currently on is sustainable. with an annual deficit of $1.6 trillion. unemployment hovering near 10% across the country in my district, pushing in many places, beyond 15%. an economy showing only tepid signs of recovery, it's clear that we must change course now, or face catastrophic consequences in the very near future. my colleagues, i think, the simple truth is that uncle sam, among other things, needs a diet. our greatest challenge, and our greatest hope to achieving a lasting recovery, lies in curbing uncle sam's appetite for spending. it's time to cut up the gove the unprecedented increase in non discretionary spending. last year alone, that spending

increased by almost 13%, and that is excluding the $862 billion stimulus package. this stunning acceleration of spending has let the skyrocketing deficits, and annual discretionary funding is only part of that equation. a little long term, spending on the three mandatory federal programs will one day consumed our entire budget. a changing course will require all level of political courage not often found here in washington. starting today, we will continue inflicting lasting damage on our economy, -- on our country, affecting not only our grandchildren but their grandchildren as well. earlier this year, the president announced with great fanfare that he would submit fiscal year 2011 budget that freezes most

non-defense and non-homeland security funding. that does not appear to be the budget that he has submitted. i hope that you will clarify that. . wrong, i hope you'd clarify that. i say that, because the president's budget currently increases spending across 8 of the 12 appropriations subcommittees, where is the suggested freeze? mr. president, we're anxious to see your freeze. it's disingenuous to suggest that the budget represents anything close to a freeze, particularly when it's being particularly when it's being applied to the budget ast year's 13% increase in discretionary spending. and after last year's stimulus package which was approved under the faulty premise of stimulating the economy and creating jobs. unemployment rates at 15% in my district would suggest that

clearly has missed the target. in addition, the president's plan relies on several accounting gimmicks. like transferring programs to mandatory spending. to skew the true totals. ultimately, this proposal will have very little, if any, positive effect on our overall budget picture. there is not a member in this room today who believes this budget will result in significant deficit reduction. in my view, the president's budget falls woefully short in reining in the government's spending. it simply doesn't go far enough to give the scale of the fiscal challenges we face. the administration continues to ignore the explosive growth of entitlement programs and places where it's open a fiscal commission to address the tough issues of this budget. sadly, this commission is not accountable to congress or the american public.

and it won't even begin to make recommendations until after the midterm elections. about the time we start running our government by way of commission is about the time we truly know we're on the pathway to bankruptcy. the administration's own numbers paint an unflattering picture of the president's budget. over the course of the next ten years when the administration assumes the economy to have recovered from a recession and the war in iraq to have ended our debt deficits and spend will go remain out of control and will continue to worsen. assume for a moment, that we finally implemented this president's budget. the deficit would never drop below $700 billion. and will start climbing above $1 trillion again by fiscal year 2020. publicly held debt would nearly triple by the year 2020. the interest on this debt would

quadruple over the same period and would become one of the largest single expenditures of the federal budget. ironically, the issue is not lack of federal budget under the president's proposal. it's because the president is proposing nearly $2 trillion over the next decade from various tax increases, fee increases and other revenue raisers. so not only will uncle sam be spending more, but the president's budget will be aggressively taking money out of the pockets of taxpayers and out of the private economy. at this moment, for every available job, in the united states, there are six people now seeking work. the president has said that creating new jobs and reducing unemployment is, and i quote, the single most important thing we can do to rebuild the middle class. the key to job growth lies not in more spending, more stimulus

or more jobs bills. but in less spending, less taxation, and removing regulates tore barriers that will hinder economic growth. putting it simply, the administration is not only spending too much. in my view, it's scaring the hell out of small businesses. the economic engine of our national economy. it has done this through promoting cap and trade legislation. new rules on greenhouse gases. and new taxes and fees from its health care reform bill, all of which will result in higher prices that will be passed on to consumers. what small businesses is going to invest -- which, or how much small businesses are going to invest, or we hire anyone in this uncertain environment. we can agree to disagree on the cause of our economic troubles. but the fact remains that we cannot spend our way to economic

health until this congress and this administration curbs its appetite for spending, our economy will continue to suffer. i will close as i began with this comment. the simple truth is that uncle sam does need to go on a diet. thank you, mr. chairman. >> if we could proceed with our testimony, i would ask each of our witnesses to please hold your comments to five minutes. and i will ask each member, when we get to the questioning period, to remember that the five-minute limitation applies to both question and answer. so if members would like to receive an answer from the witnesses, it would be very helpful if we don't give five-minute exchanges along the way. we'll have to keep a very tight clock this morning, so that as many members as possible have an opportunity to question.

secretary geithner. >> thank you chairman obi. the hearing takes place today, critical moment for the american economy. we're seeing encouraging signs of progress but we face many, many daunting challenges ahead. today, though, we can say because of the actions we took to put out the financial fire and because of the recovery act, the economy is expanding. because we provided 95% of working americans with tax cuts, because we provided billions to state and local governments to maintain basic services, to keep teachers, police officers, firefighters, first responders on the job, because we provided emergency relief to those hardest hit by the recession by expanding and extending unemployment benefits and to make health insurance cheaper to families who rely on cobra, because we are rebuilding roads and modernizing across the

country, because we acted to bring down borrowing for businesses and families, because of all of that, the economy is expanding. exports are raising. manufacturing output is increasing, businesses are investing again and consumption is growing. this is progress, but this recession caused a huge amount of damage. and it's going to take a lot of time to repair the wreckage and establish a stronger foundation for future growth and income and opportunity in this country. now, the president believes that right now it's important that congress act to reinforce this expansion and make sure it translates into job creation and broad-based income growth across the country. he believes the best way is for congress to emphasize targeted areas. first, we want to ramp up small businesses. we proposed tax cuts for small businesses. a smooth lending fund. and expanded authority for the

small business administration. secondly, to boost investment in the nation's infrastructure so we can help enlist to take on public works projects that are overdo and help put more americans back to work. third, we need to stimulate local governments to avoid further cuts to essential services and personnel. and we also need to investment in clean energy for consumers for their homes and promoting energy efficiencies, we can help american households save money, help reduce emissions and help create clean jobs. now, chairman roemer will shortly speak in greater detail. she may speak, too, about her economic outlook and the immediate challenges ahead. but at the core of the president's economic strategy is a recognition that we need to invest in reform so we can innovate and grow. we need to invest more in basic science and research so american businesses can refund the technology of the future.

we need to invest in education so we can do a better job of teaching and creating the skilled workforce of tomorrow. we need to invest in promotion because the more we do, the more jobs we'll support at home. and a set of reforms that are critical to how the economy forms in the future. reforms to reduce the health care costs, reforms to change how we use energy and financial reforms that will protect consumers and investors and support economic growth by making sure the finance is channeling the savings of americans in companies and investments, not just in feeding real estate and financial boons. these are necessary stuff, but as you recognize, they're not enough. as we act to reinforce this economic expansion, as we pursue investments vital to our economies in the future, we need to return again to living within our means. when we have strong growth in place, we need to begin the

process of reducing our deficits. deficits matter, ours are too high, they're unsustainable. and the american people, along with the investors around the world, need to have more confidence in our ability to bring them down over time. now, the president has outlined in this budget set up policies to achieve that goal. policies if enacted, more than $1.2 trillion. reduce the deficit to below 4% of gdp. and this is more of the reduction in the economy than any president has proposed in a decade. of course, that's why the president has created a bipartisan commission on fiscal responsibility, charged with bringing out further reducing in the long-term deficits and a way to deal with the deficits as well. director orszag is going to speak in more detail about the responsibilities for fiscal responsibility throughout the country. i just want to end by saying, the challenges we face, making

sure as we focus on repairing the damage caused by the crisis, we're keeping our eye on the important. it's making sure we provide immediate targeted to the investment. so that we lay a foundation to growth that is stronger in the future, more sustainable and is shared by more americans. to restore confidences among families and businesses we need to demonstrate that this government, this city is capable of coming together to solve problems. they want to see us act. the economy today is much stronger than a year ago. we're in a much better position to deal with the challenges. but we have a lot of work ahead of us. thank you very much. >> thank you, mr. secretary. >> chairman obey, members of the committee, like my colleagues, i'm delighted to be with you this morning. i'm going to take just a few minutes to talk in more detail about the policy response to the crisis, the administration's

economic forecast and the need for further job creation measures. in the months before president obama took office, the american economy faced disruptions even larger than those that faced the great depression, the rise in uncertainty were larger in the fall of 2008 than late 1929 and early 1930. the result was a terrible deterioration in economic conditions. real gdp declined at annual rate of over 5% in the fourth quarter of 2008. and over 6% in the first quarter >> the threat of a second great depression. it has been to the swift and strong policy responds been the centerpiece was the american recovery and reinvestment act of the recovery act is the

boldest fiscal action in american history. estimates run the council of economic visors a non-partisan budget and a range of private forecasters suggest that because of the recovery act, employment was between one provide million and 2 million higher than it would have them. more generally, the broad policy response helps to change the trajectory of the economy. our financial markets are functioning again. real gdp began growing in the third quarter of last year. acre at a rigid it grew at an annual rate. -- john foster at a rate. the unemployment ratg'i is unacceptable by any measure. employment is a 0.4 million below what it was when the

session started. -- is 8.4 million below what was in the session started. started. now, prior to each budget, the council of economic advisers and office of budget and treasury worked together to produce an economic forecast. this year's forecast was finalized in mid-november. all forecasts were subject to financial standards in error. usual patterns surely provide less guidance than ordinary times. but we have based our budget projections on our best estimations. for gdp, the forecast forecasts moderate growth of 3%, followed by a somewhat higher growth of 3.4% in each of 2011 and 2012. compared with recoveries from other severe recessions, the projected growth is relatively

modest. particularly in 2010. in terms of the labor market, the forecast predicts average job growth of about 100,000 per month this year. about 200,000 a month in 2011. an about 250,000 a month in 2012. typically, following a recession, we see increases in productivity, temporary unemployment and the length of the work week before overall employment begins to recover. for the most part, developments in recent months have been following this pattern. productivity growth has serged. unemployment has risen and the work week has generally risen. indeed some private forecasters such as moodyseconomy.com.

it typically taking growth of 100,000 a month to actually bring the unemployment rate down. because we do not expect particularly robust growth every the remainder of the year, we do not expect to see substantial further declines in unemployment this year. as the pace of job creation picks up in 2011 and 2012, we're likely to see much greater pog in reducing unemployment. nevertheless, because of the severe toll the recession has taken on the labor market, unemployment is likely to remain elevated for an extended period. because of the high levels of slack in the economy, we expect inflation to remain low. and we see little risk of substantial increases in inflation. at the same time, inflationary expectations appear to be very well anchored. we do not expect to see inflation fall or turn to ought right deflation. we project that in the fourth-quarter basis as measured on the gdp price index, 1% this

year, 1.4% in 2011, and 1.11% in 2012. these forecasts of key economic indicators are very much in the range both of the private forecasters surveyed by the blue chip economic indicators and the central tendency of the federal reserve's federal open market community forecast. now, development since november have not led to large changes in the economic outlook. the most significant development was the good news that gdp growth in the fourth quarter of last year, was higher than we and virtually all other analysts expected as of mid-november. another favorable development was the fall in the unemployment rate by 0.3 of a percentage point in january. and the maintenance of that rate. it's impossible that the unemployment rate for 2010 will be slightly below the november forecast. well, the budget was released

before specific options to spur job creation has been finalized. and the facts form that these take will influence the job creation. the president has proposed high-impact creation to spur job creation which would improve the outlook for unemployment. one possible policy for continued support for those most directly affected by the recessio recession. precisely because of their difficult circumstances, these families are likely to spend a large fraction of the continued support. thus, the support not only directly helps them weather the recession but also stimulates demand and improves the overall economy. likewise, the state and local governments means that additional fiscal support to the states will provide vital cuts in vital services and counterproductive tax increases and so again have strong output and employment effects. a measure that could have a

particularly strong employment effect is a payroll tax credit for new hiring, such as the administration's proposed small business, jobs and wages tax cut or the payroll tax credit for hiring unemployed workers proposed by senators schumer and hatch. these proposals rely on the basic economic principle that if you want more of something, in this case, hiring, now lower the price. the proposals offer a significant benefit to firms that undertake new hiring. such credits have the potential for a large impact on job creation at a relatively modest budgetary cost. now, these are not the only job creation measures that the president thinks should be done and he's anxious to work with congress on other ideas. but it is essential that we take further action to spur employment growth and that we do so as soon as possible. thank you. >> thank you, director orszag. >> thank you very much, mr. chairman. let me offer some brief remarks.

first, the deficit is temporarily elevated because of the economic downturn and steps necessary to address it. this temporary rise from the deficit is both natural and desirable during an economic downturn. in other words, the problem is not this year's deficit. as we look out over time, however, current policies suggest an utterly unsustainable course, and that is the problem. so how do we get here and what should we do about it? first, let me clear up some misconceptions about what has been happening in the very near term in which there have been statements about the obama administration and a massive increase in spending. if you look at the record, in fiscal year 2008, spending was 20.9% of gdp. in 2009, it was 24.7% of gdp, a very significant increase. but let's examine where that 4 percentage point increase came from. on january 7th, 2009, well

before president obama stepped into the oval office, cbo introduced the budget outlook. that document showed the 2008 to a projected 2009. that four-percent increase was already baked into the cake before the obama administration stepped into office. reality has turned out somewhat different. total spending is slightly lower. but i hope we can return to the question of what drove that increase. second, with regard to the immediate term deficit, i think mr. obey, we have slightly different numbers, but there's a lingering effect from the economic downturn and there's a very significant effect from the 2003 legislation and that can explain the total deficit that we face every the immediate term. that's all fine and well, it's

fine to say you inherited a big problem but what are you doing. the first very basic principle has to do with pay go. we now have statutory pay as you go legislation. i would point out if we had paid and abided by pay as you go in the past, those deficits instead of being 5% of gdp would be 2% of gdp. we would have a stable medium term physical trajectory. if it had been financed, not deficit financed but offset, if the medicare had not been deficit financed. second, it's important to recognize that economic recovery itself will help to bring down the deficit from roughing 10% gdp this year to about 5% of gdp in 2015. that is still too high. a fiscal target of roughly 3% would stabilize that as a share of the economy and that should be our objective. so how do we get the rest of the way there? first, we put forward specific policy proposals, $1.2 trillion

in deficit reduction over the next decade. which i would point out is more that is contained in any budget that has been put forward in more than a decade. that includes a new fee on financial services firms. it includes allowing the 2001 and 2003 tax legislation to expire for the top earners in the society. i hope we can return to that question, also because table s-11 shows reductions in agency after agency, whether it's from agriculture department, to the commerce department, hhs, hud, interior of justice, labor and so on down the line. even with that very significant deficit reduction, however, the hole is so deep that we do not get to our fiscal target of 3% gdp which is why we have called for the creation of a bipartisan fiscal commission, not only to address the long-term, but put forward recommendations to get

to the rest of the way there over the median term. that has to do with the next decade. as you look out furthers over time, the key has to do with rising cost of health care. it is absolutely essential that we move towards paying for quality rather than quantity in health care. and the legislation which is under consideration has very important movement in that direction which we can also discuss during the question and answer period. finally, i want to highlight the effort has we're undertaking to seek more efficiency in government, in part so we can free up resources to invest in education, r & d and other drivers of long-term productivity growth. we have put forth 126 program terminations which would result in $120 billion, including constellation program at nasa, the advanced tax credit, the joint strike fighter and fossil

fuel strategies. we look forward to congress to getting all of those changes enacted. we had greater success last year than had been in the case in the past and we look forward to continued success this year. finally, if i can just close by saying what we are putting forward is a dramatically different situation to address not only the fiscal deficit but others. that is a dramatically different vision than the plan put forward by representative paul ryan which would not only cause a higher deficit at the end of the 2020, the end of the budget window. 7% of gdp which is higher than the administration's budget, but also would reduce taxes to the top 1% of the income distribution by 50%. so it contains not only higher deficits, but also exacerbation of the opportunity deficit that you were discussing.

so we do face a basic choice. and i hope we have further discussion of that basic choice. thank you very much, mr. chairman. >> thank you. again, let me remind members, we have a color-coded clock in front of me. and i will enforce the five-minute rule strictly. this morning. just one question before i turn to mr. lewis. it has been suggested by some critics of the administration, that because we've continued to see job loss in the economy, that somehow the recovery package has not had a positive impact on unemployment. i'd like you to give us your response to that. and then, secondly, i want to ask one other question. in my view, because of the

incredible stress laid on workers in this recession, there is very little faith that they have remaining in either political party because they feel, i think, that the entire system has failed them in terms of putting the needs of average workers before the needs of high rollers in the society. and i would ask you what your response would be to their concerns, if they were looking you straight in the eye and saying that today. >> why don't i take the question on whether because we're still losing jobs, that's a sign at that recovery act has not worked. i think >> what hit this economy was up enormous proportions. it is a shop bigger than anticipated. we were an economy with downward

momentum. the unemployment rate was rising. all of the evidence suggests the recovery act has been essential to changing the trajectory. it rose to almost 6%. unmentioned the estimates. those are not our numbers. if you have to but that the congressional budget office. all of them say conditions would have been tremendously worse had it not been for the recovery act. that is the essential point to understand here. >> let me ask complaint. if you look at any measure of economic activity in the united

states, at any measure of confidence in the financial system or among businesses or consumers, what you saw in march of last year was -- after all those things are falling off the cliff they returned. they turned when the peoples of the government act forcefully to fix the mess we all came into office with. and act forcefully to fix the mess we all came into office with. and it was those actions that started to change that turn. and you saw growth resume in this economy, just really one quarter, after congress started that process of offering those actions. so it was a quick arrest in a panic of unprecedented force, and a very quick resumption of the basic conditions, growth that have to precede job creation. on the broad question, i'd say the following, we came into office not just facing the worst

recession since the great depression, but we came into this mess with a series of other really daunting challenges. we'd seen a long period of stagnant growth in the median wage in the country. a long period of dramatic rise in the income and economy. a long period of erosion in the quality of education that our government has provided our children. we came into office with a long period of very, very rapid growth in health care costs, a deep erosion in the fiscal division of the country. now, addressing those is going to take a long time as you said, but we're in a position to address those things that matter to the americans today because we acted so forcefully to address the crisis. we're in a much stronger position today to address those problems and try to help rebuild the confidence in the basic security of americans. >> can i just very briefly add on -- >> 27 seconds --

>> i'm going to do it in 27 seconds. in addition to addressing the short-term economic distress that middle class families face, the budgets move towards improving our education system, towards providing things such as child care, for example, also avoids the mistake of exacerbating the intentions of middle class families by undertaking the kind of tax shift that's embodied in the plan. >> thank you, mr. lewis. that was exactly five minutes. i hope everyone keeps it up. >> mr. chairman, as you exercise the five-minute rule, it's quite amazing to have this turnout. i hope everyone remembers to spend five minutes with you it's going to be an extensive period here, but the members are looking forward to that opportunity. your budget is claiming to freeze nonsecurity spending for the next three years. however, this assumes several accounting what i would call gimmicks. shifting billions of dollars in

pell grant funding as well as other funding to the mandatory side. but even without these man users, many of our subcommittees or many of what you're calling nonsecurities funded would go up over the next year. if the pell grants and the additional costs remain discretionary, what would be the percentage of increase of nonsecurity over that let me? >> i knew that would be directed to me. first, let me point out, we propose moving the pell grant to a mandatory program last year. we proposed it again this year. we believe this is the right policy so that the pell grant is not subject to the vis sa tuds to the annual operations process. so you can go to an eighth or ninth grader and say this money will be there if you work hard and go to college. that having been set, depending on how the existing shortfall --

by the way, the existence of the shortfall, in our opinion, underscores the point. in our opinion, that's why one manifestation of moving to the mandatory side makes sense. that having been said, how that shortfall is handled, including in the higher education bill. if it is entirely covered there may not be any percentage increase from 2010 to 2011, that would be associated at keeping pell as discretionary as one example. >> thank you for your response. i must say that it appears to me that the state and other international programs funded in your security category to continue to receive increases through at least the year 2015. even though, by then, america will supposedly have withdrawn its military forces and presence in iraq and afghanistan. there are no savings in the downturn in the state of

international security category? >> one of the reasons is, as troop levels have withdrawn, there is the need to move to a different model of engagement with the population both in iraq and afghanistan. more broadly, as you know, one of the other inherited deficits that we faced involved the rest of the world, and that's exactly what the state department is trying to rectify, albeit slowly, through the various undertakes. if i could address the question of recovery act and the base work of the nonsecurity funding because i think this is important to clarify, by the end of our three-year nonsecurity freeze, nonsecurity discretionary funding will be at the same levels it would have been from 2008, projected forward with inflation. so, in other words, forget what happened with the recovery act. forget what happened in the meanwhile with any appropriations bills. if you just start in 2008, take the baseline from there, you

will be hitting that baseline by the end of our three-year freeze. >> mr. chairman, i think it's very important for the public to understand that what we're talking about is that a rather erratically adjusted upward, the baseline, across all of the funding. if indeed we see that pattern continue, that the public is not going to miss the point. indeed, the public is frightened out there. i mean, you go to the community forums and you'll see people saying, my god, how much more federal government do we need? the democratic leadership, i said that this bill produces the deficit over the next ten years. i mean, does this in part assume increased social security payroll revenue? aren't these dollars already claimed for social security use in the future? >> i'm sorry what bill are you now referring to? >> the leadership suggests that this bill --

>> which one? >> -- this budget bill. the health care bill. >> oh, okay. health care, yes. >> reduces the deficit over the next ten years. >> it's not just the leadership. the commercial budget office has said that. >> it will be really interesting to see how we raise these baselines and reduce spending at the same time. in part, this assumes, as i suggested, increased social security revenue. aren't those revenues all right committed to recipients. >> congressman, as you know, the federal government already incorporates where the funds are credited to the trust funds and also to the unified budget. >> thank you, mr. chairman. >> thank you, mr. chairman. i've got two questions. one, we still have a major backlog in infrastructure. i have the honor of chairing the

interior environment of subcommittee for three years, and during the bush administration there was a study done on the backlog of waste water treatment and clean water infrastructure of about $688 billion. and we know we've we have a bacn transportation. you would say let's spend some more money on this infrastructure to further drive down unemployment and help restore the hef knrevenues into treasury. what are we going to do about the small community banks. i still think these banks are critical to the recovery. can you help me on those two questions? >> absolutely. we agree that there is a very good economic case for putting more support and investment into

infrastructure now. we think it is good policy for the long run because it helps rebuild a -- help restore some basic quality of restructuring across the country as a way to make those investments. now on the small bank, small business question. other parts of the economy are still suffering from the recessio recession.

making capital available to small banksbanks. >> to those that are willing to increase lending to small businesses. >> legislation? >> it does require legislation. and to expand the ability of the sba to provide guarantees in larger amounts than would be possible. we think those two things, guarantees and insuring small banks are a way to make sure that businesses get access to capital they need to grow and expand. >> thank you, mr. chairman. >> everyone will appreciate ways

to borrow money more cheaply. a quarterly report suggested that the u.s. needed to make significant improvements to avoid downgrading its credit status. preserving debt affordability will require fiscal adjustments of a magnitude that in some cases will test social cohesion. pretty strong. what do you think? >> i agree with all of you who say today, say in the past and future, that our deficits are unsustainable. and it is very important that the american people understand that if you care about long term growth, care about opportunity, future growth and income, how strong our economy is, we need to make sure that we are working together to bring the deficits down. it is important not just for the long run but it's important now. our capacity to make sure we are

re-enforcing this expansion in helping small businesses, those things only work if they are done in a frame work that produces confidence. so all of you who emphasize this problem are right to emphasize it. you are absolutely right but those are not in conflict today. if you care about our long term fiscal position, you have to care a lot about getting this economy back on track. make sure we are growing again. if we don't achieve that, then our long term fiscal problems will be much more difficult. >> the key to determining a credit rating is the percentage of debt to revenue. agreed? >> i would say it this way, congressman. what people look at our country, credit rating agencies, investors, americans, is whether we have the political will to restore gravity to our fiscal

position. >> you propose a record $1.6 trillion in deficit spending. >> no, what the deficit does, propose to bring down a deficit at exceptionally high levels to start with dramatically over the next four to five years. if congress would act on the changes you would bring about a dramatic improvement. we still i went to underscore what he can prevent it is very important for people on both sides of the bio -- deficits matter. tax cuts are not free. we have to pay for the things the two. we have to recognize it.

if we abuse our credit rating, what does it mean have to pay higher interest-rate? >> there is no way that is going to happen. it is important to read a that is a feature. be weaker. this recovery will be weaker if we do not do a better job over time of demonstrating the we will have the political will to make tough choices. that is why the fiscal and formation is so important. they are asking us to step back from politics and propose changes. >> he also says that the service costs and higher.

aren't we walkie blind youth? >> -- are to be walking blind here? -- are we not walking the line here? it will get this below 4% of gdp. we have to act on the for that to work. we will work together to find some political will. this is within our kpas capacity to solve it. we have to wok together to make the choices. >> the political will and the budget that has been submitted projects a larger deficit for one year and also the freeze that has been propose d. you are only freezing a tiny piece of the overall spend iing. >> again, you are right to say

that we started with unsustainable deficits. we have to bring them down. dramatically necessary is not sufficient. we would welcome you joining with us to make sure we can dig out of this hole we inher itted. >> thank you. mr. chairman, welcome to this committee. just for the record, out of curiosity, because i think we live in different worlds, i am curious what your fathers did for a living. could you state that for the record. >> i'll start. my father was a chemical engineer and worked in a manufacturing firm. >> thank you. >> my father is a professor of applied mathematics. >> thank you. >> my father was a navy pilot

and worked for the ford foundation for 28 years. >> thank you very much. my top priority is putting people back to work. your testimony doesn't mention the total number of unemploy ed. that is 25 million people. only three paragraphs of your testimony address unemployment. three paragraphs. but you devote five pages to the deficit. i might offer we have a deficit because we have unemployment. on page three, you con seed

unemployment won't go down. you have no urgency. in ohio, unemployment is going up. rates are over 15%. we have more cities poor in this country than any other state now. our food bank lines are growing longer. 25% of our food banks and food shelters turned away people last year. people are becoming desperate. i am their representative. i cannot politely sit and listen to this. expecting some from you. one of every ten americans are now in foreclosure or three months behind in their payments. i am not saying it's all your

fault. there should have been. in fact, j.p. morgan chase made profits of $11.67 billion last year. wells fargo made 8.49 billion. the head of j.p. morgan, he alone in base compensation got $19.65 million. they are doing fine and the taxpayers bailed them out. my people are suffering. they are at the edge. where is the urgency in your testimony? mr. geithner, i have been trying to tell you this. i have to listen to all of this. i can't get an answer. the five biggest banks are

heavily involved in derivative trades. about 195 trillion as of last quarter. that's the same bunch that caused this mess in the first place. does the secretary have any idea of the quality nature of those risks? are we at risk of another collateralized mortgage scam? are you willing to tax them on some of their profits and make programs to put people back to work and solve these foreclosure problems? >> absolutely. let me start where you started. this president acted with enormous care and force and speed. some of you had never seen this country or any other country facing a crisis like this. and work to enact the most powerful set of support for accounting as you have ever seen before. those things were difficult to do. they were essential. there is no path to unemployment

improvement. there is no path to any basic improvements. they did not start with fixing the crisis and restoring the growth. people that were careful and responsib responsible. >> i want to respond quickly. i want to highlight the following thing. the program that we put in place has reached more than 1 million americans who are getting more than $500 a month in lower mortgage service payments. the banks are not doing enough. >> it is pitiful. an embarrassment to the nation. >> i want to end where you ended. we have proposed a fee that

would raise from the nation's major banks $90 billion over ten years that we can use to address the many problems we face as a country. >> i have a bill in that puts everything on the table. medicare, medicare, social security, tax policy, and you all opposed it. only on the last day did the president come out and support it had you put the emphasis in the administration and your effort behind it you could have passed our bill in the senate and it would have passed in the house. your bill was not authentically

bipartisan. secondly you do not mandate a vote. requires that the public hearings around the country to listen to the american people. your bill if it has ever come up will be voted on by a lame duck session with probably 50, 60, 70 member members. listen to the american people and secondly will you revise the order and allow additional time for the commission to work and put to bill before the 112th congress. two questions.

>> congressman, if i could comment first with regard to public hearings, my understanding is that the co-chairs, i want to come back to that point. it's not just the administration but the co-chair who will be determining the activitactiviti. do not forget in order to get a recommendation, i think this is the key question. you need to get 14 out of the 18 members. that is the key question. will the commission come together and reach a bipartisan recommendation? if that is the case, both senator reid who promised to bring a bill directly to the floor using rule 14 and speaker pelosi have made commitments about the float. it is not whether it is brought to a vote in the congress but the first step is to make sure

we get a solid recommendation about the commission which will require bipartisanship. >> what about the lame duck session? >> we have been hearing about the urgency. >> come on now, one month difference. accountability. do you favor voting with people who have been elected rather than with a group of men and women who are looking for jobs to be lobbyists. that's the question. >> we have put forward what we believe is the best path. we reached a very significant fiscal problem. we have to get ahead of it before it becomes a crisis. we believe this is the right way forward. >> it should have been more bipartisan. that would have had the confidence. >> how so? >> because the president got six appointments. he got six. so it totally is not. it skewered that way.

that's just the reality. there ought to be a mandate. there must be an outreach. i don't think you should ether. that it should be voted on by a congress. people who are loobing for jobs as lobbyists. i yield back my time. >> thank you. and thank you ladies and gentlemen for appearing before us. i know several of you have mentioned loans to small business and i have legislation as well. before i get to my question, i would be most appreciative if you could provide special information regarding the loans to small businesses this is a

constant complaint over and over aga again. we are doing a lot of talk. i have legislation but i would like specifics regarding new york. now in particular as a former -- i guess you still have a home. as a con stit went. the ultimate min hit by the ultimate minimum tax. i have worked on legislation which would increase to 100,000 for married taxpayers filing joi

joint. if any of you could elaborate on the president's position with regard to the a mt and has a determination of how much revenue is necessary for the federal government to continue collecting i would appreciate your comments. cut the think it is a good package in the area. >> this is really the price of a loan. almost every measure to send your kids to college would

barrault -- would barrault stains. if would barrault it. -- borrow it. we are happy to work with you on the proposal. the present as word of a way to make sure that americans are not caught in doing it in a wave that is fiscally irresponsible. -- fiscally responsible. in the speed with that support growth, is fair, and this fiscally responsible. >> 42,000 nuns have been made to small businesses. -- loans have been made to small business. i think that is important to get them through this time.

been incredibly important i also want to re-emphasi re-emphasize. the urgency we all feel about jobs, it's 42,000 loans to small businesses. and $20 billion. >> if you can provide that to us in writing and hopefully regionally based. >> we will work with the small businesses to get that. it is absolutely essential. i was going say the urgency is absolutely enormous. i can tell you that every single time we meet with the president, his president is what does that mean for jobs. and one of the big things we have been thinking about is small businesses. they are a job creator. that's why we have proposed zero capital gains. we want to make it particularly helpful and sporltive of small businesses. all of those things are for small businesses because they are essential to job creation.

>> the stimulus program, there are now 24% fewer job openings in the private sector. nearly 3 million jobs have been lost. hiring has decreased by 9% and unemployment has gone from under 8% to nearly 10%. here is a statement by the majority whip that the stimulus program will create 3.5 million jobs february 13, 2009, statistics.

500,000 americans will lose their jobs. that's what happened after we did pass it. yet you are telling me the stimulus program is good. i would suggest to you that more people have experienced elvis sightings than have seen jobs created by the stimulus program jobs. the economy is showing signs of recovery despite the stimulus program. despite irreresponsible spending. despite misguided regulatory burdened. if we really want to help create jobs. we need targeted regulatory relief and we need to help community banks, not the big

boys on wall street who will always get their bail outs. i keep hear iing how horrible everything was. from 1995 to 2007, the republican party which spent too much money. the deficits accumulated to 1.2 trillion dollars and in 2009, the deficit alone was $1.4 trillion. 12 years of republican majority rule in the house and three years of democrat majority rule in the house and you got a deficit bigger than 12 years accumulated. that's not the end of it. you got another deficit this year projected of $1.6 trillion followed by $1.3 trillion the next year. some of the programs which the president supported when he was in the senate.

november of. february '09. $787 billion stimulus bill and the federal reserve, $29 billion in march of '08. now up to $140 billion for aig. and now a takeover of health care that is now about a trillion dollars when all is said and done. it is not going do the trick. i guess my question to you would be with 37% of our revenues revenues plus deficit, 37% is deficit spending.

if you had to do it again would you pass the exact same stimulus bill, would you do it again? if so, what would you have done? >> let me at least start. i think the most important thing to understand is the incredible. i just have to remind you we are losing more than 700,000 jobs a month. this economy headed down incredibly fast. the act played a key roll in turning that down. it slows the ralt of job loss before it adds to positive job gains. you ask how do you know its working? i can give you our estimates. we can talk about all of the

other analysts including those that say it is saving and creating jobbing. if you go out into america you will find 12,000 transportation projects. >> i actually do go out and that's where i get a lot of my information. >> time has expired. th the gentleman controls his own time. i don't think it's appropriate to have a witness continue on the jaman's time. >> we should not forget how we got here and one of the things that got us here was the lack of oversight and the enaction of

federal agencies to protect the consumer and investor. there are two bills. one that went through the house and another by senator dodd that speaks to a consumer financial protection agency. senator dodd is in the board and the other one is in the federal reserve bank and the other is within an independent agency. and other senators have joined in and cynthia talked about the record the fed has had. should it will part of the fed and why? >> you are raising a very important question. the president when he proposed a set of financial reforms the

judgment we reached is we looked at the record of the people in charge. we did not do a good enough job. reducing. we wanted it to have a narrower set of responsibilities and a clear authority and accountability for those daunting charges on the run. we wanted to have a new agency that woke up every day. the critical thing and this is really the most important thing is this agency has independent budget authority. led by somebody appointed by the president confirmed by the senate. it has ability to right rules. from banks to payday lenders. that's not enough icht has to

have the. we are going keep working hard to make sure it comes out of the process at the end of the day in a way that has strong independence. independent budget authority. capacity to write rules. left out of the rules of the game with no adequate enforcement rules. >> we thank you for that. and just as a little side note, the years that i have been on this committee, i have not seen what happened a couple of years ago where agencies in charge of overseeing the protection of the consumers, we are being asked by members of the sub committee how much they needed. we were told we don't want any

more money. they didn't want money to do more. the members were saying we can get you the money and the agency was saying no, we don't want more money. that sent a signal. >> it's just one example of what we need. investor proteks. we need much stronger tools. if the country ever again face the risk, and if the government has to step in, we don't have to face -- have the taxpayers face any risk of loss.

what the house passed is the most sweeping set of reforms. they are necessary. we have taken a lot of careful time to get here. we want to move and get the reforms in place. >> this administration provided by way of bailouts to the big banks out of t.a.r.p. >> thank you for raising the question. we have been able to restore stability to the financial system at a fraction of the resources you authorized us at much lower cost than anybody anticipated. i will give you a few facts. none of those to replace the

taxpayers money. when we cam into office the initial lesson that it would cost were in the range of $500 billion. today those estimates are below $100 billion. we worked very hard very effectively. to make sure we got the investments back from the major banks so we had more resources available to meet the challenges. we have achieved much more improvement much more quickly. 95% of the commitments we made went to housing, small business mitigation. >> thank you. >> thank you. like that, i would like to put a more human face on this

discussion. let me say chairman, one thing you can be sure of whether republicanors democrats, we have been out there listening to our people. we have our ear to the ground. while new jersey may not be ohio, our unemployment rate in new jersey is 10.1%. the real rate is probably close to 7%. it includes blue collar, white color, and those that represent states around here. take this whole issue very, very personally. tens of thousands are out of work. we don't make anything in this country any more. so there is not a lot of consumer confidence. they see the economic stimulus

package as a waste of money. huge expenditure all borrowed. i know that has a political flavor to it. what are you doing down there? well, we are on the energy and dollars appropriated to the entire department of energy. let me repeat that.

accounting for nearly 24 billion of unspent stimulus dollars appropriated to the entire department of energy. what is going on. >> very quickly what i was trying to answer before one of the best ways to see is in the projects that started. we do have transportation projects going. i have a number here. >> let's talk about one of the major initiatives of the administration which is clean energy, clean jobs. what is happening here? i know there is problems with loan guarantees and things of that nature. had we not hired enough people to handle all of this money or what's going on? >> if i could jump in here. i am sure you have had or will have an opportunity to talk to secretary in more detail about the department of energy's

activities. it takes time to get new programs up and running. more than $25 billion has been obligated. the money has not been distributed, the recipients have been identified and the money is starting to flow. in a lot of cases, what was involved here was new activities or programs, the department of energy wanted to make sure that it was done right so we didn't have problems with fraud or inprommer payments. that took a bit of time. the system is now operating and working. let me take this opportunity. here i think we need to attribute the vice president's activities. to date there have not been the kinds of stories about fraud and abuse that one may have expected given an activity this large.

i tribt that to speaking to governors and recipients to say don't do this. >> you might take a look at the department of energy's ig report. that's an independent entity. first of all a lot of money is going out as you are aware of. i understand the difference between outlays and obligations. a lot of money is going out to the states. so people back home are wondering what the hell is going on here besides all of the money being borrowed. they wonder when will they see private sector jobs. that's another issue here. the people back home want to actually work for themselves, not for the government. thank you, mr. chairman.

>> actually, i have one, just one fact as you look at the second quarterly report done by the sell sill of economic advisors, we looked at the clean energy sector. we identified jobs. it is surnly there. not nearly as big as it's going be. but it certainly is starting. >> let me say to members of the committee. i don't think it's fair for members to run out the clock on their questions leaving the witnesses no time to respond. if that happens, i will have to give the witnesses a minute and a half to respond. i hope we can try to avoid.

th that. >> thank you. in a joint statement you mentioned in your statement, significant infrastructure investments we have made. we face an investment deficit. funding we provided will help our recovery but won't help long term economic growth. according to an epi study we will need approximately $335 billion to simply maintain the tap water systems.

that provide clear economic environmental long material creation and economic growth. i believe this is a way for us to build and lay a foundation for sustainable growth in this country. an advisory board made a case for a bank. what are your thoughts on the role of the national infrastructure bank. keeps us globally competitive? >> i want to echo what my colleagues have said. infrachuck trur investment is good for job creation right now in an economy that is desperately in need of it.

revamping our infrastructure. it's capital. raises standards of living. i want to strong ly infr infrastructure spend iing i thi that is absolutely a very good way to go forward. certainly proposals for an infrastructure bank are another way to continue this process to leverage private sector funds and certainly something that is very worthy of consideration. >> i would just add as you know we have had many discussions about this and we have stepped forward with a national infrastructure fund which i know does not go -- >> with all due respect, $4

billion in the department of transportation is not a national infrastructure bank. >> i want to know where we have moved away from the concept of a national infrastructure. >> that is something we want to continue to express to you. this would be a first step in that direction. not the full approach that you and others have put forward. >> i would just say to you that i support the transportation

efforts. if we are going build and be on the cutting edge of technology then we have got look at water systems, environment, broad band and tell communications. we are going backwards in this rart rather than forward. on a continue to talk about it but there is enough support and folks in the financial interest cho believe this is a way for private investment. not going europe but private investment being in the united states. >> i want to say that you are right.

we agree that a bank that is well designed could play a useful role in meeting those needs. >> appreciate that. thank you. >> we are already $655 billion in debt. we really making projections only have enough money to cover the mandatory spending. we have to borrow for everything over that. so we are going increase our debt once again this year further. you made a comment about help us dig out of this hole. when you are in a hole, stop digging. i am advocating for creating

jobs. driven by federal policy. energy or litigation policy. you can't create the wealth. last year the wisdom of this committee was to defund epa from regulating and taxing livestock emissions. in kansas we would seal that very deeply. that prodex would have gone south of the border where capital is more welcome. it was the wisdom of this chittee to strip the funding. new we are faced with funds. cap and. i think there is a great danger in that. it will drive up costs for all

americans in the way with we we have to make things. we can't survive as a service economy. these regulations are continuing to grow. the benefit should exceed the cost of implementation. even for ethynol now drive production out of our country and will only be able to procure

ethynol because of regulations from brazil basically because they make it from sugar cane. we have this big challenge facing us. to help us, freeze resources. saying that the ben filt has to exceed the cost or we will repeal or reform the regulation. >> first let me agree with regard to climate change and the efforts to address it would be better to address in determines of regulations that were adopted, the record shows that

the benefits far exceeded the cost during the previous two administration. i don't know that a freeze is necessary. regulations whose benefits exceed their costs and an effort to make sure that's true with regard to new regulations and existing ones. >> can i add two things? go ahead, sorry. >> i just want to mention that if we don't make it more appealing to attract jobs here we will continue to offshore jobs. this is a huge part. every time i hear it they have got do something to right

regulation. >> just want to say that you are absolutely right to remind people is the capacity of the united states. supporting innovation. the test will be whether we see a durable recovery led by private sector investment. you are aonune&y@@@r z@p@p@p@p@; clarity. it is important on health care. it is very important on financial reform.

businesses have a huge stake. these areas will be so important to the american economic future. >> i want to thank the three witnesses. >> a local level of government where the rubber hits the road in terms of the public sector's direct impact on people. municipalities across the country have benefitted from the stimulus bill. they haven't always given the federal government credit but it has resulted in their possibility to retain hundreds of thousands of teachers.

the bill will be exhausted by the end of next year. unfortunately, real estate values which are their principle source of local revenue to pay for coming back the next year or the next several years. at the local level of government, there will be a very substantial retrenchment in the quantity and quality of services and probably a substantial increase in property taxes on those who are able to retain their homes. i would like for you to give us insigh insight. >> i couldn't agree with you more that the conditions and state and local budgets have been absolutely terrible because

of the recession and our anticipated to remain very, very bad. i think one of the, we have talked about the recovery act but one of the great success stories is the aid for state and local governments ichlt really has had a direct impact on state services and on keeping teachers, firefighters, first responders employed. it has been essential. something that we haven't discussed much, part of the transparency is to have the reportings of about a third of the recovery act funds they have to file a report every quarter with the government to say what they have done with us. i think it is from the state fiscal relief that you see some of the largest numbers. for the first report, some 300,000 jobs that were saved or created. the president is looking

forward, thinking about what more we need to do keep our economy growing to try to put people back to work that state and local fiscal relief is essential. >> if i could follow up. the federal government, the role of education can do little more than fill gaps or build capacity. the problem is that the basic foundation of our public school system is going be substantially threatened by the loss of revenue coming in. do you have any thoughts about that? >> i would say and the president believes this very strongly. there is a very strong case for providing additional assistance to not just states but to reach the local government on a significant scale for exactly the reasons you said. and programs like build america mondays programs has been a very successful program. but we think there is a good economic case still providing more re-enforcement that reaches down to the local level of

government so we can maintain critical services as we go through a long period of repair and recovery. >> thank you very much. >> a lot of people have talked about jobs as the number one issu issue. it is of concern to me that nobody in the administration really has no business background and understands what they are going through today. as i talk to small business people in my district, i talk to my local bankers, there is the fear of what we are doing to them here that is causing them to be frozen in place today.

you talk to your local bank on main street, they have got plenty of liquidity. their problem is the examiners are coming in the back door saying you cannot make this kind of loan. you have got cut this line of credit in half and their hands are time. you will have tremendous new costs per employee. you look at cap and trade, the potential in our part of the country to increase the utility rates. there is tremendous uncertainty out there. your capital gains tax rates will go up next year if you do invest. if you are a small business

person like my family and most people that i know, you are scared to death today and you are frozen in place because of what the agenda is that it's going do to a small business. and that's about 70% of the jobs out there. you will have to get small businesses moving if you want to get the economy growing. what do i say to a small business person today that is scared to death of the agenda coming out of washington? >> let me start. first i want to agree with what you said. they are seeing what they see in any recession. people tend to overcorrect and part of what the banks are face something what they perceive to be unjustified soup visery potential. you are right about that. part of the solution is to try

to mitigate that and make sure they have capital now. we have proposed in this budget a series of very powerful tax cuts for small businesses. zero capital gains rate for investing in small businesses. to extend and expand tax cuts that go to 97% of businesses across the country. extended expanded. we think that combination of tax measures would be very constructive. but i also agree with you that providing clarity on the financial side because that's important to credit would be good for confidence and certainty. people want to know what are the rules of the game that i need to plan for. it is better for us to resolve for them. again, i would emphasize the

things we can do right now are very substantial additional packaging for small businesses and some powerful measures to make sure that those are growing and can get access to the credit they need. >> can i just jump in on small businesses and health care? the counsel of economic advisor of the legislation. i think this is really one of the big success stories of how the legislation has been crafted to help small businesses. and just let me give you some facts. $40 billion of tax credits will go to small businesses to help them provide health insurance for their workers by having an insurance exchange, the congressional budget office says that small businesses will be able to pay some probably 4% less for the insurance than they provide for their workers. and that we have explicitly not put any employer responsibility provisions on firms smaller than 50 employees. that's 96% of all the firms in the economy. so this is certainly an issue

that congress has heard and has crafted the legislation to make sure that it helps small businesses not hurt them. >> i think it's very unfortunate that, you know, the banks on main street are not the ones that a caused the problems we had. and they're the ones basically being penalized today an i would still submit that people are scared to death of what the agenda is in washington and they are frozen in place because of that. thank you it, mr. chairman. >> again, i would just take the other side of it if you sat here and did nothing, we would not be helping restore confidence in business across the country, because they would be more uncertain about how fast the economy is going to grow, they would be living unsustainable rate of health care costs that

are killing them. they're dealing with a financial system that hurt them terribly, so if you care about business confidence and you care about investment, i think we all recognize the government has a responsibility not just to provide more reinforcement to this expansion but to provide some clarity about how we as a country are going to address the burden imposed by the health care system, the confusing mix of regulation for how we use energy and a financial system did a terrible job of meeting the credit needs of working families and businesses across the country. and the people suffering through the financial crisis are businesses and families that had nothing to do with the crisis. so i agree with you about the imperative, but i think if you care about confidence and certainty you want to care about bringing these reforms down to earth so we can have a stronger economy in the future. >> well, thank you,

mr. chairman. thank you, mr. chairman. mr. secretary, in your original statement, you referenced one of the key requirements for a robust economy. i'm going return to the comments and support the comments made by the gentlewoman from connecticut here. that the key requirement for robust economy is infrastructure. you then listed broadband, water and sewer and power grids and energy modernization and transportation. i think you could well have included as well education and housing. i chair the transportation and hud subcommittee of appropriation. and i strongly agree with that premise. in fiscal 10, you propose an infrastructure bank which was $5 billion, but i don't remember if

there was any legislation actually proposed to actually create that infrastructure bank. we did create, however the high-speed inner city passenger rail program and tiger grant program with moneys that could arguably come from that but only in transportation. in fiscal '11, you proposed the infrastructure fund somewhat like a bank, i guess, and again, i see no legislation and again, don't know whether it's narrowly transportation or something larger. now, it seems clear to me that we need an investment level that is at least in order of magnitude greater than the $5 billion in the one year or the $4 billion in the second year in order to zeal with the infrastructure needs across a broad range of areas. and i'm just curious to know whether you have any intention in this session of proposing a

broad based kind of a fund and bank, much broad er than this, that would include revenues that raised and leverage across the whole of our economy essentially. it's somewhat in proportion to the impacts that the infrastructure you're talking about would have on the private, the public, the commerce, commercial and business segments of that economy. >> congressman, first, we are proposing substantial additional investments in infrastructure across a whole range of what we think are very high return parts of the economy as a whole. we are examining how best to design a bank or fund that would help leverage private sector dollars, help leverage the taxpayers' dollars and make sure

that we're allocating those scarce resources to where they can have the biggest potential effect on projects that again have very high economic returns. we're taking a careful look at what would be best design. happy to work with you and your colleagues. different people have different views about how to do this. szby:m2zz@ @ @ rrrhn%h b the scale of resource the president has proposed to put in the infrastructure it's several multiples of that basic number. again, we think there's case for

looking at a bank or a fund as part of that broader mix as a complement to the existing mechanism this committee and other committees have for allocating money for infrastructure and i'm happy to work with you on what the best design is. >> thank you. >> thank you, mr. chairman. >> the constellation program directly or indirectly 10,000 or 20,000 jobs if you include the suppliers. the aries-1 was "time" magazine's last year. and some think it could be ready to go by 2014 and not 2017. of course, as you have seen while the testimony is being given the hill, there's hardly any member of the house or the senate that has endorsed the new plan and given the condition of the economy, i would just want to throw out the idea that you

think it might be at this time at least consider to -- or at least to reconsider your plan to kill constellation to keep those real jobs working on real projects and then gradually move into the commercial aspects of space travel. >> congressman, as you know, the president is holding a summit in florida in april on precisely this topic. as you also know, the motivation behind the proposal is to allow the united states to return to the tradition of leap frogging technologies and being at the cutting edge of space flight rather than simply returning to things that we've already done. you also know constellation is behind schedule and overbudget. so all of those things were motivations for the new direction with a larger emphasis on cutting edge researched development that will allow us to leap frog new technologies that can allow more interesting

and exciting space exploration but again, there's going to be an entire summit devoted to discussing this in more detail. >> so will this be reconsidering that? >> we believe we're on the right path here and that is supported by a wide variety of people including, as you know, buzz all driven and sally ride and others, but again, we're going to have a summit where we can have a full discussion of precisely this topic. >> thank you, mr. chairman. >> thank you, mr. chairman. i would like to be in with you and asking questions and perhaps you can ask with a yes or no or very succinctly. when president clinton left office was there a sur prus plus or a deficit? >> surplus. >> when president george w. bush left office was there a surplus or a deficit? >> deficit. >> was the deficit that he left president obama to inherit estimated for fiscal year 2009 above $1 trillion? >> yes, sir.

>> prior to that in american history, wasn't the largest deficit ever $292 billion? >> that sounds correct. >> 1919 26r7b8g9s yes, in nominal dollars. >> is it correct that when president bush took office, in six of those eighter use, republicans controlled the congress that when he came into office there was a projected surplus of $4.2 trillion for define and through fiscal irresponsible policies many of which were push on a partisan basis by my republican colleagues in congress who i think lost touch with their constituents back home, that surplus, didn't that turn into $3.3 trillion deficit? >> there was a very substantial shift from projected surpluses to projected deficits. >> so ats $7.5 trillion turnaround from projected surplus to actual deficit? >> very significant shift. we can walk through the precise

numbers. >> unprecedented in american history. while i am one who wants to work on a bipartisan basis to grow our economy and reduce our deficit and while i am one who believes frankly our long-term deficit should be lower than the obama administration has proposed, i must say in all due respect to some of my colleagues that it's a little trying to be getting sailing lessons from the captains of the economic titanic who took the largest surpluses in american history and turned them into the largest deficits. took an administration where we were gaining 200,000-plus jobs a month and turned it into eight years of average of i think 20,000 jobs a month growth. and at the end of that administration, we were left with the largest, most serious recession in american are history or at least since the great depression. let me ask you, miss romer, what was the gdp drop on an annualized basis in the last

quarter of 2008? >> it was -- sorry. it was well over 5% at an annual rate. it was 6.4% in the first quarter of 2009. >> so the last quarter of the previous administration, what was the gdp growth in 2009, the last quarter of the first year of this administration. >> 5.9%. >> what was the s&p change in the -- in year 2008 did the s&p go up or down? >> it unquestionably went down. >> was it about 38% or approximately that amount of loss? >> that sounds about right. >> what did the s&p do in 2009? >> it certainly after falling early in the year, then grew tremendously. >> in fact, it's actually gone up by over 62% since march 9 of 2009 is that correct? >> yes, indeed. >> miss romer, what was the job

loss in the last quarter of 2008 on a missourily basis? >> i think it was over 500,000. >> what was the job loss in the last quart of 2009? >> it was less than 100,000. >> so what we basically have the administration inherited the deepest most serious recession since the great depre, the largest deficits in american history that were turned around from the largest surpluses in american history. while there's a lot of pain out there, miss kaptor very passionately express that pain, at least the building blocks for bringing those jobs have been put in place. now what we have is mr. ryan, one of the leading voices of our republican colleagues in the congress, the ranking member of the budget committee, laying out a road map for the future. i would say it's more like a u-turn to the past. past failed policies that got us into this mess in the first place. as yogi berra said, it's like deja vu all over again.

mr. orszag, you talked about the ryan road map for the future. what would its effect be on the deficit? >> because the proposal would significantly reduce revenue that it would result in deficits by the end of this decade of 7% of gdp, significantly higher than under the obama budget. that reflects quite regressive tax cuts. not only is the the deficits higher but you're the opportunity gap. >> it would end medicare by turning it into a voucher program. so 85-year-old widows can negotiate what kind of health care policy they could get. what would be the impact of the ryan road map of the wealthiest 1% of americans? >> they would pen benefit from a very substantial tax cut. >> thank you. >> miss emerson.

>> thank you, mr. chairman. secretary geithner, director orszag, miss romer, thank you so much for being here today. my question is for secretary geithner, since i didn't get to finish asking you questions last week, ilg take advantage of your graciousness in being here again today. you testified and also mentioned today that the administration has award no new t.a.r.p. funds to big banks and you've only provided $7 billion to the smaller banks. if that is the case, then why is it that you decided to extend the t.a.r.p.? >> excellent question. although we have been very successful in restoring a measure of stability to this financial system at much lower cost than we expected. you can see challenges facing small community bank, commercial real estate markets, a lot of stress and damage still.

we wanted to make sure we had the capacity to make sure we are supporting targeted, well-designed programs to help people stay in their home, help small business have access to credit, help small banks get through this and generally repair what is still damaged in this financial system. we also thought it was important just to make sure we had a contingent capacity in an abundance of caution. we wanted to respond without having to come back to the congress. but i think those additional programs are likely to use only a small part of the remaining authority. and you can see in cbo's numbers and the administration's numbers that the overall cost of this program will be a very, very small fraction of what any of us an t anticipated. and programs we're recommending still in small banks and small businesses, themselves also have a very, very low additional potential risk. >> well, i'll follow and ask the

question in mr. edwards' vein, yes, or no, did you ever come to the congress and ask us if you could extend the t.a.r.p.? >> i notified the congress of my decision to use the authority congress gave me, which is to extend, but in making that notification, i just want to emphasize this, i was very, very clear, what we would use that authority for and what we would not. you can, of course, look very carefully at everything we're doing because we made these things completely transparent so you can judge us by our action. >> but answer is no, you didn't ask, you just told us. >> well, no, i listened carefully to your colleagues all the time and i get a lot of support foreign minister members including your sides of the aisle frankly, asking me to make sure we continue to do things and that we're helping small banks again. because as many of you have said, as you go across the country, you can still see, even

though the financial market are more healthy today, there's a lot of damage and wreckage in areas that the t.a.r.p. was designed to help us fix. we made a lot of progress, but we've got some work to do. it's partly because of the concerns many of you had expressed to me, i thought there was a good economic case for extending. >> i worry and i think a lot of my colleagues worried that the t.a.r.p. funds are actually going to be used as a budget gimmick. i mean for example, in the december jobs bill we used t.a.r.p. funds to offset the cost. that's what t.a.r.p. funds were, number one. back in february, y'all said you wanted to use the t.a.r.p. funds for small business lending, i think $30 billion for small business lending, but yet at the same time, the director of the cbo, elmendorf says that you know, this is just one pool of government money and everything sells accounting treatments to keep track of various purposes,

which to me says this is a -- treatment is a nice word for gimmick. it's worrisome. >> i will not support anything in that -- i agree your concern about it. we would not support it. the law does not allow us to do that the way the law was written, when he get resources back from the banks. as i said, we've got $170 billion in capital back in very substantial positive return. those resources go to reduce the debt. what we're suggesting is that we reserve some authority to make sure we can help reinforce, provide support to small community banks and propose congress authorize a second program to deal with the credit problems facing small businesses. i would not propose anything that met the test of your concern about -- and nothing, we don't have the authority to do what you're concerned about. we wouldn't do it.

>> thank you, mr. chairman. >> thank you very much. >> very much to the point and to the responsibility given to you. >> we're facing one of the most economic condition this country has ever faced. in modern history of america. second only to the great depression which is talk and a great deal. as many people point out, the deficit sun sustainable. the but it's important as my friend mr. edwards pointed out just recently, i thank him for much for the way he posed those questions and respond theed to them, it's critically important for the people of this country to understand how this deficit came about. what caused this deficit. and what is being done to try to deal with it.

those are the critical issues that we have to deal with. and there are several that are so obvious. one of them was the tax cuts of 2003 and 2004. which have now brought about the greatest concentration of wealth in the hands of the wealthiest 1 1% of tltdzr,8vs medicare prescription drug program put into place without any means of taking care of the

high cost of the prescription drug program in the context of medicare now. all of that is helping to drive up this huge deficit. these are the things that we need to focus attention on. and these are the things that are being dealt with adequately by this congress and by this administration and it really needs to be done very, very strong lind a effectively. the point that was made a little whiling a about the government takeover of health care is absolutely absurd in the context of this health care bill. there are some people who would like to see more government takeover of health care by doing something like medicare and putting it more broadly across the country and there are a lot of people out there who would like to see something like that done, too. but this health care program is not anything like that. so anyone who says this is a government takeover of health care is intentionally falsifying

the situation because they're not ignorant. they wouldn't be here if they weren't that ignorant. so they're intentionally falsifying that situation for their own political objectives. that's what we're seeing over and over again, falsification of information for political objectives. these are the things that need to be dealt with. what do you think we should be doing? i know this great stimulus bill is having a very positive effect but there are substantial amounts that haven't been put into play. frankly my judgment was the stimulus bill should be about twice as large as it really was. there have not been adequate investment in the needs of this country in an awful long time and lot was done intentionally for other reasons. so this is something that has to be done. what do you think that we should be doing right now to upgrade the quality of this economy, jobs for the american people and get a situation that is much more equitable, fair and reasonable in the context of this economic circumstance?

>> let me address that i want to come back to the budget, puts in place a plan for dealing with the long run deficit. makes very hard noise choices now. sets up a bipartisan commission. but if you look at our, about $250 billion of relief efforts. state fiscal relief, continuing the unemployment provisions of the recovery act. all of those things are essential for helping the economy to continue to grow. also included $100 billion in targeted jobs initiatives. to hiring tax credit, to zero capital gains for small businesses to a proposal the president has taken a great deal, a clean energy or energy efficiency retro fit for homes. all of those things are smart

program, target fiscally responsible wechblt think they can move the dial. help us get americans back to work. so there are good ideas out there and the president is asking with all urgency that congress move on those and get those onto his desk for signature. >> yes, i want to follow up with just one question as mr. edwards was talking about a particular time frame. just a yes or no on this. isn't it also true we were attacked on our homeland and fought through two wars during our period of time? thank you. my other question is the president's budget for fy '11 proposes the deletion of all the appropriations language which currently places limitations on transfers of guantanamo bay detainees and also requires advanced notification and related reports.

this language was passed on several fy '10 bills and negotiated to be acceptable to the administration. the amendments from our side of the aisle would have involved tighter resfrikzs and reporting requirement requirements. so my question is why are you proposing the committee delete this language? for example the lang gentlewoman from specifically prehilberts the release of detainees into the united states and prohibits the transfer of detainees to the united states for continued indefinite knit attention. does this mean the administration plans to release detainees into the u.s. or transfer the detaken ayes for detention in fy '11? >> congresswoman as you know, the president believes guantanamo bay should be closed tour a variety of reasons. beyond that i what i will say is there are ongoing discussions with the attorney general and others about the appropriate course forward and i'm going defer to him in those discussions for the specifics but i'm sure he would be delighted to follow up with you. >> would anyone else like to

answer? thank you. mr. chairman? >> when i really appreciate having this hearing and thank you for your public service. we appreciate that as well. i wanted to follow up on on an earlier question about the credit at the local level at our small banks. one of my three counties that i represent has 22% unemployment it's a large agriculture, the county next door, salinas valley has about $4 billion of agriculture. incredibly productive area but we also have the largest base close in the united states and in 16 years still trying to get that. there's a lot of opportunity. what the small banks are telling me is they just don't have the credit because of two things they really impact it is the increased cost of fdic insurance but the second was the markdown of their underwater

mortgages. the people are still paying because these houses are worth a lot and they recovered. my house is the same way. i mean the market value of my house isn't what my mortgage is. but i know it's going to come back. so it's not that they're defaulting on these mortgage mortgage payments but they've had to mark them down. and between the loss of that capital plus paying the insurance, they're just saying they're squeezed. how do i respond to that? i mean what you said earlier that you want to get some stimulate this, but specifically what can i take away and say is going to happen? >> well, again, you're absolutelily rigy labsolute will right, some banks in the country really need more capital and they can't raise it in the current market environment. >> yeah. >> so there's a very good case for making sure they have access to capital from the government on sensible terms so they can

use that capital to increase lending. but they have to borrow that capital, right? >> they do, but again, we've designed a program where it's a very simple program. you can come and get capital from the government for a long period of time at a very low dividend rate and that will go down as you increase lending. now, you're also absolutely right that a lot of banks report that they're under a lot of pressure from their supervisors to cut back lending frankly in part because they've seen the value of real estate holdings fa fall. i should have said this before our supervisor independent of the treasury but they in recognizing this problem came together, all four of the national bank supervisors came together and put out guidance in november to their examiners across the country. to try to make sure that they had clear instructions not to put additional pressure on banks simply because they had had a

borrower that would borrow from the bank backed by real estate loans. they wanted to make sure that they're looking at the cash cash flow of the business. >> if penalize if there are nonperforming loans. >> exactly. the bank supervisors followed up that guidance with additional guidance just last month focused on small business lending guidance. i don't think the message is quite getting out with enough force yet but sheila bair who plays a critical role in this and the other heads of supervision in the united states are working to try to make sure they get the message out, but i think frankly they could do more to make sure the examiners are not overdoing it. >> so the money they can borrow is that t.a.r.p. money? >> we, t.a.r.p.,s as you know is an enormously unpopular program we're trying to put it out of its misery. but and the conditions that come with t.a.r.p. and the uncertainty of future conditions and the stig mav using t.a.r.p. made it basically untenable as

an instrument for this basic need. as an example, we had more than 600 small banks withdraw their applications from the treasury in the first nine months of this year, last year, because of the stigma and conditions. so what we proposed to do is set up a lending facility outside of t.a.r.p. that would provide capital in support of lending and we're working now with your colleagues across, in both houses to try to come up with a package that would command broad support and again, this along with more support for the sba is one of the most powerful ways we can help make sure that businesses across the country are not starved for credit as they try to expand and grow. >> so these banks can't get that credit until we pass this legislation? >> that's right. but the virtue in this is that it's not complicated to design and when congress passes it, we can move very, very quickly to approve application. so i think it has probably the quickest time to market of any programs we can design and again one of the best use of a dollar

of scarce resources is capital to a small bank because that will turn into $8 to $10 in additional lending capacity. >> thank you. >> thank you, mr. chairman. thank you all for being here today. first three or four comments and then a question. first of all, for the benefit of mr. edwards, my good friend and for mr. orszag, paul ryan isn't on this committee. if you would like to comment on that -- on his plan, i suggest you do it when he can respond to it because i think he probably has a little different take than either you or mr. edwards have on his plan. secondly, fiscal economy, i agree with you. i think the president was right to do that. many of us have been suggesting this for a long time. and i think everything ought to be on the table and it's going to be ugly. decisions are going to be ugly. we all know that if i think they're in the best interest of the country, i'll vote for it, if not, i'll vote against t thirdly, when we talk about

unemployment and era funding, while we talk about creating jobs, i'm not one of those who says it hasn't a job. obviously it's create someday jobs. 300 in one company in my district doing cleanup. we are now planning for next year when they play off those 300 people. that's something you're going to have to deal with a it's like cash for clunkers, it moved the purchase of automobiles up and then it depressed it in future times. so it is something we're going to have to deal with when that unemployment hits in the coming year. fourth, i have heard surprisingly i guess, financial deficits, opportunity deficits, job deficits, education deficits, investment deficits and a new one, foreign relations deficit the only one i haven't heard is the reality deficit that seems to have been created from all of these. if there there are any other deficits you faced when you came in would you like send me a list of all of them? i would like to hear about them.

now the question. one thing i heard over the last couple of weeks, everywhere i went at every banquet i had is i wish you at the federal levels what making the tough decisions every state legislator is making. i heard that from state legislator. i've been through the decisions when i was in the state legislature. they've made tough, tough decisions. is the president going to plan -- or submit a supplemental to bail out states? and if so, why should those states that have been fiscally responsible bail out those that have not made the tough decisions? and we all know there are some who have not made the tough decisions that others have made. so why should my taxpayers or indiana's taxpayers bail out -- i won't mention the states that have been irresponsible? >> maybe i could just begin. i think you're right to say, just to go back to one of your

initial points is you need to think of the recovery act as a bridge to private spend, sprist investment. if you look carefully at what's happening across the country today, you can see encouraging signs signs of that's happening. if you just look at what's happening to businesses, you are seeing private investment expand again. export exports start to grow. that's encouraging that the economy is going to grow coming out of this even as we do the necessary things which ch is wind down the emergency things we had to do in the face of the worst recession in a long time. and you're absolutely right, of course, we have to make tough choice. i think american families not just -- governments are making that choice all the time. what the government does is lay out dramatically consequences and commitments over the next four years that will bring our deficits down very, very sharply over that period of time and a congress is going to have to

choose again what mix of those policies it's going to embrace. but everybody has to face the reality which is getting those deficits down over a period of time. but i think in the near term, this year, given the damage of the recession we're still living with. there's a very good fiscal case to save local governments so they don't have to cut critical services deeply at a time the economy is vulnerable and so many people are still cover suffering. we can do thata@@@a)znyrjrzz thing we've complimented the

administration on in past years is they have fully paid in forest service and interior. this year, interior has to accept $109 million in fixed cost. how are they going to do that? >> first, let me just say, since you raised fire in particular, ag vat resources not just in the interior but the agriculture department and elsewhere for draetsing wildfires is up 5%. look, you talked about hard choice. i dent at omb we face a flat nominal budget despite the fact that the vast majority of our budget is personnel and there's normal upward pressure because of not only wages but health benefits and we have to make hard choice. interior accident no different. going down the list of other departments i did earlier where the secretaries have agreed to even nominal reductions, they have plans to do so. i mean in other words they have specified budget plans to do so. we could follow up with secretary salazar in particular

if you're interested but that's exactly what's involved in getting more efficiency out of the federal government. >> thank you, mr. chairman. two things, one is i want to make a comment. then get to my question. so we had the first six years of the bush administration, we had alan greenspan testifying in the first months of the bush administration that we had $5 trillion surplus and we could be an entirely debt-free country. at the conclusion of eight years of the bush administration, eight years later, much different reality, the republican party in its outrageous to hear this selective amnesia of some of my great friends nlt other side, the war and we have been at war before as a country but we have always paid for it with war bonds and taxes. we paid for it. and then finally, the -- a major increase in entitlements without

paying for it. so the country is now fiscally brupt as you come into office. the president has a national office of over $10 trillion. a deficit in his first year by the time he was sworn in over a trillion dollars. t place the blame on this administration. it's an amazing political feat that they're trying to pull off. i don't think it's going to work at the end of the day. but i do want to get to the substance, what we have to to go forward because you've done a great job. we see a lot of kaerts of a great job, manufacturing up, consumer spending up, purchasing orders up, export s up, we've seen us go from in the first two months of last year luce losing almost 1.5 million jobs. losing less than 100,000 over the last two months. we see progress but there's more

work to be done. i'm interested in one of the more deep seated problems hidden in the budget which is the national debt itself and the interest we pay on t now i propose that we have a dedicated revenue source and that we exempting the financial markets focus on everyday transaction, take a penny off of a dollar and pay off the debt. have a dedicated program to pay off the debt. most economists who have looked at this said we need to look at the long-term growth of entitles, raise additional revenue and move to broad based tax reform. so i'm interested in what you think about a dedicated source of revenue, a new source focused only on the debt. and what you think about the notion of a nominal transaction fee on everyday transactions, the stock market. but that happen through our economy. and you could start with the budget. >> okay. thank you.

several comments. first, while there are interesting ideas about dedicated revenue in a variety of settings, it important to remember that money is fungible, so dedicating a dollar to this specific use is in some sense no different than the pool, given the fungibility of money. second, one of the key tasks the fiscal commission faces is coming forward with a set of recommendation which may well include both things on the spending side and possibly the revenue side, too, that will get us ahead of this medium-term deficit problem even more than the budget already does. so in that setting, i'm sure there are going to be a whole variety of ideas discussed an evaluated and we would like to allow that process to play out and the co-chairs to conduct the commission's operation. so you don't believe that you could segregate a revenue source

just to pay off the long-term debt. >> we can do anything. >> it's not possible. >> anything is possible. one could do that. what i am saying is we have a commission set up to get ahead of the broader problem and we would like to let it work. >> thank you. >> mr. secretary. >> you and i have talked about this many times in the past. i want to thank you for the attention you're giving to this problem we face. you're right to focus attention on it. and we will of course take a careful look at any credible idea to help contribute to that reduction. we look at all these things through a simple set of objectives, principles, which is are they going to make the economy stronger in the future? are they fair? do they provide a fair burden of adjustment on the american people? are they going to make a big enough contribution to sustainability? but as dr. orszag said, we

weren't the commission to take a look at a range of options for how to reduce these unsustainable debt burdens. i want to compliment you again on being courageous enough to put forward some creative ideas for solving it. >> thank you, mr. secretary. we have about $8 hundred unhundred trillion in transactions in our economy. about $500 trillion outside the financial markets. do you think that a dedicated fee would make some sense. >> your time has expired. >> mr. bonner. >> thank you, mr. chairman. i would first of all like to thank my colleague from ohio mrs. kaptor for her comments today because she expressed the frustration that many of us feel that there is a disconnect. that's not laying a partisan finger because she's a member of the majority. but she is speaking for a lot of communities, a lot of cities and a lot of people who feel that their government, democrat,

republican, congress, administration, is not paying attention to what they're feeling and what they're fearing. mr. orszag, you commented initially about the fact that health care was something you would be willing to discuss. i think i'm correct that all three of you are presidential appoint overs confirmed by the united states senate. is that correct? >> correct. >> i would like to just share a couple of quotes because i'm confused. i've worked up here for 18 years as a member of congressman's staff pour my district. i've been in congress representing the people of my district for i'm going on my eighth year. last week the speaker of the house said to the national association of county officials, we have to pass the bill so you can find out what's in it. this morning in today's "the washington post," she says we may actually pass the bill without even voting on it, thg that is called dean and pass. i'm not going to ask you to

comment on the speaker's kwet quotes, i'm going to ask you to comment on senator obama and senator biden. senator obama said in september of 2007. maybe you can eke out a victory on 50 plus one but you can't govern. you know, you get air force one, there are a lot of nice perks but you can't deliver on health care. we are not going to pass universal health care with a 50 plus one strategy. then senator biden said in may of 2005, i say to my friends on the republican side, you may own the field right now, but you won't own it forever. and i pray god when the democrats take back control, we don't make the kind of power grab that you are doing now. were senator biden and senator obama right? or is president obama and vice president joe biden right with regard to the discussion of

health care? >> congressman, first, let me jut say that the procedures that will be followed with regard to passage health care reform have been long established. all we're asking for is simple up or down majority vote. i don't want to get into the legislative strategy. key content, the substance is we're on a path over the long-term, it doesn't matter where you support ruin crease, hahn health care spending reductions, we are on anchors that unless we change incentives in our health care systems. on this i agree former senator frist had a piece in "the new york times" saying the key thing we need to do is move away from paying for quantity, and towards quality. i couldn't agree more. i've been to the institute of medicine, brookings, ai, what have you seminars. we don't know exactly the con trusts that should be used. we have very promising ideas,

accountable organization. penalties against high readmission rates for hospitals, but exactly whether it it should be 5% or 10%. what the it's my firm belief what we need do is be very aggressive about testing out strategies and having a m mechanism for moving the scale on the most promising ideas, if we don't do that, which by the way, sets up an infrastructure for doing. ultimately nothing else we've been discussing on the budget is going to matter. >> mr. orszag with all due respect, dr. orszag, that is just as good a shift as i have ever heard. i asked a very question. were senator biden -- >> i gave you a clear response. >> you gave a good washington response. let me shift subjects.

i would like for you numbers, what were the numbers of small businesses that were approved for help from the government? 45,000. >> i have 42,000 loans made to small businesses through the recovery act. >> do you know how many small businesses actually applied for help and were turned down? >> i don't have that number. i can try to bet it for you. >> that would be helpful. because when i look at my district, since january of 2007 when a new majority took control of congress, my district has gone from 3%, 6%, 4%, 3% 6% to 11%, 18%, 13%, 12%, 16% and 22%. i think it would be helpful to get those numbers to see who's not being helped. thank you, mr. chairman. >> ms. lee. >> thank you, mr. chairman. let me just clarify something. the gentlelady from texas

departed but she referenced 9/11. yes, we unfortunately, were attacked on 9/11. it was a horrific attack. but we also started a war in iraq which had nothing to do with 9/11. which has cost us over 4,000 lives and billions of dollars. is he i just wanted to clarify that. good to see you, dr. romer and all of you. let me just -- i have one question for each of you. congressional black caucus continues to sound the alarm regarding the glaring unemployment rate among the chronically unemployed. the unemployment rate is over 15% for african-americans. over 12% latinos. compared to national average of about 8.8%. the congressional black caucus has specifically proposals to address these huge disparities which really are moral gaps. we presented them to our leadership and president obama as recent as last week.

i'll give you copies of these proposals. but there's been proposals will trickle down to these populations. it hasn't worked really in the past. and i want to know, dr. rome, if you think trickle down economic policies will work now? second, to second geithner. we also discussed with the president a report indicating that only 1.1% of african-american businesses and 1.6% of latino businesses have received contracts under the recovery act. although we have from the stakeholders outreach initiate ive that 16.0% of our contracting dollars have gone to minority firms. there's a big discrepancy there because the kiran institute has done a study, they used government data, so did a reference in the bloomberg business report by jesse washington in february. he also said 1.7% of latino

businesses and 1.1% ofs african-american business. so i would like to get that clachbd i would like these numbers broken down. and finally, to director orszag. good to see you. >> good to see you. >> let me just ask you about >> let me just ask you about this partial f%7cug)a d d a a ay tded) bnog áegcåaácán á 8n 2o å)

people just in terms of how much education you have, the unemployment rate has been much higher for less educated workers. all of that is absolutely terrible and something that we need to deal with. i do want to say that one of the things we know is things like the unemployment rate for african-americans is particularly -- it moves with the business cycle just more extremely. so just as the unemployment rate tends to go up more when the unemployment rate rises national tli, comes down more when the overall unemployment rate comes down. so i think our focus on just getting everybody back to work is certainly key and appropriate. but certainly we can do more. we're very anxious to work with you. i've been listening to your ideas, something that's an active process in the white house trying to figure out what we can do because we want to put everybody back to work just as

fast as possible. so we look forward to working with you on. >> that again, we're missing you in berkeley. but you're doing a great job here. >> i miss berkeley. >> congressman, can i answer your first question, too. i agree with you and dr. romer that it's not enough to focus on things that we affect the national growth numbers. there's a very good case for making sure we're providing target investments in communities across the country, hardest hit by the recession, housing crisis, unemployment rates. we're going to continue to do that. i'll give you two examples of things we've done at the treasury with the support of the president. up with one is to substantially expand the money we put in the cdfi and those programs only go principally to many of the communities with highest rates of unemployment. most adversely affected by the financial crisis. we think they really work and have a good, very good record of success. and we have, we announced just a

few months ago, a target program under t.a.r.p. to give capital to cdfis as well and the combination of those two things are a very large increase to communities across the country. that's just part of a response, i just wanted to highlight those two things. on the number, i'll be happy to take a look at those and explain the disparity and i'll work with my colleagues in the administration and see if we can give you a response on the numbers. >> thank you very much, mr. chairman. >> thank all three of you for your patience. it's been a long morning i know. secretary geithner, while i agree with some comments made by my colleague, miss emerson about t.a.r.p. and what's happening now. i really do, i mean this quite seriously, appreciate your spirited defense of t.a.r.p. and fact that it actually costs less than of us thought it would, that we're going to get most of our money back and actually accomplished what it was supposed to do which is stabilize the financial system. who was president when that was passed? >> i think you know the answer

to that president bush proposed and passed. my predecessor secretary paulson acted with the initial actions -- >> the reason why i make that point is simply we all want bipartisanship, we all know we're going to need it to confront the problems all three of you laid out very well. we would get along a lot more if you thank the last president instead of blaming the last president for everything in the world. >> i think that's a very good point i fully supported the legislation and fully supported -- >> just i would like to that point made occasiccasionally be frankly it never is. second, just looking at the stimulus act or recovery act, whatever term we want to use. i don't dispute at all it's created some jobs and done some go. you can't deploy that much resources and not have some impact but at the time that it was offered, this is probably more fairly directed to you, miss romer, but you know, the

implication was or the statement was you passed this unemployment will never get above 8%. clearly it's gotten above that clearly we don't envision it getting back to 8% for a good long while. why the shortfall? >> it's a very legitimate question. i think the important thing to say is it really was a deterioration in the baseline forecast without the stimulus. that you know, back in december of 2008 when we were designing the fiscal stimulus and certainly thinking about the effects, we knew the unemployment rate was headed up and think i ninth we nor private analysts realized just how much. some of that is because the recession turned out to be deeper, especially i think one of the things i remember very much from that fall was the question of would it be isolated in the united states or would it spread throughout the world? one of the key things we learned early in 2009 is just how much it was an international phenomenon. the other thing to point out is

this recession has been particularly hard on the labor market. and actually, ilg give you a little known fact. when we did our forecast last year. we actually turned out to be almost dead on on the gdp forecast. but in fact, what has happened is the unemployment hate rate has risen 1 to 2 percentage points you would have anticipated given the rate of gdp. it has been particularly hard on american workers. >> i would take from that that t.a.r.p. came closer to achieving its objective than the recovery. i but your answer is a fair one. mr. orszag, this gets at where the administration wants to take us over a long period of time. i think you made the point that historically, federal government spends around 20%. 21% of the gdp. you talked about the spike up

this year for i think very legitimate circumstances. looking long-term, if the president achieves all he wants to achieve, what is the long-term level of spending as a percentage of gdp going to be at the end thf -- let's assume he gets re-elected at the end of a long two terms? >> in the budget it's still in the 23 to 24% range. >> pretty significant increase. >> let me explain while. that reflects two force, one is underlying health care costs and retirement of baby boomers which puts upward pressure on medicare medicaid and social security. those three programs over the decade. secondly because of i guess the chart has come down, but i guess because of the large debt and i won't use the word inherited again, but the large debt that the nation faces, interest payments are higher than would otherwise be the case and that raise s overall spending. >> would it be fair to say, i'll give you a chance to respond.

you envision expansion in the size of federal government. i would say fairly substantial and we would still have the end of that period a debt that -- an ongoing deficit that is larger than you are comfortable with? >> a, the deficit is larger than we are comfortable with. and that is exactly why, again, we have in the process of a full appointment of the fiscal economics. that's what the fiscal economics is intend to do. but crucially important to realize that increase is not due to administration policies. and that's what i was trying to emphasize, there's an underlying problem. we need to address the underlying problem and my opinion is we need to do it together. >> thank you very much. thank you, mr. chairman. yield back. >> thank you, mr. chairman. i thank you all for being here today. we have talked and talked and

talked about infrastructure, it appears that you all agree that we need more and we need to maintain better what we already have. we have a hydroelectric dam that's halfway finished with renovation. we have -- it would cost $20 million to shut the project down. and we can finish it for 50 and your administration's zeroed out. pedro, you and i have talked about that. i don't know if you remember or not. this was -- this was a first time you recommended shutting it down. now you come backer a and say r it out. that is a mystery to how that decision was arrived at. it's one of the reasons i don't trust the administration to make too many spending decisions because i don't think they do it very well. the other issue i'd like to hear someone address is the way fema is redrawing the flood maps in

this country. putting millions of houses in the flood plain when they don't belong. and given almost zero explanation as to how they arrived at this. except to say that as they do this, they're considering that there is no flood protection. and then the place where i come from, every square inch can be flooded by somebody some way somehow. so, it's causing a huge problem. it started after katrina. it has continued in the obama administration. in fact, it's gotten worse. these are some of the economically e pressdepressed a in the country. thank you. >> congressman, first with regard to fema, i guess i have been more focused on the funding for the disaster relief fund.

as you know, action will be necessary there. we can have an administration official get back to you on the flood plan because i am personally aware of fema's activities on that. >> it's a huge problem. and it covers even montana has got this problem of all places. they don't have enough rain or water to hardly have a flood. they have all get together and cooperate to have one. so we -- >> we will have an administration -- >> we haven't been able to get fema's attention. we haven't got anybody's attention and adds $1,000 to the cost of a house payment a year. and it just about everywhere. and it's a very serious matter to those of us, especially in the lower mississippi valley. >> okay. >> and you hadn't got any comment about shutting the dam project down? >> as you know, we have had discussions on this.

and let me just say this. the corps of engineers process as a whole -- let me sort of step back and say the corps of engineer process as a whole from an administration prospect, we have two key objectives. one is to remain focused on the three areas it's historically focused on and the second is to use consistent cost benefit analysis as we were talking about earlier on regulations to make sure that the best projects are funded. those are the two key guiding principles the administration uses with corps of engineer funding. [ inaudible ] i appreciate that. >> a project half paid for. and it's going cost you half of what's left to shut it down. and it's a hydro projikect. it's already there. it's a renovation project.

>> again, in addition to the fema flood plan, we'll come back and have a further discussion with you about that specific project. >> thank you. >> i thank you, mr. chairman. i apologize. i was away for a while. i was on the floor. it's a problem with the commercial real estate sector at the present time. as you know, commercial real estate values in the united states are literally collapsing. going down as much as 40%, 50% in some areas. and most experts assume that this continuing collapse will continue through 2011, 2012. deutsch bank did a study of outstanding commercial paper. an instant part will come due by 2013. almost half of it is under water. as you know, a lot of mid- and

small-sized banks and regulators aren't helping much, especially on the performing assets. we have performing asset where is people are making their payments, making their tax payments, making their insurance payments, they're current. and yet, the bank's bringing them in because of appraised values and telling them to come in with a significant capital call. can which they can't do in this credit market. and what the banks are doing are taking back the property. putting it on the loan loss side of the ledger taking credit away from these banks because they don't have the money. so, what can we do? this won't -- from my perspective wouldn't cost the government anything if banks have discretionary on performing assets. these are performing assets. why aren't the banks given discretion to footnote that these assets and they are assets, are current and can be treated as an asset rather than a liability on the balance

sneet. >> you are right about the problem and right we have a ways to get through the broader adjustment still ahead of us. and we discussed a little bit when you were away but i think again the two most important things to do this area is small community banks take capital from the@@@@rxns";duns@p@p s@p@r

across the country. i think you are right to emphasize them and need to underscore that the bank supervisors which are independent of the treasury. i don't have the ka pass toy direct what they do in this case are working to provide more balance guidance to lean against just the practices you're shining a light on and i think they can probably do a better job. >> this goes back to the mark to market provisions and i understand that there may be from my perspective a step back in this economy where you have an overcorrection in value to take a look at relaxing those mark to market provisions on performing assets because of under the accounting rules or they'll continue to deflate. this will continue to deflate these values and that's not helpful this trying to get the economy moving again. i'm fearful that the commercial real estate problem is so huge and can put us in a double dip recession. >> i do not believe it poses that risk at the moment.

i think, again, it is a challenge. >> we thought same thing about the housing market. >> i think this is different and the financial system is in a much stronger position. the sec and fisbo are looking at the practices. i'm happy to talk to you about how to think about the role of fair value accounting to play this in mitigating these kinds of pressures in the future. >> thank you, mr. chairman. >> there's talk about the stimulus package. in my district, we have taken $20 million and leveraged a $650 million investment from a french company that makes tubes for oil and natural gas. we had a $350,000 community development block grant leveraged into 650 incoming tech jobs in johnstown, ohio. a california company. we'll leverage $100 million. 750 full-time jobs.

we used recovery bonds and block grant money in akron to keep the technology center in akron. there are many success stories of the stimulus packages and many happening in our district. one of the other thing that is's positive is general motors. we have had the lordstown plant in ohio for the cruise. a third shift with the bridge loan and the whole nine yards. so there's been some positive things. secretary geithner, i've got to talk to you about the delphi salaried retirees located thousands of them in my district, thousands of them in ohio and across the country who just flat-out got a raw deal on, you know, throughout the gm bankruptcy. we need your help. there are families here, these are middle class families. there's a variety of issues with them. but their pensions didn't get topped off. they need their help. it is having a traumatic to the economy and our ability in ohio to fully recover because of the pensions they're not getting and

we have about 15,000 to 20,000 people extremely upset. not only at the government, but at general motors so i think it's going to hurt gm's long-term success in some very traditional manufacturing states loyal to general motors. we need your help on this to 23ig your out through the. the t.a.r.p. money. >> people should 'understand this. even though the u.s. aunl sector is coming out of this in a much better position and successful in preventing just enormous job loss across not just these companies but supplies, there's damage by the restructuring process and i understand that. you've been a forceful advocate for highlighting the pain many people because of this and happy to spend sometime talking with you about with a what to do in that area. >> twoef do more than talk. we have to figure it out.

here we are in youngstown, ohio. been in recession for 30 years. finally, as i said, starting to get some progress and this is going to rip $100 million in pension money out of our community that's going to be detrimental not only to our community. we have to figure this out. you have enough creative 'm in your organization and my office and with others to be able to figure this out. please, please, please help us figure this out. we need your help. we can't do it without you. one last thing. i have a bill that will help with some bond funding with local communities. as i said, the recovery bonds with very, very helpful. we want money in the local port authorities and my bill has a government guarantee of four times what the reserves are for the -- far local port authority, for example, to leverage a lot more money. they do a great job of getting money out, economic impact, deals done, making deals happen.

do you see that as a viable option to help us with? >> i have to look at the details. i'll get back to you on it. i would underscore that the bill mark-up bond program to expand and reform has been very, very effective in meeting many of the similar challenges. i'm happy to look at the details of your proposal. >> okay. the port authorities are great. >> i wanted to add. the things you highlighted, the degree to which stimulus, you know, the recovery about funds get leveraged by private sector funds is an essential characteristic. i think it also goes, you know, so much we hear, you have created government jobs and so important to understand the huge quantity of jobs are in the private sector. and that is a key part of what the recovery act is doing. >> correct. just lastly, mr. secretary, i talked to the president yesterday. he was in ohio about the delphi salaried retirees and we'll follow up and continue to work with you on this.

thank you. >> well, you know, a lot in politics is for us not always dealing with fact. you have heard it here today, the dispute of facts, a lot about perception and in our districts. our constituents' perception of what is going on. i would like to talk about the issue of banks lending money. i think of any issue out there now, and the slowing down the recovery, it is about who get the banks to lend money and whether it's money for home mortgages, commercial money, whatever. and i think the way to deal with that, and what i'm hearing over and over is to try to refocus and get as much money into the more local community banks and that then as a result of them lending money, infuse capital which creates jobs, allows them to buy inventory and also allows us to get tax revenue once people are working again. let me ask you this. where are we or would you consider to recycle the existing

t.a.r.p. money getting back into the community banks? i think this is probably one of the best ways to move forward, but when you're out, we hear what the administration or what you say hear and out in the community it is just not happening. it is not happening in the business community, small business community. how about this issue? >> you are right about the problems, senator. and the best solution is to make sure that those banks can come and get capital. it's most effective thing to do. a dollar of capital is -- >> tell me how we can do it then. >> we tried four different ways over the last nine months to get small banks to come to the t.a.r.p. but because of the stigma and conditions, 600 withdrew their applications. we after trying, we decided that the only way to do it is go outside and around t.a.r.p. so we have legislation pending and we believe it's a good klans of winning broad support to authorize a small business lending fund that would do exactly what you suggested.

and again, if enacted, it is very quick. people can come. and we give -- provide capital very quickly and the best, most effective way. best leverage of taxpayers for the probables many businesses still face. >> i suggest we do that very quickly. if you look at the savings and loan crisis, we create add resolution trust. we bought the bad notes from the banks that weren't worth a lot. but then, that cleared the books, allowed the savings and loans to start lending and it also -- that paper was worth something when we got out of the crisis. another issue and then i'm finished. the other issue is that we have a lot of mid-sized bank that is are really having difficult problems doing whatever they can to find an infusion of cash to start lending. a lot of these mid-sized banks in our areas might have a thousand, 2,000 jobs. it seems to me their complaints are that the regulators are constantly telling these banks and when they try to borrow money not lend. and yet, if there's a group that

probably needs more help is mid-sized banks that might -- not that's not a lot of money, $10 million to survive. that infusion could turn things around, create jobs and allow lending. that is not happening and i would suggest in each major jurisdiction that you work closely with members of congress because when we're involved, it is like a negative. write a letter, call. that is our job to put pressure on. i suggest you work closely and i want my staff to contact somebody in your staff because i have a couple of bank that is are there and feel they're not treated like the big banks. the smaller banks, they're getting certain help. but the mid-sized bank that is create a lot of jobs in the area. so how can we deal with these mid-sized bank that is might need $10 snl put them in a different area and the regulators say -- don't lend or whatever. how would you deal with that? >> fdic, the federal reserve

board office of thrift supervision are the ones responsible for trying to make sure that the examiners get the balance right. some areas to be tougher, frankly. but we are careful not to overdo it and make the problem we're working through worse and the best thing to do is highlighting the problem for their supervisors. i can help reinforce that but they're independent. and i cannot direct what they do. i can encourage them to get that balance better. they're working on it. but they need to get the message out not just -- they need the message out of washington so that people in washington aren't just hearing it. people who do bank examis acros the country hear the message. >> i like the line of questioning of chet edwards. we have to learn and not make the mistakes and move forward. thank you. >> thank you, mr. chairman. i want to make an observation and then ask my questions all at once and give you most of my

time to answer them. i just really want do point out that i wish that when i was in the minority in my first two years that we had been asked to come to the table and work in a bipartisan, cooperative spirit as many times as we have attempted to reach out and do the same since we took over the majority. that's just an observation. and then, i'm just retorically, mr. chairman, wondering how many 7 1/2-hour bipartisan summits did the previous president hold at the white house to bring people together and figure out how to come together on a very important issue. i think the answer is none so that having been said, i want to ask you, mr. secretary, a follow of up to question when you were in front of the subcommittee about the hardest hit fund program because since that subcommittee hearing, it's come to light that the housing agencies, my state getting the

second most amount of money and we truly appreciated it. it's badly needed are only given six weeks to submit their plans and my concern is that that's a very short time frame to come up with something innovative. and there have been comments about not reinventing the wheel but coming up with something inventive and risking money is a concern. that's my first question. just to piggyback on what many other members asked, again, i asked you this in the subcommittee hearing. the thing that i hear the most often in my upper middle class to wealthy district, i do not have a lot of working class neighborhoods in the district. you think that somehow we would be shielded. no one is shielded. neighborhoods dotted with foreclosures and every town hall meeting and many of the phone calls i get in my office, the folks stopping me on the street are saying, i've done everything i can to try to get my bank to work something out with me. i'm upside down.

i want do stay in my home. i can make mortgage payments. i don't want to walk away. i hear you saying, we're trying. we're cajoling. we're encouraging. that isn't enough. we need to make them do it. why haven't we eat proither appd or proposed them to do it? on summit april 15th at the kennedy space center. this is not for you. probably best director orszag to answer it. is that summit, i appreciate that -- you taking us up on the suggestion those of us concerned about the president's plan, is that summit going to be a session where the stakeholders and the administration and others are going to be able to come together and focus on a workable plan, a compromise? or is it simply going to be a sum in it which the president

tries sell his plan to the people who participate? because are two very different type of summits. those are my questions. >> i'll take a look at talk to my colleagues. ' a mix of carefully redesign gged incentives and huge amount of public pressure. one form of pressure we use are to put the numbers of performers, the servicers in bank by bank so everybody can look and see which banks are doing a reasonable job. nobody is doing a terrific job. which banks are doing a terrible job. >> i'm sorry to interrupt you. they lead people on. they tell them they are going to work with them. they tell them to put in an application. months go by. >> you're exactly right. people have incredible stories. the banks in this country have

down an amount of damage to trust and confidence and they have a long way to go to earn back that trust and confidence. i agree with you. we are looking at a range of improvements to this program to help ensure it reaches more people underwater and more people who are unemployed. ter. can't refinance. than people unemployed and we are hopeful that we're going to come up with some improvements to those programs in those areas and walking -- walking the responsible committees through those changes as soon as we can. peter? >> on the summit, the goal is to have an open discussion now. you won't be surprised to hear we hope the outcome is everyone see it is wisdom of the path we have chosen. it's an open discussion. >> but that -- okay. i know that will be the goal. but is there an opportunity, is there open minded in the administration so that it's not

my way or the highway summit? >> i don't think we ever do my way or the highway summits and hoping that people see the benefits of the course we have put forward. >> thank you. >> met thank you very much. it's been very educational. and i want to personally thank you for being here this whole morning. i know that during the difficult times, and it's unfortunate in terms of the situation that we find ourselves in, but one positive thing is that we have a tendency personally to refocus attention as to what we're doing at home and with our families and what we're doing at home in our countries as a whole. and that i think is very healthy. and there's -- i want to thank you and congratulate you for refocusing attention on those basic issues because we can't as an individual, we can't help anyone if we're hurting. and we can't help anyone externally as a country.

we're not there yet. and one of the things that i think has come to light as a result of that is -- and i think we have negligent as a country in terms of investing in our infrastructure. marion barry talks about the dams. 60 to 90 years old. i have probably the worst dam in texas getting money through the stimulus, the state of texas through the water development board, moneys they got from the stimulus so i want to thank you for that. we have other dams. i have one and a falcon dam on did border that were built for four generators and has two and could make some things happen there. so i really believe that there could be a serious anempbt looking at transportation, water projects. not only create jobs, but also, invest in future generations of americans. and so, and this -- through the stimulus we have probably done

more of that than any other administration. i thank you for that. i want to also thank you for your investment in our veterans coming back. there's still a lot more to be done. there's over 150-something hospital that is are 40 to 60 years old and at some point we're going to have to do something about that. that's just in the va itself and not to mention the infrastructure. i know that in the area of health care, the arguments against health care is cost. yet, we know that, you know, it is going to cost us 4.4 trillion in the next 8 years if we don't do anything. and we're handed 20% cuts last year on medicare and this year and we had to try to do that fix. can you provide me some feedback in terms of for those individual that is say health care is more costly than save money, where will it save money?

>> why don't i take a crack at that? first, there are significant and, again, these are not our numbers. these are, for example, from congressional budget office. there are sufficiencies of a broader pool of people through the exchange that is at the heart of the legislation. so for example, for small businesses, one of the problems of small businesses face today is if a single employee, for a very small business, single employee has very high cost in a particular year, their rates in the future can skyrocket. if you're in a broader pool, you don't face that risk and there are efficiencies from that. along with administrative benefits of having more people involved. more broadly, this returns to the discussion of earlier, moving to emphasizing quality rather than just more in health care. and that is the direction in which this legislation moves. i think in the most sensible approach, which is, health care's a dynamic market. it is constantly evolving.

we need a system for keeping pace with that and constantly evaluating what's working and what's not and moving towards the stuff that's working and away from what's not. that is not structure we have in place now. that is structure that's created by the legislation. >> can i just add that when the council of economic advisers looked at the legislation coming through both houses of the congress our estimates were to slow the growth of health care rates a percentage point a year and an incredibly important change. a huge impact on standards of living over aex tended period of time. the other thing i wanted to come back from, i so -- you know, your emphasis of infrastructure. i like whad you said defining it broadly, including veterans. the president i think would say our educational system. it is all part of the new foundation making us a more productive economy going forward and i couldn't agree with you

more and reflected in the budget and decisions we are making. >> i want to thank you and also just add that we also dish out $100 billion annually for uncompensated care. and that's not necessarily the poor because they get medicaid. this is uninsured so want to thank you. thank you very much. >> mr. chairman, thank you very much. i certainly have enjoyed listening to the suggestions and obviously the questions of many who serve on this committee. there are a couple of things i want to say before i ask a couple of questions. i'm 66 years old so i can remember a little bit of history, especially most recent history. and i remember in 1981, on january 1st, looking at the treasury and see we owed $933 billion. i can remember driving down the road and heard that congress raised the debt celling. i almost wrecked. thinking how do we survive this?

little did i know we would go to $4.1 trillion in debt in just 12 years? 400% increase in what do we buy with it? what infratruck which you are did we build with it? over the next several years we would grow that debt to little over $11 trillion. in a period of 28 years. and what did we buy with it? here's what we had in 1981? interstate system, the dams that we need repair today, lsh built. in las vegas, it comes from a lake in the roose velt, hoover and nixon, johnson or kennedy era. the infrastructure was built. the shuttles today, one threw in 1986, built before 1981. all the dollars for the almost 100 reactors of '75 through '85. america's infrastructure was built. we had four wars. one and two, korea, vietnam.

before 1981. we built the panama canal and gave it back to them when europe in 1979. as i hear the talk about dealt, i wonder where the folks were back then. where were they then? it seems they have back slidden in the majority. in 1981, we had 55 republicans in the senate and 45 democrats. in 1995, we had a majority in both the house and senate. republicans. in essence, through that period of time, 18 of those controlled by the party today saying debt matters. it did then, too. we had a thousand% increase in national debt and we haven't built a single infrastructure or repaired what we had in this country. when you said a moment ago that 750,000 jobs lost in the first quarter of last year, that's 2.25 million people. and last quarter of 2008, and 650,000 first quarter. that's 1.950 million people.

in those 6 months we saw dramatic losses of jobs, in this country, if we had not lost souls, a 6.5% unemployment rate today. we have stopped the bleeding. we have put a turn yet on and seeing a rebound sog we're not continually cutting the throats of the american people. and so, i've always heard that figures don't lie but people who figure, you figure out what they do. because in here we have heard comments that i just can't hardly get under belt. the question i want to ask is that after those comments. i think the administration's taken the roughly pessimistic look at our budget report. we had about 6% growth in the fourth quarter. and i -- i think we're notorious sometimes as we make predictions if in fact in the first year the

predictions are too pessimistic or hospital mioptimistic. if, in fact, our rebound is stronger, how do you think that will impact eventually the deficits and the budget in the future? >> let me just beliefly comment on that. the deficit is extraordinarily sensitive to economic activity so if economic activity turns out to be stronger than projected, the deficit comes down more rapidly than is shown in our budget documents. >> i think, also, as you look at the current short-term rates, we are keeping them down. the fed are and the treasury are. i think maybe the long-term bonds may factor in to inflation. if we can keep inflation about 2%, let's say, how will that -- and how do you think that will impact eventually the future as

far as economic growth? >> well, i think -- i mean, you raise several good points. i think one of the most important is the idea that there's uncertainty about any forecast and certainly for 2010, in our budget, we have a fairly, i think, conservative estimate of growing at 3% over the year. and that is certainly less than after other severe recessions. and so, certainly if we can get faster growth as dr. orszag mentions, that would -- >> thank you. >> -- about 2% inflation rate. >> any concluding comments? >> thank you very much, mr. chairman. i'd certainly like to thank the panel for your patience as well as the time you've spent with us is extremely helpful. i'm only struck by one item in this discussion before us through the week. but really hasn't drawn discussion that's conclusive. i noted that dr. romer mentioned

the exchange earlier. presuming that somewhere out might have an exchange that involves national health care. the public is reacting very clearly to this whole discussion. vast percentage of the public has health care programming that they are happy with. they're very concerned about the federal government deciding they want do get between them and their physician. and the exchange idea essentially says we have to have a nationalized system when the problems we must be dealing with can be handled simply without the government in the middle. president obama expressed support for a national exchange. speaker pelosi expressed support for a national exchange. george miller, her closer adviser, has done the same and my friend henry waxman makes it very clear he believes the

federal government ought to be between those physicians and their patients. i've just suggested that this is very, very dangerous ground and want to think very carefully where the public is coming from as we move forward here. thank you, mr. chairman, for your courtesy. >> thank you. let me thank all three of you for coming and let me make a couple observations of my own. i personally am very happy that we have a president and a speaker and a congress that is determined to do something to reform our health care system. it's all well and good for people to sit back and say, i've got mine. to hell with you. but the fact is that this is a moral issue. and it's also an economic issue. morally, we cannot afford to have 55 million people without insurance. economically we cannot afford to have a situation of which the insurance companies determine what the hell we're spending on

health care. day after day after day. with respect to deficits, i have a sheet in my hand as the senator from wisconsin used to say which indicates that over in four of those years, we were under the clinton administration after the congress took a tough vote in 1990 -- 1993 to begin to close the deficit. and it also indicates that prior to that, the only surplus in the last 50 years was under l.b.j. in 1969. one thing in common. in each of those five years, revenues as a percentage of g.d.p. were at least 19.5%. if you take a look at the other 45 years where we did not have a balanced budget, only one of

those years did you have revenue approaching 19.5% of g.d.p. so what the chart also shows is that we were riding with a surplus of $69 billion in 1998 and then we ran into tours, one justified and one not in my judgment. we ran into two tax cuts not paid for except with borrowed money. w borrowed money. and as a result, we went from a surplus of $128 to a deficit of $1.2 trillion. i think there's a lesson there for all of us. i also think there's a lesson in what miss capner said today because the fact is people are desperate out there. and i do not believe there is

sufficient urgency being demonstrated by either the administration or the congress. hard as we have worked on some items. it's very well and good for all of us sitting comfortably in a room like this to not have a sense of urgency about what's happening to people around the country. but we will pay a terrible price in terms of the health of this democracy if we don't do more than we're doing today. if we do not act to provide additional support for states, we will see half the teachers whose jobs we saved last year lose their jobs this year. we will see school boards in trouble. we will see local police departments in trouble. we will see local state budgets in trouble. and again, i that means we have

to have further action on the job front. i want to congratulate -- even though he's not here, i want to congratulate mr. cole for what i think was an extremely balanced and fair view of what's happened the last few months. the most unpopular vote i have cast in this congress except getting involved in the panama canal treaty in the carter era, the most unpopular vote i have ever cast and it's a vote mr. lewis also cast was the vote to support the creation of t.a.r.p.. i agree george bush takes a bad wrap on that. the way i see that, you had president bush admittedly belatedly and certainly not with much pleasure ask the congress for the t.a.r.p. authority. you had both candidates, mr. mccain and mr. obama, who

answered his call to do the patriotic thing and support giving him that authority. i don't have to like the way hank paulson harried out that authority in some instances but i think it's fair to admit that that helped stave off catastrop catastrophe, not just for this country but for the entire world. i do wish that we would have the same sense of balance exhibited on the part of people when they review the performance of the stimulus package or the recovery package. was it perfect? no. i have no doubt that package should have been bigger. i said so at the time. i say it again today. it should have been bigger. and -- but we were required to scale it back in order to get three crucial votes in the senate. because of the filibuster rule. and you know what?

even babe rouuth strikes out 1,0 times so i make no apology for having to recognize that democracy almost always produces imperfect results so i simply wanted to say that i would hate the shape of this economy today without that stimulus package. and i would remind people as someone said today, deficits don't cause unemployment but unemployment certainly caused deficits. and that's why we have got to keep at least as much focus on unemployment as dwoe getting down our long-term deficit. with that, i thank you all for being here. i appreciate your staying for the whole nine yards. the committee -- without objection, the committee stands [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute]

>> on c-span today, a senate

confirmation hearing for the president's nominee to be ambassador to syria. then part of tuesday's house debate on health care and that is followed by today's wourge live with your phone calls -- "washington journal" live with your phone calls. education secretary arnie duncan comes to capitol hill today to testify about the president's proposal to overhaul the no child left behind act. we'll have live coverage of the house education committee beginning at 2:30 p.m. eastern time on c-span this 3 and on our website c-span.org. >> this week lawmakers are making the final push to get health care legislation to the president's desk. c-span. take us wherever you go. online.

c-span's health care hub. see what house and senate members are saying via twitter. this weekend on c-span 2's book tv. historian andrew lewis on the civil rights group that included julian bond and john lewis. the economic crisis has left some americans questioning the value of capitalism. steve forbes disagrees in how capitalism will save us. afterwards, diane rabich on why too much testing is causing the death of the american school system. >> now a nomination hearing for robert ford to be the u.s. ambassador to syria. a post that has been vacant for more than five years. the u.s. last had an ambassador in syria in 2005 when the bush administration withdrew margaret scobey to protest the

assassination of the lebonese prime minister. to explore the possibilities, the administration's decision to send an ambassador to damascus marks an important step forward in that process. i'm pleased to see that the administration has nominated a strong candidate to take on this challenging assignment. after 21 years in the foreign service, robert ford served as ambassador to algeria from 2006-2008 and since then he has

served with distinction as the deputy chief admission in iraq. his success in this new post will be vital from iran and iraq to lebanon and the arab-israeli peace process just about every major american securities interest in the middle east has a syrian dimension. clearly we have serious issues with syria still to be resolved. last month, the director general of the iaea determined that the syrians had not been cooperative into their investigation into the suspected nuclear site.

journalists, students and human rights activists have been arrested. secretary clinton -- mahmoud ahmadinejad -- nazralah and the members of the islamic jihad sent a very negative signal about the current mood in damascus. at best, it was bad optics. syria has its own list of requests. topped by the removal of u.s. sanctions and the return of the goal land heights. syrians will argue that they have taken positive steps, including sending an ambassador to beirut, continuing to house hundred dollars of thousand s of iraqi refugees and agreeing to try lateral thoughts with border security, discussions that i was personally involved in.

they would argue that those steps have not been reciprocated by the united states. it is fair to say that we have a great deal to discuss. so president obama did the right thing by deciding to send an ambassador to syria to make our case at the highest levels. some have pointed to our disagreements as a reason not to pursue this nomination. i believe just the opposite is true. we need an ambassador now because we are at such a pivot almoment. remember, my friends. diplomacy is not a prize. it is something we do to advance our interests and we should not fear forceful, principled engagement. the real challenge is not deciding whether to engage. it is to find a viable path to improved relations. i believe that with confident, carefully cal brate diplomacy,

we can show -- calibrated diplomacy, we can show damascus what it stands to gain by mod right behavior and what it stands to lose by going in the other direction. to succeed, we must present damascus with a clear vision of a different future. i met with president assad on different occasions. frankly, we have had a good day log and i saw many possibilities for joint cooperation and other kinds of efforts between us. i believe that he understands his country's long-term interests and his own as the head of a secular government, something that he prizes, that those long-term interests are not well served by aligning syria with a revolutionary shiite regime in iran and its terrorist clients. to the contrary. syria would be on a much firmer footing if it instead builds

meaningful ties with neighbors and the west. president assad understands the economic stakes as well. syria's oil wells are beginning to run dry just as half of its population under 18 begins to enter the marketplace. syria clearly wants to join the global economy and that will require closer ties with the rest of the world. all of us should be realistic about what engagement can accomplish. a syrian realignment won't come automatically or overovernight. let me be clear. it will never come at the expense of lebanon's sovereignity. if we do succeed, it could be transformtive in galvanizing the peace process and improving the peace process for our friends in

israel, lebanon and the west bank. in short, this presents us with the opportunity to change the strategic landscape in the middle east and that is an effort that we cannot afford to ignore. most immediately we have much to gain by reinvigorating syrian-israeli diplomacy. today the parties have reached a public impasse. president assad wants israel to make a deposit promising that a successful deal would deliver the heights to syria. president netanya huh says that is an unacceptable condition. history shows that progress is not just a pipe dream. progress is possible. remember in the 1990's, two israeli prime ministers came very close to an agreement with syria. and just over a year ago, prime

minister olmert and president assad made real progress toward direct talks in negotiations brokered by turkey. going forward, our challenge is to translate this into tangible progress measured in changed behavior. over time, splitting the difference will not be acceptable and syria may not make the choices that we think may be in its best interests. but the only way to determine whether syria will decide on a different future is to put real, clear choices on the table and having an ambassador there on a daily basis to engage on that dialogue enhances our ability to do that. ambassador ford, you come highly recommended. we admire the job that you have been doing in iraq enormously and i think you will bring just the right talents to this task. once you are confirmed, we look forward to looking closely with you. senator luger?

>> thank you, mr. chairman. i joan with you in welcoming ambassador ford back to our committee. during the last several years, you have accepted some of the most difficult assignments a diplomat could undertake. as the chairman noted, you are currently the deputy chief of mission in iraq. as i understand, even as d.c.m. of iran. ambassador to algiers. you were sometimed posted in iraq on extended temporary duty. the nominees -- nominee's long record of skilled service to our country clearly qualifies him for this post. but we own our hearing with the understanding that we are discussing not just the nominee's qualifications but also the policy decisions related to syria and our diplomatic reputation in that

country. syria has been on the state sponsored terrorism list since it was published in the december, 1979. despite recent united states overtures, relationships are damascus remains deeply strained. in giant press conference with the president of iran, assad made inflammatory remarks that raised the question whether the regime is prepared to engage at any level with the united states. more concretely, syrian actions frequently have been hostile to the united states interest. damascus has been unhelpful, its ability in iraq and the safety of our troops there. it supported hamas and hezbollah. it has long suppressed basic freedoms and human rights, instructed iaea investigations.

even the cooperation on much smaller issues have been rare. for example, syria has refused to grant the united states immigration officials visas to interview and to process thousands of iraqis living in syria who are seeking resettlement in the united states. given these factors, we should temper expectations about what should be achieved with the syrians in the short run. nevertheless, declining to post ambassadors to countries, though sometimes necessary, rarely serves the united states' interests for long. in this case, syria is an unavoidable factor in the middle east peace equation and affects the united states foreign policy goals in iraq, iran, lebanon and other neighboring states. it is understandable that as the administration tries to make progress on several fronts in the middle east, it is proposing

to send an ambassador to damascus for the first time since 2005. i will be interested to hear from the nominee about how the administration plans to address the set of problems presented by syrian activities and how improving relations with syria fits our broader diplomatic campaign to achief united states' goals in the middle east and i would also like to hear whether the administration believes there are diplomatic risks and costs to returning ambassadors to damascus and if so, how the state department is planning to mitigate them. for these many reasons, we all look forward to the insights of the distinguished nominee and we are privileged to have you before us this morning. thank you, mr. chairman. >> thank you very much, senator lugar. ambassador ford, we welcome you, as i said. your full statement will be put in the record.

>> can i just interrupt for one minute. i at not going to be able to stay. i have another hearing. i want you to know that we're very proud of another misdemeanorer before our committee and fully recommend him for confirmation. secondly, let me point out his wife allison is stationed in morocco. so this is a career family that served our nation very well. it is nice to have mr. ford before the committee. >> thank you, senator cardin for those comments. we appreciate them and i know mr. ford does. mr. ambassador? >> mr. chairman, senators lugar, dodd and cardin. it is really an honor to appear before you today. i'm very grateful for the trust

and the confidence placed in me by president obama and secretary clinton in nominating me to serve as u.s. ambassador to the syrian-arab republic. mr. chairman, i submitted a longer written statement for the record so if it is ok with you, i would like to make some brief remarks to the committee. >> we would appreciate it. thank you. >> the president's desire to have a sustained and principled dialogue with the syrian government at the ambassador ya'll level is in our national interest and it should move us closer to achieving our goal in syria and in the region. let me reiterate that return ang ambassador to syria would not -- an ambassador to syria would not be a reward to syria. no would it mark a change in the fundamentals of our concerns with that important country. rather, it would mark a change in the way we try to secure our national interests in syria. and syria has its own interests in iraq, in lebanon and in the

middle east peace process. thus, returning an ambassador would mark a change in how we try persuade and press syria about where syria's true interests are best found. as president obama said in his speech at cairo university, the united states should commit itself to an effort, a sustained effort to find common ground. but the president also said that we should not ignore sources of tension. instead, we have to confront those tensions squarely. especially at a time when the middle east confronts increasing tensions, we should be talking every day and every week with top level officials who have influence and authority in syria. they need to hear directly from us. not from the media and not from third party countries what

american calculations and american thinking are. and what could be the potential costs to syria of their miscalculations. if confirmed, unfiltered straight talk with the syrian government will be my mission priority. and if confirmed, i have major issue priorities to follow, mr. chairman. first, getting syria to be helpful in stabilizing iraq. in addition, getting syria to stop helping terrorist groups and to be more respectful of lebonese sovereignity. in addition, securing syrian support for the peace process and securing syrian cooperation with the international atomic energy agency. and finally, encouraging greater respect of human rights in syria. i am under no illusion as to how big a challenge this will be.

i served for more than four years in iraq and have i seen first hand the tragic aftermath of terrorist car bombs perpetrated by foreign fighter networks that infiltrated suicide bombers from damascus airport into iraq. on the subject of iraq, let me be clear that i would press the syrians to adapt their policies, and they have an interest in doing so. they have an interest in a sovereign, secure and stable iraq. notably, syria and iraq could establish economic ties that would be mutually beneficial for both countries. i would also like to underline, as you did, mr. chairman, that our policy of intensified dialogue with syria will not come at the expense of any other state in the region, including lebanon. thenitis is firm in its -- the

united states is firm in its commitment to lebanon sovereign stability. in recent weeks, we have seen sharp, rhetorical exchanges between hezbollah and our friends in israel and even the syrians are joined in in some cases. we do not see how it is in syria's interest for new fighting to break out in lebanon. fighting that could escalate and even drag syria in itself. more over, we will maintain sanctions on syria as long as it supports terrorist groups like hezbollah and hamas. thus, if confirmed, there is much for me to discuss urgently with the syrians about lebanon and syrian actions in support of terrorist groups. connected to this lebanon

situation, mr. chairman, is another priority. securing syrian support for our middle east peace efforts. you know how hard senator mitchell is working in this regard. our policy is clear. we seek a just and comprehensive peace. a peace that would be in the interest of our friends in israel and in the interest of our friends in the arab region and the broader international community. we have been urging the syrians to support our effort to restart negotiations between israel and the palestinians. and in addition, senator mitchell and his team have been exploring ways to restart negotiations between israel and syria. for the past 16 years, the syrian government has said a peace agreement could be in its interests and we want to foster movement in that direction. mr. chairman, another big issue

is syria's nuclear program, where we in the international community have serious concerns. syria has not cooperated with the international atomic agency inspectors since june, 2008. despite repeated iaea requests. the latest iaea report has raised big questions and if i am confirmed, i would expect to press the syrians hard on this issue. mr. chairman, members of the committee, the aspirations of people in the middle east for dignity, economic opportunity and respect for their human rights are dear to me personally and professionally. i first went to the arab region as a peace core volunteer to morocco 30e years ago and i am proud to say i worked on that when i was an ambassador for algeria and i would do so in

syria if i am con firled. -- confirm. there are very big problems there. there is much that an ambassador could and should do to help syrians determine how best to implement peaceful reforms and improve respect for human rights. in conclusion, mr. chairman, this is a big agenda and it is a hard one. it doesn't promise fast results. but all of these items are in our national interests and it is in our national interests that we press the syrians on these situations daily at the highest levels. improving relations between us and syria has to be a two-way street. it will require that syria takes steps to match steps we take. sometimes we have seen the syrians respond. for example, the europeans after a long, hard discussion,

convinced the syrians to toughen their laws against trafficking in persons and after we pressed, syria also saw how it was in its interests to cut the flow of fires going into iraq. however, the syrian government didn't go as far as we want in shutting down those networks and it reminds us that we have to be firm and we have to be patient. thus, as i said, it is a full agenda but if confirmed, i am ready to start on it. thank you very much and i would be pleased to take questions. >> thank you very much, ambassador. appreciate the framing that you have just presented to us. let me just ask you, since you are currently or you have just been in iraq, and the iraq

cooperation is with syria. syria may have been blind sided by the iraq initiative and it came about partly because of prime minister malaki's needs. can you share with us what how you might see the current post-election process empowering us to move forward in that regard? >> senator, as i said, the syrians themselves have a real interest in a stable and secure and sovereign iraq. with respect to the tri-part discussions that you talked about. there was an effort, which the administration undertook to bring the iraqises the syrians and some of our experts together to look at how to improve security along the border.

in the end, those discussions didn't happen because of events that occurred in baghdad and the iraqi political reaction after that. we still hope that iraq and syria will find a way to build a better bilateral relationship. there is a hugement. >> can you be more explicit? what were the interests? what happened in that regard? what did malaki see as -- go ahead. >> in particular, prime minister malaki publicly and in private accused the syrians of being -- of helping the groups that executed the august 19 bombings in baghdad, the bombings that destroyed the foreign ministry and the finance ministry. >> did you have any evidence to that effect? >> mr. chairman, we have of course, studied it. we have not found a direct link.

>> and so, what now do you believe, i mean president assad and senator dodd and i were there and met with him a year ago and i have been there since. he has been very clear act wanting a stable iraq. it is in their interest. they have a sunni minority population compared to the sunni majority population and in h iraq it is a minority. their interest is in seeing it stable and not having it spill over into their country and so forth. so we accept that at face value but what is it now that can be done in your judgment, to rapidly get this back on track? >> senator, the first and most important thing that the iraqis could do to -- sorry, the syrians.

is to shut down the remaining foreign fighter networks. they have not shut them all down. the number of fighters going over the border we estimate was about 100 per month, say 2 1/2 years ago. mid 2007. that number has diminished now to about 10. so that is a big improvement. part of that improvement probably is less because of a syrian policy decision than because our forces in iraq and iraqi security forces have had a lot of success taking down some of the al qaeda networks in places like baghdad and mosul but the syrians have shut down some but not all. there is more they could and should do. frankly, were they to do that, i think the iraqis woled respond. >> when you say could and should, are those groups under

their control or within their capacity to shut down? we think they have the capacity, senators. in addition, senator, in terms of the politics of the relations between iraq and syria, the syrians promote and allow -- will both promote and allow iraqi groups to undertake activities that are destabilizing to the constitutional government in iraq. for example, there is a television station in iraq -- sorry, in syria. it is operated by a real rogue. it shows pictures of humvees blowing up and attacks on american forces. attacks on iraqi forces. this is not a television station that is broadcasting to syrian

audiences, mr. chairman. it is broadcasting to iraqis. it is trying to foment violence against our forces and iraqis. they have in their capacity to turn that off. there are other things in that vein, mr. chairman. >> what do you believe is the current -- policemen preface it by saying i had a conversation the other day with president assad when i was in the middle east and he mentioned the degree to which they kept their word with respect to lebanon and that lebanon, has in fact, been quiet over the period of the last month since the election and the new government. can you speak to the syrian posture and what you see in terms of the stakes for lebanon in terms of better american relations with syria?

>> we are firmly committed, as i said, to lebonese sovereignity and stability. we have worked quite hard to build and strengthen the capacity of lebonese institutions. we would like the syrians also to cooperate with lebonese government institutions. it is a good step that they opened an embassy in beirut. it is a good step that they announced during the visit of the prime minister to damascus that they would begin the border, the syrian-lebonese border delination efforts. the syrians in a sense, mr. chairman, said this would open a new era of relations between syria and lebanon.

that would be good. we welcome that but we would like to see that actually implemented on the ground. and of course, one of the biggest problems is the transshipment of webs from syria to armed groups -- of weapons from syria to armed groups, hezbollah, and frankly it undermines the lebonese state. >> fair enough. there are obviously some questions. my time is up with respect to hezbollah. senator lugar? >> ambassador, the united states officials have visited damascus frequently as we already mentioned throughout 2009 and 2010. syrian officials have been invited to washington. the syrian ambassador in washington has been meeting regularly with the united states policy makers but now the

question is sending you to be an ambassador in syria. the american public thus far has seen syria's response to our positive attitudes as belligerent, at worst. at best, dismissive. i just inquire has something occurred to further anger syrians while all of this is going on and what the signs are, a gesture of respect would be similarly met. you have mentioned that by being there, you can give the possibilities of our policies to is syrians. the penalties and so forth. our calculations in the depth and our reasoning. but some extent, a good bit of this has been proceeded even without having an ambassador. why would this additional step make a difference or is there something occurring that you perceive in the syrian policy

that is more promising? >> senator, i think it is very much in our national interest, especially when tensions are rising in the region, to have an ambassador in syria. it is an important country. it has its own interests in places like iraq, we were just talking about lebanon, and the middle east and it has an ability also to be helpful or to be unhelpful. in those situations, i think sustained dialogue, sustained lobbying, if you will, are really useful to make sure that both sides understand exactly what the others' thinking is. both sides understand what the other's calculations are. it is very hard in countries in

the region, foreign embassy to go in at a sort of medium level and get messages passed up to the top. bad news just doesn't flow upwards very well over there. there is a lot more we could be doing, frankly. were we to have an ambassador there, both to remind the syrians of what our calculations are and also where their interests best lie. these are things in our interests, regardless of how the syrians respond in the short-term. >> let's say that you are there and now, you find, as you pointed out in your long statement, that syria has of course a very large young population that perhaps might have different views. might in due course be more friendly. we already have adopted a certain number of sanctions against syria and now with

regard necessarily -- not necessarily with regard to young people but older too. business people. what sort of changes will we need to make and what sort of advice can we anticipate in this committee that you might come back and say in order to really make headway with this young pop or with the business folks and so forth, you need to reconsider this or that. >> i just think it is very important to reach out beyond government circles when you're an ambassador. frankly, any position in an embassy, the diplomatic staff, that would be part of my job managing the embassies is to make sure we're reaching out to all segments of the society. a couple of things come to mind, senator. in the wake of the syrian allegations of an american raid on the syrian border, they shut

down our cultural center in damascus. they have allowed the english language teaching center to reopen, which is a good step. we welcome that, and i understand that actually attendance at our english language courses is quite high. i think young syrians want to learn english and many are open to being exposed to different viewpoints. there is an american cultural center that has not yet reopened and that is certainly something that would be on my agenda as soon as i arrive. we also have what we call american corners. these are smaller cultural centers placed in things like universities. when i was in algeria, we opened three of them. we have two in syria right now and i would like to see those reinvigorated. and then we will have our contacts with the business

community absolutely, the embassy does now but the possibilities for economic relations are limited because of the strong sanctions regime that we have in place now. >> there is an open invitation as you see, sanctions which may or may not be helpful, if you see openings, obviously you have suggested some thoughts, thoughtful suggestions about the use and the corners idea. keep in touch because it may be that some back and forth is going to be required to get your message out. finally, i think all of us in the senate and the administration were staggered by news to have nuclear program and this became, first of all, through intelligence sources that were closely guarded and now became a much more general picture but