are demanding new services for health care, those are going to become more and more expensive, and that's what's going to blow up the budget in the long term. so to answer your question, how do we -- having said that, there's no doubt that we've lost trust. and part of it was just bad timing. it's like the cartoon, right, you're sort of standing there and somebody hands you a ticking time bomb and it

explodes, and you've got all this gunpowder on your hands, and you didn't construct the bomb, but you're holding it. and so what happened last year was, we come in. you got a $1.3 trillion deficit that we're inheriting; you've got $3 trillion revenue that are lost because of the recession; you've got an $8 trillion projected debt over the next 10 years; and you've got trillions more in projected deficits when you start looking -- counting entitlements. everybody has been looking at kent conrad's charts here for the last several years about it. and so at that very moment, suddenly the headlines that people are seeing is, "bank bailout, recovery package," and it all kind of merges together into just this blob of spending, and people aren't seeing, how is this benefiting

me. it just looks like washington business as usual. and all that suspicion gets amplified. so it's completely understandable. i think the way that we regain trust is to pursue good policies but not be afraid also to explain these policies, and to be honest with the american people that we're not going to dig ourselves out of this hole overnight. so a couple of things i've done. i have encouraged that we go back to paygo, pay-as-you-go. people understand that concept: you pay as you go. i congratulate the senate on voting for it. i expect the house to get it done. i want to sign that. >> not a single republican. >> the second thing you already mentioned is this non-defense discretionary freeze. one thing i want to mention, though. it's not as if we're not going after defense, as well. it's just it would be irresponsible when we have two

wars for me to impose that same kind of limitation, tie my hands not knowing what contingencies may be needed. but if you look at what bob gates has been doing in the defense department in really going after some sacred cows over at the pentagon, he's been serious about it. we've already saved billions of dollars. we intend to keep saving billions of dollars more on that front, as well. we've already proposed $20 billion worth of savings for this year by eliminating and consolidating programs. last year we proposed $17 billion and we were pooh-poohed. some of the editorials were all, "uh-huh, 17, this is a pittance." you know, only in washington is $17 billion a pittance. but it also indicates one of the dangers that we have, is that you've got to chip away at this problem. so every dollar counts. the work that claire has done on auditing -- if we can squeeze

out $5 million here, $10 million here, make this program work a little bit better, over time it creates good habits, and it starts exercising the fiscal restraint muscles in ways that won't affect programming for people but will affect our bottom line. so we're moving aggressively. we hope this year we get that stuff done. but what we also have to understand is that if i take all the steps that i've put forward and congress follows my lead on the non-defense discretionary spending, we're prudent in terms of defense spending, and we do all the things that we've talked about, we've still got this structural deficit that we've inherited. essentially what my proposal does is to pay for the recovery act and the other extraordinary steps we had to take for last year, so that i will have covered what happened on my watch.

that's important to understand. whatever spending that i had to take that was extraordinary that you took with me, including the recovery act, if we follow my budget outline, we will have taken care of, paid for what happened on our watch. but what we will not have solved is that huge structural deficit that existed the day i walked in. and we've got to be able to tell the truth to the american people that that is hard to solve. and the reason it's hard to solve is most of it is coming from entitlements that people like. and it has to do with the fact that there's this huge gap between the amount of money being paid out and the amount of money coming in. and everybody understands this here, but i think that there's a misperception in the public. if you ask your average constituent where does federal dollars go, they'll tell you foreign aid.

and you say, well, foreign aid accounts for 1 percent of our budget. and then they'll say, well, earmarks. look, i think we have to discipline ourselves on earmarks just because symbolically i think people -- it makes people feel like we're not showing the same kind of discipline that they are. even for worthy projects you've still got to make choices. so they're absolutely right about that. but earmarks account for about 1 percent of the budget. all right, so even if we eliminated all foreign aid and all earmarks, it doesn't solve our problem. and as far as the arguments that our colleagues on the other side of the aisle are making, i think it's important to explain to people that in order for us to balance the budget while exempting entitlements, no new revenues, you'd have to cut non- discretionary defense spending by 60 percent -- cut it by 60 percent.

that's everything -- student loans, nasa, veterans programs -- you name it, we'd have to cut by 60 percent -- six, zero. that's just not going to happen. that's why we called for the commission, because we've got to look at some tough, long-term policy objectives. and that's why we've got to -- and i will personally do this, i will say to my republican friends, i want to solve it. i don't want to play politics on it, but you've got to step up, you've got to fill these slots with this commission that we're going to set up, put these people in a room, and actually solve some of these problems. and i hope they do. and maybe i'm naïve. i'm still counting, evan, on the notion that good policy over the long term is good politics. if you do the right thing, and you explain it clearly and you

do it openly, i'm confident that the american people -- you can have an adult conversation and say, this is not going to be easy, this is not going to be painless, we're going to be struggling for a while, but our future is bright. and if we show the same grit and determination that previous generations have shown, i have every confidence that we are going to have a 21st century, the american century, just like the 20th. all right? thank you, everybody. god bless you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] . .

there is discussion about the president's budget, an internet campaign talks about parliament- style meetings, where he takes questions from members of congress. we will discuss it with david corn. "washington journal" is live at 7:00 a.m. eastern. >> "in depth" welcomes a former adviser to margaret thatcher,

and author of more than 40 books, his latest on winston churchill -- an author. this is live from london at noon eastern on c-span2. >> is really easy to just complain about the issues -- it is really easy. i tried to be entertaining, informative, and relevant. >> progressive talk radio host and author of 30 books, thom hartmann is our guest on c- span's "q&a." >> timothy geithner testified on the budget for fiscal year 2011. he also talked about today's news that some aig executives would be receiving bonuses. new york congressman charlie rangel was the chair of the two- hour meeting.

[captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute] [gavel] >> the meeting will come to order. the ranking member and i have been trying to find some way that we can move this forward. the secretary of the treasury has a limited amount of time. we hope that the members would agree to a three-minute limit in terms of questioning, and we will stick to it. we want everyone to have an opportunity to ask a question. we expect a battery of votes on the floor in a couple of hours, and so, i yield my opening statement to the ranking member, mr. camp.

>> with that, i will submit meinecke for the record -- mine for the record the f.a.q, mr. chairman. >> mr. geithner, -- i will submit mind for the record. -- mine for the record. >> is a pleasure to be back here today. one year ago -- it is a pleasure to be back here. one year ago, the economy was contracting at an annual rate of about 6%. the financial system was on the verge of collapse. credit was frozen. the housing market was in free fall. millions of americans have lost their jobs, and the economy was losing jobs at the rate of three quarter million additional jobs a month, and this is very important. when the president came into office, he faced a deficit of

$1.30 trillion and projected deficits before a single bill was enacted that according to cbop with more than double the nation's debt in the next decade -- according to cbo. i want to say this again. in january 2001, cbo, which is your designated, non-partisan, neutral scorekeeper was talking about $5.60 trillion. in january 2009, before the president stepped into office, those projected surpluses turned into $8 trillion in projected deficits, so let me just repeat that. over the course of eight years, we went from $5.60 trillion in projected surpluses to $8 trillion in projected deficits. that is a swing of $13 trillion. now, this recession caused

tremendous damage, and today, millions of americans are still living with the consequences of that recession, and we all know that the road to jobs and to economic security and fiscal responsibility starts with economic growth, and today, in large part, the actions congress took and that we took to put out this financial fire, our economy is now growing again, and in the fourth quarter, it grew at the fastest rate in six years. this is progress, but it is not enough, and that is why we need to work together to intensify our focus together on job creation, on investment, and on innovation. now, when you talk to small businesses across the country, as i know that you do, they tell a similar story. they worry about whether they will see demand for their products and their ability to expand and hire a depends on their access to credit, he and that is what the president in new hampshire yesterday proposed

new legislation to create a small-business lending fund. we need them, if we are going to be able to grow and create jobs. that is what the president is also proposing to substantially expand what the small business administration can do in terms of higher loan limits, lower guarantee fees. we want to build on the provisions. now, in addition to helping small businesses get access to credit, we are proposing tax relief for small businesses. expensing, bonus depreciation, and we are proposing zero capital gains for small businesses, and we want to work with you to design a credit to help small businesses expand hiring. the president's proposal is, and we are open to ideas on how best to do this, is to give small businesses to add jobs $5,000 for each net job they create and

combine that with some payroll tax relief. now, in the presence of the budget, we have laid out a comprehensive agenda for innovation and to strengthen our foundation. this budget is concerned to -- is created for the private sector to grow so that business is small and large can create jobs. to do this, we need serious financial reform, to make sure our financial system is taking the savings of americans and financing future growth and innovation, not financing financial and real estate boom is. we want to encourage american innovation. not financing financial and real estate blooms -- not financing financial and real estate blooms -- booms. we are committed to working with this committee and the congress to produce strong trade agreements, because the more

american businesses are able to export, the more jobs they can create in america. we want to invest in education. and finally, we need health-care reform so that we can provide greater economic security for tens of millions of middle-class families and help reduce the extraordinary cost burdens are existing health-care system puts on businesses large and small. now, these are reforms the government has to make. if the government fails to meet these basic challenges, americans and businesses will suffer. the market cannot solve these challenges on its own. the government needs to address these challenges in order to provide a strong foundation for a dynamic growing sector. now, part of this foundation requires returning as a country to living within our means. when we have strong growth in place, we need to begin the process of bringing down our

deficits. çóthese deficits are too high. they are unsustainable, and the american people and investors around the world need to have the confidence that we are going to work together to bring them down when the economy is stronger. now, the president's budget proposes important steps towards that objective. starting in fiscal year 2011, we propose to tax non discretionary -- suddenly, there are some important changes for a tax system to make it more fair and to bring down those long term deposits, so we are proposing to allow the tax cuts put in place for the richest americans to expire, to close what is called a carried interest in the poll, so we are taxing the interest of hedge fund and private equity managers in the same way we tax the incomes of teachers and firemen, and we went to eliminate unnecessary and unfair tax subsidies. -- and we want to eliminate

those. we went to extend a tax credit for 95% of working families -- we want to extend a tax credit. we are looking at closing down the tarp. if you join with the president in passing this, the taxpayer will not be exposed to one penny of loss on the actions the government was forced to take to fix the financial system. third, we have to restore basic disciplines in budgeting that all american families live with by reinstating pay as you go. any new initiatives should be paid for without adding to the deficit. in the 1990's, those disciplines help move us from the deficit that was over 4% of gdp to a substantial surplus in 2000. now, this budget outlined the past to bring our deficit down as a share of our economy to below 4% -- this budget outlines the path.

we cannot let our future deficits and debt continue to grow faster than our economy without hurting future prosperity. this is going to be a difficult task. it will require tough choices, politically difficult choices. but it is important that we work on that, and that is what the president has proposed a bipartisan fiscal condition that will be charged with identifying responsible policies that can win support across the aisle to bring down the deficit. i want to close by saying the following. the united states economy is in a much stronger position today than it was one year ago, but our challenge is not just to repair the damage caused by this recession. we have to make the investments necessary for our future prosperity. we have not been investing and making the kinds of reforms that are essential for a broad-based economic growth in this country, and that is why this budget is so important. now, i know we have got

different ideas on how best to get the economy growing again and to make sure we are creating jobs, but i want to underescort where i think you can find some common ground today. -- i want to underscore where i think you can find some common ground today. deficits matter, and ours are too high. we have to pay for the programs that we have proposed to undertake, but our priority today, our priority today is to make sure we get americans back to work and that we of the conditions in place for a sustainable recovery. -- and that we have the conditions in place for a sustainable recovery. i want to conclude, mr. chairman, just by saying one thing. you read the news today about aig. what happened at aig was an outrageous failure of policy. as a country, we should have

never let a company take on a scale of risks that could threaten the stability of the financial system, and we should never allow the taxpayers ever again to be in a position where they have to pay one penny for rescuing a financial system from the mistakes caused by not just government but the decisions of the people running these major firms. part of what contributed to this was a set of compensation practices that defied gravity. they were deeply irresponsible. in a simple way, what happened was people were paid if things went well, but they were not exposed to losses if things went bad, and what happened at aig is the people running that firm, as they were taking on a level of risk we had not seen ever before, there was the presumption that they would share on the -- in the gains if things went fine, but if things went south, they would be protected from those losses.

these contracts were put in place in december 2007 and in march 2008. big company came to the government and ask for help. -- that company came to the government and ask for help. -- asked for help. i asked kenneth feinberg to come and help us work through this. he knew he was not going to make anybody happy, and he did a very good job of negotiating down those payments and trying to make sure that we did not have any of that kind of stuff in place in our major firms in the future. now, if you join with us in passing this proposed fee on our largest financial institutions, then you'll be able to say as we do that the american taxpayer will not pay a penny for what happened at aig, and if you work with us on financial reform,

then we can put in place the kind of a bankruptcy procedure we have for real companies and banks -- and small banks, without having to face the kinds of averages things we have had to confront in this process, -- the kind of outrageous things we of had to confront. we have always to go, and we are looking for the best ideas -- the kind of outrageous things we have had to confront. understand the deep obligation we have. this is so we can have a secure economic future. thank you, mr. chairman.

>> let's see where we have a common ground. we will talk to mr. camp. the misery and the pain out there is not republican. it is not democrat. i think there are looking for some degree of unified support, so we have got to give it our best try. mr. camp and i. and we do hope that you share with us to help us to get through the political problems that, unfortunately, we face. i thank you for your testimony, and i yield to mr. camp.

>> thank you, mr. chair. obviously, we will do what we can to work on all of the issues facing our country during this difficult time, and i want to thank you for being here, mr. secretary, and the opportunity to have a hearing on the president's 2011 budget, and it appears that the president is calling for about $2 trillion in tax increases. is that correct? i think it is. >> what we are proposing to do is -- >> i would like to get your comments. >> we are proposing to let expire the tax credits for the 2% to 3% of the richest in the country. we think that is there. we think that is just, but we are extending very important tax cut for the vast bulk of americans. the vast bulk of american businesses, and these are powerful, very powerful tax

cuts. they are good policy. we should work together to make sure those happen. >> and i notice that the budget does not factor in the house- past national energy tax, if you did factor that in the budget, it would be closer to $3 trillion in tax increases in the budget -- does not factor in the house-passed national energy tax. since the democrats came into the majority, the debt limit has increased by 60%, and now, you want to pay for all of that spending and all of that debt with about $3 trillion in new taxes if you add in the two plus the $1 trillion in cap and trade, and those taxes on small businesses and the benefits of working americans, and as i said, taxes on energy. now, i understand the president has called for money to a small businesses, and on the surface,

i think that sounds pretty good, but as i look at the president's budget, this would hit small business is particularly hard, because you're increasing taxes on nearly to -- this would hit small businesses particularly hard. small businesses would pay an additional $10 billion in taxes in 2011 alone, and a total tax increase over a 10-year period of over $200 billion. it seems to me that $30 billion in held pales in comparison to 250 dollars billion in tax increases -- it seems to me that $30 billion in help pales in comparison. >> the tax benefits for small businesses in the president's budget are very, very substantial and dramatic, and, again, one very important point, and these are not our numbers.

letting the tax cuts on high- income americans expiry affects only 2% to 3% of american small businesses -- letting the tax cuts on high-income americans expire. what we will give them is very, very substantial, and we hope you'll join with us in extending as incentives. >> in light of the private- sector losses, further job losses in january, i do not see are raising taxes will have the effect of leading to job creation, and when you look at the turtle tax relief, it is a significant tax increase, particularly on small businesses -- and when you look at the total tax relief. >> could i just respond to that last point? i just want to do it one more time. i have been in public service all of my life. my first job in public service was at the treasury department.

first undersecretary jim baker. lloyd bentsen it be my first job at treasury. when i left the treasury, we de la hoya bensen gave me my first job at treasury. -- first under secretary jim baker. lloyd bentsen gave me my first job at treasury. there was nothing good for business and that swing. -- in that swing. we are trying to dig out of it. we are willing to work with you on how best to do that, but our priorities, again, are to fix what is broken, people are back to work. if we do that well, then we will be in a better position to help dig ourselves a lot of that

fiscal hole. >> where i come from, when you're in a whole, you stop digging. -- when you are in ta hole. we want to see where we can find ways to move ahead and get jobs started again in this country. thank you. >> we can start the clock over for mr. lwevin. -- levin. >> i just want to be clear about the numbers. there is a new category now called the democrats' control budgets, -- democrats control budgets. [gavel] >> mr. levin will proceed. >> i think we need to find common ground, but it will not work if people try to escape

from the past, and i think everyone needs to remember that the sentence you read simply put over $8 trillion of the projected deficits -- they were due to the fiscal policies of the last eight years and the facts of the deep recession as president in heritage. i want to ask you then, mr. camp talked about the impact on small business, and when they do that, they talk about the 250 categories. 250 thousand. not maintain the tax cut for those people, and they include everybody, lawyers, etc. repeat for as the impact, if you would, mr. secretary, of not continuing the tax cut for wealthy americans. who is hit by that? >> roughly 2% to 3% of individuals and roughly 2% of

small businesses. >> ok, that is a fact. also, there has been opposition to the fee on financial institutions. say a word about why the administration is proposing that. >> the law that was passed to fix this financial mess require the secretary of the treasury to propose a way to recoup -- required the secretary to propose a way to recoup, so what we did was a simple, common- cents thing. that was to impose a fee on the largest bank -- what we did was a simple common sense thing. that was to oppose a fee on the largest banks. it helps make the system stable if it is designed well. >> i hope as we search for common ground that those on the minority side will indicate their position on that, and the same on the $30 billion for

community banks. just some of quickly what you suggest we do that and what you suggest how we pay for it. -- just sum up quickly why you suggest we do that and why you suggest how we pay for it. >> they need to have access to capital. what we are proposing is a simple thank. that is to give them capital and design it that the more they lend -- what we are proposing is a simple friend -- a simple thing. alongside these tax incentives for small businesses, it is a powerful package of measures. >> mr. chairman, i hope that those on the minority side will expensed -- express their

position. >> doctor? >> thank you, mr. chairman. a budget is setting the priorities of how the group spends their money, whether we are talking about a family or we're talking about the federal government, and as you look at the situation today where everybody wants a job, and all we're talking about is jobs, jobs, jobs, the example of the priorities of franklin delano roosevelt was to create jobs through the works project administration, through the ccc. you see the same thing in the jobs that have been created, and i would like to hear you convince me that putting a tax credit out for small business is more effective than recreating some of the creation of jobs that have gone on in the past.

the seattle seawall. if we have an earthquake like they just had it in haiti, the city will slide down into the ocean. -- like they just had in haiti. the one in san francisco went down. so the infrastructure jobs are everywhere around us. there are human service jobs in schools, in nursing homes, and all kinds of places. convince me that your balance of putting money on the side of small business, hopeful job creation -- because of people do not have money, they do not go to small businesses to buy stuff, so -- >> i agree with you, and that was well said, and that is why we a been so supportive of very substantial investment in infrastructure across the country -- and that is why we have been so supportive.

it is good for the economy as a whole, as well, because as you know, there are parts of our nation's infrastructure that have been allowed to decay over time. so infrastructure is very park " and its we will be supportive -- so infrastructure is very important, and we will be supportive. in addition, one of the most effective things we can do is to make sure that at the state and local level, there are resources so that teachers can stay in the classroom teaching, firefighters are able to stay on the job, and those that are first responders, helping state governments avoiding making deeper cuts, that is good policy, very powerful, and can operate very quickly, so you are right to say that tax cuts alone are not going to solve this problem, and you are right to say that we need to do other things are wrong side that -- other things

along side that. but come together, we think that package could be quite powerful -- other things along sidside t. the balance of the rest would go to things that we think would also complement that, help repair infrastructure, the first responders, make sure we have teachers in the classroom, so that is one to cut the package. >> thank you. >> thank you, mr. chairman. secretary geithner, it has been one year since the president signed the so-called stimulus bill, and americans are still

wondering where are the jobs. in my own northern california world district, the unemployment rate is over 15% -- in my own and northern california rural district. the last thing we should be doing is passing legislation to make this worse. the president's budget assumes that congress will pass a health-care bill. this raises taxes by more than $732 billion over the next decade. using the methodology developed by christina romer, president obama santop economic adviser, these tax hikes could cost -- president obama's top economic adviser -- does losing 5 million jobs on top of the double-digit unemployment rate concern you? >> congressman, those are not

our numbers. of course, we would not ask you to support programs that would carry that risk. >> the methodology by the president's own adviser, that calculated this -- >> there is not a chance that a reasonable independent economist would look at that package of measures and suggested that would be the effect over time. one thing is important -- and suggest that would be the effect over time. the board and of the current system is not good for business. they normally put it at the top of their basic concerns -- the burden of the current system is not good for business. even the national number does not capture it. there are much higher numbers in many parts of the country. that is why it is so important

that we are on this and keep working to reinforce this. the worst thing we can do today is to stand back and say, "all right, we are going to hope that our challenge is now can be best addressed by cutting these dramatically today -- our challenges now can be best addressed by cutting these dramatically today." it would not be good for the country. >> i would like to ask you about some specific tax issues. the president's budget does not provide any details of what he is asking congress to pass. does the administration supports a new 8% payroll tax on employers who do not offer health insurance that meets the government's standards? a tax that could result in the loss of millions of jobs? and does the administration supports a tax on any american who chooses not to by

government-mandated insurance, a tax that would fall on millions of americans making less than $250,000 per year -- a tax on any american it chooses not to buy -- who chooses not to buy? >> what they would like to know is what the rules of the game will be. they would like to have uncertainty lifted and for the debate to end. and they would like us to lift the burden of cost the chrysostom put on them, so i know you have spent a lot of time on this -- lift the burden of cost the current system puts on them. we want to expand coverage, improve the quality of care, and and the huge hidden cost and and fairness in our current system. -- and anend the huge hidden cot

and on fairness -- unfairness in our current system. >> trying to restore fairness to our tax code. i am also glad to see that the president is taking on to reduce a gap. could you please take a moment to share with us some of the ways in which the president seeks to close the tax gap? and could you please tell us why this is so important? >> we are following the lead of this chairman and many members of the committee. and let me give you an example. this creates a range of incentives that encourages

companies to shift investment in incomes offshore. -- investment and incomes offshore. if one of them ships overseas, it pays less in taxes. -- shifts overseas. we do not think that is fair. they can make the system more fair -- if one of them shifts overseas, it pays less in taxes. we do not think that is fair. we want to make the system more fair.

there are subsidies that go to oil and gas, for example. the other is the tax of hedge fund managers and private equity people. these are simple, fair things. we want to make permanent the middle-class tax cuts that, again, go to 95%, 97% of americans. we want to do this in a way that is there and that is responsible. there are other things we can do, but we are starting with that, and we are proposing have to dig ourselves off of this -- how to dig ourselves are out of this hole we are in. it is fair to the american people. >> thank you. >> it sounds good to me, mr. chairman. thanks, mr. secretary.

first, thank you for including my bill in your legislation. i do not understand why there would be any opposition to that. it has been well met by insurance agents and credit unions, as well. i also want to say, as mr. lewis mentioned ago, i appreciate the inclusion of reinsurance. i do appreciate the simplicity of your proposal, but it might still allow a significant shifting of profits offshore, outside of the reach of u.s. tax system. domestic companies are upset about this. this is not an issue that was brought to my attention by the afl-cio. this was offered by domestic insurance companies who want something done about it. they do not understand why they have to compete with companies that move offshore. in addition, mr. rangel has been

talking about tax reform, and i appreciate the time and effort you put into these. recently, the chairman asked me to look into transfer pricing. i hope that we can were together on these international reforms, because mr. rangel's proposal does encourage companies to stay here and to prosper. now, would you explain briefly the changes and how they have changed since the last budget? >> again, we are trying to balance a simple imperative. we want to make sure there is a level playing field for american companies, so we are not creating an incentive for them to ship jobs overseas. we want to do it anyway -- not creating an incentive for them to shift jobs overseas. we want to do it in a way -- we

have for a lot of reaction. we took that into consideration -- we have heard a lot of reaction. we made some additional suggestions, too, but there are different ways to do this. of course, we will work closely with you on this. we are open to suggestions, and we understand a lot of people think you cannot really do this without doing comprehensive tax reform, or corporate tax reform, and that may be true, but we think these are sensible common sense things, and we would like to move on them. >> i hope it remains a priority with the administration, and, lastly, mr. secretary, could we get treasury to submit to us what the cost of the war in iraq will be? and not just the immediate costs, which are now north of $1

trillion, but just as importantly, the obligation we have to be men and women who have served as honorably -- the obligation that we have to the men and women? this is part of where we find ourselves, so it is ok to suggest that if we are digging a hole, and we find -- that obligation is a very honorable obligation, to pay for those veterans hospitals for years and years to come, so i would hope that you can give us a cost and what we find ourselves in some measure with these deficits we have today. >> is to be honest and account for the cost of governing -- is to be honest. -- it is to be honest and

account for the cost of governing. we want to make sure that we are being fair and honest. i completely support that principle. >> mr. geithner, i would first like to express my appreciation for the president including something in his budget, which i introduced along with my colleague, earl pomeroy, about removing cell phones from property. that is dumb. >> i thank you for saying that. i think that is something most people are very supportive of. but i would like to begin it. i am -- >> i would like to begin. i do not know if you had a chance to read article in "cnn money." in that article, a small- business owner in my district is

quoted as saying, "i need the money before i hire the people, not after i hired them," so according to him -- not after i hire them." >> the key thing is to make sure there is growth and demand for products people want to buy. i think if you look at what is happening across the country now, it is not just that the economy has stopped shrinking and that a group at the most rapid rate in six years last quarter, -- and that it grew at the most rapid rate in six years last quarter -- as that happens, when this will do is make it more likely that people add jobs in at -- what this will do is make it more likely that people will add jobs. this does not solve all of the

problems, but we think it will make a real difference. >> you need to fix the bank problem first. let me ask you question about the president's fiscal condition. our tax increases on the table for social security reform? yes or no? >> thank you for asking that. .

in this commission, our view is that you need to have democrats and republicans together recommending things that will work. it will not work to just have republican ideas or democratic. these are big problems and we have got to work on them together. >> social security can be fixed but it does not need to be taxed. >> allied to recognize the gentleman from tennessee. >> thank you, mr. chairman. i will be very brief. i hope you all will talk more about the dangers that we face as a country if we do nothing about the structural deficit.

in 2000, if you look at the website of the treasury department, revenue expenditures were around 90% of gdp, basically breaking even. the sec it worse thing in 2001 happened in february when they projected a surplus. i was wondering what the price of cotton would be in 10 days and they were telling me what the surpluses would be in 10 years. in september, we had 9/11, and every assumption was no longer a valid. the administration had not gone back and revisited the fact that since that time, revenue has never been as much as 90% of gdp, and expenditures had never been less than 20%.

in iraq and afghanistan, we borrowed money, never before had been done. it is a structural deficit. and this idea that we can just cut spending here or there, we all know that it is not possible. to and to do not equal four anymore. i told someone the other day that the way this congress operates, and has since basically i have been here 21 years, no matter who is in charge, we would still have pony express days in wyoming if it was up to congress and we did not have the commission for defense spending. the temptation here is to put off the tough decisions, but we are rapidly reaching a point

where we cannot any longer do that. i just want to thank you for what you're doing, but i think the more if this we put on the american people about this structural deficits, and be honest with them, i think this idea of that you raise taxes -- rich tax is a penny on someone making more than $10 million is a crime, that has got to be addressed. we cannot get along without some acknowledgment that revenue and expenditure have to somewhere equal about the same on this percentage of gross domestic product. i am making a little speech here. i hope that people understand it. >> our fiscal position is unsustainable. we will be poorer as a country if we do not fix that.

our priority has to be growth in jobs. without that, you cannot fix our long-term deficits. but even when we're growing again, when everyone is back up to speed, we're still left with an unsustainable fiscal position. so if we do not commit to bring that down, we face the risks unfair not just a businesses but the families. i agree with you. even though it is a deeply political movement, it is encouraging. people do not say that deficit -- people do not think that deficits do not matter or that tax cuts are too big. we cannot make huge commitments and perpetually -- in perpetuity without paying for them. and that is fundamentally encouraging.

to get this economy growing again and job creation up again, and then next year we start the process. that next year is not too late or too soon to start. but we recognize this. >> thank you, mr. chairman. mr. secretary, i have two questions regarding your testimony this morning. your goal is to get the best thing for the buck to get people back to work. the first thing concerns the comment you made this morning that repeat what the president said in his radio address, that we need to close the tax loopholes that have corp's

shipping jobs offshore. i've read your budget proposals and their exactly the ones you a dance last year -40% of the revenues from multinationals who have exported jobs overseas and shelter their income. set to announce the proposal last year, other than an occasional reference to it, i have not seen anything done to achieve these objectives other than the "wall street journal" report that you assured multinationals that they should not be worried about this. my question is, what reason is there to believe that the administration will do anything more of the 60% of the proposal left to close the tax loopholes the resulting jobs being shipped overseas than they did last year? my second question, mr. secretary, refers to the job tax credit. everyone is for a tax provision

that will produce more jobs in a cost-effective way. but there is question about a particular proposal for $30 billion that this administration advance. a former treasury official, and it -- commented that that tax credit is a stinker. it simply encourages people to do what they would have done anyway. center proposal is retroactive, surely there can be no claim that there is a new jobs added in january or february before this bill was signed which was caused by this provision. it also distorts the market. for my small business in texas hanging onto its employees even though it's painful to do so, they get nothing out of this jobs tax credit. but for those who dismissed employees or a new company

coming into town, they benefit. one of your secretaries has said we don't know how effective it may be, but even if we got to% at of this, that would be great because it would ensure liquidity for small business. surely the treasury can come up with a better way to promote job growth than a proposal that may be 90% ineffective. the congressional budget office has also noted that this provision will be the least used. >> i'll suggest that you respond in writing to the eloquent questions. i would like to recognize mr. brady of texas. >> i am confused.

your grip of $1 trillion annual deficit that you were handed -- but congress controls the pocket books, remind us who was in charge of congress for two years when you're handed that annual deficit? >> you know the answer to that, congressman. but the damage to our fiscal future, the transformation from $5.60 trillion -- >> i just want to make sure our listeners were not confuse by who handed to that horrible deficit. i want to bring up aig. there is common ground. the anger and outrage at the way a i.t.'s bailout has been handled by you in treasury.

congress, democrats, republicans, you saw the deal that gave one hundred cents on the dollar to the counterparties of aig. if they had been trying to advance the public from knowing the details of that. a year later, $100 billion -- $100 million in bonuses come out. the administration handling of aig resembles the keystone kops. it would be funny if it was not the taxpayers crying about it. i do think that you've taken your eye off the ball pursuing an extreme agenda and failed economic policies. the viewers have no confidence in the economy. people are frightened by the

thought of health-care costs, higher taxes. but where there is common ground in the president's commitment in the state of the union to double exports over the next five years. other economies are growing faster than the united states. that is where the customers are at. that will create jobs in the united states. i'm putting up a graph of what our exports are doing. it took 11 years to double the exports during pretty strong -- pretty strong economic times in global growth. my question is, there is common ground for that on this panel and in the congress. so what is the president's plan to double exports over the next five years? >> i am going to ask the secretary to respond, however.

i hope that members give time for the secretary to respond within the three minutes. it's not fair to the new our members will not get a chance to ask questions. please be brief with the secretary so that we can make certain that we get answers. >> i am glad to hear what you said about exports. i think it is a realistic objective. the world is growing fast -- faster, and because companies are very good at competing in a range of things that the world needs, it is a very realistic objective. it requires us to work together to pass strong trade agreements that will expand opportunities in those foreign markets. we cannot let other countries go and compete markets away from us. we need to make sure that

businesses are getting assistance where they can, and investing in things that help bring in innovation. helping to put the largest investment in research and development, permanent extension of the r&d tax credit, those of the things that make a big difference and help ensure that we are in the game, and gaining market share around the world. i think you're right to emphasize it. exports have been doing quite well recently, but we want to make sure that we are reinforcing that. >> our trade agreements part of that plan? >> absolutely, and as the president said, it is not just that. we need to be in the game in asia. they moved to try to negotiate, we want to make sure that the broader multilateral agreements are in place in a way that are

going to be good for american companies. >> mr. pomeroy, north dakota. >> thank you, mr. chairman. comments from my friends on other sides of the aisle about aig and the other regulatory failures from the last and ministration, it seems to me incredibly out of place. we've seen a lot of regulatory resolve. i used to be an insurance commissioner. it does not mean that you don't watch the swindlers and short cuters. people are still picking up the pieces at great expense to the public for that misguided, unbridled faith in the marketplace that occurred in the last administration. the question i want to ask about relates to job growth.

in this tight budget time frame, one area where we can have job growth consistent with sound budget principles -- we played a part in putting into law an extraordinary stringent funding regimen for pensions. i believe that it made no sense. that was before. we have crushed portfolio values with the market correction, lower interest rates which produced an onerous funding picture. not to the jeopardy of the solvency of the plan, but bringing in funding requirements more in line with solvency principles. if we do that, mr. secretary, we

could have more companies maintaining their pension plans, more cash and the operation to support the company. >> we think that there is a good case for that plan for relief. i could work with you on doing that. i don't know that this is the precise way to do it but we are prepared to work with you on that. >> mr. thompson, california. >> mr. secretary, thank you for being here. i want to thank you for your responsiveness and working on issues through my office. two members before me talked about this new jobs credit. i want to associate myself with their concerns. mr. mcdermott talked specifically about projects that actually generate jobs and at the same time generate security

to communities. i just think it is an congruent that we want to spend money to hopefully create jobs in small businesses. i do not know anybody in business who hires employees because they are going to get a tax break. people hire employees because they have work to do. and at the same time this budget cuts the corps of engineers -- and there are things critical to the public safety and the people that we represent, projects beyond shovel-ready, but terribly underfunded. it seems to me we can get a lot more bang for the taxpayer dollars by looking at that rather than putting this together on how we hire employees. >> i completely agree. the most important thing we can do is make sure there is growing demand for the products the american businesses are creating.

that is a necessary thing. nothing is possible without that. but take a careful look at the way this was proposed. there were a lot of concerns about this. we listened carefully to those concerns. i am not sure we address all of them, but this is designed to meet most of those concerns. we do not have a monopoly of ideas on this. we want to do things that have the highest prospect for providing a spark to investment, a spark to job creation, and we think that this in play a role alongside what you said. >> another proposal in the budget is the idea of doing away with the lifeboat, last and, first out accounting practices. this is one that works well for some u.s. businesses.

if we do this, if we end it, what is going to happen is that u.s. small businesses will take a big tax hit. their competitors overseas are going to have a terrific advantage over us in the marketplace. there are some industries that have to hold their inventory for a long time. this is a fair and reasonable way to recognize that and i would strongly urge you to go back and revisit that, along with the user fee that this budget imposes. i cannot think of anything that would be more difficult for the small businesses to deal with than this. it charges people who do not use the tv. and gives a terrific advantage to our overseas confect -- competitors of the marketplace. i would urge strongly to revisit these two issues. i yield back. >> the majority and minority

make it together in the workshops with your office to thrash these ideas out. mr. ryan, it seemed like you have been with me all week. >> we should get together more often. first order business -- we've been talking about salary pensioners, and it could get back to me, i would like a response from you. i brought out page 126 in your budget, and when you take a look at this, i just find this amazing. you get your budget totals here, which by your own admission, you're wrong budget director -- you're a smart guy with smart economists over there. all of them say that the medium

and long budget deficits has to get below 3% of gdp. but this plan that you are bringing to west does not even get close to it. >> you're exactly right. >> i only have three minutes. you get the cigarette tax and a magic box that says we're going have commission here. we're going to have a bipartisan -- a bipartisan commission -- a partisan commission, to to one democrat. >> that is not fair. >> we're going to solve the problem that we inherited. >> why don't you put it in the budget? you're the guys that run the government. why don't you do that? why don't you give us a budget

that actually gets the budget -- deficit to a sustainable level? [unintelligible] let me quote this from the "wall street journal." the unusual situation that the government finds itself and will not last. and he adds, how you get ahead of the downward spiral of the plunging dollar and the sinking economy? >> i think that is a good ". >> the american people are going to get hurt. why don't you give us a budget, not pointing to a commission, but giving us a budget that is actually sustainable. a>> a budget that takes the huge deficit that we inherited -- >> you can only blame bush so long.

[unintelligible] >> when i left the treasury, it was surpluses as far as the eyes can see. >> you obviously inherited a tough situation but you are making it worse. >> we're working with you in digging our way out of this mess. we're bringing this down from the ridiculous levels that we inherited. we get down below 4%, but we need more assistance to getting at down further. you're absolutely right about that. it is very good for the country to hear you and your colleagues stand here today and say we're ready to be responsible. it is a good thing for the country and we welcome working with you and how to do that. [unintelligible] >> mr. lawson of connecticut, so

much for the bipartisanship. >> thank you so much for your service to the country. mr. secretary, i wanted to ask you specifically, and i know you may have said something in your opening remarks, but with regard to the privatization of social security -- or the idea being one that includes the privatization of social security or vouchers for medicare, what is the administration's position on that? >> the president would oppose that. i would oppose that. it is not fair to say to americans that we're going to privatize social security, leaving elderly americans with a voucher that would not cover the cost of basic health care as they go into retirement.

i do not think that that would be fair, and we would work against that. >> is this anything different than we heard from the previous of bush administration about how they would privatize social security? >> congressman, i have not seen the details of the proposal. but i actually do not think that their proposal would have had a lot of support on the other side of the aisle. >> i want to thank the secretary, and certainly would support the administration in that respect. with regard to small businesses, it could further enlighten us with regard to -- if you could further and likeness with regard to why the administration is focused on and -- for the small businesses that

are hurting? >> this does is create jobs. we need businesses, small and large, to add back the jobs that they cut as the -- as they feared the economy was falling off the cliff. that requires growth and the economy is not growing. but we want to make sure that we are reinforcing that. growth is not enough. with growth, we want to see more jobs created. for that to happen, it is a good place for targeted incentives, and they need some credit if they are going to be able to spend three lots of small businesses across the country through no fault of their own, they are hurt because the credit prize in the economy are still blocked. but we need to open those up so they can start to meet this growing demand.

that's the basic. infrastructure, help for state and local government, those kinds of proposals -- this is a good place for targeted tax incentives and get that credit to the best policy can be used. >> i hope the president continue to go out on the road and talk about small business, but especially about the preservation of social security and medicare, and how important that is -- and so many baby boomers now in a position to see these benefits. it's true that we have to make sure it is sound and secure into the future. but that does not mean throwing out the baby with the bathwater. >> it could not be more important understand that. -- to understand that. >> thank you for being with us. i wanted to make sure mentioned the conversation i had with the

assistance secretary recently about a month or so ago about the programs that you have underway in the tarp to get >> out -- get dollars out into the communities and the efforts being made to make sure that businesses on by veterans, women, and minorities get opportunities. we want to make sure that they are able to manage those accounts. i hope you'll allow me to follow-up with you. i learned some, not disturbing, but confusing information about how you track those. >> i would be happy to do that. >> our overall number on contracts, it is quite low, and a lot like to do better. >> i would follow up it.

there is a chart that should go right before that. take a look at the chart, you'll see that this is a chart that tracks our annual deficit since 1981. i go back always because too often the conversation here is very limited in scope. talking only about this year's deficit for this year's problem or this year's accumulated deabt. i thought i would go back 30 years to talk about what is going on. deficits and surpluses, and if you take a look, it is very interesting. that chart in 2009 when president obama was handed the keys by president bush. you can see the decline that we were in. that is in terms of our annual deficit. the only time we were in surplus was under president clinton.

now go to the second chart. but that first chart amounts to is a chart that shows how many years of deficits we had, and quite honestly, when you total up, it turns out to be a lot of that. we ended up having a doubling, a near doubling of the size of the national debt under the previous administration. if we will go to the next chart, it's tough to turn that deep hole into a pile of good news. what has not been the best news for americans this past year, things have got much better. we of ashley seeing economic growth for the first time for some time. now we're beginning to experience that. as we go to the next chart, we will see how that uptick toward

economic growth, some of that due to the policies of the administration. losses were this many when obama got the keys from president bush. to the point where we saw little bit of job growth in november. a vast reduction in the jobs that we've lost. and finally, the last chart, i want to point out, is that it does matter if we have deficits adding to the dead because the american people may not think in terms of the national debt but they certainly know what they have in their bank accounts. we saw the bank accounts of americans dropped dramatically. while the news is not all good, it is improving, and you have to

put it in the historical context of where we were. mr. secretary, let me ask this question -- you have a train with 120 cars on a traveling at 50 m.p.h. and it is traveling recklessly, fiscally recklessly. how long does it take to stop that train when the conductor says i have to pull the emergency brake and change course? how long does it take? >> it cannot turn on a dime but you have to start. >> it would take a least a mile and a half to stop. it will take awhile for this country to turn around. >> in your opening comments you stated the obligation of your department to come up with these proposals including a new tax on banks.

when did this proposal originate? who originated it? how long was under discussion? >> congressman, we at the treasury started to take a look at how attend meet that obligation under lock in the fall of this year. -- how to meet that obligation under law in the fall of this year. >> whose proposal? >> this is the president's proposal and we recommended it to him. and it had his full support. >> could you share in the interoffice memos on this? >> i would be happy to explain -- >> with the interoffice memos explain the origination of the tax? >> i would talk to committee about the best choices on how to

do this. but the simple point, i think, is that the law required us to recoup losses. we did a bunch of different ways to do that. it was put on the people that benefited the most and did not leave the taxpayers exposed to a dime. we wanted a way that it was a fee on leverage and risk. that is why we chose this model. we know that there are other ways to do it but we think that this is a pretty common sense solution for >> can you share with us these memos? >> i would be happy to talk with you about all the discussions that we had about the alternatives. >> would you give us some of the memos between you and others in the department to show how this was arrived at? >> do you want to have a debate about the merits of the proposal? >> i would like to see the memos.

>> i would be happy to be responsive to a new request you made about how to do this. >> in the tarp wind down, he made some mention in your opening comments -- you made some mention in your opening comments about paying down the deficit. >> when repayments come in, they go to reduce the debt. it's important to recognize that we have been successful in getting $170 billion back from the banking system, and that goes directly to reduce our long-term fiscal challenges but it did not reduce the authority. we're still left with that. we think it's a good idea with some of that existing authority to make sure that we're helping

small community banks do with the need to do to help their business customers to the full extent. that is the basic principle and design of the bill. again, i hope this is something that we can do together, because community banks across the country in every district and every state, they will say what is true even though they are well run banks, they do not have opportunities to spend three there's a good economic case to make that to take a dollar of investment in their -- they have the highest return on a dollar of tax revenue than anything that we have seen. >> your answer is that you are reusing the money. >> to $175 billion that we took back from the banking system when i came into office goes to reduce the debt. but we're going to take some of the authority that congress

authorized to make sure that we're helping the small banks. >> if you could identify these documents, i would help you get them. >> thank you, mr. chairman. and thank you, mr. guy, for joining us. -- mr. geithner, for joining us. members of congress all think it is important to be fiscally responsible. it's important how we do it. i commend my friend, paul ryan, who is leading the charge for republicans on the budget, coming up with some specifics. how will debate -- i will debate paul on a few of those but i think he is offering of valuable service to say here is what we need to do. i think this is something that we need to continue to do.

to have some element -- you have got some elements of the budget which alike. and i think you have some unjustified subsidies to ad business -- ag business that does not help farmers or ranchers. you've offered up their reinstitution of attacks -- the superfund tax that would help us create jobs and protect the environment. what you said a moment ago about the fiscal situation not be sustainable and that our priority should be on jobs and recovery of the economy, i could not agree more. but i would hope that as it developed this and you work with congress, you can think about one area like our infrastructure spending. we are hearing a common theme at least on this side of the aisle.

we have a trust fund in deficit for the first time in history. for shoring up the general fund which is adding to the deficit in the long run. we are at an impasse with the authorization. and so we're not dealing with the long-term investments in transportation that would create jobs and revitalize the community. i am hopeful that we can have a thoughtful discussion about the wisdom of spending about as much money on more tax breaks, extending the provisions for business which would be about the fiscal had room necessary to fully fund a transportation bill, that would put people to work and would have a higher economic multiplier for the task ahead of us.

any comment about actually financing the infrastructure deficit? >> what is going to do the best job of getting growth, more per, more jobs? and to do that in a way that is fiscally responsible over the longer term and in a way that is fair? bear on businesses, working families -- that is basic and i agree with you if you do infrastructure spending right, you get a very high return and it affects how fast businesses can grow. people depend on the basic infrastructure but we have out -- find the balance. will be working with you to find the best balance. >> thank you. >> mr. secretary, thank you for your testimony today. in speaking about fairness, there is a lot going on right now about the causes.

a lot of people should know better. recent history shows that while republicans were in control, the past two large tax breaks that affected the most wealthy. not a nickel of it was paid for in the budget. two wars overseas, not a nickel paid for. and the largest expansion of entitlement spending when they passed the prescription drug plan. analysts say that that will cost the country about 1 $2 trillion over the next 10 years, not a nickel of it paid for. we came into the -- this administration came into a budget mess worse than any previous administration since fdr. it took awhile to get into it. a lot of bad policy decisions in my point of view, and it will take awhile to get out of it. i am glad you're focused on the small-business agenda. that will be the locomotive that

pulls the sad of this mess. in my district in wisconsin, small businesses and family farmers are the backbone of the economy. everything we can do to help them right now is going to be needed. that is why the administration's proposal to extend depreciation and immediate expenses, no capital gains tax for small businesses, and i want to work with your office to make sure that family farmers are eligible for those loans because they are going to need them. they have the spring planting, an important component. among the focus briefly on the new jobs tax credit. i guess this fits into the category of not doing anything new around here. it is not a new idea. it's something we tried back in 1976. maybe i am missing something, but from the analysis from that tax credit back then, it fell flat and we did not get a good bang for the buck.

what do you see in your proposal which is different from 1976 that might spur jobñr creation, especially with the small businesses in the country to get the economy back on track? >> if you had a net job relative to the amount of people that you have on the payroll in 2009, you get up by thousand dollar tax credit. in addition -- 8 $5,000 tax credit. if you raise wages for them, you get a role relief alongside that. -- pedro relief alongside that. it is buried -- you get payroll relief alongside that. there may be different ways to do that but we've made that it

is much more effective in providing a bit more spark to hiring as demand picks up. but you are right, this is a controversial proposal. we're trying to be creative and pragmatic about it. we recognize that what businesses say most is they want to make sure that they are growing orders and advancing enough to meet those orders. we want to provide more spared to create more jobs than we otherwise would. >> mr. secretary, thank you for being here. the president said that we must budget our money the way the american people do. i am sure that you agree with that. my dad came to america literally on a vote and got a job at a manufacturing plant. some years he made less than others. when he met less, we spent less.

when he lost his job in his pension and we lost our health care, we spent even less than the year before. you recognize this document. >> i do. >> i thought you would. back in 2007, the american people gave up $2.50 trillion of their money. we spent $2.70 trillion. two much. the deficit was hundred $56 billion. after several years and other events, our deficit was too much $160 billion. two years, the economy off a cliff. according your numbers, the american taxpayer is giving to $0.10 trillion -- $2.10 trillion. we're spending $2.50 trillion.

in 2015, because of tax increases, we're going to take $3.60 trillion -- my dad would say, we are taking an $3.60 trillion? long term, no, but that would be highly disappointed because we are going to spend $4.30 trillion. that is not how the american people budget, mr. secretary. small business -- everyone talks about small business. >> can i respond to that point? >> you can answer that question and in this question. in this proposed budget, we did you -- if you and the irs the authority to classify

independent contractors to work across the country for small mom-and-pop businesses, carpenters, people to lay carpets and to put on a route, independent contractors, and you could be classified them for payroll taxes? this will put small businesses across america out of business. >> we're not proposing to do that. >> you're going to take that out? >> we're proposing to work together to legislate a party -- authority to clarify that. small businesses look at the current system. you have to take in consideration different factors. it is not fair to them be estop large businesses.

-- versus large businesses. we make it easier and we're not point to change that basic line. i completely agree with the concern that you have. i would not support that. it is much worse than you said. it is not just that we came into office with a $1.30 trillion deficit, but the projected deficit at that point, we're going that ad and an additional -- we're one add an additional $8 trillion over 10 years. we have to live within our means, too. but in a financial crisis and recession, you cannot save your way out of it. you cannot cut spending and expect to lift your way out of this. when you're facing this type of damage, it was expensive in the

great depression but we learned our mistake. you cannot cut deficits in the middle of a deep financial crisis and expects to do anything but seat thousands of jobs, thousands of businesses close. >> my time has expired. >> thank you, mr. chairman. despite the promises made in tarp, it seems as hard as it was a year ago for small businesses in my area in north jersey to get loans. you know that better than i do. taking $30 billion from tarp to create a special program designed to buy and -- provide capital for small bags, i

understand. i think that we should not look like we at the deficit reducing suggestion. what is the justification and evidence that this will open up lending? we had a justification last year that did not work. what makes this justification any more cogent? >> we are recession caused in part by people across the country ball rolling too much. and we had the economy shrinking at an annual rate of 6% after they had borrowed too much. there was no way to seek borrowing come down as people went back to look live within their means. you've seen a substantial drop in loans and credit to small businesses. the problem for us as a country is when a good business, a viable business with good customers that can expand, wants

to grow and meet tha÷i demand with access to credit. >> and that is a lot of business. >> i agree with you completely. that is not easy to fix. what this does is help open up the pipes to make sure that a small bank does not haveñr to ct further. >> you thinkçóñfiñi that is the difference and providing park money for the smaller banks compared to what we did last year? ñrñr>>ñi the capital that with e small banks last year was very helpful. -- that went to small banks last year was very helpful. in a simple way,ñr a dollar of capital from theñi government creates a $8çó to $10 in lending capacity. çóñrñibut it is good to recognit we had more than 650 banks, small banks, with applications

for assistance from the government for a lot of reasons. one was a public perception created that that made him look weak. many competitors ran ads against them. there were very scared that this would come with burdens and conditions making it harder for them to run their bags. >> i just wanted to say to the secretary that we need to do something about the expanding of foreclosures. and finally, the amt -- as i read this budget, the talk about a permanent solution to at&t, but it was like you're paying for with deficit financing. you go back to the past administration, and it seems you are replicating it by not paying for the reduction permanently of the alternative minimum tax. you're doing the same thing as the other guys. >> absolutely not.

>> how are you paying 4for it? >> add we're facing exactly the concern you raise. >> good to see you again. i feel compelled to explain to you and highlight was brought up earlier today, kevin brady from texas, talking about aig. i've been a ball with this issue with you. it is important that we -- i think you did a good job in your opening statement i wanted to clarify again that the former president and his party bag this congress to create the park. the former president and his

party gave the money to aig almost unfettered. now they want to blame this administration and your office for their mistakes. just like they do on the deficit here today as well. mr. secretary -- >> i need to start further back than even that. what happened in this country is that we allow people to get around basic protections we put on banks and to build up huge risks and leverage outside the things that banks do. this is true in a number of institutions, without effective oversight or constrained or that kind of basic tools for bankruptcy to handle these problems. those failures, the failure of regulation and policy, and the regulation of lack of tools, that is why it is so important

that we fix them so we're not faced with those choices again. >> i agree. if we took all the spending, and a markos card, no more food safety inspectors, air traffic controllers, and did not pay any federal employees, we would still have a $1 trillion deficit. >> i think that is exactly right. >> the principal factors driving in our social security and especially the eye control costs and the medicare system, is that correct? >> yes, but it is not just that. tax cuts put in place for the most fortunate americans. >> i'm one to get to that 0.3 -- i am going to get to that point. i one of lloyd mr. -- i want to

applaud mr. ryan as well. but going against the failed policies of the former ministration projected by the american people, and providing vouchers to the medicare system, they were rejected before. i'm glad to hear that the president strongly rejects that proposal. >> we would. >> i thank the chairman. mr. secretary, i have a series of five questions. if i may submit them and ask mr. geithner to submit written answers? >> without objection. >> the most recent estimates indicate that the u.s. will spend about $700 billion a year

in interest payments by the end of this decade. to put that in context, it is like a new tarp every single year for which the taxpayers get $0 in return. i did not vote for the tarp, by the way. right now you werare borrowing more. what happens when confidence fails and interest on treasury bonds skyrockets? the second part of that question is, speaking of tarp, community banks are still doing some lending and yet you're proposal is to escalate that. but the larger banks, that could help out, sir, are doing nothing with credit. they're putting businesses out of business.

that is why we have such a problem today in this economy. when that deal with the large banks to stop lending to the american public, sir? -- why not deal with the larger banks who stopped lending to the american public, sir? >> we have to work together to bring that deficit down. i completely agree and you said it well. let me just talk about the financial system very quickly. when we came in office, we took back $170 billion from the largest banks in the company by forcing them to raise private capital so that the american people could take those resources and use them to meet our long-term needs, including the ones that you pointed out.

it is important to keep working together. >> i don't think that you can use this money twice. i don't think you can give it to community banks and comply with the deficit. >> the way that this law was very carefully written, it says that when we -- $170 billion in repayments replaced by private capital. >> my time is almost up. one other question. when we talk about the fact that we had a surplus, no one is saying who was in charge of congress. i think you know and i know and the american people know it was the republicans who insisted on that. it was the republicans to control congress at the time. with that, mr. chairman, i yield back the balance of my time.

>> mr. van holland. >> it is indisputable that the obama administration inherited an economy in free fall, and before the president even put his hand on the bible, we had a $1.30 trillion deficit last year. the question is, how do we go forward? the more we hear ideas from the other side, the more we hear that they want us to turn back the clock and that the proposals from the bush administration that got us into the mess to begin with. let's talk about tax policy. the recovery bill provided tax relief for 95% of working americans. the head of the republican house congress decide -- described those as boutique tax cuts. and then as the president it

would to a tax cut that help the wealthiest. -- and then he asked the president if he would do a tax cut that helped the wealthiest. and at the same time, you've got to get those deficits under control. you cannot have it both ways. the bush tax cuts that the president proposes to allow to expire on their own terms these are on incomes over $250,000. and by doing that, we would reduce the deficit by $826 billion over 10 years, almost $1 trillion. it's interesting that they say we should turn back the clocks again in give disproportionate tax breaks to the wealthiest americans and then say, well,

let's work together to reduce the deficit. we also adopted the statutory paygo, which most americans understand, you have to make do, and make sure that you were going to add to government programs and all said one way or another. -- and offset one way or the other. we have to have a discussion about our. the president told us that we're going to wrap it up. the president said, it was necessary to turn things around. now what are we going to do to get the money back? your proposal on the table to make sure that aig and the financial industry that got taxpayer money has to pay back every cent. i hope our colleagues on the other side will work with us, because when we passed the wall

street accountability bill, we had a proposal to do that, but we did not get a vote from a single republican member. i would just ask you to get back to me on a proposal to establish a financing authority for clean energy. i think there were some promising ideas and the president's budget to create a $4 billion infrastructure innovation projects. i hope that we can develop that the clink energy initiatives. i look forward to the conversation with you on that. >> mr. davis of kentucky. >> allied to continue our discussion where we left off last february. regarding last 1in, first out accounting. it is not a loophole, but

speaking of turning the clock back, going back to the roosevelt administration, most of that got shot down by the senate as a result of overreach. my concern is that if we want to create jobs in manufacturing, it is a well established practice. our foreign competitors do not have lifo, it is one of our small and manages. how we complete -- how we compete with the chinese. in industries like distilleries were you have to sit back and mentor for many years, and the costs of a cruel are dramatically higher, -- and the cost of a cruel -- accruel are

dramatically higher. i can see this killing jobs, reducing investment, where that is already a challenge now. congress rejected a proposal to repeal it last year. you brought it back to us. you told me there was a difference of opinion on that. there was broad bipartisan support to keep it. what is the compelling reason to repeal this? >> you make your case and i understand the concerns. but we're following them lead of many members of this committee. i would be happy to talk to you and to respond in writing and walk you through what the impact might be. we thought it was good policy back then and we think it is good policy. i understand the concerns that you raise. i know not everybody agrees.

when it is a delicate these proposals and figure out the best benefit. -- we need to work through these proposals and figure out the best benefit. >> i don't sit attacking republican presidents on infrastructure. were calling for bipartisanship and in making endless attacks. i put this in light of going into a failing plant, the one thing that you never do is hurt the things that are ashley maintaining financial stability. it's a further burden on cost. when you come in with $160 billion deficits, and then if i took that before a board of directors, i would get fired. that is what the american people are going to do if we continue this at a control spending.

>> i think he said an important thing. a failing company, we have to turn around a problems. i don't think we have a failing economy. but we have a turnaround problem. we're beginning to make some progress turning it around. we would like to find ways to work together to make it more likely we get this economy back on track and repair the damage and wreckage, and as we grow, produce more jobs. >> miss swartz, pennsylvania. >> thank you, chairman. i appreciate your comments. i think a colleague on this side of the house at best, we inherited a mess. thank you for your comments and clarifying the reality of what

we inherited and some real remedies, all we can do to stimulate the economy and job growth. i appreciate the focus on small business and small business lending. and also the focus of the pay- as-you-go, the commission, and the fact that we're trying to balance this. the actions of this administration and congress and what we're going to do going forward. something that has not been asked yet, on the issue of helping encourage americans to save. in retirement, there were some comments that we have had more like families do, and a lot of american families that troubled

by borrowing more that they could repay. but we do not always make easy decisions. some of the things that happened during this terrible recession -- it is challenging for families that are facing very difficult questions. it is easier when you can save for your employer. 70 million working americans do not have any kind of retirement plan or savings plan at their workplace. what i want ask you is -- the proposals to encourage small businesses to encourage retirement savings, speeding up 401(k)'s, and even a small businesses that do not do a 401(k), did do some kind of

automatic savings -- to do some kind of automatic savings for their employees. the money that you put away adds up over time, and i encourage my younger staffers to do that. this is really important and it is something that we can all agree with in a bipartisan way. >> let me tell you the problem that we have here with the members that have not had an opportunity to inquire and we have 10 minutes to get to the floor. for those members that want to stay, you can have one minute of peace, or at the 2:00 hearing, give priority to those who are not able to make inquiry. who would want to wait to 2:00? ok. [buzzer sounds]

>> how to close by saying thank you and i look for to working with you. >> i would be happy to give you more detail in writing. >> do i have one minute? do we have time for three minutes? mr. chairman, how much time do i have? thank you sir. mr. secretary, you and i had an exchange regarding trade. i want to go back to that quickly. for 1995-2007, we had growth in our exports but there were 93 trade agreements passed during that time. mr. chairman? the president has said that he wants to double our exports. we need to have treatment -- trade agreements past three years supports the idea of free

trade? >> yes. >> the korean agreement, the colombian agreement, yes or no? >> we support having strong trade agreements, open markets for u.s. exporters that are fair -- >> do you believe that we're losing jobs by not passing fair trek -- free trade agreements? mr. chairman? [inaudible] >> thank you mr. chairman. but the in the category of those who support the hiring tax credit -- put me in the category of those who support the hiring tax credit. let me ask you i talked to

several people who wanted this to happen. congressman rangel and i introduced a tax credit bill. this is been slow to develop because of the financing side of the issue and i know that you have been working on that. the president's budget includes the buy america bonds act, and i hope that that will qualify because they can put a lot of people to work very quickly. >> happy to see you again, mr. secretary. my district is in a world of hurt. at that 13% unemployment. a that the highest mortgage foreclosure rate in the country.